A Mock Challenge under the CPR Rules for Administered Arbitration of International Disputes – An Overview

By Ksenia Koriukalova

On December 6, 2016 CPR’s Young Attorneys in Dispute Resolution (“Y-ADR”) and New York International Arbitration Center (“NYIAC”) hosted a seminar in New York City. The event featured a panel discussion on hot topics in international dispute resolution in 2016, as well as the mock challenge of an arbitrator under the CPR Rules for Administered Arbitration of International Disputes (“CPR Rules”).

The mock exercise was based on a hypothetical case involving the challenge of an arbitrator after a draft award had been circulated based on his alleged connection to the officer of the winning party, as well as on the views he expressed in his prior publications. The arbitrator in question served on a three-member panel which rendered a unanimous award in favor of one of the parties. The draft award signed by all three arbitrators was circulated to the parties by the chairman of the tribunal, and indicated that it would become effective if no comments were received from either party within 10 days.  The award was not delivered by CPR as required under its Rules. The losing party filed a request to correct the award within 20 days of the date of the Award, as provided for under Rule 15.6 of the CPR Rules. It simultaneously challenged one of the arbitrators. The challenge alleged “evident partiality” based on the fact that the arbitrator had been connected to the winning party’s CFO on LinkedIn for four years, and the two of them served on several committees of the college they had both graduated from. Another ground for the challenge was the alleged issue conflict, based on the arbitrator’s prior publications on the legal questions raised in the arbitration.

The mock challenge was considered by a panel of three CPR Challenge Review Board members, which included James H. Carter of WilmerHale, Lawrence W. Newman of Baker & McKenzie, and Hon. Curtis E. von Kann (Ret.). Anna Tevini of Shearman & Sterling LLP argued the case on behalf of the challenging party, while Ank Santens of White & Case LLP represented the party opposing the challenge.

The challenging party argued that the challenge was admissible, and that the challenge should have been granted, as the circumstances of the case allegedly gave rise to justifiable doubts as to the arbitrator’s impartiality. The challenge was based on Rules 7.5 and 7.6 of the CPR Rules, as well as on the provisions of the CPR Challenge Protocol.

The counsel stated that the challenging party had timely filed the challenge within 15 days of the time it had become aware of the respective circumstances, as provided for in the CPR Rule 7.6. She explained that submitting the challenge at the late stage of the proceedings was due to the arbitrator’s failure to disclose the relevant facts, which he allegedly had a duty to do. She also pointed out that, although the challenge was filed after the 10-day period for commenting on the draft award had lapsed, that did not make the award effective and the challenge – inadmissible, as the latter was submitted within the 20 days granted under CPR Rule 15.6 for seeking corrections of the award.

On the merits of the challenge, the counsel argued that the arbitrator’s connections to the other party’s CFO on LinkedIn and via college committees, his prior publications expressing views favoring the winning party’s position in the arbitration, and his failure to disclose these circumstances gave rise to justifiable doubts as to his impartiality. She referred to the 2004 Code of Ethics for Arbitrators in Commercial Disputes to support the argument that even the “appearance of partiality”, not necessarily actual partiality, satisfied the justifiable doubts standard.

The party opposing the challenge argued that the challenge was inadmissible, because the challenging party had been able to learn about the relevant facts from public sources well before the time of the challenge. The counsel referred to U.S. case law, the practice of England, France and Switzerland, as well as to the provisions of the American Arbitration Association and the CPR Rules applicable to challenges to prove that the right to challenge had been waived.

She further argued that the CPR Rule 7.5 “justifiable doubts” standard for arbitrator disqualification was not satisfied. The counsel referred to the IBA Guidelines on Conflicts of Interest in International Arbitration, which put arbitrators’ social media contacts on a “green list” and as such do not create even an appearance of bias, and thus do not require disclosure by an arbitrator. The same is true about prior expression of opinion on an issue arising in an arbitration, where such opinion does not focus on the case at issue. Finally, counsel argued that the arbitrator had no duty to disclose the facts at issue, and, in any event, non-disclosure was not an independent ground for disqualification.

After the oral arguments, the members of the CPR Challenge Review Board panel deliberated in front of the audience. They concluded that the challenge should be denied, as none of the facts referred to by the challenging party created grounds for disqualification of the arbitrator.

The mock was an interesting exercise which not only focused the attention of the attendees on current legal questions, but also demonstrated how the challenge of an arbitrator under CPR administered arbitration works in practice. Stay tuned for other upcoming Y-ADR events in 2017!

Ksenia Koriukalova is a CPR Fall intern

Interview: Users Respond to CPR’s New International Rules – Most surprising and valued reported features

InternationalRulesSlimJimCPR recently launched a new set of Rules for Administered Arbitration of International Disputes for use in cross-border business transactions. These new Rules reflect best practices, including the arbitration work of UNCITRAL, and address current issues in international arbitration, such as arbitrator impartiality, lengthy time frames to reach resolution, burdensome and unpredictable administrative costs and requirements. To celebrate their release, and introduce them across the globe, CPR held a series of well-attended launch events in London, Paris, Miami, Geneva, Madrid, Brazil and Washington, DC.

CPR’s newest event takes a deeper dive into one of the Rules’ most buzzed-about aspects, the Screened Selection Process for Party-Appointed Arbitrators ™. Responding to the need to both preserve the right of the parties to appoint their arbitrators and guarantee the fairness and impartiality of arbitration, the Screened Selection Process ™ is available under the new CPR Arbitration Rules, and will be discussed from the perspectives of the users, outside counsel and arbitrators on July 30, 2015 at Jenner & Block in Chicago and via live webcast.

Olivier P. AndreToday, we sat down with CPR’s Olivier André, Vice President, International and Dispute Resolution Services, for a recap of the launch events and a preview into our upcoming event.

To begin, could you provide a quick recap of CPR’s recent launch events celebrating the new rules? 

Over the past few months, we have organized eight events to celebrate the launch of the new CPR Rules for Administered Arbitration of International Disputes.  At each of these events, panelists discussed the key benefits and innovations of the rules from different perspectives – the corporate counsel, arbitration practitioner, arbitrator, and institutional perspectives.   The events were well attended and, whether they were held in the US, Europe or Brazil, they triggered a lot of interest.

What were some of the most memorable responses you received about the rules, either at the launch events or otherwise. What are people most surprised about, thrilled about, etc.?  

The new rules triggered a lot of interest because attendees felt that they really address many of the criticisms we currently hear about arbitration, such as high costs, lenghty timeframes, and bureaucratic administration of the proceedings.   With the new rules, CPR provides only the services that are necessary from an administering institution, and no more.  Thus, CPR gets involved at the very beginning – at the commencement and arbitrator appointment stages – and at the end – to provide a “light” review of the awards and to issue them.

In between, CPR handles all billing aspects, but lets the tribunal interface directly with the parties on all other matters.  All pleadings and filings to CPR are in electronic format only.  As a result of this “lean administration,” CPR is able to offer a very competitive schedule of administrative costs.  Administrative costs are capped at US$34,000 for disputes over US$500 million.   At a time when all companies are trying to contain the costs of dispute resolution – and where smaller companies simply cannot afford an expensive dispute resolution process – that was particularly appealing.

Another feature which triggered a lot interest is the provision under the rules for the issuing of the award within 12 months of the constitution of the tribunal.  Very often, users of arbitration have had terrible experiences of proceedings that lasted longer than court proceedings, when arbitration is supposed to offer a fast dispute resolution process.  The CPR rules require all actors of an arbitration to use their best efforts to comply with this time requirement.  Any scheduling order or extension from the tribunal that would result in extending this timeline must be approved by CPR.  Such extension requests are not new, but what was interesting to the attendees of these events was the fact that these approvals are not automatic.  Whenever such an approval is requested, CPR can convene all involved in the arbitration to discuss the factors that have led to the extension request.  This mechanism increases the accountability of all actors of the arbitral process while asking them to comply with a reasonable timeframe.   I say reasonable because historically the average length of CPR cases is a little over 11 months.

Finally, there was a lot of interest – particularly from the corporate counsel – for the provision in the rules which encourages the arbitral tribunal to propose settlement and assist the parties in initiating mediation at any stage of the arbiration proceedings.

CPR’s event in Chicago delves deeper into one of the most unique and valued features of the rules—the screened selection process. What were the challenges that necessitated this specific Rules feature? How did we address those challenges? What have responses from users of the new rules been like on this point in particular?  

Arbitrator selection is a key phase of any arbitration and getting qualified arbitrators appointed for a particular dispute is critical to ensure smooth proceedings.  The ability for the parties to choose their decision makers is also one of the main advantages of arbitration.  The CPR rules offer many options that arbitration users can choose from in their arbitration clause depending on the speficic nature of the disputes they anticipate.  The bottom line is that they have the ability – and are encouraged – to really control the arbitrator selection process.

One of the options provided is called the CPR Screened Selection Process ™ for party-appointed arbitrators.  That process – which is unique to CPR arbitration rules – enables each party to choose their “party-appointed” arbitrators without them knowing which party has designated them.  CPR acts as a screen between the parties and their candidates.  This is an interesting process because, even though all arbitrators under CPR Rules must be impartial and independent, there can be some degree of ambiguity around the role that a party-appointed arbitrator is supposed to play.  This selection offers the parties the ability to choose their arbitrators while, at the same time, removing that ambiguity and changing the working dynamics among the members of a tribunal.

Olivier André is CPR’s Vice President, International and Dispute Resolution Services. In this capacity, Mr. André is responsible for CPR’s international activities, as well as international arbitration and mediation matters which are brought before CPR pursuant to its rules. He can be reached at oandre@cpradr.org. For Mr. André’s full bio, click here.