REUTERS | Srdjan Zivulovic

English court deals firmly with the spectre of the “fourth arbitrator”

The spectre of the “fourth arbitrator” has been discussed in numerous articles and at many a conference. Guidance notes, guidelines and training schemes abound. However, judicial consideration of the use of tribunal secretaries has been relatively limited.

The arbitration market may be grateful, therefore, that an email sent in error to the wrong person gave rise to considerable discussion on the use of tribunal secretaries in the recent English court decision in P v Q.

The decision demonstrates that creative arguments to challenge an arbitrator based on the use of a tribunal secretary will not be adequate to persuade the English court that the tribunal has departed from the requirement to properly conduct proceedings, which is required to satisfy section 24(1)(d)(i) of the English Arbitration Act 1996 (AA 1996). Obiter, the court also reinforced the need for applicants under section 24 to articulate how the conduct complained of (whether or not related to use of a secretary), has or will cause substantial prejudice for the purpose of section 24(1)(d). Vague suggestions of lack of trust going forward will not cut it in this regard.

Moreover, the court emphasised repeatedly the nature of the process which the parties themselves have chosen and gave effect to the principle of party autonomy. This resonates, not only in the deference of the court to the decision of the arbitral institution chosen by the parties, but also in the references to the scope of the discretion given to the tribunal in the decision-making process under that institution’s rules and the tribunal’s duty to avoid unnecessary delay or expense under section 33 of the AA 1996.

By way of brief background, a reportedly experienced tribunal appointed a secretary in a London Court of International Arbitration (LCIA) arbitration. The appointment and identity of that secretary was agreed by the parties. During the proceedings, an email from the chairman of the tribunal asking the secretary for his “reaction to the latest from [claimant]?” was sent in error to the claimant’s legal team. This email triggered a request from the claimant for:

  • A description of all the tasks allocated to the secretary.
  • Disclosure of certain communications between the tribunal and the secretary.

A description was duly provided, but the request for documents declined. The claimant then challenged the entire tribunal by way of application to the LCIA court basing the challenge, amongst other things, on alleged improper delegation to the secretary of tasks beyond those permitted by the LCIA Rules and policies. The evidential basis was the chairman’s email and the proportions of time spent by the tribunal and the secretary in relation to three particular procedural decisions (the decisions). The claimant also challenged the chairman individually on the basis of comments made at a conference.

In response to the challenge based on improper delegation, the tribunal explained that the tasks undertaken by the secretary included organising papers, highlighting relevant authorities, maintaining factual chronologies, preparing drafts of orders and correspondence for consideration by the tribunal, and sending correspondence on behalf of the tribunal. The LCIA court held that none of the grounds based on a formulation of improper delegation were made out and declined that challenge. However, the separate challenge against the chairman was upheld. A reconstituted tribunal with a new chairman thereafter adopted the decisions.

The claimant then applied to the English court to challenge the co-arbitrators under section 24 of the Arbitration Act 1996 alleging, among other things, that the co arbitrators had improperly delegated their adjudicative functions directly (the so-called “Adjudicative Function Argument”), or by virtue of the fact that the co-arbitrators had properly relied on the chairman but the chairman had improperly delegated adjudicative functions to the secretary (the “Indirect Delegation Argument”).

In dealing with the Adjudicative Function Argument, the court quoted extensively from the letters which the co-arbitrators had submitted to the LCIA court in response to the challenge at institutional level. These focussed on the way in which decisions were made, including the labour done by the chairman and by the secretary in producing draft decisions, and the consideration of those decisions by the co-arbitrators. In dismissing the Adjudicative Function Argument, the court had little to say regarding the involvement of the secretary but wholeheartedly endorsed the way in which the co-arbitrators discharged their adjudicatory function by considering the chairman’s draft decision in the context of the submissions which the tribunal had received and either accepting that decision or proposing amendments.

The court’s approach was firmly rooted in statute (the tribunal’s duty under section 33(1)(b) of the AA 1996 to avoid undue delay and expense (also a common feature of most arbitral rules)) and the entitlement of the co-arbitrators to delegate authority to make procedural rulings to the chairman under the LCIA Rules; that is, this was within the scope of the procedure to which the parties had agreed when they agreed to arbitration in London under the LCIA Rules.

The court gave short-shrift to the Indirect Delegation Argument, on the basis that the delegation to the chairman of the task of preparing drafts was in fulfilment of the co-arbitrators’ adjudicatory function and was not a delegation of that adjudicatory function. The argument also failed on the ground that section 24(1)(d) requires a failure to conduct proceedings properly by the arbitrator who is being challenged, which failure causes substantial injustice. Section 24 could not be used against an arbitrator who has done nothing wrong.

Moreover, the court found no delegation by the chairman of any adjudicative functions. Whilst there was considerable attention given to various guidance and commentaries on the use of tribunal secretaries and the non-delegable duties of an arbitrator, the court assessed the chairman’s conduct by reference to the “critical yardstick” of section 24 of the AA 1996. The court held that:

“… the use of a tribunal secretary must not involve any member of the tribunal abrogating or impairing his non-delegable and personal decision-making function. That function requires each member of the tribunal to bring his own personal and independent judgment to bear on the decision in question… and to exercise reasonable diligence in going about discharging that function.”

Establishing whether the conduct measures up to the metaphorical yardstick depends on “the nature of the decision and the circumstances of each case”. Again, the court looked at the process upon which the parties had agreed, including their choice of the LCIA Rules by which they had conferred on the tribunal the “widest possible discretion” as to how it discharged its “core decision-making responsibilities”.

So, what conduct by arbitrators or a tribunal secretary might lead to the conclusion that that secretary is, de facto, a “fourth arbitrator”? According to the court, best practice to avoid the real danger of an inappropriate influence over the decision-making process is to steer clear of tasking the secretary with anything which involves “expressing a view on the substance of that which the tribunal is called upon to decide”. However, the court gave a warning to any party who may seek to apply this as a determinative test: failure to follow best practice, it noted, is not synonymous with failing to conduct proceedings within the meaning of section 24(1)(d) of the AA 1996. In the circumstances of this case, the court found that it would not be an improper delegation were the chairman to have solicited or taken account of the views of the secretary on the merits of procedural decisions. More generally, soliciting an opinion even on the merits of a decision does not inevitably lead to an inference that an arbitrator has surrendered any part of his or her own decision-making role. Again, this would depend on the circumstances.

As well as offering some judicial guidance on use of a secretary, this decision demonstrates the cost and efficiency savings which use of a tribunal secretary may achieve. The court considered carefully the time spent by the co-arbitrators in reviewing the draft decisions in comparison to that spent by the chairman and the secretary in preparing them and concluded that the co-arbitrators’ labour was sufficient for them to have discharged their functions appropriately. Based on these financial savings and the court’s robust defence of the tribunal’s approach, the question may be asked whether the arbitration community should be less wary and get more comfortable with the use of tribunal secretaries.

Herbert Smith Freehills Hannah Ambrose Vanessa Naish

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