REUTERS | Yuya Shino

The arbitration vaccine: immunity of arbitrators

“A judge, for anything done by him as judge, by the authority which the King hath committed to him, and as sitting in the seat of the King (concerning his justice) shall not be drawn in question before any other judge”.

Preconceived wisdom holds that because judges and arbitrators are in the same business, namely the administration of justice, both should be granted immunity as a guard of independence. This article considers a comparative view on the extent to which arbitrators may be immune from any scrutiny of their actions in the course of their mandate.

Affaki affair

In September 2020, a Kenyan court ordered that the ICC disclose documents in a fraud case against arbitrator George Affaki. Proceedings were commenced against Affaki in both Kenyan and French courts by Kenyan mobile phone repair company Technoservice Ltd (Technoservice), for breach of contract, fraud and breach of trust.

The fact that the Kenyan court compelled the handover of documents shows that the court is at least willing to entertain the possibility of arbitrator liability. This begs the question: to what extent are arbitrators immune from liability?

Arbitrator liability: an occupational health risk?

The Affaki affair is the latest high-profile instance where arbitrators have been held publicly accountable for their alleged behaviour in accepting and carrying out their mandate.

In late 2019, 14 arbitrators were imprisoned (and later released) in Peru while they were investigated for alleged bribery in favour of Odebrecht, the Brazilian construction company at the centre of the Operation Car Wash corruption affair.

In October 2018, three arbitrators were sentenced in absentia to a three-year prison term in Qatar, after they rendered a £20 million award against Qatari businessman Sheikh Al Misnad.

In a case concerning civil liability, the Spanish Supreme Court found against two arbitrators for negligence in February 2017. They were involved in an arbitration between PUMA and ESTUDIO 2000.

These cases, alongside the Affaki affair, suggest that possible civil or criminal liability is almost an occupational health risk for arbitrators; they are not completely immune from liability.

Institutional rules: the preventative medicine?

The arbitration rules for many of the major arbitral institutions provide for high levels of arbitrator immunity.

For example, article 41 of the ICC Rules 2021 states that arbitrators “shall not be liable to any person for any act or omission in connection with the arbitration, except to the extent such limitation of liability is prohibited by applicable law”. Article 31.1 of the LCIA Rules 2020 states that an arbitrator shall not “be liable to any party howsoever for any act or omission in connection with any arbitration, save:

  • Where the act or omission is shown by that party to constitute conscious and deliberate wrongdoing committed by the body or person alleged to be liable to that party.
  • To the extent that any part of this provision is shown to be prohibited by any applicable law.

A similar approach is adopted in the rules for the ICDR (article 38), SIAC (rule 38), HKIAC (article 46) and the SCC (article 52).

As an example in relation to ad hoc arbitration, article 16 of the UNCITRAL Rules 2010 states that:

“[…] save for intentional wrongdoing, the parties waive, to the fullest extent permitted under the applicable law, any claim against the arbitrators, the appointing authority and any person appointed by the arbitral tribunal based on any act or omission in connection with the arbitration”.

The apparent uniformity in the rules of these major arbitral institutions suggests that they ought to act as a first line of defence, or a preventative medicine, for arbitrators, against findings of liability with respect to their mandate as arbitrator.

Domestic regimes: the alternative medicine?

While the position taken by the rules of major arbitral institutions suggests that arbitrators generally enjoy some degree of immunity with respect to their mandate, such immunity is not absolute and is often caveated by either exceptions for the arbitrator’s deliberate wrongdoing or mandatory rules under domestic law (or both). As regards the latter, it would appear that one can broadly distinguish between the approach taken by common law and civil law jurisdictions.

The common law approach holds that arbitrators are entitled to an almost unqualified immunity by virtue of their quasi-judicial office. This is exemplified by section 29 of the English Arbitration Act 1996:

“An arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith”.

Significantly for the Affaki affair, section 16B of the Kenyan Arbitration Act 1995 (as amended in 2010) also provides for broad arbitrator immunity. If the Kenyan courts eventually find Affaki liable for the allegations advanced by Technoservice, it may signal a departure from the typical common law approach and what is generally understood to be Kenya’s arbitration-friendly stance.

Conversely, the civil law approach to immunity is slightly more qualified, allowing for civil liability in cases of negligence or willful harm, on the basis that there is a contractual relationship between the parties and the arbitrator.

For example, an arbitrator may be liable for damages in the event of committing gross negligence in the Netherlands, without any requirement for the arbitrator to have acted in bad faith.

The position in the Middle East is much less sanguine. Qatar and Tunisia both apply strong civil liability regimes. Criminal liability was only repealed in the UAE in 2018.

Conclusion

The Affaki affair is conspicuous as one of the rare instances, particularly in a common law jurisdiction, where a court has been willing to consider and investigate an arbitrator’s liability. However, recent cases suggest that, while arbitrators continue to enjoy their status as quasi-judicial decision-makers, they should be fully aware of the potential personal liability in accepting an appointment.

With thanks to Suraj Saggar, trainee solicitor at Stephenson Harwood, for his contributions to this post.

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