The document discusses the meaning and significance of arbitrator independence and impartiality. It provides definitions, examples, and guidelines for determining independence and impartiality. It also addresses four specific parts: 1) The significance is that independence and impartiality are fundamental principles of arbitration. Arbitrators must be free from bias and not favor one party over the other. 2) The Dutch claimant can seek to remove the chairman based on doubts about his impartiality due to published views on intellectual property. 3) The Dutch claimant can seek to remove the Indonesian arbitrator based on his new role with a creditor of the Indonesian respondent, which raises doubts about independence. 4) A party can seek

1. 6. Answer ALL FOUR parts of this question:
(a) What does it mean to say that an arbitrator is "independent" and "impartial"?
(a) Arbitration rules and laws usually do not provide a clear definition of these terms, except the
Swedish arbitration law, section 8, containing a list of instances where the required “impartiality”
is deemed to be lacking. Certain guidelines as to “independence” and “impartiality” can also be
found in Codes of Ethics and in the rules on the nationality of the sole arbitrator or the chairman.
However, there is some general understanding of the concepts of impartiality and independence.
Impartiality requires that an arbitrator neither favours one party nor is predisposed as to
the question in dispute.
Impartiality must be distinguished from neutrality as it is used in the AAA Code of Ethics, as
this provides that in some types of arbitration party-appointed arbitrators do not have to be
neutral - if the proximity between a party and an arbitrator doesn’t influence the outcome of the
proceedings, the lack of neutrality should not impair the impartiality. Neither should the mere
fact of having identical nationalities, of itself, affect the arbitrator's impartiality (Article 11
Model Law). However, it is common practice in most arbitration rules that a sole arbitrator or a
chairman should be of a different nationality than either party (ICSID Convention requires that
the majority of the arbitrators must be of a different nationality than the parties), although this is
based more on the implied agreed qualifications of the arbitrator than on the basis of his
perceived lack of impartiality.
Cases of partiality are rare (Re The Owners of the Steamship “Catalina” and The Owners of the
Motor Vessel “Norma” [1938]). In arbitration involving states more general political comments
may become an issue (The Iran-United States Claims Tribunal – one of the arbitrators was called
for resignation, since he allegedly accused Iran “of condemning (sic) execution”). A clear
predisposition in relation to a dispute exists where the arbitrator has already expressed an
opinion on the concrete legal question or has even acted as counsel for a party in the matter
(except earlier publications dealing generally with legal topics). Given the subjective character
of this concept, the standard to be met is generally not actual impartiality but the appearance of it.
The interviewing of arbitrators before appointment does not impair the impartiality, provided
that the case is not discussed in detail and the arbitrator does not give a party advice on how to
proceed on the case.If the chairman is appointed by the two party appointed arbitrators
impartiality is not impaired by ex parte contacts with the appointing party to receive views on
the acceptability of potential nominees (Rule 5.2 IBA Rules of Ethics). However, impartiality
can be violated if a party appointed arbitrator considers himself as the party's representative in
the tribunal.
A dissenting or concurring opinion rendered in a previous/preliminary award, by itself does not
lead to impartiality. However, if arbitrators go further than negotiation and try to exert pressure
on any of the parties, they lack the necessary impartiality (ICT Pty Ltd v Sea Containers Ltd,
(2002)).
Examples of breach of impartiality:
- presiding arbitrator spent 2 nights with lawyer representing the successful party (Mission
Insurance case);
- if the same arbitrator is appointed for related matters, preconceived opinion may prevent the
arbitrator’s impartiality in the case of the party that wasn’t party to the previous proceedings (no
general test to be applied to determine impartiality in such cases).
Independence requires that there should be no such actual or past dependant relationship
between the parties and the arbitrators which may or at least appear to affect the
arbitrator's freedom of judgment.
In legal systems where either impartiality or independence is the relevant criterion the
interpretation adopted incorporates most elements of both concepts.

2. Normally a stricter standard of independence is applied at the time of appointment of the
arbitrators (leads more towards exclusion) than at the time of challenge procedures (may entail
the retrial of considerable parts of the proceedings), given the disruptive effect challenge has on
an arbitration.
Examples of breech of independence:
- an arbitrator havingan interest in the outcome of a case (e.g., no one should be a judge in his
own cause - Locabail (UK) Ltd v Bayfields Properties [2000]);
- major shareholders or directors of a party being its arbitrators – however, independence issue
doesn’t arise in case of minor shareholders);
- a person having an important and actual relationship with either party, e.g. party's usual lawyer
(depends on the time and the extent of the relationship – e.g., longstanding and continuing
relationship with the arbitrator's law firm).
In Locabail (UK) Ltd v Bayfields Properties [2000] CA UK, it was held that particular facts of
the case need to be considered in order to determine whether there was a “real danger of bias” to
disqualify the judge.
In Laker Airways case, English court held that the fact that an arbitrator was from the same
chambers as counsel for one of the parties did not undermine his impartiality or independence,
however, this case is specific to its facts and not final on this issue. In Liverpool Roman Catholic
Archdiocesean Trust v Goldberg [2002], the court looked at whether there was a relationship
between the proposed expert and the party calling him which would reasonably be understood to
make it favourable to that party – held that barrister expert wasn’t independent, because the
barrister was appointed as an expert on behalf of his friend, another barrister from his chambers.
This test should be extended to the independence and impartiality of an arbitrator from the same
chambers or law firm of one of the parties or its counsel.
- Arbitrators from law firms having an alliance with a firm representing one of the parties
(Mustang Enterprises, Inc v Plug-In Storage Systems, Inc), or arbitrators having a close
relationship to the lawyers of one side.
- Prior appointments by one party should not be sufficient to cast doubts on the independence of
an arbitrator unless there is a pattern of regular appointments. If in doubt, the arbitrator should
disclose to the parties his past connections with one of the parties.
- arbitrators attending events organised or sponsored by law firms do not affect the independence.
- one of the parties is a state or a state entity and a person working for the government is
appointed. In general, employees are considered to lack the necessary independence, but this
doesn’t cover certain types of public officials and civil servants (e.g., judges, law professors,
directors of state-controlled enterprises). In case of developing countries, it should be taken into
account that apart from the functionaries there may be few juristswho could serve as arbitrators.
What is the significance of arbitrator independence and impartiality?
It is a fundamental and universally accepted principle of international arbitration that arbitrators
have to be impartial and independent of the parties and must remain so during the proceedings.
Arbitrators usually have a duty to disclose all relevant facts, including party appointed arbitrators
(however, in domestic arbitrations they can represent their party's interest). Both requirements
are established in most arbitration laws and rules and form part of the codes of ethics for
arbitrators of the IBAand the AAA. Some rules clearly spell out that obligation (Article 5(2)
LCIA Rules – arbitrators shall remain impartial and independent of the parties), others make lack
of independence or impartiality a ground for challenge (Article 10(1) UNCITRAL Rules). Few
laws and rules, however, refer to only one of these requirements – it can be either because only
one requirement is imposed (the reference to impartiality only in section 24 English Arbitration
Act), or for other reasons – e.g., the omission of “impartiality” in Article 7(1) ICC Rules. Both
principles should be distinguished though in practice they are often used interchangeably.
Arbitration rules and laws usually do not provide a clear definition of these terms, except the

3. Swedish arbitration law, section 8, containing a list of instances where the required “impartiality”
is deemed to be lacking. Certain guidelines as to “independence” and “impartiality” can also be
found in Codes of Ethics and in the rules on the nationality of the sole arbitrator or the chairman.
However, there are stilldivergent views as to the actual content of these concepts. Courts have
come to different conclusions as to whether arbitrators are subjected to the same requirements of
“independence” and “impartiality” as judges - the US Supreme Court held in Commonwealth
Coatings v Continental Casualty (1968) that arbitrators should be submitted to stricter
requirements than courts, since there is no appeal against their awards, the English Court of
Appeal held in AT&T v Saudi Cable that the same requirements apply to both.
However, both concepts cannot be interpreted in exactly the same way as for state judges, even
where the arbitration law declares that an arbitrator can be challenged on the same grounds as a
judge, because arbitrators are different from judges in many respects, especially by the fact that
arbitrators are appointed and paid for by the parties.
b) Dutch and Indonesian companies are engaged in an arbitration under theUNCITRAL Rules
with its seat in London. The arbitration relates to theinterpretation of an agreement licensing
the use by the Indonesian company ofintellectual property owned by the Dutch company. The
contract is governed by Dutch law. The Dutch claimant appointed an English barrister as its
arbitrator. The Indonesian respondent appointed a retired Indonesian judge as its arbitrator.
The two party appointed arbitrators appointed a Dutch law professor as the chairman of the
arbitral tribunal. During the course of the arbitration, the Dutch claimant learns that the
chairman has written several articles in legal journals in which he expresses the view that
intellectual property rights are too robust and that they should not be too strictly enforced.
Can the Dutch claimant seek to remove and replace the chairman and, if so, on what grounds?
Lack of independence or impartiality constitutes a ground for challenge, as per Article 10(1) of
UNCITRAL Rules. As per article 13(1), a party that intends to challenge an arbitrator shall send
notice of its challenge within 15 days after it found out about the circumstances giving rise to
justifiable doubts as to the arbitrator’s impartiality or independence.
It is common practice in most arbitration rules that a sole arbitrator or a chairman should be of a
different nationality than either party, while the chairman of the tribunal in question is of the
same nationality as one of the parties (UNCITRAL has no such provision). However, the mere
fact of having identical nationalities, of itself, should not affect the arbitrator's impartiality,
therefore, does not constitute sufficient grounds for successful challenge of the chairman’s
appointment in our case.
The appointment of the chairman could be challenged as a result of circumstances that give rise
to justifiable doubt as to such arbitrator’s independence. However, from the facts of the case
described above it seems unlikely that such challenge will be successful. Such challenge can be
based on the following circumstances, provided that they were only discovered by the Dutch
claimant after the appointment of the chairman (the following list is based on the possible facts
of the case and only includes circumstances which may be likely in this case, but are not sure to
exist):
1. if the chairman turns out to have a longstanding and continuing relationship with one of
the parties, or withits lawyers
2. if there is a pattern of regular appointmentsof this chairman with one of the parties
3. the chairmanhas a personal relationship or is a member of the same organization or club
as senior officers of one of the parties (this does not always allow a successful challenge
of an arbitrator);
4. As per article 11 of UNCITRAL Rules, an arbitrator, from the time of his or her
appointment and throughout the arbitral proceedings, shall without delay disclose any

4. such circumstances to the parties and the other arbitrators unless they have already been
informed by him or her of these circumstances.So non-disclosure of the relevant facts
may be grounds for challenge of the appointment of the chairman, provided that UK law
allows a successful challenge of an arbitrator if there is “reasonable suspicion” or a threat
of “an appearance” of lack of independence. If UK laws allow to do that, the award may
be set aside due to failure to disclose all facts which might create the appearance of bias
(like in US case Commonwealth Coatings Corp v Continental Casualty Co);
Also, the appointment of the chairman could be challenged as a result of circumstances that give
rise to justifiable doubt as to such arbitrator’s impartialityif the same arbitrator (chairman) is
appointed for related matters. Preconceived opinion of the chairman may prevent his impartiality
in the case (however, there is no general rule to resolve such cases).
Earlier publications on legal issues generally cannot in themselves be considered to be a breach
of impartiality (IBA Guidelines on Conflicts of Interest list them as categorically acceptable
connections of an arbitrator), so such publications are unlikely to be considered as satisfying
grounds for challenging the appointment of the chairman.
(c) After the evidentiary hearing has taken place in the arbitration, but before the arbitrators
have rendered an award, the Dutch claimant reads in The Financial Times that the Indonesian
judge has been appointed a non-executive director of a bank that is a significant creditor of the
Indonesian respondent.
Can the Dutch claimant seek to remove and replace the Indonesian arbitrator, and, if so, on
what grounds?
As per article 13(1), a party that intends to challenge an arbitrator shall send notice of its
challenge within 15 days after it found out about the circumstances giving rise to justifiable
doubts as to the arbitrator’s impartiality or independence. Therefore, even after evidentiary
hearings taking place a party can still challenge the arbitrator.
Since the arbitrator appointed by the Indonesian respondentbecame adirector of a company
which is in a continuing and longstanding relations with this party (significant creditor), then it
could be argued that there are grounds to challenge appointment of such arbitratoras a result of
circumstances that give rise to justifiable doubt as to such arbitrator’s independence. However,
given the circumstances, the non-executive director, being a member of the board, does not form
part of the executive management team, is not an employee of the company or affiliated with it
in any other way.Apart from this, it is not clear whether the creditor of the Indonesian
respondent, whose non-executive director is the Indonesian arbitrator,is interested in the subject
matter of the dispute under consideration (interpretation of an agreement licensing the use by the
Indonesian company of intellectual property owned by the Dutch company), and therefore
whether there could be suspicions of bias of such creditor’s non-executive director as to the
outcome of the case.
However, it is contended that it is not necessary for a party challenging an arbitrator to
demonstrate that the individual lacks independence or impartiality; it is instead sufficient to
show that there is enough “doubt” or “suspicion” as to an arbitrator's impartiality to justify
removing the arbitrator (IBA Guidelines, General Standard 2). Still, it is important to consider
what risk of unacceptable partiality exists.There are different views as to the interpretation of
reasonable doubts, one of them is expressed in the IBA Guidelines on Conflicts: the doubts must
be in the mind of a “reasonable and informed third party”, which essentially means that an
objective standard for assessing doubts regarding independence and impartiality should be
applied.
It can be assumed that a “reasonable and informed third party” would probably have doubts as to
the impartiality and independence of the freshly appointed non-executive director of a major
creditor of one of the parties, in the event that the outcome of the dispute between the Indonesian
party and the Dutch party could result, e.g. in substantial damages payable by the Indonesian

5. party, and consequently lead to default of such Indonesian party under the contract with the
Indonesian creditor. Therefore, it can be concluded that the Dutch party can try to remove the
Indonesian arbitrator on the grounds of the circumstances that give rise to justifiable doubt as to
such arbitrator’s independence.
Another possible grounds for removal of the Indonesian party appointed arbitrator may be as per
point (4), reply to question 6(b) above, in the event that the Indonesian arbitrator fails to disclose
information about his appointment as non-executive director to the parties without delay, as per
article 11(1) of the UNCITRAL Rules.
(d) In what circumstances and on what basis can a party to an international arbitration seek
compensation from an arbitrator who has resigned or been removed due to a conflict of
interest?
Non-disclosure of relevant facts by an arbitrator may result in an action for damages against the
arbitrator, i.e., may allow a party to an international arbitration to seek compensation from an
arbitrator. E.g., in Austrian ObersterGerichtshof, 28 April 1998, H GmbH v Hon, RPS (2/1999)
Austrian Supreme Court held that the immunity granted to an arbitrator for his judicial task does
not extend to a violation of the disclosure obligation for which an arbitrator may be liable for
breach of a contractual duty. In Raoul Duval v V(1996) (Tribunal de Grande Instance Paris, 12
May 1993, confirmed by the Courd'appel Paris (1995) and the Cour de cassation (1997)), non-
disclosure by an arbitrator of the fact that he would start working for one of the parties after the
arbitration led to an action for liability against the arbitrator.