In the third of Podcast by Brodies' focus on international arbitration, we take an in-depth look at the role of the arbitrator. Ken MacDonald, Partner at Brodies LLP and Professor Derek Auchie of The University of Aberdeen consider what it means to be an arbitrator. Issues addressed include: Is judging and arbitrating the same? Has the role of arbitrator changed over the years? What extraneous factors influence arbitrators and is there an ideal personality type for arbitrator?
The future evolution of arbitrators including the development of AI in the arbitration space is also covered.
David Lee, Podcast host
David is an experienced journalist, writer and broadcaster based in Scotland. He has been the host of Podcasts by Brodies since 2021.
Transcript
00:00:05 David Lee, Host
Hello and welcome to Podcasts by Brodies. My name is David Lee and today I'm joined by two experts in dispute resolution to discuss international arbitration and specifically the role of the arbitrator or arbitrators. What does it mean to be an arbitrator? Who fills the role and what is expected of them? Do we need a human being or are we moving inexorably towards machine lead arbitration?
To discuss these issues and more, I'm joined by two experts, Derek Auchie is a professor in dispute process law in the School of Law at the University of Aberdeen, and Ken MacDonald is a partner at Brodies welcome to you both.
Let's start as ever, with some definitions. Ken, can you describe, first, what we mean by an arbitrator and what role the arbitrator plays?
00:01:01 Ken MacDonald, Partner
The role of the arbitrator is to make a decision that will be legally binding on the parties who have brought the dispute to arbitration. There's several attributes that are important to any dispute decision maker, but particularly one in international arbitration.
Clearly, an ability to process complex facts and apply sound legal reasoning must be a given. Being invested in reaching a fair decision in an efficient manner is at the root of the arbitrators role. In addition to that, having a firm hand at the tiller to ensure that, despite any efforts of a disruptive party, the arbitration stays in course is important and a calm and commanding temperament is also desirable.
00:01:50 David Lee, Host
Thanks very much, Ken. Derek, Ken's touched on it a little bit there, but what type of person would typically fulfil the role of an international arbitrator and what qualifications do they need?
00:02:04 Professor Derek Auchie, Dispute Process Law
Well, it's interesting because technically speaking, there are no qualifications that are required. So, anybody could technically be an arbitrator, but of course arbitrators and practise will have qualifications and potentially an accreditation. It's important, I think, for parties to look at that properly and look at the quality of the training and the accreditation, because they're not all the same. A host of professionals, largely lawyers, are typically arbitrators, but it's not uncommon to find other professionals who are involved in the arbitration panel, particularly where there's a panel of three. This can be where there are issues in the contract and in the dispute around, for example, valuation or engineering or technical issues which brings in a different professional from the legal profession. Independence and impartiality are important, Ken has touched on that already, the idea that of course you're wanting a fair hearing from someone who is not connected with the parties and is going to give the parties equal airspace, if you like and consider their arguments equally. Someone with expertise is useful, expertise I mean in the contract subject area if you like. But that expertise, if it's too niche, can give rise to the potential for a conflict of interest, in other words, the person is so involved in the type of contract that that they may have a connection with one of the parties, even a remote connection, or with a witness, or with a legal representative for one of the parties. That's a major problem in international arbitration. The other thing that that someone who has a niche interests or niche experience in the area can bring is, what I would call, baggage. That means, in in essence, it can be a disadvantage to have been involved in the area. You come with your own preconceptions potentially of the contract type or the parties involved or whatever. Even though you don't have a direct connection with them.
So, somebody who is good in the field but does not have very close connections with the field can be worth considering because you can avoid those disadvantages, if you like, but obviously they can still have the skills that Ken has highlighted that that makes them a good.
00:04:37 David Lee, Host
Thanks very much, Derek. Coming back to you, Ken, again, Derek touched on this a little bit. Is it normal in arbitration to have a single person, a single arbitrator or are there occasions where there might be a panel of arbitrators? If so, when would maybe three arbitrators be more appropriate rather than one?
00:05:00 Ken MacDonald, Partner
Well, thanks, David. The contract will provide for arbitration, and it will typically set out what number of decision makers will be appointed. Sometimes the arbitral clause will refer to a set of institutional arbitral rules, and they in turn will prescribe the number of arbitrators to be appointed to a dispute. It is preferable to make conscious choices in your arbitral clause for how you want your dispute resolved, including the number of arbitrators. It is of course possible to agree a number in a post-dispute agreement to refer your dispute to arbitration. We call this a submission agreement and it's always possible for parties to agree to vary the contract requirements to a greater or lesser number of arbitrators to suit the circumstances of their dispute. Obviously, three arbitrators are more expensive for the parties than one but is useful where the matter in dispute is of high value and has complexity as it allows the decision makers to discuss and deliberate on the issues and to allocate the work of writing the award between them. Three arbitrators for higher value disputes avoids having all eggs in one basket, where the contract can bear the weight of 3 determiners it makes sense to do so.
The second factor in favour of three arbitrators is where the subject matter of the dispute is of a heavy multi-disciplinary flavour, where having a surveyor or perhaps an engineer in addition to the lawyer complement, makes sense. Three is useful where you need more than one background on the panel. A single arbitrator will not have colleagues to bounce any ideas off but can decide the dispute more quickly and cheaply. This choice is certainly suitable for lower value, less complex disputes. If the dispute is not high value but is complex, then there is a trade-off between one or three decision makers. However, you never want three if the contract value is not high, that would be the worst position to be in.
Single arbitrator is more economic and quicker as it avoids the pace of trying to coordinate three diaries for timetabling the arbitration and the dates for the final hearing. Where there are three arbitrators, you need agreement of two out of the three to achieve a final award, there may also be delay with the award being signed by all three arbitrators. At the end of the day, there is no one-size-fits-all approach when it comes to determining the appropriate number of arbitrators. You're generally having to predict what type of disputes you might get in the future under the contract and decide on the optimal number of decision makers from there. An odd number is conventional, but I think Derek, you might have a view on that.
00:07:56 Professor Derek Auchie, Dispute Process Law
Yeah, I do. Before I come to that, Ken, just on the question of timing of when you choose the number of arbitrators that you want to have that choice can be made in the contract assuming you don't have a submission agreement. The disadvantage to that of course is that you don't know what the dispute is going to be about until it happens and therefore, I personally have a view that it's better if it's possible to leave open the choice of number of arbitrators until you know what the dispute is about now, I'm not saying that's going to make it easier to agree on the on the number of arbitrators, but it might give both parties a perspective on whether one or three is best because you could get a small value dispute even in a complex contract, or indeed a large value or a dispute in a in what seems to be a simple contract.
Your point about numbers, one or three is what you've discussed Ken and I wonder a bit about whether the option of having two arbitrators is something worth considering. It's not something that's been discussed very much as far as I can see, although I see there's an article
under the auspice of the American Bar Association in 2020, in which this very question is discussed and in fact the answer is it might be two. In particular I think 2 arbitrators might be an option, where you've got one lawyer who's the chair and has a casting vote, and that's how you break block between the two and the second arbitrator is someone from a different discipline who is there to provide their expertise on that discipline alongside the legal chair. As you've said, Ken, I think where one is cheaper than three, two is quicker than three, two is also cheaper and quicker than three. So, I think the option of having two arbitrators is something which is not often considered but might be worth considering. So it could be, in other words, one, two or three. That's what I'm saying.
00:10:03 David Lee, Host
Thanks very much, Derek. We'll look a little bit more now about at the actual arbitration process and specifically what the different parties might expect from it, including the arbitrator. So, Derek, can you give us a little bit of a perspective of the arbitration from the party side? Ken, if you can say, what, how things look from the arbitrators side of things?
00:10:28 Professor Derek Auchie, Dispute Process Law
Yeah, happy to do that. I think the parties will have, quite rightly, high expectations of the arbitrator. They're investing a lot in the arbitral tribunal, and they would and let's deal with some of the things that are perhaps obvious, but which should be stated that the process should be fair, which Ken has touched on already, and transparent, the parties should expect diligence. So that means the arbitrator is going to have done the preparation work and understands the issues and has read everything and put in the hours.
Competence, somebody who's a very good lawyer, of course, is needed. If it's a legal member of the tribe, you know, fair mindedness is of course needed as well. Brave case management, want to say a little bit about that because one of the difficulties in international arbitration, I think, is that arbitrators can be worried about a challenge to their award in in a court, or indeed a challenge in an enforcement court, so an appeal on one hand, or a challenge in the Enforcement Court on the other, or indeed both and that can be a worry for arbitrators. For process decisions, it's quite difficult to challenge an award by an arbitrator because it's a margin of discretion given on process decisions, both by the rules that will apply and by the Court in which the challenge is taken. So, arbitrators should be less worried about that and be braver in their process decisions as a result, and a party should be able to expect that to be the case than is sometimes at the position. So, arbitration friendly jurisdictions and often those would be the jurisdictions chosen as the seat, do not readily interfere with arbitral awards and by seat I mean that's the jurisdiction in which at least a challenge might be made. An enforcement challenge is slightly different, because that could be in any jurisdiction, but nonetheless, most developed jurisdictions want to be arbitration friendly to attract arbitration business to that jurisdiction. So, it's quite difficult to a challenge a decision of a tribunal on a process matter. In addition to that good drafting and reasoning skills on process and substance is important. It's important, I think, in an award as an arbitrator, and I certainly try and do this and the decisions and awards that I produce is to make sure that I reason my process decisions as well as my substantive decision, and that's important so that they appear the Challenge Court, if there is one or whether it’s an appeal court or an enforcement challenge court will know why I have made a decision in that in that particular way, even if it's a decision on which the parties have agreed and that can be important to record so that the Challenge Court, if there is one, can see well actually the parties agreed to this course of action that that the tribunal takes so, we can't now challenge it later because you because you want to. So, all these things you know are designed, I think avoid a challenge to the award, that's the final decision of the Arbitral tribunal, based on something that the Arbitral Tribunal has not done properly because the parties don't want that, obviously because that causes a lot of delay and uncertainty and expense, not because of something they've done, but because of something that arbitrator has done or not done. So, I think that's important that the parties can expect that kind of level of attention by the arbitrator.
00:14:14 David Lee, Host
Thanks, Derek. So, Ken, we need an arbitrator who's fair, fair minded, transparent, diligent, competent, brave and has good drafting and reasoning skills. So, let's sit in that arbitrator's chair. That's quite a lot to live up to. What does it look like from that seat?
00:14:35 Ken MacDonald, Partner
Yeah, it's certainly a heavy burden to discharge. What does it look like from that seat? I think that depends on the parties that are appearing in the case and what their agenda is, whether they're there to work towards achieving a final award or whether they're there to be disruptive. Certainly, I think from the perspective of the arbitrator, he or she needs parties compliance with procedural time limits that are imposed during the arbitration. They would look for courtesy and fair dealing, but they've got to be prepared for worst case behaviours, including guerilla tactics, possibly the empty chair, that's where one party is not present for some or all the arbitration and any other form of disruption. Think they also have to have a calm temperament and be prepared to expect the unexpected.
The arbitrators should certainly expect parties Council to provide sound reasoning in submissions, with appropriate references to accurate legal sources, and we've covered in other podcasts the dangers of using AI where inaccurate legal sources can be brought up. The arbitrators should also expect to accommodate differences between business cultures and legal cultures in the parties jurisdictions. The whole point of international arbitration is that you're dealing with parties potentially from disparate parts of the globe, each with their own traditions and approaches to how to present cases in dispute.
00:16:15 David Lee, Host
Thanks very much, Ken. Derek, do you want to come back in there?
00:16:19 Professor Derek Auchie, Dispute Process Law
Yes, I just wanted to emphasise, and I agree again with everything Ken has said. I want to emphasise that last point about different legal cultures and I think that lawyers sometimes behave differently in front of an international tribunal than they would in their own home jurisdiction because there aren't the same conventions and understandings and even rules that are in place for everyone that are in place in their own home jurisdiction, their own courts in other words, in an international arbitration. I think parties can try and take advantage of that sometimes, there's nothing wrong with that but the arbitrator needs to be prepared to deal with that and to deal with that robustly, I think because of the guerrilla tactics, that Ken just mentioned, are extremely common in international arbitration, and I would say more common than in domestic litigation for the reasons that that we have that we've discussed and the parties, I think some parties will try and test the arbitral tribe, you know, by doing things and trying things on if you like and that brings me back to the point I made earlier about the arbitrator having to stand up to that and being alive to that and dealing with that. That's important because these guerrilla tactics can really derail a whole arbitral process and make it much longer and more expensive and painful for everyone involved, not least the tribunal.
00:17:48 David Lee, Host
While we’re talking about some of the challenges, we'll just move on to talking about some of the external challenges faced by an arbitrator in international disputes. Ken, can you just lay down what some of those challenges are? Then Derek, we will come back to you to maybe look at some ways that they can best be overcome. So, you first Ken.
00:18:08 Ken MacDonald, Partner
Well, there's certainly several challenges to consider. Leaving aside the internal challenge of avoiding unconscious bias and focusing on the external challenges, one that comes to mind is cultural differences or ethical boundaries applicable to different parties Council, and I think Derek's already touched on that to some extent. There's also dealing with different legal traditions, whether that's the common law tradition or the civil law tradition in your fellow arbitrators and how your fellow arbitrators will approach the case when you're working with them in a panel of three, but also challenges around how the parties present their cases and all of that requires some nimble footing from the arbitrator’s open mindedness and an ability to work across a range of landscapes in terms of dealing with parties from disparate backgrounds.
The possibility of the empty chair where one party doesn't participate for some of all the cases, certainly requires the arbitrator to ensure fair process, but without adopting the role of the counter party and it is a challenge in that situation to ensure that there is a fair testing of the case put before the arbitration when there is an empty chair and the arbitrator must do that, but at the same time, remember that their paramount role is as decision maker.
There's also the possibility of unethical behaviour, and obviously in extreme cases that can take all manner of unsavoury forms. A more mundane challenge, but an important one that the arbitrators must overcome is where there are non-cooperating parties in an arbitration, they're simply unable to agree anything, whether that's timetabling or the way in which the disclosure process should be addressed and, in those circumstances, the Tribunal must step in and there can often be heavy tribunal intervention to make sure that the arbitration stays on track and in the same way, making sure there's good case management in the arbitration is important and the tribunal may have to take a very firm line in dealing with all of that where there are poor positions being adopted by the parties.
00:20:44 David Lee, Host
Thanks Ken. Derek, as I said before, what are some of the ways are in which those challenges laid out by Ken, there can be overcome by a skilled arbitrator?
00:20:55 Professor Derek Auchie, Dispute Process Law
The key step is that the arbitrator needs to be aware of thepotential for those challenges and that might sound quite mundane and quite basic, but it’s not because many of the challenges that an international arbitrator can be presented with are completely different from the challenges that a local or domestic judge might be presented with, or indeed that Council might be presented with on one side rather than the other. So, I think I think an awareness of the different context of international arbitration, and also the things that Ken has just mentioned, can go wrong and or being prepared to deal with them is important. Ken said strong case management which I have mentioned earlier. I think that the key task is to get to a decision as quickly as possible without compromising the parties opportunity to fully present their case. That's it in a nutshell. When I say a full opportunity to present their case, I don't mean a full opportunity as they see it, I mean a full opportunity objectively because a full opportunity as they see it will be much fuller than looking at that question objectively. In other words, not letting the parties have what they want just because they say they want it, that comes back again to the strong case management. As Ken said, stick to the task and remember what your function is and make sure you stick to that all the way through.
00:22:41 David Lee, Host
Thanks, Derek. So, when we consider all of that, Derek, and put all that together, the different perspectives we've talked about, the different challenges we've talked about, what do you think is at the heart of what makes a good arbitrator? Do you think there is a particular personality or a type that suits the arbitration process best?
00:23:03 Professor Derek Auchie, Dispute Process Law
Yes, one of the things that I think is important is that the arbitrator wants to be an arbitrator and that might sound a bit strange but just because you're a good lawyer doesn't mean you'll say you'll be a good arbitrator and I've certainly heard some lawyers say to me, I don't want to be a decision maker. I want to fight my client's corner, I like a fight and that's what I like doing and I'm good at that and I don't want to be in the decision-making chair. That's quite good, because that's someone who recognises that that role is not suited to them. So that's the first thing you want. You must be someone who wants to make a decision.
You also need to be someone who can work in a team, if you are in a tribunal of three, which you often will be. If you are not a good team worker then you probably wouldn't make a good international arbitrator because you won't work well in a team of three. You can't always choose just to take on sole arbitral appointments. So that's important as well and not just being able to work in a team, but being able to work in a team, perhaps a team, which includes people who are not lawyers, potentially because if you're a lawyer, you're wing members, if you like, may not be.
An active listener is important also and a listener who is able and willing not to let the parties know what they're thinking about the arguments and the evidence as the case unfolds. Now that's crucial to the impartiality part of the of the role and the impression you create of impartiality, you don't want to be indicating whether you agree with a particular argument or point or witness, and that could be particularly difficult when you're asking questions as an arbitrator of a witness, which you would be doing or intervening during a submission by a lawyer, so the poker face is important. The ability to keep a poker face because the party shouldn't be able to tell what you're thinking by how you're behaving, and that should be maintained through the whole process, being swan-like. You might be panicking or thinking something in your head, or wanting to react to what's just been said, but you must be able to hold that back.
I do think the question of personality, which is a different question from the question of attributes, is something which should be addressed when thinking about whether you want to be an arbitrator and thinking about who to choose if you're choosing an arbitrator.
00:25:52 David Lee, Host
Thanks very much, Derek. So, Ken, Derek's talked there about having the poker face and two in extent the poker voice as well if you're sitting in the arbitrators chair. Will that become less significant in future? Are we going to need human arbitrators or are we going to see a lot more technology, artificial intelligence and machine justice coming into arbitration, do you think?
00:26:18 Ken MacDonald, Partner
I think that's a very fundamental question that you've posed, and it's certainly a very topical one now. I think I start from the position that machines don't have feelings. They don't display emotional intelligence. I think the way the tribunal process is run is often very important. It's not just about the result in terms of the arbitral award, it's about the journey to that arbitral award. I think this is particularly important given the focus of challenges to awards are generally procedural in nature rather than substantive. We've also got the challenge that we don't understand fully how machines think that's being described by many observers as the black box problem, and if we don't fully understand how they think, then there's always going to be residual concerns around the fairness and transparency of AI decision making. I do, however, think there will be significant use of AI by arbitrators and legal research and research to allow selection of best candidates for the role of chair, in drafting boilerplate sections and awards. But I still come back to the fundamental question of will we ever, as a society, accept a machine determiner in international arbitration? I personally feel that's unlikely given the complexity and value of disputes that we see, but going beyond that, how can a machine control badly behaved parties during the arbitral journey? Machines also cannot interact with two human arbitrators easily. In a panel of three, there's always going to be unexpected process events and cases don't always go smoothly, and there are so many variations on the theme there. For example, Council illness in the middle of a trial, witness unavailability production of late documents and so on, and most challenges in appeal or at recognition enforcement stage is process orientated. Challenges to the substance of the award is significantly more difficult as they are excluded or restricted opportunities to appeal. But issues arising about the decision-making process and whether it was fair or within the ambit of challenges to awards, it will be difficult for machines to deal with that, a machine cannot be programmed for all issues that can arise. f the machine cannot deal well with the procedural issues, you are therefore not going to be able to cut down on the prospects of challenges to awards. That may be famous last words, but I still think that humans have a lot to offer in international arbitration.
00:29:07 David Lee, Host
Thanks very much, Ken. If you are listening to this podcast, there are a number of others in the series, including one specifically about the use of artificial intelligence in arbitration, which is extremely interesting. So please have a listen to that one as well coming towards the conclusion, Derek, how has the role of the arbitrator changed over the years and how do you see that role of the arbitrator and the wider arbitration process evolving in the coming years?
00:29:37 Professor Derek Auchie, Dispute Process Law
Well, it's evolved significantly already, David. I think it will continue to evolve. So, hundreds of years ago when international arbitration started, it was merchants or traders who made decisions on disputes between their fellow merchants or traders and that process was very speedy and was essentially a decision by an expert, and lawyers weren't involved because hundreds of years ago, lawyers tended not to be involved in disputes of that kind. As the law has evolved itself and lawyers have become necessary in a representative capacity, then things have changed and of course litigation has developed and lawyers who are involved in arbitration are also involved in litigation. Lawyers who are arbitrators often come from litigation background and therefore litigation and arbitration have become closer and closer particularly over the last couple of decades. The demands of business have not changed, businesses want a speedy process and I'm going to quote you something from 1622. This is Gerard Malins, who wrote a book called Lex Mercatoria. He said “Merchant affairs in controversy ought, with all brevity to be decided to avoid interruption of the traffic”. I think that statement is as valid today as it was over 400 years ago when it was written. I think businesses are demanding and I think there is a backlash, if I may say so against the litigation like arbitral process and businesses want a movement, not necessarily back to how it was 400 years ago, but they want a movement backed in that direction generally. They want a speedy process. They want it to be final and they want expert involvement. They don't want their lawyers' tactics, if you like, to make the process like a litigation process and that's quite a challenge for lawyers and arbitrators alike, I think. But it's a challengeI think they'll have to rise to because that's what businesses are demanding more and more these days.
00:32:00 David Lee, Host
Thank you, Derek. I think the most historic reference we've yet had in a Brodies podcast get taken us back to a quote from 1622, which as you say is still very relevant today. So having looked back for inspiration Ken, let's finally look forward. As you see, Ken, what does the future of arbitration and the role of the arbitrator look like?
00:32:24 Ken MacDonald, Partner
I think fundamentally the role of the arbitrator will remain the same. That's to produce a quality legal binding decision that resolves the parties dispute. What I do see is the use of artificial intelligence to accelerate the decision-making process and probably in many ways, we cannot yet predict. I certainly think there will be an expectation on arbitrators to use AI as a tool. But as I've said, I don't see that we're going to be getting to the stage of machine arbitrators just yet for the reasons I've expounded upon earlier. They can't control the process, and even if they get to a position where they can draught sound final awards.
00:33:06 David Lee, Host
Thanks very much indeed, Ken and to Derek for your fabulous insights today from Lex Mercatoria to artificial intelligence and everything in between.
This episode is part of Podcasts by Brodies, where some of the country's leading lawyers and special guests share their Enlightened Thinking about major issues and developments in the legal sector and what they mean for organisations, businesses and individuals across the various sectors of the economy and wider society, if you'd like to hear more, please subscribe to Podcasts by Brodies on all your favourite podcast platforms and for more information and insights, please visit brodies.com.
Contributors
Partner
Professor in dispute process law at the University of Aberdeen