Thou shalt namoore, thurgh thy flaterye,

Do me to synge and wynke with myn ye;

For he that wynketh, whan he sholde see,

Al wilfully, God lat him nevere thee!

Chanticleer the Rooster in Chaucer’s Nun’s Priest’s Tale^*

Les hommes ont oublié cette vérité, dit le renard.

Mais tu ne dois pas l’oublier.

Tu deviens responsable pour toujours de ce que tu as apprivoisé.

Antoine de Saint-Exupéry, Le Petit Prince^**

6.01  ‘Regulation’ and ‘self-regulation’ are ‘normatively loaded term[s]’.¹ The word ‘regulation’ is more likely to send shivers down the spine than to inspire confidence. The main reason is that regulation is usually conceived of as a top-down, command-and-control operation; it is the imposition of coercive state power through rules generated by pointy-headed state bureaucrats. The word ‘regulation’ brings to mind enormous tomes of convoluted fine print and picayune restrictions.² It is a synonym for unnecessary red tape.³

(p. 222) 6.02  ‘Self-regulation’, meanwhile, is often derided as ‘self-serving, self-interested, lacking in sanctions, beset with free rider problems, and simply a sham’.⁴ It is an indicator ‘that the government is not serious about an issue’.⁵ It prompts the age-old question: Should foxes ever be left to guard the henhouse?⁶

6.03  As debates about ethical regulation have bubbled up in international arbitration, some commentators have issued a health warning of sorts against what has been called ‘Legislatis’, meaning the urge to legislate and use more rules to solve problems.⁷ Other commentators have questioned more specifically whether it would be appropriate for international arbitration to ‘usurp’ from national authorities the inherently public function of regulating professionals.⁸ These critics argue that professional regulation is bound up with national public policy and inextricably intertwined with national cultural preferences.⁹ Still others protest that ethical regulation in international arbitration would be unnecessary meddling in a system that is doing just fine without it, thank you very much.¹⁰

6.04  This chapter seeks not only to answer these critiques, but to reframe the regulatory debate in international arbitration, including how foxes and henhouses feature in that debate.The primary thesis of this book is that international arbitration must undertake express self-regulation of those who participate in its processes. The need for ethical regulation, particularly with regard to attorneys, has been the subject of heated debate, played out most recently in a series of publications and events.¹¹ To move this debate forward, it is necessary to debunk (p. 223) some of the underlying myths that animate it, to replace these mistaken assumptions with more robust and meaningful definitions of the term ‘regulation’, and to examine existing forms of self-regulation in international arbitration.

6.05  Building on the admonition of de Saint-Exupéry’s wise fox, this chapter urges international arbitration to be responsible for those professionals it has ‘tamed’ in its processes. Drawing contrast with Chanticleer’s narrow escape,¹² it argues that responsible regulation in international arbitration can no longer be resisted by self-satisfied, closed-eyed crowing that regulation is not needed. The first Part of this book established that all professionals are in need of greater guidance and accountability in international arbitration. This chapter demonstrates that professional self-regulation would not be a radical innovation. It is, instead, an inevitable evolutionary development. It is similar to prevailing trends toward global self-governance in other transnational activities and emerges out of existing predicates in international arbitration practice itself.

6.06  This chapter begins in Section A by defining the terms ‘regulation’ and ‘self-regulation’, both as general concepts and as they apply to professional conduct. The remainder of the chapter builds on these definitions. It argues that internal mechanisms and procedures maximize the competence of a regulatory regime like international arbitration. Meanwhile, competing interests within international arbitration, as well as national bulwarks, prevent self-regulation from devolving into a race to the bottom.

6.07  After establishing the definition and parameters of self-regulation in Section A, Section B argues that international arbitration is already engaged in the self-regulation of international arbitrators. Specifically, the ethical standards for arbitrators developed by members of the international arbitral community are more precise, effective, and professionally relevant than those developed by national legislatures and courts.¹³ Arbitral institutions directly oversee the selection, appointment, and challenge processes under their rules. In performing these functions, arbitral institutions act as primary regulators, both in developing applicable standards and enforcing them. National courts remain available as a final bulwark. In some systems where permitted under national law, they rule directly on arbitrator challenges; in other systems, they review awards allegedly affected by arbitrator misconduct in annulment or enforcement proceedings. National courts, however, conduct this review in only a small fraction of international arbitrations. Their conclusions differ from arbitral institutions’ decisions on arbitrator challenges in a smaller fraction of that already small fraction. In other words, both by design and in practice, national courts provide a minimalistic backstop to self-regulation rather than serving a primary regulatory function.

6.08  There is clearly room for improvement in regulation of international arbitrators, including increased transparency and accountability in the selection process. These topics are taken up (p. 224) later in Chapters 8 and 9. The basic framework for arbitrator regulation, however, has proven to be more effective and reliable than might otherwise be imagined or implemented through any external or national regulatory processes.

6.09  Based on the general outlines of international arbitrator regulation, Section C proposes a model for attorney regulation that implements the essential structural features that have made arbitrator regulation successful. Specifically, these proposals are for the promulgation and enforcement of ethical obligations at an international level and by private entities within international arbital processes. These proposals mean that national bar authorities and courts would not funcition as primary regulators, but instead as essential, albeit limited secondary regulators.

6.10  A growing number of commentators have been calling for development of express regulation of counsel in international arbitration.¹⁴ These proposals, however, have also been met with knitted-brow disdain. Noted arbitration professionals publicly lament that ‘more’ professional regulation in international arbitration might ‘cure the disease but kill the patient’.¹⁵ The admonition to all is that, if international arbitration were to attempt self-regulation, it would run the risk of ‘regulating [itself] out of existence’.¹⁶

6.11  These articulated concerns, it will be shown, are predicated on outdated and ultimately misleading assumptions about what is meant by ‘regulation’, ‘regulators’, and ‘self-regulation’. This Part unpacks the meaning of these terms and locates them in modern debates among political scientists and policy analysts about the nature of transnational and global governance.(p. 225)

6.12  Resistance in the international arbitration community to proposals for express ethical regulation or even self-regulation was predictable, if not inevitable. When ‘regulation’ is translated to mean traditional, heavy-handed bureaucratic controls, the term itself is a welcome mat for opposition. By now, however, this view of regulation, and the notion that States have a monopoly on the production of regulation, are understood in academic literature as over-simplified relics.

6.13  At a descriptive level, scholars from fields as disparate as political science, economics, legal pluralism, sociology, psychology, and others, have demonstrated the ‘obvious’ fact that ‘the state does not…exercise a monopoly in regulating the lives of citizens’.¹⁷ Even within the confines of a single State, a host of forces impose order on society and ‘regulate’ its members.¹⁸

6.14  These insights have created pressure for a new, more modern definition of ‘regulation’, even if efforts have not yet distilled into consensus. As Christine Parker explains:

Definitions of regulation range from ‘a type of legal instrument’, to any area of law that aims at social control, to any intentional ‘process of controlling behavior with reference to some standard or purpose’, to ‘an outcome of an interaction of forces and actors’, to and even ‘a property of self-correction’. ‘Regulators’ can be state institutions, non-state actors, social and economic forces (e.g., markets, norms, or even language), or physical or virtual technologies.¹⁹

Without parsing the nuanced reasons for variances among competing definitions, it is useful to adopt a general definition for the purposes of this chapter. Julia Black defines regulation as:

[T]he sustained and focused attempt to alter the behaviour of others according to defined standards or purposes with the intention of producing a broadly identified outcome or outcomes, which may involve mechanisms of standard-setting, information-gathering and behaviour modification.²⁰

This definition refocuses the definition of regulation on the objectives (controlling behaviour) and the functions required to accomplish that (setting substantive standards and enforcement).

(p. 226) 6.15  The redefinition of regulation has, in turn, ushered in a range of theories and proposals about how and when regulation is most effective, and which mechanisms are optimal to accomplish desired ends.²¹ The result is a vigorous debate about which strategy, or combination of strategies, is optimal for ensuring compliance with regulatory objectives.²²

6.16  With respect to international and cross-border activities, the obsolescence of traditional notions of regulation is even more apparent. As corporate enterprises have become multinational and supply chains have gone global, individual States have become largely incapable of imposing conventional domestic ‘regulation’ on transnational activities.²³ This regulatory impotence has been demonstrated in areas as diverse as the environment, health and safety, workers’ rights, human rights, financial reporting standards, and the like.²⁴

6.17  At the transnational level, regulation through conventional forms—treaties and intergovernmental organizations—has also proven to be ineffectual.²⁵ As Stacie Strong explains, ‘Formal regulatory bodies…find it difficult to respond rapidly to threats of international legal harm, even though the pace and integrated nature of modern globalized society means that developments in one jurisdiction can have a nearly instantaneous effect elsewhere in the world’.²⁶ Just as State-centric views of domestic regulation have broken down, scholarship regarding global regulation reveals ‘what is really going on’ at the transnational level in the absence of effective traditional State regulation.²⁷ These assessments are called variously, and with significant overlap, ‘New Governance’,²⁸ ‘transnational norm theory’,²⁹ ‘global (p. 227) governance’,³⁰ ‘global legal pluralism’,³¹ ‘new regulatory initiatives’,³² ‘“hard” and “soft” law in international governance’,³³ and ‘global law without a state’.³⁴

6.18  What these various theories and models all have in common is that they identify a declining role of formal, centralized state action in conjunction with a rise, and even primary role, for private actors and networks in implementing what are largely voluntary new regulatory regimes.³⁵ The reasons for this ‘privatization and internationalization of governance’ is that ‘governments lack [the] requisite technical expertise, financial resources, or flexibility to deal expeditiously with ever more complex and urgent regulatory tasks’.³⁶ The observed, measurable result is that, in global contexts, regulatory solutions to global governance problems tend to involve more market-oriented, participatory, decentralized, and self-regulatory strategies.

6.19  These strategies complement, and sometimes even displace, traditional State-based regulation. By internalizing monitoring and enforcement, and delegating it to insiders within the institutions being regulated, self-regulation can rely on specialized knowledge, technical capacity, proximity, and social capacity that government regulators lack.³⁷ These strategies can increase coverage and effectiveness. For example, in one study of the pharmaceutical industry, internal corporate inspectors were better able to detect problems, audit compliance, and trap suspected wrongdoers than government officials.³⁸ Another example of largely successful self-regulation is the City Code on Takeovers and Mergers, a body of rules written and administered by the Panel on Takeovers and Mergers that is staffed by personnel on secondment (professional exchange) from the professional community it regulates.³⁹

6.20  While the shift toward private, self-regulatory regimes in global contexts is essential, and perhaps even inevitable, it also raises important questions and concerns.⁴⁰ How and under what conditions can self-regulation be effective, reliable, and legitimate? When and how, in other words, can foxes be responsible guards of the henhouse? The importance of these questions is perhaps most acutely demonstrated by the failures of self-regulation in the global financial (p. 228) industry, illustrated most vividly by the LIBOR scandal described in the introduction to this volume. These questions must be answered by any regime that seeks to self-regulate.

6.21  Here again, governance scholars have developed a range of proposed theories and strategies for how to fill this governance gap to make self-regulation effective and legitimate. Two important contributions provide a basis for the model of professional self-regulation, developed later in this chapter. The first is John Braithwaite’s concept of ‘enforced self-regulation’.⁴¹ The second is Julia Black’s prescriptions for ensuring the legitimacy of private regulators.⁴²

6.22  Braithwaite identifies the fundamental weaknesses of self-regulation—that when enforcement would impose costs on those deputized to act as regulators, their incentives to regulate break down and the potential effectiveness of self-regulation also breaks down.⁴³ To address this problem, Braithwaite proposes a model for optimizing compliance with regulatory objectives that does not simply abandon any role for traditional State power. Instead, it emphasizes a combination of self-regulation backed up by public enforcement that is sufficiently punitive to ensure both the efficacy of the self-regulatory model and internal compliance with it.⁴⁴

6.23  In this model, private embedded actors are primary regulators, but government entities monitor various stages of self-regulation, ensure compliance with minimum governmentally enacted standards, and provide back-up legal enforcement when primary enforcement breaks down.⁴⁵ Braithwaite provides examples of where his enforced self-regulation model is already in place, including areas as diverse as aviation, food safety, mining, and environmental protection.⁴⁶

6.24  Even if his model is designed to avoid self-regulation’s most significant weakness, Braithwaite nevertheless also acknowledges potential problems with his model. He identifies the potential for bottlenecking in approving privately-written regulations, increased corporate costs, moral ambiguity in private drafting of regulations, judicial inflexibility in accommodating private rules, and the inability for corporate internal compliance monitoring groups to remain completely independent.⁴⁷

6.25  Another essential weakness with self-regulation, explored by Black, is that private entities can control the conduct only if their exercise of power is regarded as legitimate, meaning that (p. 229) they are perceived as acceptable and credible by those they seek to govern.⁴⁸ State regulatory machinery is imbued with an inherent legitimacy that derives from its sovereign, governmental status. For a fragmented, decentralized, and largely private regulatory regime that operates in the shadow of State power, those who promulgate and enforce regulations must find other means to affirm their legitimacy.

6.26  An organization or institution is considered legitimate if it establishes a ‘generalized perception or assumption that [its actions and objectives] are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions’.⁴⁹ In regulatory contexts, Black explains, legitimacy essentially means being ‘perceived as having a right to govern both by those [the organization or entity] seeks to govern and those on whose behalf it purports to govern’.⁵⁰ In this respect, the question of when a regulator is legitimate is not only a normative enquiry, but also an empirical enquiry.⁵¹ With ethical regulation in international arbitration, Jan Paulsson has made a similar observation about the limits of ‘self-policing’. He notes that ‘its success waxes and wanes in light of the perceptions of its bona fides’.⁵²

6.27  As Black explains, legitimacy can be established through a range of techniques. An institution can claim legitimacy based on invocation of larger regulatory goals and values, or based on its conformity with written norms and concepts of procedural justice, fairness, transparency, consistency, and the like, which Black refers to as ‘justice-based claims’ and ‘constitutionalist-based claims’.⁵³ Claims of legitimacy can also be based on what Black refers to as ‘functional claims’ about an organization or institution’s effectiveness in performing assigned regulatory tasks, as well as ‘democratic claims’ through reliance on processes that are representative, participatory, and deliberative.⁵⁴

6.28  As discussed in greater detail later,⁵⁵ international arbitration’s existing legal framework already largely tracks the essential features of Braithwaite’s and Black’s prescriptions. International arbitration is, as Braithwaite proposes, a largely private regime backed up by government enforcement that is highly punitive, but triggered only when self-regulation breaks down. Moreover, both as a community and among its constituent parts, international arbitration self-consciously builds and guards its legitimacy through many of the means and techniques that Black analyses.

6.29  The principal thesis of this book—that international arbitration should engage in express self-regulation of its participants’ professional conduct—would map ethical regulation onto these existing features of international arbitration. The call to self-regulation, in other words, is for international arbitration to acknowledge and leverage existing self-regulatory (p. 230) structures, extending these structures and institutions to professional regulation of various participants.

6.30  As explained in greater detail later,⁵⁶ this process of express self-regulation is already well developed with respect to arbitrators. An analogous regime is developing with respect to counsel, but it must be more expressly undertaken, also with respect to experts and third-party funders. Before turning to international arbitration and application of this reconceptualization of self-regulation to its participants, it is important to examine first the distinct, but related conceptualization of self-regulation traditionally applied to the professions.

6.31  When it comes to the professions, the terms ‘regulation’ and ‘self-regulation’ have their own separate baggage that is related to, but distinct from, regulation in other contexts. The term ‘self-regulation’ as applied to attorneys has traditionally been the essence of what it means to claim status as a professional.⁵⁷ It is conventionally conceived of as the means of guaranteeing professional independence from political and State control. Today, this definition and the ideals it embodies are deeply contested.

6.32  Just as with self-regulation of other economic actors, sceptics of attorney self-regulation worry about the incentives of those entrusted with their own regulation. Critics contend that professional self-regulation is a sham through which lawyers maintain an unhealthy monopoly on the provision of legal services.⁵⁸ Under this view, self-regulation is what allows the legal profession to ‘stave off state regulation’ and to ‘support the status hierarchy in the profession’ by defining as unethical conduct that in which mostly non-elite lawyers engage.⁵⁹

6.33  In a distinct but related vein, attorney self-regulation is also challenged as a myth because, as a practical matter, attorneys do not actually control attorney regulation. In many countries, attorneys are expressly and heavily regulated by the political branches of government.⁶⁰ In the United States, England, and many European countries, the ideal of self-regulation is often insisted on rhetorically, and sometimes trotted out to resist external regulation. For example, the International Monetary Fund had pressured Greece, Ireland, (p. 231) and Portugal to subject their lawyers to regulation established by a regulatory body comprised mostly of non-lawyers, which would have handled discipline and complaints. In opposition, US and European bar authorities relied on notions of professional independence and self-regulation.⁶¹ Specifically they argued that an external regulator would be:

…in clear breach of one of the core principles of the legal profession: regulation independent from the executive branch of the state—a principle recognized in Europe, the United States, and internationally. It is the cornerstone of any democratic society based on the rule of law and also necessary for the sound administration of justice.⁶²

Despite persistent rhetoric of professional independence, and the related notion of self-regulation, as a practical matter attorneys in Europe and the United States do not solely control the mechanisms for their own regulation.

6.34  In the United States and much of Europe, courts are actively engaged in the regulation of attorneys. Some scholars contend that judicial involvement signals that self-regulation is illusory.⁶³ Others argue that judicial supervision is consistent with a version of self-regulation,⁶⁴ or a means of ensuring the most important aspect of self-regulation, namely independence from the political branches.⁶⁵

6.35  Despite these objections about the role of courts, the greater challenge to the ideal of self-regulation, even in the United States and Europe, is the virtual explosion of auxiliary regulation aimed directly at attorneys engaged in specific industries and practices.⁶⁶ These regulations include national legislation, administrative regulations, judicially created rules (including liability rules), and international trade agreements.

6.36  These various ancillary regulations aim at controlling activities such as money laundering, corruption, terrorism, tax evasion, and international trade in legal services, but they de facto affect traditional notions of self-regulation by licensing and disciplinary authorities.⁶⁷ For (p. 232) international arbitration, as examined in Chapter 1, two countervailing transnational regulatory interests affect national bar authorities’ power. First, international trade pressures have forced national bar authorities to open local markets to foreign attorneys, usually on the condition that they register with local bar authorities.⁶⁸ Despite this development, in response to pressure to attract international arbitration business, most local bar authorities expressly exempt foreign lawyers appearing in international arbitration from such registration requirements or any other obligation to abide by local ethics rules.⁶⁹

6.37  This account of attorney regulation focuses on historic, formalistic definitions of ‘regulation’ as the conventional imposition of power by entities officially authorized to regulate attorneys. But what about the new theories of regulation in other spheres examined in the first part of this chapter? Is there a corollary to attorney regulation?

6.38  Just as the term ‘regulation’ in commercial and social contexts is now understood to refer more generally to intentional mechanisms for controlling behaviour,⁷⁰ a more accurate account of attorney regulation is now expanded to include the various forces that actually control attorney behaviour. At the same time notions of command-and-control regulation were being debunked in other fields, the prevailing model of traditional attorney regulation is also on the wane. Scholars of the professions long ago noted ‘a steadily shrinking percentage of the rules and regulations governing the various aspects of legal practice’,⁷¹ hence a declining role of formal disciplinary mechanisms. To the extent that traditional attorney regulation was a form of ‘self-regulation’, this trend is not moving toward privitization. It is parallel, however, in its transition to a more flexible and utilitarian approach to how regulation acutally works.

6.39  In his seminal article about ethical regulation in the United States, David Wilkins synthesized these trends, distilling them down to four categories of sources that regulate attorney conduct:

• • Disciplinary Controls, meaning traditional mechanisms imposed by local bar authorities working in conjunction with the judiciary;

• • Liability Controls, meaning malpractice claims;

• • Institutional Controls, meaning mechanisms that exist within the institutions attorneys operate (i.e., judicial or administrative sanctions); and

• • Legislative Controls, meaning statutory obligations imposed on lawyers by political branches that supplement, but are separate from, their bar-imposed ethical obligations.⁷²

Wilkins’ reconceptualization of attorney regulation parallels new governance theories that challenge traditional streamlined command-and-control models for regulation of other economic activities. Like other theories of regulation of commercial activities, Wilkins’ work demonstrates that attorney regulation is more complex, fragmented, diffuse, and multi-faceted than the simple story about traditional forms of attorney regulation at the national level.

(p. 233) 6.40  Just as new definitions of regulation have led to debates about which regulatory regimes work best in other fields, new understandings about attorney regulation similarly permit and require normative reconsideration of how attorneys should be regulated. What had previously been conceived of as ‘formally universal professional norms’ are given new meaning ‘as new and differently situated decision makers apply these rules to concrete cases in differing contexts’.⁷³ Based on this fragmented reality, Wilkins argues that professional norms developed for specialized practice settings will be most effective if enforcement is contextualized, meaning if they are interpreted and applied by the institutions that are most competent and have the greatest incentives to perform the necessary regulatory functions.⁷⁴

6.41  For domestic attorneys operating as advocates in national courts, this prescription suggests that national court judges should act as primary regulators.⁷⁵ As Wilkins explains, ‘[b]y making the enforcement process a part of an ongoing system of interactions between these knowledgeable actors and the offending lawyer, institutional controls increase the incentive for these parties to participate in the regulatory process’.⁷⁶ Institutional controls also ensure informational advantages through situational monitoring and specialized institutional competence that external controls lack.⁷⁷ The efficiencies of situational monitoring allow tribunals to shape enforcement within the context of adversarial incentives.⁷⁸

6.42  While emphasizing what Black would call functional claims, Wilkins is also arguing that attorney regulation should do more than efficiently enforce a static set of professional norms. Attorney regulation should also help inform an ongoing discussion about competing conceptions of the lawyer’s role.⁷⁹ Such assessments should be ‘open and accessible to ensure that information about the conduct in question and the standards being applied can be reviewed, critiqued, refined, and internalized’.⁸⁰ Wilkins effectively argues that attorney regulators focus on functional claims, but also employ what Black characterizes as ‘value-based’, ‘constitutionalist-based’, and ‘democratically-based’ claims of legitimacy.⁸¹

6.43  The lesson of this analysis for international arbitration, explored in greater detail in the remainder of this chapter, is that professional regulation of attorneys is most effective if located within international arbitral proceedings, institutions, and related international organizations. National institutions lack the functionality advantages that Wilkins identifies. Conflicts among national attorney ethics have already proven problematic, and internationally promulgated rules that are enforced through national institutions risk re-fragmentation. There are, however, both normative and practical challenges in relocating regulation of attorney conduct in international arbitration to the international level and within private (p. 234) institutions and processes. The final section of this chapter takes up these challenges, after analysing self-regulation in international arbitration generally and with respect to international arbitrators.

6.44  The main purpose of this book, and specifically this chapter, is to encourage a more systematic approach to professional self-regulation within international arbitration as a means to increase its legitimacy, reduce disruptions, and stave off potential external regulation. Although often framed as a new innovation, in reality, professional self-regulation in international arbitration is already a reality in various forms. At the most fundamental level, international arbitration is itself an example of a self-regulating dispute resolution regime, as examined in Section 1. With regard to international arbitrators, a robust form of self-regulation, analysed in Section 2, has developed organically and in response to perceived needs. A similar process, already underway with attorneys, is examined in Section 3. The chapter concludes with some thoughts about developments toward a self-regulatory regime for arbitrators and counsel being extended to experts and eventually third-party funders.

6.45  International arbitration is often characterized as a ‘ticket’ to admission to international trade. According to some commentators, sacrifice of national regulatory objectives is the price of that ticket.⁸² Under this view, international arbitration is one of the essential reasons why States have lost regulatory control over international economic activities.⁸³ Without dismissing the underlying concerns, that analysis arguably inverts, at least partially, the cause-and-effect relationship between the State loss of regulatory control and the rise of international arbitration.⁸⁴

6.46  Analysis of the effect of international arbitration on State regulation of global activities must begin with a clear understanding of what international arbitration displaces. In domestic contexts, national courts are a primary mechanism for enforcing State regulatory power.⁸⁵ While this function is most prevalent in the United States, with its tradition of private enforcement through litigation, other jurisdictions are increasingly relying on judicial mechanisms for regulatory enforcement.⁸⁶ With transnational activities, however, the viability of this (p. 235) function breaks down considerably.⁸⁷ This breakdown is in part what inspired global governance scholars, described earlier, to analyse how regulation of global commercial activities systematically exceeds the grasp of States.

6.47  Like other forms of national regulation dispute resolution similarly loses its potency when the target is cross-border conduct. National court control over transnational disputes, including disputes aimed at enforcing important national regulations, is fraught with ambiguities and limitations. Basic matters of jurisdiction, choice-of-law, cross-border evidence gathering, and—most crucially—enforcement of resulting judgments present unique challenges when disputes involve transnational elements.⁸⁸ Gary Born has dubbed these the ‘peculiar uncertainties’ of national litigation of international disputes.⁸⁹

6.48  The cumulative effect of these ‘peculiar uncertainties’ is that, although one State might assert that a particular national law is mandatory, that law is only actually binding if the State that imposes it can also effectively enforce it. As a practical matter, an ostensibly mandatory national law can be avoided, can lose its mandatory quality, in a particular case if another State’s court adjudicates the case and applies its own law, or refuses to enforce the enacting State’s judgment.⁹⁰ International arbitration must be evaluated against the background of this regulatory uncertainty, not against the false assumption of a fully effective regulatory framework that simply does not exist at the transnational level. The effectiveness of international arbitration in contrast to national courts explains why, for many categories of claims, it has emerged as the primary mechanism for resolving transnational disputes.⁹¹

6.49  International arbitration has become the primary mechanism for resolving transnational disputes precisely because it ensures an enforceability for awards that might otherwise be elusive with national court judgments.⁹² International arbitration avoids the ‘peculiar uncertainties’ (p. 236) of transnational adjudication in national courts by replacing State-produced rules and procedures with alternatives that are primarily developed and implemented privately and at the international level.⁹³ In international arbitration, the agreement between the parties generally determines the venue, the applicable arbitral and procedural rules, the applicable substantive law, and the identity of the arbitrators themselves. A range of private and non-governmental organizations promulgate rules and guidelines that facilitate these party agreements and provide gap fillers. Most prominent among these private entities⁹⁴ are arbitral institutions, which promulgate arbitral rules and administer arbitration cases. Through their rules and under their auspices, arbitral tribunals, appointed through agreement among the parties, generate binding awards.

6.50  Arbitral awards are not endowed with any formal precedential effect on subsequent cases or other arbitral tribunals. They have nevertheless incrementally built up into a body of informal international arbitration precedent, in both investment arbitration⁹⁵ and, to a lesser (p. 237) extent, in international commercial arbitration.⁹⁶ Cumulatively, these awards have become an important source of guidance for subsequent parties and tribunals.⁹⁷ Because they are the products of private sources, however, they are not pronounced or promulgated like public laws. They are, instead, disseminated through private channels.

6.51  Although global and diffuse, in the past several years international arbitration has become remarkably effective at exchanging information and vetting new developments among various participants.⁹⁸ An extraordinary number of conferences, professional publications, professional trade organizations, listserves, blog posts, LLM programmes, moot court competitions, lunch clubs, special interest groups, young practitioner groups, and networking events facilitate these exchanges. In addition to facilitating dissemination and discussion of developments in the field, these processes also contribute to a socialization process within the international arbitration community.⁹⁹

6.52  Similar information-sharing and socialization in other substantive areas, such as antitrust, securities, and corruption, have been characterized as creating international networks that promote transnational regulatory governance.¹⁰⁰ Even more deliberatively, international arbitration has claimed for itself various regulatory powers that were historically regarded as the exclusive province of States, including enforcement at the transnational level of securities, antitrust, and anti-corruption laws. Perhaps the best illustration of how international arbitration evolved into a mechanism for global governance is with respect to corruption. Although contracts procured through corruption were historically regarded as beyond the jurisdiction of arbitral tribunals,¹⁰¹ such disputes are now generally regarded as subject to arbitral jurisdiction.¹⁰²

6.53  Today, the exact nature and perimeters of arbitral tribunals’ regulatory function regarding allegations of corruption is being vigorously debated.¹⁰³ Questions range from fundamental (p. 238) issues about the extent and limits of arbitral tribunals’ obligations to more technical issues about the burden of proof applicable to establishing corruption as a legal defence.¹⁰⁴ The very existence of that debate, however, demonstrates recognition of the potentially important regulatory function for international arbitrators with respect to commercial and investment activities involving corruption.¹⁰⁵

6.54  Beyond issues of corruption, international arbitral tribunals also routinely adjudicate claims involving transnational applications of mandatory law, perhaps even more often and more effectively than domestic national courts for certain types of disputes.¹⁰⁶ In contrast to the ‘peculiar uncertainties’ of transnational litigation, anecdotal evidence suggests that international arbitration is doing a reasonably robust job of enforcing mandatory law in individual cases.¹⁰⁷ Far from completely undermining the public concerns embodied in mandatory rules, international arbitration is capable of ensuring, often does ensure, and perhaps even strengthens, their vitality in cross-border contexts.

6.55  Just as Braithwaite proposes in his model of enforced self-regulation, described earlier, international arbitration’s success is at least partially attributable to the fact that States provide an essential, though limited, control function. Virtually every State active in international commerce is a signatory to the New York Convention, the Panama Convention, or both.¹⁰⁸ Consistent with the Conventions, national judicial involvement in international arbitration cases is minimized, but it comes into play at key junctures, most notably annulment and enforcement of agreements and awards. States adopt national arbitration laws, which can undergird arbitral procedures, fill gaps in the absence of party agreement, and provide grounds for annulling locally made awards. National legislative and judicial functions are in the background of the primary and private ordering of the regime, but provide a last resort when things go wrong in the private ordering.¹⁰⁹

(p. 239) 6.56  The fact that most awards are voluntarily complied with¹¹⁰ means that even if national courts are authorized to review awards in annulment or recognition and enforcement proceedings, they rarely actually undertake that review. When they do, it is even more rare that they would actually annul or refuse to enforce an arbitral award. Despite the low probabilities in absolute terms, the risk that national courts will annul or refuse enforcement of an award is like the north point on a compass that keeps arbitral proceedings on course. Arbitrators have an affirmative duty to render an award that is likely to be enforced,¹¹¹ and parties often reference the risk of annulment or non-enforcement when arguing in favour of procedural opportunities or applicability of mandatory law. Arbitration’s self-regulatory function, in other words, operates in the shadow of national courts’ control function.

6.57  The result of these arrangements is a ‘transnational, hybrid institutional constellation in which states cooperate to put the authority of their domestic courts behind private dispute resolution bodies’.¹¹² International arbitration is a complex, fragmented, diffuse, and multi-faceted regime. States are willing to defer to it because they cannot replicate the expertise of international arbitration specialists, who are best-situated and suited to develop and operationalize applicable procedural rules and standards that can produce enforceable outcomes. Although not often regarded as such by arbitration practitioners themselves, the international arbitration regime is an example of the model of global governance described earlier in Section A.1. The remainder of this chapter argues that the professional regulation of participants in international arbitration has been, and should be, intentionally modelled to fit the self-regulatory structure of this regime.

6.58  As examined in Chapter 2, international arbitrators are largely exempt from traditional forms of national regulation that bind various other professions, such as barbers, taxidermists and even lawyers. Until recently they were also largely exempt from any regulation at the international level. Instead, international arbitrators’ conduct was subject only to unchecked self-monitoring, and a hodge-podge of anaemic and disjunctive controls.¹¹³ Chapter 2 examined how this vacuum has been filled with a range of new sources, but also how expectations on and challenges for arbitrators have expanded in recent years. Drawing on those descriptions in Chapter 2, this Part analyses how the sources and procedures that control arbitrator (p. 240) conduct have evolved into an effective and legitimate—if still-evolving—self-regulatory regime. Arbitral institutions and organizations operate as primary regulators. These entities have establishd their regulatory role through demonstrated expertise and proximity, as well as constructive self-interest in safeguarding the effectiveness of arbitral processes.

6.59  Focusing on arbitrators’ obligations of independence and impartiality, Section a of this Part examines how the various constituent substantive parts of those obligations—a duty to investigate, a duty to disclose, and standards for disqualification—were primarily developed and refined by private international institutions and organizations, not national or governmental regulators. Section b examines enforcement of these obligations primarily within international arbitration processes and institutions.

6.60  Arbitrators’ skill and expertise may entice parties to entrust their disputes to international arbitration, but it is their neutrality that largely accounts for confidence in their final decisions. International arbitrators personify the promise of neutral decision-making in international arbitration.¹¹⁴ Their ethical obligations are the expression of that promise. As examined in Chapter 1, international arbitrators were historically a small, intimate group that did not seem to need any formal professional regulation. With increased complexity, size, and diversity of cases, as well as ever greater demands for transparency and predictability, arbitrators’ personal sense of rectitude and related informal social controls are now insufficient.¹¹⁵ That determination, and regulatory responses to it, were made primarily by private arbitral institutions and organizations.

6.61  As a practical matter, the selection and appointment process is the primary means through which arbitrators are regulated. This process begins with a duty by prospective arbitrators to disclose information about potential conflicts of interest. The development and refinement of this duty over time is one of the best examples of how regulatory competence is allocated in international arbitration.

6.62  National law has been notably vague, and occasionally even silent, about the existence and perimeters of a duty of disclosure for arbitrators. Perhaps most strikingly, the English Arbitration Act of 1996 deliberately omits any express affirmative duty of disclosure¹¹⁶ and English courts have not imposed such an obligation.¹¹⁷ English legislation and case law may be an outlier since national legislation and case law from jurisdictions acknowledge the (p. 241) existence of such a duty. Even those States that impose such a duty, however, do not effectively clarify the perimeters of the duty.

6.63  While some national laws still lack disclosure obligations, all international arbitration rules impose such a duty.¹¹⁸ These obligations evolved within arbitral institutions, even among those institutions that are not private.¹¹⁹ This analysis illustrates two important features of the duty to disclose. First, arbitral institutions preceded States in imposing such a duty. Second, when national authorities adopt a duty to disclose, they draw inspiration from the privately implemented obligation. For example, when the US Supreme Court first pronounced the existence of such a duty under US law in Commonwealth Coatings Corp. v Continential Cas. Co.,¹²⁰ it relied on the existence of a duty to disclose under American Arbitration Association (AAA) arbitral rules as ‘highly significant’, even if ‘not controlling’.¹²¹

6.64  In addition to creating arbitrator disclosure obligations, arbitral institutions have also significantly and voluntarily refined the content of those obligations over the years. For example, the earliest version of disclosure obligations in the International Chamber of Commerce (ICC) Rules required only that a prospective arbitrator disclose information that the arbitrator believed from the arbitrator’s own subjective perspective called the arbitrator’s independence into question.¹²² Later versions of the ICC Rules reduced this almost absolute personal discretion by requiring that arbitrators disclose ‘any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties’.¹²³ Even more recently, the ICC disclosure standard has been revised again to require disclosure of ‘any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality’.¹²⁴

(p. 242) 6.65  These newer standards, which are often referred to as incorporating a ‘subjective’ standard but this time from the parties’ (not arbitrators’) perspective,¹²⁵ are intended to require broader disclosure.¹²⁶

6.66  Some institutional rules also supplement disclosure obligations with a statement of independence that includes additional specificity about the nature of disclosures. For example, in response to continued complaints about delays in arbitral proceedings and the timeliness of awards, in August 2009 the ICC expanded its more general Statement of Independence to a ‘Statement of Acceptance, Availability and Independence’. This new Statement compels disclosure of specifics about prospective arbitrators’ caseloads, not ‘[g]eneral descriptions, such as “many” or “several” [matters]’. To that end, prospective arbitrators must list their ‘currently pending’ cases, including cases as counsel, co-arbitrator, and sole or presiding arbitrator. They must also confirm their ability to devote necessary time to the arbitration and to conduct the process ‘diligently, efficiently and in accordance with the time limits in the Rules’.¹²⁷ In addition to disclosure obligations during the appointment process, new revisions to the ICC Rules also require arbitrators to provide the parties and the ICC Secretariat with an expected date when the award will be rendered after the close of proceedings.¹²⁸

6.67  This newly expanded disclosure obligation was prompted by the ICC’s need to safeguard its own legitimacy among parties and to compete effectively with other institutions. The response, however, also demonstrates the power politics that can affect private implementation of new regulatory policies.¹²⁹ The new ICC disclosure requirement drew swift and vigorous backlash from some arbitrators. Among other things, on the substance, they argued that counting cases was not an accurate means of evaluating how busy an arbitrator is or how efficiently the arbitrator can resolve a case. Some arbitrators apparently even threatened a lawsuit, alleging that the proposed rule violated EU Competition Law and data protection rules. In halls of arbitration conferences, occasional mumblings can still be heard to the effect that the ICC has become outright hostile to arbitrators. These objections may have developed more traction were it not for support for the ICC reforms reportedly offered by law firms and corporate parties. The ICC may have been risking perception of legitimacy among arbitrators, but that seems to have gained legitimacy among other critical groups, users, and counsel.¹³⁰

(p. 243) 6.68  Outside of mainstream European arbitral institutions, arbitral institutions have a slightly different approach to arbitrator regulation. Several newer regional institutions have introduced specific codes of ethics for international arbitrators.¹³¹ For these newer institutions, which do not enjoy the established legitimacy of older and better known competitors, codes of conduct for arbitrators can be seen as a signal that the institution was ready to assume an active regulatory role in assuring proper arbitrator conduct.¹³²

6.69  While arbitral instititions have been at the forefront of arbitrator disclosure obligations, they contain mostly vague standards, such as ‘independence’, ‘impartiality’, ‘in the eyes of the parties’, and ‘justifiable doubts’. The problem with these standards is that, they are qualitative standards. As such, they effectively leave arbitrators with tremendous discretion about what to disclose and provide little guidance for how to interpret and apply the standard in specific situations.

6.70  When arbitrators are asked to decide how to apply qualitative standards to these specific factual settings, even acting in the utmost good faith, there can be disagreement about whether disclosure was warranted. In the words of one commentator, even under the supposedly more exacting ICC standard, ‘[a]rbitrators are… required “to stretch their mind” as to how certain circumstances might be perceived by the parties’.¹³³

6.71  The problem with this mind-stretching exercise is that it occurs precisely at the moment when a prospective arbitrator must also stretch their minds to put aside their own potential financial interests since the decision to make a disclosure can lead to challenge and disqualification. In other words, the decision to disclose a conflict-within-a-conflict. While intuition alone might suggest that this conflict-within-a-conflict is a problem, today we also have psychological research that verifies how a self-interested conflict can blur or ‘bias’ the decision to disclose.¹³⁴

6.72  Consider, for example, the situation in which a prospective arbitrator is a member of a law firm that is providing legal advice to one of the parties on an unrelated matter with which the arbitrator has no personal involvement.¹³⁵ Such contacts are today generally, but not universally, regarded as necessary to disclose. Fifteen or 20 years ago, most international arbitrators might have considered this situation unnecessary to disclose. Given historical changes and current room for disagreement, it is easy to imagine how a well-intentioned arbitrator reading the (p. 244) ICC’s standard could reasonably conclude that, since the arbitrator does not have any direct involvement in or knowledge about the representation, it could not affect his or her independent judgment and no party could believe it would.¹³⁶ In other words, the vague qualitiative standard leaves arbitrators with significant discretion in interpreting how that standard applies.

6.73  This is where the International Bar Association (IBA) and its Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines on Conflicts) make an important difference. The drafters of the IBA Guidelines on Conflicts converted vague qualitative standards into more precise quantitative, objective, and fact-based categories of information. These categories are organized in the familiar ‘red’, ‘orange’, and ‘green’ lists, which allow for relatively easy reference and application. These categories were developed relying on the collective experience of the drafters, systematic study of national and international precedents, and an extensive public consultation process.¹³⁷

6.74  By shifting from qualitative standards to quantitative, fact-based catetories, the IBA Guidelines on Conflicts help reduce ambiguities and much of the guesswork for arbitrators in deciding whether to make a disclosure.¹³⁸ They also tend to reduce the risk for parties in making unsuccessful challenges and make it easier to identify challenges that are not made in good faith (i.e., when the basis for the challenge does not fit into a red or oranage list category).¹³⁹ By creating clearer guidance to make the arbitrator selection process more transparent and predictable, the IBA Guidelines claim legitimacy through what Black would call ‘functional’ and ‘constitutional’claims.¹⁴⁰

6.75  Despite apparent advantages in format, the Guidelines are criticized on several fronts, including that in some instances they are ‘not strict enough’.¹⁴¹ Moreover, when they were first introduced, the Guidelines encountered significant scepticism from individuals and institutions.¹⁴² As Born explains:

A number of arbitral institutions initially greeted the IBA Guidelines with some coolness…The ICC stated that it would not apply the IBA Guidelines (or other guidelines) in considering institutional challenge; the LCIA also indicated skepticism about the Guidelines’ usefulness in institutional challenges.¹⁴³

(p. 245) Despite initial resistance, the IBA Guidelines on Conflicts quickly became an essential touchstone for parties, arbitrators, and institutions.¹⁴⁴ In addition to confidence in their content, the perceived legitimacy of the Guidelines is also attributable to the profile of the IBA, the prominence of its drafters, and (at least partially) the timing of their project.

6.76  By contrast to the Guidelines on Conflicts, the IBA’s earlier Rules of Ethics for International Arbitrators (IBA Rules of Ethics), published in 1987, were rarely if ever cited, except occasionally in academic literature.¹⁴⁵ Given the absence of perceived need for greater detail,¹⁴⁶ the IBA Rules of Ethics in substance did little more than articulate general platitudes about what constitutes good behaviour.¹⁴⁷ As analysed further later, they did not, for example, include a clear duty for arbitrators to investigate potential conflicts. The IBA Rules of Ethics were also drafted before the IBA even had an Arbitration Committee. No such committee existed because in the 1980s international arbitration was not necessarily recognized as a distinct practice area. Instead, the IBA’s Section on Business Law had a Committee on Procedures for Settling Disputes (Committee D), which appointed a drafting group led by three eminent lawyers who specialized in international arbitration.¹⁴⁸

6.77  In the time since publication of the Rules of Ethics, international arbitration practice and its role in the IBA have grown immensely. Today, the IBA’s Arbitration Committee boasts 2500 members from over 90 countries.¹⁴⁹ Instead of being a stepchild of the Section on Business Law, the Arbitration Committee is one of the crown jewels of the Dispute Resolution Section, at least as measured by membership and prominence of arbitration-related programming at IBA events.¹⁵⁰ The Arbitration Committee has distinguished itself by developing the popular IBA Rules on the Taking of Evidence in International Commercial Arbitration (IBA Evidence Rules), which were first published in 1999¹⁵¹ (and later revised in 2010).¹⁵²

(p. 246) 6.78  The process for drafting the Guidelines on Conflicts also contributed to their general acceptance. The working group itself included an exceptional array of talent and experience. Nevertheless, they engaged in extensive consultation with others, circulating an initial draft years before the final version and taking into account specific feedback produced by that initial draft. As Black explains, a consultation process like this is a means for a regulator (here, the IBA as a rule-maker) to increase its normative legitimacy.¹⁵³

6.79  The IBA Guidelines on Conflicts were a response to dramatic changes in expectations about transparency in international arbitration practice that had occurred since the 1980s,¹⁵⁴ when the Rules of Ethics were drafted. In the 1980s, leading specialists were advocating restraint in disclosure requirements and their monopoly on arbitrator services was largely uncontested and uncontestable.¹⁵⁵ By 2004 when the IBA Guidelines on Conflicts were published, as described in Chapter 2, new entrants had brought new expectations and increased interest in transparency. These trends were enough both to compel drafting of the Guidelines and to overcome initial resistance to the IBA Guidelines on Conflicts.

6.80  All this is not to say that the IBA Guidelines, however technically written, are simply the product of an objective application of technical expertise to the problem of arbitrator conflicts. As scholars in other fields have observed, ‘global regulatory processes are not apolitical’.¹⁵⁶ Such rule-making typically ‘has important distributional implications, generating winners and losers’.¹⁵⁷ The political nature of global rule-making can also raise important implications both for the content of those standards and for their perceived legitimacy.

6.81  One example of the political dynamic with respect to the IBA Guidelines is with respect to barristers. Historically, barristers from the same chambers could appear as counsel on opposite sides of the same case or in the same arbitration as arbitrator and counsel.¹⁵⁸

6.82  Despite the history and apparent functionality of this approach in England and other jurisdictions that have barristers practicing in chambers, the practice came under increasing pressure in international arbitrations.¹⁵⁹ A primary reason is that practices in barristers’ (p. 247) chambers differ from file-sharing that is the norm in law firms.¹⁶⁰

6.83  The drafters of the IBA Guidelines on Conflicts attempted to respond to this conflict among national traditions by requiring on the ‘orange list’ disclosure if ‘[t]he arbitrator and another arbitrator or the counsel for one of the parties are members of the same barristers’ chambers’.¹⁶¹ Inclusion on the orange list requires that the information be disclosed, but leaves open the possibility for the arbitrator to continue to serve, assuming he or she continues to believe that he or she can act independently,¹⁶² and generally in the absence of party objection.¹⁶³ This battle over disclosure standards for barristers illustrates both the potential for political wrangling in the process of creating international rules, and the fact that solutions to those political quandaries involve winners and losers.¹⁶⁴ This political dimension is the background against which the IBA Guidelines, like any other transnational private regulations, must establish their legitimacy.

6.84  In contrast to the long history of arbitrators’ duty to disclose, the related duty to investigate is a relatively recent innovation. Most early judicial decisions refused to imply a duty to (p. 248) investigate potential conflicts of interest,¹⁶⁵ and rules of leading arbitral institutions were similarly silent. When disclosure standards were vague, the absence of a duty to investigate arguably created an incentive to turn an intentionally ‘blind eye’ to any possible conflicts. Ignorance about an alleged conflict would allow arbitrators a complete defence against either non-disclosure or the underlying conflict itself.

6.85  Today, at the international level arbitrators are generally understood as having a duty to investigate. That duty was first codified by private international arbitral institutions and organizations. The 1987 IBA Rules of Ethics were apparently the first source to suggest that there might be such an obligation, but they framed the obligation as narrow and related only to what the IBA Rules referred to as ‘indirect relationships’.¹⁶⁶ The duty to investigate was formalized and clarified in 2004, when the IBA published its Guidelines on Conflicts of Interest in International Arbitration¹⁶⁷ and the American Arbitration Association/American Bar Association (AAA/ABA) Code of Ethics for Arbitrators in Commercial Disputes was published.¹⁶⁸

6.86  More recently, in 2008, the ICC modified its standard statement of acceptance and independence to refer to a duty to make ‘due enquiry’,¹⁶⁹ and the 2012 version of the ICC Statement of Acceptance requires arbitrators to confirm the absence of conflicts ‘to the best of [his/her] knowledge’, and that such assertion is after ‘having made due enquiry’.¹⁷⁰ Virtually all arbitral rules and procedures now either include an express duty to investigate¹⁷¹ or have been interpreted to imply such a duty.¹⁷²

(p. 249) 6.87  National law, by contrast, still lacks any coherent consensus about the existence of a duty to investigate.¹⁷³ Some national court precedents have found or implied a duty to investigate,¹⁷⁴ and held that failure to investigate could be the basis for annulling or refusing recognition or enforcement of an award.¹⁷⁵ In finding such a duty, however, many judicial precedents have expressly relied on the existence of such a duty under arbitral rules.¹⁷⁶

6.88  The evolution of the duty to investigate, and standards for disclosure in the previous section, are striking because the most significant developments were initiated at the international level, predominantly by private international arbitral institutions, and in contravention of individual arbitrators’ narrow self-interest. The prominence of private arbitral institutions and related international organizations in establishing the substantive standards for arbitrator conduct is no accident. It reflects their unique technical expertise, self-interest in effective regulation of arbitrator conduct, and related perceptions of legitimacy in promulgating these standards.

6.89  As analysed previously,¹⁷⁷ ethical rules that are developed for specialized practice settings are most effective if they are enforced in that same context. This prescription means that they should be interpreted and applied by the institutions that are most competent and have the greatest incentives to perform the necessary regulatory functions. For arbitrators, arbitral institutions not only led in developing substantive standards for arbitrator disclosure and disqualification, but they also operate as the primary regulators in enforcing those standards. This regulatory power is primarily implemented through administration of arbitrator selection and challenge procedures, described later in sub-section i, but also in new ad hoc regulatory functions, described in sub-section ii, and possibly future certification, described in sub-section iii.

6.90  Under most arbitral rules, selection and challenge procedures are administered by arbitral institutions and through procedures established by arbitral rules for constituting the tribunal. Once arbitrators make prescribed disclosures, arbitral procedures require parties to (p. 250) assert challenges based on alleged conflicts, and provide for how arbitral institutions and appointing authorities will rule on such challenges.¹⁷⁸ While Chapter 2 reviewed the functional details of these procedures, the important point for this chapter is that in administering these procedures, arbitral institutions operate as primary regulators.

6.91  Pursuant to most arbitral rules, until recently, the basis for institutions’ rulings on challenges were not disclosed. Ambiguities about how arbitral institutions resolve challenges to arbitrators ultimately concern the lack of transparency and parties’ need for more information.¹⁷⁹ In response, leading arbitral institutions have begun to publish information about how specific challenges have been handled. The Stockholm Chamber of Commerce gets credit for being the first mover, as for many years it published summary reports of its challenge decisions.¹⁸⁰ Similarly, the ICC published three reports containing general summaries of the outcomes of its challenge decisions, although without providing any reasons for those decisions.¹⁸¹ The most ambitious effort was by the London Court of International Arbitration (LCIA), which with tremendous effort and fanfare published redacted versions of its actual challenge decisions.¹⁸²

6.92  Publication of institutional challenge decisions demonstrate the need, identified by Wilkins, for assessments of professional conduct to be ‘open and accessible to ensure that information about the conduct in question and the standards being applied can be reviewed, critiqued, refined, and internalized’.¹⁸³

6.93  Increased transparency regarding institutions’ challenge rulings is also important because, under most arbitral rules, the decisions made through these procedures are treated as ‘final’. As such, because arbitral rules contain ‘finality clauses’, institutions’ rulings on arbitrator challenges are not subject to being re-evaluated under the arbitral rules.¹⁸⁴ National (p. 251) courts may still operate as a final check,¹⁸⁵ but not based on the standards in arbitral rules. In the words of one English court, ‘[T]he finality provision [in Article 7(4) of the 1998 ICC Rules does not mean] that the English courts have no power to review the decision of the ICC Court’; meaning that subsequent review is under national English law, not the ICC Rules.¹⁸⁶ In their independent review under national law, English courts have indicated arbitral institution’s challenge decisions are ordinarily accorded substantial deference, even if in applying a different standard, they are not technically deferring.¹⁸⁷

6.94  Under this general framework, national courts have only rarely ever effectively ‘overruled’ an arbitral institution’s rejection of alleged conflict. Most often, challenges in national courts involve alleged conflicts that were never presented to an arbitral institution because the conflict arose or was discovered after the close of proceedings. A judicial decision that is inconsistent with an arbitral institution’s ruling is rare because national standards generally provide narrower grounds for challenge than those imposed by arbitral institutions or the IBA Guidelines on Conflicts.¹⁸⁸

6.95  One contrary example, notable precisely because it is so exceptional, is the decision of the Court of Appeal of Paris in J&P Avax SA v Société Tecnimont SPA. In that case, a French Court of Appeal applied Article 1502(2) of the French Code of Civil Procedure to set aside an ICC award on the ground that the arbitrator had failed to disclose a conflict of interest.¹⁸⁹ The court reached this decision despite the fact that the ICC Court had dismissed the challenge as inadmissible because it was asserted too late.¹⁹⁰ The Tecnimont case reminds (p. 252) us that national courts still provide a final check on arbitrator bias. Although decisions like Tecnimont are rare, when an award is annulled or refused enforcement based on alleged arbitrator misconduct, its effect reverberates throughout the international arbitral regime. Decisions like Tecnimont are highly publicized, scrutinized, and debated in the international arbitration network described earlier.¹⁹¹ As a result, they become incorporated into community standards about arbitrator conduct and future regulatory assessments by institutions. By providing back-up legal enforcement, decisions like Tecnimont illustrate what Braithwaite calls ‘enforced self-regulation’, meaning severe State sanctions when self-regulation apparently breaks down.¹⁹²

6.96  Like the evolution of disclosure obligations, increased transparency regarding institutional decision-making is typical of efforts by non-state actors to increase their legitimacy. Black observes that ‘[r]egulators can increase their legitimacy by providing information on aspects of their existing activities which they think will provide a basis for acceptance from different legitimacy communities’.¹⁹³ Here, arbitral institutions were seeking to increase their legitimacy by making selection and challenge procedures more transparent, and also using disclosure as a means of increasing efficiency in issuing awards. These efforts are a natural response to increased competition among arbitral insitutions, and related pressure to respond to party concerns about unwarranted delays or other infrequent but disruptive forms of arbitrator misconduct.¹⁹⁴

6.97  While not usually characterized as a form of regulation, arbitral institutions’ control over compensation for arbitrators’ fees and costs incurred fits within modern meanings of ‘regulation’.¹⁹⁵ Institutions have various methodologies for how arbitrators are compensated. One feature they all have in common, however, is that they retain ultimate control over the amount of compensation finally paid to arbitrators.¹⁹⁶

6.98  Under the ICC Rules, for example, the ICC Court has sole discretion to fix arbitrators’ fees in accordance with an established fee scale,¹⁹⁷ based on the amount in dispute and within ‘its discretion’.¹⁹⁸ In setting arbitrators’ fees, the ICC Court of Arbitration considers a list of factors, including the diligence of the arbitrators, the time spent, the rapidity of the proceedings, (p. 253) and the complexity of the dispute.¹⁹⁹ More specifically, representatives of the ICC have stated publicly that they have ‘punished’ delayed awards or other arbitrator dereliction with reduced fees.²⁰⁰ Control over the purse strings by which arbitrators are compensated is an important tool for ensuring arbitrators comply with obligations that contribute to efficiency.

6.99  In addition to developing and enforcing clearer and more demanding standards, arbitral institutions have also asserted several independent, ad hoc regulatory powers. For example, the ICC Secretariat ‘spot-checks its electronic database to ascertain whether arbitrators have made proper disclosure about prior or pending ICC arbitrations’ and in ‘several cases’ has ‘discovered undisclosed information through this process’.²⁰¹ Upon discovering such omitted information, the Secretariat may request that the arbitrator supplement disclosure or inform the ICC Court or the Secretary-General of an arbitrator’s failure to disclose information as part of the confirmation process.²⁰²

6.100  In a similar vein, most institutions reserve for themselves discretion to appoint or to remove an arbitrator on their own initiative and independent of party objection or consent.²⁰³ In addition, most institutions also have an informal, unwritten, internal ‘blacklist’ of arbitrators whom they will not select when acting as an appointing authority. In some extreme cases, arbitral institutions may even refuse to appoint an arbitrator to whom the parties agree. Overruling party preference with regard to arbitrator selection is a rather extreme measure, but arbitral institutions and appointing authorities have an interest in avoiding appointment or reappointment of arbitrators who are seriously unreliable or have committed significant transgressions.²⁰⁴

6.101  In addition to controlling individual arbitral proceedings, institutions also play a role in future appointments. One way institutions affect future appointments is through use of lists of potential arbitrators that parties are either encouraged to use or, in some rare instances, required to use.²⁰⁵ Some commentators have expressed scepticism about the value of such lists.²⁰⁶ Whatever practical function they may serve during the selection process, these lists function as a form of self-regulation. Formal or informal controls on entry are, according to most sociological profiles, a typical form of self-regulation among professions.²⁰⁷ For example, the AAA has a stated policy of only nominating ‘qualified’ arbitrators from its existing rosters, which it advertises as highly ‘select’ and open only to a limited number of arbitrators. (p. 254) To qualify, a candidate must attend training sessions administered by the AAA, as well as possess certain minimum professional qualifications.

6.102  Lists also create the possibility of removal from such lists as a potential sanction for professional misconduct. For example, the AAA has a well-known ‘one-strike-you’re-out’ policy. Under this policy, an arbitrator whose award is challenged for improper non-disclosure goes on inactive status and will not be nominated to future arbitrations while the judicial challenge is pending.²⁰⁸ Even after a final judicial decision, including a decision that upholds an award, the AAA makes a separate determination of whether the arbitrator should ever be restored to active status on the roster. The Milan Chamber for National and International Arbitration has published a similar policy incorporated in its Code of Ethics, which is appended to its arbitral rules.²⁰⁹

6.103  Institutions that do not establish formal lists or panels of arbitrators nevertheless also have informal means of cataloguing individuals from among whom they appoint arbitrators when charged with that task. For example, when appointing arbitrators, the ICC solicits names from its national committees and ‘selects a candidate from its extensive database of experienced practitioners’.²¹⁰ While the ICC does not specify what criteria are required for admission to the database, in selecting arbitrators ICC personnel inevitably consider institutional knowledge about arbitrators, including internal records of sub-optimal conduct in past arbitrations. Similarly, other institutions also consider an arbitrator’s past conduct when making appointments. In this respect, formal or informal disqualification from appointments provides another regulatory check on arbitrator conduct.

6.104  In the absence of formal licensure, arbitral institutions and appointing authorities are today the most visible and effective regulator of arbitrators. They have a permanence and tangibility that makes them naturally well suited to serve as regulators. They also have unique expertise based on their intimate knowledge of and direct involvement in arbitration practices and procedures, and a unique ability to operate in a multi-national, multi-cultural environment.²¹¹

6.105  Despite performing this function, apart from a few arbitral institutions noted previously,²¹² most institutions do not have established formal policies for responding to arbitrator misconduct. Instead, they employ indirect mechanisms, most obviously through the selection, appointment, and challenge procedures, but also through some indirect means, described later.²¹³

6.106  This informality is inevitable and in some respects necessary, but it also necessarily implies a lack of transparency. The primary function of arbitral institutions is to administer (p. 255) international arbitration cases. That function imposes on them confidentiality and fairness obligations that limit what they can do. Competition among institutions, however, pressures institutions to be more accountable.²¹⁴

6.107  For example, as examined previously, arbitral institutions were rightly pressed to publish more detailed information about their challenge decisions.²¹⁵ Arbitrators’ names, however, are necessarily redacted from these published sources. Moreover, the stores of information institutions accumulate internally is not generally provided directly to parties, even if that information would be extremely valuable to them in the arbitrator selection process. Instead, it remains confidential in the hands of arbitral institutions and outside of consideration when parties are selecting arbitrators. If more publicly available, such information could operate as a form of market-based regulation and accountability for arbitrators. One potential solution to this information conundrum, explored in Chapter 8, is the development of an independent resource that collects and makes publicly available information and feedback about arbitrators.²¹⁶

6.108  The most classic form of self-reguation involves licensing or certification. Formal certification or licensure could be a means for providing training and quality control for new arbitrators, particularly from jurisdictions that do not have established traditions of arbitration from outside mega-multi-national law firm practice.

6.109  While certification of international arbitrators may seem like a remote possibility today, certification is a reality for international mediators. The International Mediation Institute (IMI) has a well-regarded and effective certification programme for mediators. The IMI’s model includes submission requirements that members have minimal training through qualified programmes, abide by its code of ethics, and provide feedback from parties.²¹⁷

6.110  For arbitrators specifically, the Chartered Institute of Arbitrators, or ‘CIArb’, has a well-established certification programme. The CIArb refers to itself as a ‘Professional Organization for Arbitrators, Mediators and Adjudicators’²¹⁸ and lists having a ‘prestigious secondary professional qualification’ as among the benefits of membership.²¹⁹ The CIArb has stringent, published entry requirements, which may include extensive training, passing (p. 256) an examination, and completing an interview.²²⁰ It also has a relatively detailed code of ethics and related practice guidelines that pertain to arbitrator members. Most interesting of all, the CIArb has a grievance procedure for complaints against arbitrator members.²²¹ This process was recently invoked to expel and publicly condemn an arbitrator for a more than four-year delay in rendering an award and for ‘repeatedly making promises which proved to be empty and meaningless’ about when the award would be forthcoming.²²²

6.111  While CIArb boasts robust membership, not all assessments of it are uniformly positive. It is also not certain that formal licensure would be a meaningful substitute for processes and credentials that currently prevail in the market for international arbitrators. As described in Chapter 2, experience and reputation established through previous service as an arbitrator is the primary credential.

6.112  Before concluding this Section, it is worth pausing to consider how arbitrator regulation would function if arbitrators were primarily regulated through domestic standards and national institutions. As already described, to date most national courts have exercised admirable restraint, providing an effective backstop, but not disrupting or interfering with arbitral processes. National courts are not, however, the only potential source for disruptive intervention.

6.113  As previewed in Chaper 2, national legislatures and bar authorities may seek to regulate arbitrators sitting locally or locally licensed attorneys who serve as international arbitrators.²²³ For example, the California legislature has adopted aggressive new rules regulating arbitrators, which do not purport to apply directly to international arbitration, but have caused consternation nonetheless.²²⁴ Similarly, a proposal by Professor Carrie Menkel-Meadow in (p. 257) cooperation with the International Institute for Conflict Prevention and Resolution (‘CPR’) and the Georgetown Law Center would implement a new Model Rule for Lawyers Acting as Third Party Neutrals, which would be incorporated into the United States Model Rules of Professional Conduct for lawyers.²²⁵ This new rule would impose on arbitrators its own version of impartiality (and other) obligations.²²⁶ As examined in Chapter 2, the Rule is interpreted as expanding significantly international disclosure obligations.²²⁷ While the proposed Model Rule has not been enacted by the ABA, some other national bar authorities have adopted similar rules that apply when their attorneys act as arbitrators.²²⁸

6.114  In the domestic context, national bar authorities arguably have an important and appropriate role in regulating domestic arbitrators. If domestic arbitrators are lawyers, they are most likely locally licensed. Moreover, standards that apply to domestic arbitrators’ conduct, as well as the law and procedures that apply in arbitrations over which they are presiding, are all most likely local law. National authorities quite naturally fit into that regulatory space. National authorities are less fitting as regulators of international arbitrators, who are subject to international standards promulgated and primarily enforced by international arbitral institutions and organizations. If national bar authorities were to supplement this regulatory framework with new national rules enforced by domestic entities, the meaning of obligations such as impartiality would be fragmented and disaggregated.

6.115  This section has examined how arbitrators, arbitral institutions, and related organizations can and have developed responsible, reliable, and highly sophisticated standards and procedures for ensuring ethical conduct. Effectiveness is ensured by a variety of factors, including arbitrators’ specialized knowledge and professional ethos, and institutions’ incentives to attract parties by ensuring proceedings are fair and awards enforceable. To the extent that these efforts fall short, national courts retain the power to annul or refuse enforcement of awards tainted by alleged misconduct.

6.116  In contrast to the well-functioning self-regulatory regime for international arbitrators, attorneys in international arbitration continue to be subject to uncertain, multiple, and fragmented ethical obligations that primarily derive from, and are presumed to be enforceable only by, national institutions. The final section of this chapter considers the extent to which incentives and interests similar to those for international arbitrator regulation can produce an effective self-regulatory regime for counsel in international arbitration.

6.117  As clashes over ethical conflicts have become more frequent and more disruptive,²²⁹consensus has emerged about the need for regulation of counsel ethics in international arbitration. (p. 258) Opposition to such regulation, however, still remains and at times is quite emphatic.²³⁰ Opponents often cite the role of national ethical rules and professional discipline authorities. In many jurisdictions, these authorities are deemed to have exclusive jurisdiction to discipline attorneys. Moreover, in many jurisdictions, attorney ethical rules are generally regarded not only as mandatory, but also an essential corollary to attorney licensing at the national level. The conventional view is that only the entity that licenses an attorney, and ultimately holds the power to revoke that license, can regulate attorneys.

6.118  With a starting assumption that attorneys should be regulated exclusively in and by national legal systems, sceptics of self-regulation in international arbitration also characterize attorney regulation as beyond the reach of internal private regulation by international arbitral mechanisms.²³¹ Some argue that the formal limitations of arbitral jurisdiction mean that arbitral tribunals and institutions cannot be ‘regulators’ or ‘regulate’ attorney conduct. These first two lines of objection fit into a third, larger category of general resistance to promulgation of any ‘new regulations’. As analysed previously, these various objections are based on largely outdated concepts of regulation,²³² outdated understandings of how attorneys are actually regulated in national systems,²³³ and how profound the conflicts and regulatory gaps are for counsel in international arbitration.²³⁴

6.119  Assessments of global self-regulation of national regulatory interests must be assessed against national regulatory impotence.²³⁵To this end, assessments of international arbitration must be assessed against the limitations produced by the ‘peculiar uncertainties’ of national courts²³⁶ and international regulation of arbitrators must be assessed against national alternatives. Similarly, the need for and potential effectiveness of counsel regulation within international arbitration must be assessed against the backdrop of regulatory gaps created by national regulation and inherent limitations of traditional national regulatory models.

6.120  As examined in Chapters 1 and 3, it is inherently uncertain which ethical rules, if any, apply to attorney conduct in international arbitration. As a formal matter, few national ethical codes indicate expressly whether they apply extraterritorially or in international arbitration.²³⁷ Empirical studies meanwhile verify that many attorneys themselves are often (p. 259) uncertain if their home rules apply at all, or are supplemented by other rules,²³⁸ such as the rules of a ‘host’ jurisdiction where the arbitration is seated or where proceedings physically take place.²³⁹ Attorneys nevertheless generally presume and act as if the rules of the attorney’s ‘home’ jurisdiction, meaning where the attorney is licensed, govern.

6.121  As surveyed in Chapter 3, meanwhile, applying the national ethical rules of attorneys’ home jurisdictions may mean that attorneys in the same arbitral proceedings are abiding by significantly different and even directly conflicting ethical rules.²⁴⁰ Then there are specialized ethical issues that may be unique to international proceedings and thus ‘not easily amenable to resolution by reference to any single [national] code within the “home” or “host” jurisdiction’.²⁴¹

6.122  The paradigmatic example, examined in detail in Chapter 3, is contrasting national regulations regarding pre-testimonal communication with witnesses.²⁴² Communication that is prohibited in many systems is ethically required by other systems. Other potential conflicts exist because of differing national obligations regarding the nature and extent of confidentiality obligations, conflicts of interest, obligations to produce documents, and obligations related to candor to the tribunal, among others.²⁴³ These conflicts can only be resolved by applying a single body of ethics.²⁴⁴

6.123  Even if substantive standards are harmonized or made uniform, enforcement would still be limited to traditional enforcement in the jurisdiction where attorneys are licensed; no single national bar authority would have the power or competence to rule on the conduct of all attorneys within the same proceedings. As a result, enforcement would be uneven and unpredictable.

6.124  This regulatory vacuum is probably still preferable to active efforts by national bar authorities to regulate the conduct of counsel in international arbitral proceedings. As previewed in Chapter 3, international ethical standards are developing. As a practical matter, however, national bar authorities would have significant difficulties understanding, interpreting, and applying these new and unfamiliar ethical obligations developed for international arbitration. These sources might be in a foreign language and would address conduct under (p. 260) unfamiliar procedures that likely involve opposing counsel and arbitrators from entirely different legal traditions.

6.125  The meaning of core ethical concepts like ‘truth’, ‘confidentiality’, ‘knowledge’, and ‘loyalty’ are hotly debated even within national legal systems. A simple linguistic translation of these terms across systems is difficult if not impossible. Relatedly, the culturally and contextually determined meaning of terms like ‘reasonable’ and ‘independence’ makes them equally difficult to translate linguistically. Adding to these conceptual problems, national bar authorities would also have difficulty assessing the factual underpinnings of alleged misconduct, which would most likely have occurred physically far away, and potentially in a foreign language. These types of institutional limitations are why Wilkins argues for contextualized enforcement as opposed to traditional disciplinary controls even in domestic contexts.²⁴⁵

6.126  In addition to purely practical challenges, there are also more constitutional challenges. Regulatory authorities are not all-purpose machines into which a set of ethical rules can be input at one end and a disinterested disciplinary decision applying those rules is produced at the other end. Like the lawyers they administer, the individuals who staff regulatory authorities are products of a local legal culture.²⁴⁶ Their legal history, background, and training necessarily colour their perceptions about the propriety of attorney conduct and their interpretation of rules applied to such conduct.²⁴⁷ When filtered through national regulatory authorities, international and foreign legal ethical rules will be refracted through these national perspectives. For example, it is difficult to image that US disciplinary authorities would punish a US attorney for ‘improperly’ preparing a witness in a manner that is ethically permissible or even required under US ethical rules. It is similarly difficult to imagine a French bar association disciplining a French attorney for ‘unethically’ withholding documents that should have been disclosed in an international arbitration but would be considered confidential under French law, in a country that is historically hostile to the very notion of US-style document exchange.²⁴⁸

6.127  In addition to discounting the difficulties with national regulation of counsel conduct in international arbitration, sceptics of regulation also fail to take into account existing trends in international arbitration. The next section examines several important precursors to the development of formal ethical regulation of attorneys within international arbitration before the subsequent section then examines trends toward more formalized substantive ethics and enforcement mechanism. Based on these trends, the final subsection concludes with proposals for future directions in attorney regulation.(p. 261)

6.128  Adopting a ‘can’t-wait’ mind set, even before any formal efforts to address this regulatory uncertainty, a number of ad hoc efforts sought to address counsel ethics informally and indirectly. These earlier efforts demonstrate an implied consensus about the need for international regulation of counsel ethics within international arbitral procedures and institutions, and provide important precursors to future developments. Most specifically, the IBA Evidence Rules took up several issues relating to counsel ethics under the guise of promulgating evidentiary rules. For example, the 1999 version of the IBA Evidence Rules harmonized distinctly different national procedures, but also clarified in Article 4(3) that ‘[i]t shall not be improper for a Party, its officers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses and to discuss their prospective testimony with them’.²⁴⁹ When Article 4(3) was revised in 2010, the drafters implicitly acknowledged that the previous rule regarding pre-testimonial communication left open a number of questions²⁵⁰ and responded by adding that parties could also ‘discuss their prospective testimony with [witnesses]’.²⁵¹

6.129  The 2010 IBA Evidence Rules, meanwhile, built on and expanded on these indirect efforts to regulate ethical conduct in arbitral proceedings. In Article 9(2)(b), the 2010 IBA Evidence Rules provide that arbitral tribunals have the power to determine which ethical rules are applicable and to enforce those rules by holding that evidence may be excluded as privileged under applicable rules.²⁵² In recognition both of the need to resolve conflicts among national ethical rules and of the role of arbitral tribunals in providing that resolution, Article 9(3) outlines criteria that a tribunal should ‘take into account’ when it ‘consider[s] issues of…privilege under Article 9.2(b)’.²⁵³

6.130  In another acknowledgment of the necessity for arbtrators to rule on ethical issues, Article 9(6) provides that tribunals can take into account a party’s failure ‘to conduct itself in good faith in the taking of evidence’ in assessing ‘the costs of the arbitration, including costs arising out of or in connection with the taking of evidence’. Although they are designated as rules of evidence, the use of the terms ‘good faith’ and ‘improper’ reveals that these rules effectively address ethical issues. Notably, they were promulgated after the IBA Task Force on Counsel Ethics was established in 2008, but before it announced that it would be publishing its own Guidelines.²⁵⁴

6.131  Some of the truly unique and symbolic precursors to ethical regulation of counsel are ad hoc efforts by individual lawyers to ‘promulgate’ international standards. For example, in connection with his International Council for Commercial Arbitration (ICCA) keynote (p. 262) speech, Doak Bishop together with Margrete Stevens drafted in 2010 an ambitious proposed code of ethics for counsel in international arbitration.²⁵⁵ Similarly, Cyrus Benson drafted a ‘Checklist of Ethical Standards for Counsel in International Arbitration’, which is comprised of a series of proposed resolutions that parties and tribunals can agree to adopt, reject, or modify at the commencement of arbitral proceedings.²⁵⁶ These are not academic proposals. Both Bishop and Steven’s Code and Benson’s Checklist were created to provide usable resources that aimed to even the playing field by ensuring that counsel are abiding by the same ethical rules.²⁵⁷ In addition to these initiatives, some individual arbitrators now include in their initial procedural orders provisions that address specific ethical issues, such as procedures for retention of new counsel to avoid conflicts of interest with members of the tribunal. These improvisational, entrepreneurial efforts by individuals are illustrative of how international arbitration practitioners operate as what Dezalay and Garth referred to as ‘moral entrepreneurs’.²⁵⁸ Practitioners self-consciously seek to protect and strengthen the efficacy and legitimacy of interational arbitration, also in an effort to bolster indirectly their own credentials as knowledgeable participants and thought leaders.

6.132  In addition to direct, ad hoc efforts to harmonize conflicting national ethical rules, arbitral tribunals rountinely rule on ethical issues during the ordinary course of arbitral proceedings.²⁵⁹ Arbitral tribunals impose costs and fees,²⁶⁰ and occasionally even express ‘sanctions’,²⁶¹ based on perceptions of alleged misconduct by attorneys. Tribunals have also imposed what might be called ‘reputational sanctions’,²⁶² excluded evidence or drawn adverse inferences,²⁶³ issued interim orders, and on occasion even dismissed parties’ claims.²⁶⁴ It has also been reported (p. 263) that some individual arbitrators specify in initial procedural orders that the tribunal has the power to preclude conflicted or disruptive counsel from arbitral proceedings.

6.133  Informal sources and techniques have emerged in response to a perceived need for greater ethical guidance and regulation, and have been an important gap-filler. The problem with most informal methods for enforcing ethics, however, is that they are imprecise. In the absence of formally articulated ethics, arbitrators rely on their own perceptions and often undisclosed assessments of attorney conduct. The sanctions they impose, therefore, are often for unarticulated violations of unknown rules and without any opportunity for counsel or their clients to be heard.

6.134  In addition, these indirect techniques for responding to perceived ethical misconduct may sanction a party when the misconduct belongs to the attorney. Clients may be made to pay substantive awards produced by negative inferences, and sanctions, costs, and fees, even if the misconduct that produced them belongs wholly to the attorney.²⁶⁵ Some opponents of ethical reforms argue that, since attorneys are agents of parties, it is reasonable to impute to parties consequences for the misconduct of their counsel. While this assumption may be true in some cases, it is not in all cases.

6.135  In Pope & Talbot v Canada,²⁶⁶ counsel improperly facilitated the publication of confidential information.²⁶⁷ The tribunal deemed counsel’s conduct to involve either an ‘intentional violation’ or ‘reckless disregard’, that was ‘highly reprehensible’,²⁶⁸ and ‘not acceptable’.²⁶⁹ Apparently acting on a belief that it did not have the power to directly sanction counsel, however, the tribunal directed the offending counsel’s client to pay costs (US$10,000) for the motion on the issue.²⁷⁰ In so directing, the tribunal ‘expressed the wish’ that counsel would ‘voluntarily personally assume those costs’²⁷¹ and ‘assumed’ that counsel would make its decision public.²⁷²

6.136  Pope & Talbot’s finding that counsel, not the party, were responsible for misconduct is not sui generis. Irresponsible counsel can take positions, even in advocacy settings, that betray clients’ best interests,²⁷³ though ostensibly asserted on a client’s behalf. In domestic contexts, client monitoring of attorney conduct can reduce such risks. In international arbitration, however, even from the client’s perspective, conflicting national ethical rules and resulting ambiguities make it exceedingly difficult to monitor and detect misconduct by counsel.

6.137  Against the backdrop of existing precursors, development of substantive ethical standards for counsel is already well underway. Just as with development of substantive ethical obligations for arbitrators, these standards are being developed by private, international entities. As explored in Chapter 3, the most important and significant effort to date has been the IBA Task Force’s publication in 2013 of Guidelines for Party Representation in International Arbitration.²⁷⁴

6.138  To become binding on the parties, the Guidelines must be accepted in whole or in part by the parties or imposed by an arbitral tribunal.²⁷⁵ As analysed in Chapter 3, the IBA Guidelines for Party Representatives attempt to resolve many of the areas in which national ethical rules conflict, such as communication with witnesses²⁷⁶ and the extent of permissible communications with arbitrators.²⁷⁷ The Guidelines also address issues relating to attorney obligations in light of document exchange procedures²⁷⁸ and submissions to the tribunal.²⁷⁹

6.139  The Guidelines are not without their detractors, however. As indicated at the beginning of this chapter, some critics generally oppose development of new rules or guidelines.²⁸⁰ Others are critical of asserted inconsistencies between the Guidelines and the IBA Evidence Rules, particularly how the Guidelines appear (according to critics) to expand dramatically the scope of documents that can be sought in document exchanges.²⁸¹ This latter concern is echoed by some civil-law-trained lawyers, who complain that some of the provisions in the IBA Guidelines are decidedly common-law oriented, as opposed to an established harmonized or neutral ethical standard. The nature of these latter concerns is addressed in Chapter 7.²⁸²

6.140  While debate continues about particular provisions, the ultimate success of the IBA Guidelines for Party Representatives will be determined not by an abstract assessment of their content, but by how widely they are accepted as legitimate, as well as used in arbitral proceedings. In this assessment, the Guidelines will not be the only product. Instead, it seems a vibrant marketplace for international standards may be developing, as previewed by Bishop and Steven’s code and Benson’s Checklist. As this book is going to press, the new LCIA Arbitration Rules are being revised to include what is being called a ‘regulatory scheme for counsel conduct’.²⁸³ In addition to rules imposed directly on counsel, the proposed revisions to the LCIA Rules would include two rules. The first would oblige parties to ensure that their (p. 265) legal representatives comply with ethical guidelines to be contained in a new Annex to the LCIA Rules. The second rule would empower the arbitral tribunal to exclude counsel from all or part of arbitral proceedings who are determined to have engaged in serious and persistant misconduct from the arbitration.²⁸⁴ Notably, the proposed LCIA Arbitration Rules would empower tribunals to exclude counsel by virtue of the parties’ assent to that power. As such, they do not attempt to extend tribunal powers over attorneys directly.

6.141  Calling the LCIA’s effort ‘an astounding innovation in the area’,²⁸⁵ some commentators are already speculating that the LCIA’s initiative may be ‘positive inspiration for other arbitral institutions to set up their own ethical rules or guidelines regarding the parties’ representatives’ conduct’ such that ‘the LCIA may not be the last institution’.²⁸⁶ Given the seemingly endless conferences, papers, blog posts, and debates on these topics, particularly in light of these new developments, the march toward international ethical regulation for counsel seems irreversible, even if questions still remain about the content and enforcement of those rules.

6.142  Several questions remain about content. First, culturally determined, value-ridden differences of opinion remain about what is proper and improper. Chapter 7 proposes the Functional Thesis, which will provide a more neutral approach than direct negotiations in determining the content of international ethics. Many other questions remain regarding the relationship between international ethical obligations and attorneys’ presumably continuing national ethical obligations. These latter issues are intertwined with issues of how international ethical rules are enforced in international arbitration.

6.143  One principal reason why regulation of arbitrators is so effective is that the standards defining their impartiality obligations are enforced in context. Arbitral institutions are frontline regulators for arbitrator ethics because they have the greatest institutional competence and the greatest incentives to perform the necessary regulatory functions. For enforcement of counsel ethics, arbitral institutions do not enjoy a similar situational advantage. Instead, arbitral tribunals are the entities that have the greatest institutional competence and a direct, even if not perfectly aligned, incentive to regulate.²⁸⁷

6.144  Arbitral tribunals are uniquely positioned, particularly in contrast to national authorities, to interpret applicable ethical rules in cross-cultural contexts and against the backdrop of international arbitral procedures in which the relevant conduct occurs. During the ordinary course of proceedings, arbitrators have an opportunity to observe and evaluate an attorney’s conduct in context.

6.145  Arbitrators also have a stake in the integrity of the process. Arbitrators develop reputations in part based on their ability to control proceedings and render fair and expedient results.²⁸⁸ These reputations will affect whether arbitrators are selected to serve on future (p. 266) panels, which means arbitrators have an incentive to protect the integrity of proceedings against attorney misconduct.

6.146  One potential limitation on the proper function of tribunal incentives to regulate counsel is that, as described in Chapter 2, leading law firms play a decisive role in arbitrator selection.²⁸⁹ As a result, there is a risk that arbitrators may be unduly reluctant to sanction counsel from whom they might hope to secure future appointments. This risk is compounded by concerns that arbitral tribunals may be more likely to sanction arbitration ‘outsiders’ from smaller firms, rather than big players from leading firms. Even in the US court system, several studies have demonstrated that bar authorities and courts disproportionately sanction smaller law firms and solo practitioners.²⁹⁰ In international arbitration, the risk may be heightened since newcomers are less likely to be familiar with established practices and international rules.²⁹¹ In addition to these questions about institutional competence of arbitral tribunals, questions also remain regarding whether and to what extent they may exercise this power.

6.147  Many objections to arbitral tribunals enforcing counsel ethics directly against counsel focus on the nature of arbitral jurisdiction and power. There are two distinct types of power that are contemplated—the power to disqualify or exclude counsel, and the power to sanction counsel. For both these categories, there are three distinct theories under which an arbitral tribunal might exercise such powers to rule on attorney conduct: inherent powers, implied powers, and contractual powers. The first two are occasionally, though not universally, endorsed by some public international and investment law tribunals,²⁹² and undoubtedly remain important for public international tribunals.²⁹³ The third is the contractual approach, which was foreshadowed in the earlier-described precursors that are already being embraced by recent efforts to develop international ethics. The contractual approach is also the approach most consistent with modern governance theories and models of self-regulation.

6.148  Even in jurisdictions that are traditionally very deferential to arbitration, like the United States, judicial decisions about tribunal powers are all over the proverbial map, both in terms of outcomes and in terms of justifications for those outcomes. Disqualification presents an (p. 267) easier context because, even if a tribunal decision affects the conduct of counsel, it can be directed at a party, as contemplated by the new LCIA Arbitration Rules.

6.149  Even if disqualification is the easier context, there is still significant judicial disagreement. For example, in the United States, those courts that have permitted arbitrators to rule on motions to disqualify counsel have done so on the ground that such rulings necessarily implicate the merits and procedures of the underlying dispute, which the arbitrators were better situated to evaluate.²⁹⁴ One court even went so far as to suggest that court intervention ‘would show disrespect toward the Arbitration panel, which has the broad authority to address these issues in the first instance’ and would run contrary to state and national policies in favour of arbitration.²⁹⁵ Other courts reason that deference is essential to the proper functioning of arbitration and an avoidance of judicial intrusion on arbitral proceedings.²⁹⁶

6.150  On the other hand, several other US courts have rejected the idea that arbitrators have the power to decide the issue of counsel disqualification. The line of cases most often cited for this proposition come out of New York, and can be traced back to an oft-cited, one-paragraph opinion of the court of first instance (somewhat misleadingly called the ‘Supreme Court’) of New York in Bidermann Indus. Licensing, Inc. v Avmar N.V.²⁹⁷ Cases since Bidermann have often provided more thoughtful and thorough analyses, and hence constitute a significant body of authority weighing against the existence of such power.²⁹⁸

(p. 268) 6.151  At the international level, numerous cases have also addressed questions about tribunals’ inherent and implied powers to issue sanctions or disqualify counsel. Some older commercial arbitration cases reached inconsistent conclusions about their powers. One ICC tribunal concluded that it lacked jurisdiction to rule on a request to disqualify counsel. The tribunal characterized the claim as a dispute between claimant and counsel, which it concluded was not within the scope of the arbitration agreement. Even if had been within the scope, however, the tribunal found that the ‘dispute’ would not be arbitrable as a matter of law.²⁹⁹ Notably, the tribunal also expressed doubts about whether the ethical code of a domestic bar association applied ‘in the context of an international arbitral proceeding’.³⁰⁰ By contrast, another ICC tribunal assumed its jurisdiction to decide the issue of counsel disqualification, but in assessing the substance of the challenge, it ultimately denied the request on the merits.³⁰¹

6.152  Arbitrators’ inherent authority is especially pertinent in treaty-based arbitrations, where arbitrators ‘hold a public office in view of the host State’s consent by sovereign act’.³⁰² Not surprisingly, a number of investment tribunals have ruled on issues of counsel ethics. The most prominent, perhaps even watershed, case is Hrvatska Elektroprivreda d. d. [HEP] v The Republic of Slovenia.³⁰³ In that case, HEP requested the tribunal exclude one of Slovenia’s counsel from further proceedings when it was disclosed for the first time shortly before the hearings that Slovenia’s counsel was an English barrister who was a member of the same barristers’ chambers as the tribunal’s President.³⁰⁴ The tribunal ultimately ruled that the counsel in question could not participate further as counsel in the case.³⁰⁵

6.153  The tribunal grounded its decision on the immutability of properly constituted tribunals established under Article 56(1) of the ICSID Convention and procedural powers granted under Article 44 of the Convention (authorizing the tribunal to decide ‘any question of procedure’ not expressly dealt with in the Convention, or the ICSID Arbitration Rules, or ‘any rule agreed by the parties’).³⁰⁶ Additionally, the tribunal reasoned that international courts have an ‘inherent power’ existing independent of any statutory reference to deal with any issues necessary for the conduct of matters falling within its jurisdiction.³⁰⁷

(p. 269) 6.154  Another tribunal, in Rompetrol Group NV v Romania,³⁰⁸ similarly decided that it had an inherent power to disqualify counsel, but determined that such power would only be exercised ‘rarely, and then only in compelling circumstances’ based on an overriding and undeniable need to safeguard the essential integrity of the entire arbitral process.³⁰⁹ Also, in Fraport Ag Frankfurt Airport Services Worldwide v The Philippines,³¹⁰ an ICSID Annulment Committee looked to Article 44 of the ICSID Convention and what it called a ‘functional justitfication’ to decide that it has the ‘power and obligation to make sure that generally recognized principles relating to conflict of interest and the protection of the confidentiality of information imparted by clients to their lawyers are complied with’.³¹¹ Even if it asserted that it had the power, the tribunal determined that there was no clear evidence that counsel received confidential information and hence there was no real risk of prejudice to the proceedings.³¹²

6.155  These various precedents reveal not only conflicting outcomes, but a divided conceptualization about the regulatory role of arbitral tribunals independent of their outcomes. As analysed in greater detail in Chapter 9, conceptions of arbitrators’ role is often characterized in binary terms, as either ‘justice providers’ who substitute for judges or as mere ‘service providers’ who simply enforce parties’ contractual agreements.

6.156  The conception of tribunals as service providers is most vivid in ICC Case 8897. There, the tribunal held that the issue regarding counsel ethics, even if within the scope of the arbitration agreement, would be non-arbitral because it required adjudicating the ‘criminal consequences of alleged advocate misconduct’.³¹³ The conception of tribunals as justice-providers is most clearly illustrated in the reasoning of HEP v Slovenia, which relied on its quasi-public status and finding of judicial-like inherent and implied power to conclude that regulating the professional conduct of counsel is part of that function.³¹⁴

6.157  In Fraport, the tribunal attempted to stake out an uncomfortable middle ground. It concluded that it had the power to disqualify or exclude counsel, but that it lacked ‘deontological responsibilities’, and had ‘no power to rule on an allegation of misconduct under any such professional rules as may apply’ and instead limited its power to ‘the fair conduct of the (p. 270) proceedings before it’.³¹⁵ On the one hand, this reasoning acknowledges a necessity and appropriateness for arbitral tribunals to enforce international ethics (even if the tribunal characterized them only as ‘generally recognized principles relating to conflict of interest’). On the other hand, it highlights several residual problems that will have to be addressed if international arbitration is to move toward an effective model of self-regulation for counsel conduct including the relationship between national ethical rules and international arbitration’s international ethical obligations.

6.158  Even if awards of costs and fees are a typical tribunal response to attorney misconduct, re-targetting monetary sanctions at the offending counsel presents unique jurisdictional problems. While an order to disqualify counsel can arguably be directed at the parties to the arbitration agreement, sanctions would be directed at attorneys who are not parties to the agreement. Here again the few available authories are split, with most cases finding that arbitrators lack jurisdiction over attorneys. A few cases have, however, been willing to find arbitral jurisdiction. Their reasoning is based on powers implied in arbitral rules or inherent in the nature of arbitral adjudication,³¹⁶ similar to the reasoning discussed earlier regarding disqualification in investment arbitration cases.

6.159  One recurring theme with respect to international regulation of counsel in international arbitration is its relationship with national ethical rules and professional regulation. The IBA Guidelines on Party Representatives and most tribunal decisions regarding arbitrators’ powers to rule on counsel ethics presume that national ethical rules and enforcement mechanisms do and should still apply in full force in international arbitration. For a fully functioning model of ethical regulation in international arbitration, what is needed is instead something closer to Braithwaite’s model of ‘enforced self-regulation’ that has proven so successful for international arbitrators.³¹⁷ It would be premature and presumptuous, particularly given the breakneck pace at which counsel ethics are evolving, to dictate here a specific blueprint for this goal. There are, however, a few prescriptions that seem necessary and inevitable.

6.160  First, there is a need to more clearly determine when and how international ethics displace, as opposed to merely supplement, national ethical rules. While many sceptics predict national bar authorities would not make necessary concessions, there seems to be much evidence to the contrary. For example, in the United States, Model Rule 8.5 allows international tribunals to have their own rules, such as the International Criminal Tribunal for the former Yugoslavia (ICTY) and the International Criminal Court, and US bar rules allow attorneys to abide by those rules instead of the rules of their home jurisdiction.³¹⁸ In addition, with (p. 271) respect to international arbitration, as examined in Chapter 3, Swiss, Belgian, and French bar authorities have created special exceptions for international tribunals to allow locally licensed attorneys to engage in pre-testimonial communication with witnesses that would otherwise be prohibited in domestic litigation or arbitration.³¹⁹ In a similar vein, bar authorities in the arbitral seat arguably could assert regulatory power over foreign attorneys appearing in locally seated arbitrations. As examined in Chapter 1, however, jurisdictions have almost uniformly created special exemptions in an effort to attract international arbitration business.³²⁰

6.161  The willingness of national bar authorities to grant exemptions from national rules demonstrates that international arbitration practitioners are effective at lobbying their local bar authorities to relinquish regulatory authority. The ultimate aim of such lobbying should not be a complete relinquishment of national ethical rules, but instead choice-of-law rules that allow application of international arbitration ethics to counsel appearing in international arbitral proceedings.

6.162  To be effective at creating an even playing field in international arbitration, a choice-of-law rule must be adopted by all relevant national bar authorities. The best way to approach this effort is through an international ‘model’ choice-of-law rule that can be adopted by national bar authorities.³²¹ The drafting of such a rule will require serious analysis and delineation of which rules or categories of duties get displaced, as well as when, and how.³²² The process of drafting and implementing such rules, however, will help affirm national support for primary regulation to be located with international arbitral tribunals.

6.163  Another innovation needed to ensure fully functioning attorney self-regulation, particularly if national bar authorities cede application of their national ethical rules, is to affirm arbitral tribunal powers to function as primary regulators. To this end, attorneys should be personally and expressly subject to tribunal power. Momentum is already gaining regarding tribunal powers to exclude or disqualify counsel. That momentum is manifest in assertions by tribunals of their inherent or implied power.³²³ Even more recently that momentum is manifested by proposed revisions by the LCIA that would embed such power in the arbitral rules, and consequently the parties’ agreement,³²⁴ and by ad hoc efforts by individual tribunals to create such powers by including them in terms of reference and initial procedural orders.³²⁵ The advantage of these latter mechanisms is that they establish contractual forms of arbitral jurisdiction that are less likely to encounter opposition by national courts or authorities. A similar mechanism could be used to make attorneys directly and personally subject to arbitral jurisdiction.

(p. 272) 6.164  In the ordinary course of events, attorneys generally sign terms of reference or initial procedural orders. These signatures are a form of assent, but expressed by attorneys in their representative, not individual, capacity. There is some debate about whether the terms of reference constitute an amendment to the arbitration agreement or a new superseding agreement.³²⁶ Whatever the status, however, signature by attorneys in their personal capacity could join them, for limited purposes, to the arbitration agreement.

6.165  Ultimately, having attorneys sign on to the arbitration agreement would allow tribunals to issue ‘sanction awards’ when severe misconduct was found. Such sanction awards would be enforceable like other Convention awards, and would provide a formal means for international arbitrators to issue definitive assessments of attorney conduct with real remedies attached. Sanction awards would internalize enforcement power within international arbitration’s procedures, but would subject that power to ordinary award-review or bar-review mechanisms. It would, in other words, achieve enforced self-regulation of attorneys in international arbitration.

6.166  While ‘regulation’ is a term that is generally resisted, self-regulation in international arbitration is a healthy way to preserve existing structures and strengthen the regime. The legitimacy of international arbitration is predicated in substantial part on the integrity and professional conduct of its founders and of its modern custodians—the arbitrators, counsel, experts, and administrators of arbitral institutions who manage and decide the disputes. These participants build and sustain the legal frameworks and procedures on which the legitimacy of international arbitration is founded. Clearer ethical norms and a reliable enforcement regime are essential to that function and have evolved organically in international arbitration.

6.167  Apart from avoiding potential risks of external regulation, the regulation of counsel in international arbitration presents an important opportunity. Just as with arbitrator ethics, effective counsel regulation will help to facilitate the influx of an increasingly large diversity spectrum of participants.

6.168  The evolution of internal regulation of international arbitrators, and subsequently attorneys, in international arbitration also holds some clues about the future of regulation of experts and third-party funders. For example, as with the evolution of ethics for counsel, procedural innovations regarding experts have already been introduced, most specifically through recent revisions to the IBA Evidence Rules. These efforts are already attempting to frame their ethical obligations. As examined in Chapter 4, some of these rules miss their mark and may need further revision, but they signal an intuition that some clearer regulation is needed.

6.169  Efforts to regulate third-party funders, meanwhile, may follow a similar approach. Just arbitrators were a first priority for ethical self-regulation more generally, but third-party funders may piggyback on arbitrator impartiality reforms. There are already efforts underway to incorporate disclosure obligations relating to third-party funders in revisions to the IBA Guidelines on Conflicts.

(p. 273) 6.170  Assuming third-party funders are addressed in arbitrator disclosure obligations, a related obligation for parties to disclose the presence of funders in the dispute would become inevitable. Moreover, as future refinements to counsel ethics are introduced, third-party funding regulation will likely creep in there too. Most obviously, the existence of, and law applicable to, attorney-client privilege can be determined by arbitral tribunals, as illustrated in IBA Evidence Rules, Article 9, discussed earlier.³²⁷