(This post is authored by Saarthak Jain, a third year student of National Law School of India University, Bangalore)
As the commercial arbitration industry continues to grow in terms of popularity and revenue generated, several ethical and procedural issues have cropped up in recent times. One such grey area is the involvement of assistants or secretaries in the substantive tasks of dispute adjudication. Indeed, there has been considerable anxiety in the international arbitration community that the use of arbitral assistants risks them becoming the fourth arbitrator. Despite greater regulation and codification of the role of arbitral secretaries, this perception remains widespread. In this post, I seek to highlight the ethical and practical problems associated with the use of third-party assistants in international arbitration. I have presented the divergent legal opinion and approaches taken to address this matter. Finally, I have argued for the need of a uniform standard regarding the use of arbitral secretaries.
The use of third party assistants by arbitrators has been a common practice in jurisdictions such as Switzerland and Australia. Brazilian, Argentine and Spanish law expressly envisage the possibility of appointing an assistant in the interests of cost and time efficiency. Their responsibilities range from performing clerical tasks such as organizing files and handling correspondence to performing the functions of a law clerk including legal research, sitting through deliberations, and the drafting of awards. Not surprisingly, it is their involvement in the latter circumstances that are a cause of concern to the arbitral community. Given the intuitu personae (“in person”) nature of the arbitral function, the use of secretaries in substantive decision-making roles tends to undermine the parties’ right to select their arbitrators.
In addition to concerns of propriety, there are also questions of quality involved. Explaining the rationale behind a particular outcome to the parties concerned constitutes one of the essential functions of an arbitrator. Delegating the drafting of an award to an assistant could affect the clarity of the reasoning as to why a particular outcome resulted from the evidence and the law presented to the tribunal.
Apart from the ethical concerns of the arbitration community, the use of assistants in carrying out the substantive tasks of an arbitrator can directly impact the validity of an arbitral award. Almost all domestic jurisdictions as well as international institutions recognize a serious procedural irregularity as a ground for annulling an arbitral award, as reflected in Art. 34(2)(a)(iv) of the UNCITRAL Model Law on International Commercial Arbitration and Art. V(1)(d) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The Italian Supreme Court was, perhaps, the first to grapple with this issue in the 1989 case of Sacheri vs Robotto. In this case, an award was challenged on the ground that the arbitrators had delegated the responsibility to decide the case and draft the award to a lawyer, who had been appointed as an ‘expert’. The Court held that such delegation of the decision-making function to a third party amounted to a violation of due process and annulled the impugned award. Since then, courts in several jurisdictions such as Nigeria, Singapore, France and the United Kingdom have had to deal with the suspected involvement of third party assistants in a tribunal’s decision-making.
Further, investor-state arbitrations have also come under the radar. Professor Jan Hendrik Dalhuisen, in his Additional Opinion in Compañía de Aguas v Argentina, criticised the expanded role of tribunal secretaries in ICSID arbitrations. He went on to emphasize that the appropriate role of a tribunal secretary is one of ‘administration and support’ and that the secretary is not the ‘fourth member of ICSID tribunals or ad-hoc committees.’ However, arbitral secretaries came in the limelight after the Russian Federation petitioned Dutch courts to set aside the 2015 Yukos award, because, amongst other grounds, there was an improper delegation of the decision-making duties to the arbitral secretary.
The Yukos Award
In its challenge to the $50 billion Yukos Award, Russia argued that Mr. Martin Valasek, the assistant appointed by the tribunal chairman, Mr. Yves Fortier, went on to play a far more extensive role in the adjudication process than what is expected of an assistant. According to the accounts of the fees billed by the tribunal, Valasek worked for 3,006 hours on the case out of which 2,625 hours were spent on the merits stage of the dispute. This was 40% to 70% greater than the number of hours spent by the other arbitrators individually on the case.
Russia claimed that the huge amount of time spent by the assistant on the arbitration could not have been for carrying out administrative functions since the Secretariat, consisting of a number of employees, was in charge of all the significant administrative responsibilities. Thus, it was clear that the assistant had spent the majority of his time in the substantive tasks of the Tribunal. It was argued that such participation of a third-party assistant resulted in the “Tribunal effectively consisting of four persons.” Thus, the Tribunal was de facto composed irregularly, which is an accepted ground for the annulment of an award under Article 1065(1)(b) of the Dutch Code of Civil Procedure.
Although the Dutch Court set aside the award on jurisdictional grounds without ruling on the issue of the assistant’s involvement, the Yukos award and Russia’s pleadings before the Dutch court brought to light the extent of influence of tribunal secretaries on arbitrators’ decisions, and its possible impact on the validity of an arbitral award.
Growing Trend Towards Codification
Due to the recent interest on this issue, a number of arbitral institutions have implemented rules, guidelines and/or notes addressing the use of arbitral assistants. The London Court of International Arbitration and the Stockholm Chamber of Commerce are the most recent to have updated their guidelines. This was done in the wake of the P v. Q case before the English High Court in 2017, where the claimant applied under Sec. 24(1)(d) of the UK Arbitration Act 1996 to remove the arbitrators from an LCIA Tribunal on the grounds that they improperly delegated their functions to the Secretary. To justify this allegation, P relied on an analysis of the time spent by the secretary in relation to the arbitrators, and a misdirected email sent by the chairman to P’s legal team, which was intended for the secretary, asking for his “reaction to this latest from [P]?” Although the application was dismissed, the LCIA updated their Notes for Arbitrators as a direct reaction to the issues in this case.
Most institutional rules deal with two broad areas of concern: disclosure requirements and the scope of the assistant’s duties. As to disclosures, two approaches prevail. Under the first, the tribunal is mandated to consult the parties before appointing an arbitral assistant. Crucially, there is no requirement of seeking the parties’ approval, which makes the tribunal the ultimate authority with regards to the appointment of an assistant. This approach has been adopted in the Hong Kong International Arbitration Centre (HKIAC) Guidelines on the Use of a Secretary to the Arbitral Tribunal. Under the second approach, appointment of an assistant is possible only with the consent or approval of the parties. This has been followed by institutions like the Singapore International Arbitration Centre (SIAC) and JAMS Arbitration.
As to the scope of the assistant’s duties, the rules vary across arbitral institutions. For instance, the ICC Note on the Conduct of Arbitrations requires the arbitral tribunal to personally review the files and draft any decision, whereas the HKIAC Rules allow the tribunal to delegate the drafting of the award, provided that the substantive part is drafted by the arbitrators. The JAMS Guidelines and the UNCITRAL Notes on Organising Arbitral Proceedings stop at prohibiting the secretary from engaging in the decision-making process of the tribunal.
The Way Forward
In my opinion, this issue can be best addressed by the creation of a uniform standard for the appropriate role of arbitral secretaries. The lack of uniformity on the proper role of secretaries can potentially impact “the perceived legitimacy of the arbitral process and the resulting award.”
Such a widely accepted standard must be based on disclosure and transparency. The parties should be informed and must have a clear understanding of the limits of the secretary’s duties when appointed. The secretary may conduct legal research and prepare legal briefs to assist the tribunal in in exercising its judgment. They may further be allowed to prepare draft procedural orders and other non-substantive parts of the award, provided that draft is scrutinized by the tribunal. However, the substantive portions of the award must be drafted solely by the tribunal.
At the same, concerns of efficiency and expertise should be kept in mind. International commercial arbitrations often involve adjudication over complex and technical disputes. In such cases, the use of a third-party consultant by the arbitral tribunal can save resources, and ensure a level of quality and expertise in the decision-making process. Therefore, it is important to recognize that many responsible arbitrators habitually assign tasks such as legal research to their assistants without this constituting an improper delegation of their duties. Indeed, a complete denial of this practice would be counter-productive by encouraging arbitrators to be less transparent.