REUTERS | Hannah McKay

LCIA’s changes to its tribunal secretary process: about time to make it more transparent

The use of tribunal secretaries in international arbitration has been the subject of much criticism and debate in recent times. Much of the concern has focused on the idea of the tribunal secretary effectively performing the functions of a “second”, “fourth” or “shadow” arbitrator.

Those advocating for the use of tribunal secretaries do so on the basis that that their appointment provides:

  • Savings in time: the arbitrator can focus on more crucial aspects of the case.
  • Savings in costs: the secretary has a much lower hourly rate than the arbitrator.
  • Crucial arbitration experience to the tribunal secretaries themselves in an early stage of their careers.

Those who are against the use of tribunal secretaries base their criticism on the ground that the selection of an arbitrator is intuitus personae, and as such, there cannot be any delegation by the arbitrator.

On 26 October 2017, the London Court of International Arbitration (LCIA) published its updated Notes for Arbitrators (the LCIA Note) to provide more detail and clarity on its approach to the role and use of tribunal secretaries. This post discusses the changes introduced by the LCIA Note while also analysing them in light of international best practices dealing with tribunal secretaries.

Background

It was with the Yukos case that the role of tribunal secretary came into the limelight. The Russian Federation applied for the award to be set aside before The Hague District Court on various grounds, including that the arbitrators did not fulfil their mandate personally as they improperly delegated to the tribunal secretary tasks that were reserved for the domain of the tribunal. Ultimately, the award was set aside on different grounds and The Hague District Court did not rule on the question of arbitrators delegating their tasks to the tribunal secretary.

Recently, in the case of P v Q, the question of improper delegation by arbitrators arose again. In this case, the English High Court was hearing an application regarding the removal of two co-arbitrators in an ongoing LCIA arbitration. The grounds for removal included, amongst others, that the arbitrators improperly delegated their role to a tribunal secretary beyond the permissible limits of the LCIA rules and policy. The application was eventually dismissed by the English High Court. However, the case added fuel to the debate within the arbitration community regarding the use of tribunal secretaries.

It is against this background that arbitration users have been advocating increased transparency with respect to activities concerning a tribunal secretary.

Appointment

There are two approaches prevalent in relation to the appointment of the tribunal secretary. Under the first approach, as envisaged by the Hong Kong International Arbitration Centre (HKIAC) Guidelines on the Use of a Secretary to the Arbitral Tribunal, the tribunal is required to consult with the parties before appointing any secretary. Crucially, the requirement under the HKIAC Guidelines is restricted to consulting with the parties and does not extend to requiring the parties’ consent or approval prior to such appointment, leaving the tribunal as the ultimate authority to appoint any secretary it chooses.

In contrast, under the second approach, the tribunal can appoint a secretary only once it has obtained consent or approval from all the parties. This has been adopted by various institutions including the Singapore International Arbitration Centre (SIAC), the Stockholm Chamber of Commerce (SCC) and JAMS. This approach was also adopted by the LCIA in the previous version of the LCIA Note. However, in the new LCIA Note, whilst the approval of the parties is still a prerequisite to the appointment of a tribunal secretary, such approval is to be deemed to have been given by a party if such party has not approved or objected to the tribunal secretary within a reasonable time limit as set by the tribunal.

Under the LCIA Note, a tribunal secretary is approved once the parties have agreed inter alia:

  • The particular individual fulfilling the role of the tribunal secretary based on the Statement of Independence and Consent to Appointment submitted by the proposed secretary.
  • The remuneration to be provided to the tribunal secretary.
  • The duties of the tribunal secretary.

Each of these is described in detail below.

An interesting feature in the LCIA Note is that if any party objects to the appointment of the proposed tribunal secretary, then the tribunal cannot use that person as a secretary. Thus, the parties effectively have a veto right over the appointment of the proposed tribunal secretary as they are not required to provide reasons for objecting to the appointment of the proposed tribunal secretary.

Independence and impartiality

The LCIA Note requires the proposed secretary to complete a Statement of Independence and Consent to Appointment before their appointment, in the same way as an arbitrator. The tribunal is then required to send this statement to the parties, who are in turn required to agree to that individual taking on the role of the tribunal secretary in light of the statement. The purpose of this is to ensure that any apparent conflict is brought to light, giving the parties a chance to comment on any such conflict prior to appointment.

Such a declaration of independence and impartiality is in line with the IBA Guidelines on Conflict of Interest in International Arbitration 2014, which state at General Standard 5(b) that “secretaries and assistants to the Arbitral Tribunal are bound by the same duty of independence and impartiality (including the duty of disclosure) as arbitrators”. Further, the duty to maintain independence and impartiality is a continuing obligation under the LCIA Note and the tribunal is tasked with ensuring that the proposed secretary is aware of the obligation to disclose any circumstances, which are likely to give rise to any justifiable doubts as to their independence or impartiality.

Remuneration

Another area of concern for the parties regarding the use of tribunal secretaries is the notion that they are made to pay for the secretary’s services (when they never intended to have a secretary in the first place) and this increases the overall cost of the arbitration. This may not necessarily be the case. If a secretary performs significant tasks in the arbitration that are time intensive, such as organising papers or making chronologies, they may save the parties’ costs in the long run because their hourly rates will be much lower than those of the arbitrators performing these tasks.

In order to address the parties’ concern regarding the potential costs of engaging the services of a tribunal secretary, the LCIA Note requires the tribunal to inform the parties of the proposed hourly rate (the LCIA Note suggests an hourly rate of £50 to £150 per hour) and any entitlement to reimbursement of costs. This will ensure that the parties are provided with clarity early on in the arbitration proceedings as to the costs associated with engaging a secretary, and if they consider the remuneration disproportionate or unwarranted, the parties can object to such proposals.

Duties of the secretary

The most controversial aspect of using a tribunal secretary relates to the duties they are required to perform in the arbitration proceedings. The tasks that tend to attract some concerns include:

  • Permitting the secretary to attend the tribunal’s meetings and deliberations.
  • The secretary carrying out substantive tasks such as summarising submissions, reviewing authorities, and preparing first drafts of awards or procedural orders.

In this respect, there appears to be a broad consensus amongst the international arbitration community that the tasks performed by the secretary should not result in the delegation by the tribunal of its decision making function. It is generally accepted that the tribunal should supervise those tasks of the secretary that go beyond being purely administrative (Article 3 of the Young ICCA Guide on Arbitral Secretaries).

In contrast to the earlier version, which prescribed that the secretary may perform only routine and administrative tasks, the LCIA Note does not prescribe a limited number of tasks that a secretary is permitted to perform. Rather, it envisages that the secretary may perform a range of administrative or substantive tasks for the tribunal, so long as these are agreed by the parties, are carried out in accordance with tribunal’s specific instructions/supervision and do not involve the tribunal delegating its fundamental decision-making function (see paragraphs 68 to 70 of the LCIA Note). On the subject of conspiracy, the tribunal is also required to circulate a list of tribunal secretary tasks that it “may wish to propose”, which can serve as a starting point of discussion between the parties. Importantly, the parties must agree to these proposed tasks being carried out by the secretary. Any variation to the role of the tribunal secretary, such as delegating additional tasks or changing the remuneration, must be agreed by the parties.

Conclusion

Much of the criticism directed at the role of the tribunal secretary concerns the lack of transparency around various facets of this role. By requiring engagement with and approval from the parties, the LCIA Note addresses some of the key concerns in relation to this practice and emphasises the importance of transparency from the outset.

Kirkland & Ellis Kartikey Mahajan

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