The Fourth Arbitrator
As illustrated by the Yukos arbitrations, the use of tribunal secretaries in international commercial arbitration is under scrutiny. Should a tribunal secretary be permitted to become ‘the Fourth Arbitrator’ because the work he or she carries out has the potential to influence the outcome? What can be done to guard against this?
When parties agree to arbitrate, they are giving up the right to go to court and are instead placing the dispute in the hands of arbitrators that they, or an institution they have chosen, have selected as having the right skill set to determine the dispute. They will rightly expect the arbitrators to carry out all tasks concerned with the assessment and weighing of evidence, legal analysis and a decision on the merits. This is what will happen in the vast majority of cases.
Challenge to the award
Where it does not happen, and a tribunal secretary oversteps the mark, the implications can be very serious. The award may be challenged on the basis that there has been improper delegation of the tribunal’s function. It has been reported that, in the Yukos case (Yukos Universal Ltd v The Russian Federation, Hulley Enterprises Limited v The Russian Federation and Veteran Petroleum Limited v The Russian Federation), expert evidence filed in support of the challenge suggested that the tribunal secretary wrote 79% of the preliminary objections section of the award, 65% of the liability section and 81% of the damages section.
Other examples of reliance by a party on the improper delegation of tribunal responsibility are La Société pour la Recherché, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures SpA v Statoil Natural Gas, where Sonatrach relied on an argument that “the tribunal improperly delegated authority to its administrative secretary or impermissibly allowed her to participate in its deliberations” and a more recent case brought before the Swiss Supreme Court.
The BLP Survey
On 6 January 2016, Berwin Leighton Paisner (BLP) released the results of its annual International Arbitration survey, this year focusing on the role of tribunal secretaries. The survey, which had respondents from across Africa, APAC, Europe, the Middle East and both North and South America, looked at a number of different issues around the use of secretaries.
In particular, BLP wanted to find out where respondents thought the line should be drawn between activities that were acceptable for tribunal secretaries to carry out, and those activities that were inappropriate for them to perform. BLP presented respondents with a list of possible activities and asked them to identify on what side of the line each activity fell.
The desirability of using a tribunal secretary was found to be linked to the nature of the role that the secretary would perform. The survey results demonstrated a clear delineation between tasks facilitating the arbitration process and those that encroach on the exercise of the tribunal’s duties to the parties.
Most respondents were happy that a tribunal secretary should perform purely administrative tasks, but 90% of respondents felt that it was inappropriate for a tribunal secretary to perform tasks such as writing substantive parts of the award, or participating in the tribunal’s deliberations.
78% said that there should be complete transparency about how a tribunal secretary spent his or her time.
Other findings relating to the appointment, qualifications and payment of tribunal secretaries were that:
- 76% felt that all party consent should be a requirement for the appointment of a tribunal secretary.
- 86% of respondents felt that nominee secretaries should be asked to provide a certificate of independence and impartiality.
- 74% felt that a tribunal secretary should be a lawyer or legally qualified.
- 33% felt that the tribunal should pay for the tribunal secretary.
Protecting the integrity of the arbitration process
The number of cases where there has been an improper delegation of responsibility to the tribunal secretary is likely to be very small. However, practitioners’ perception of the process is also important. Transparency and some consensus around where the acceptable boundaries lie can only enhance good practice.
There is evidence that a number of arbitral institutions are responding to this need. Express reference to the use of tribunal secretaries appears in several arbitration rules (for example, the HKIAC Administered Arbitration Rules (Article 13.4), the Swiss Rules of International Arbitration (Article 15.5) and the Arbitration Rules of the Netherlands Arbitration Institute (Article 20)), but guidance on the role of tribunal secretaries has been harder to find. However, there are several institutions that have produced guidelines on one or more of the appointment, role and payment of a tribunal secretary. In 2012 the ICC produced an updated Note on the Appointment, Duties and Remuneration of Administrative Secretaries. The LCIA has guidance on its website covering similar ground. Other bodies that have issued guidelines include the Swiss and Hong Kong institutions mentioned above, the Singapore International Arbitration Centre and Jams International.
In 2014 the International Council for Commercial Arbitration published a very detailed commentary and set of principles for the appointment and use of tribunal secretaries. In October 2014 the International Bar Association adopted revisions to the IBA Guidelines of Conflicts of Interests in International Arbitration that include extending the duty of impartiality and independence to tribunal secretaries (Standard 5 (b)).
The role of tribunal secretaries is an issue that cannot be ignored. The vast majority of arbitrators are already cognisant of the dangers and will be following good practice. Improving party perception and avoiding tactical challenges will be achieved by complete transparency about the appointment and role of a tribunal secretary at an early stage of the arbitration process. Broad consistency among institutional rules on where the boundaries lie for work undertaken by a secretary will also help to avoid the reputation of international arbitration becoming tarnished.
Note to Editor: BLP’s International Arbitration Group has conducted a number of surveys over the last few years looking at some of the key issues affecting the arbitration process. In 2012 it focused on delays, 2013 on document production and in 2014 looked at choice of seat. For further information on these reports, please visit BLP’s website.