Questions
will arise at various stages of arbitral proceedings that
require answers for arbitrators to fully understand and consider the evidence
presented by the parties and to issue an award. While many arbitrators are
likely to issue formal arbitrator inquiries through procedural orders or oral
questions during proceedings, others may refrain from issuing them for various
reasons. Regardless of your arbitral perspective, the extent to which
arbitrators participate in the arbitral process by asking questions and issuing
arbitrator inquiries is not unlimited. Arbitrators
must balance their need for information with their ethical duty to remain
neutral. Thus, with every arbitrator inquiry, whether written or oral, arbitrators
must initially answer the question: “to ask or not to ask”— that is the pivotal
preliminary internal arbitrator inquiry.
Some
Applicable Ethical Standards Concerning Arbitral Inquiries
Most
arbitral institution rules, court rules and bar association canons contain
provisions governing arbitrator impartiality. Under most arbitral institution
rules, arbitrators must remain neutral and impartial throughout the course of the
arbitration, absent an agreement by the parties to the contrary. Impartiality
means freedom from favoritism either by word or action.[1] In
New York state, an arbitrator must conduct the arbitration in an impartial
manner and act at all times with the utmost impartiality and evenhandedness.[2]
In addition, arbitrators in New York should refrain from providing
professional advice to any party and should at all times strive to distinguish
between the roles of arbitrator and that of adviser or party counsel.[3] Further,
according to the American Bar Association Code of Ethics for Arbitrators, when
the arbitrator determines that more information than has been presented by the
parties is required to decide the case, it is not improper for the arbitrator
to ask questions, call witnesses, and request documents or other evidence,
including expert testimony.[4]
However, the ABA Canons caution that arbitrators should avoid conduct and
statements that give the appearance of partiality toward or against any party.[5]
Categories of Arbitrator Inquiries
There
are at least five common categories of arbitrator inquiries that typically
arise in arbitrations and a sixth category that arises in mock arbitrations.
Category
1: Clarification or Confirmation of Facts
Category
1 inquiries involve questions of fact that provide additional information
regarding the background of the dispute and cover a wide range of basic,
primary and historical information and the course of dealings between the
parties. This line of inquiry assists the arbitrators in determining what
actually occurred in the case. Where notice and opportunity to cure is in
dispute in a construction defect case, a Category 1 inquiry could include questions regarding the names of
the parties that were provided notice of a breach, the manner in which the
notice was sent and conformance to the other contractual notice requirements in
the applicable agreement.
Category
2: Clarification of Matters of Law
Category
2 inquiries consist of questions regarding legal principles and the application
of such principles to the facts of the case. This line of inquiry assists the
arbitrators in clarifying applicable matters of law. Examples of Category 2
inquiries include questions to elicit information regarding the standard of
proof applicable to a claim and the shifting of the burden of proof, the
particular law that applies to a claim and the satisfaction of statutory
conditions to the award of punitive damages.
Category
3: Contractual Provisions in Arbitration Agreement Not Raised by Parties
Category
3 inquiries are questions that assist in the interpretation and enforcement of
the arbitration agreement between the parties. This line of inquiry helps
arbitrators adhere to their ethical obligation to conduct the arbitral
proceedings in accordance with the terms and conditions of the arbitration
agreement.[6] For
example, a Category 3 inquiry is whether a minimum arbitration award provision
in an arbitration agreement applies if the actual damages requested by claimant
is less than the minimum award. Given the obligation of arbitrators to conduct
the proceedings in accordance with the arbitration agreement, arbitrators are
empowered to proceed with this line of questioning.
Category
4: Contractual Provisions in Principal Agreement Not Raised by Parties
Category
4 inquiries are questions that request clarifications regarding contractual
provisions in the agreements directly related to the dispute that may be
applicable but may not have been raised by the parties. Where the right to
exercise a mandatory redemption is in question, a Category 4 inquiry could inquire
into the applicability of other contractual provisions in the agreement that specifically
relate to redemption rights but have not been raised by the parties. With Category
4 inquiries, arbitrators must exercise caution to perform the pivotal
preliminary internal arbitrator inquiry to determine the appropriateness of the
question. If the inquiry would appear to
favor one party over another or give the impression that the arbitrator is
acting as a party counsel, the inquiry should not be made.
Category
5: Damage Calculations – Compliance with Principal Agreement
Category
5 inquiries are questions designed to ensure that the calculation of damages is
consistent with the contractual provisions of the agreement. In a situation
where the damage submission calculation does not align with the terms of the agreement, a
Category 5 inquiry permits the arbitrators to request compliance with the
contractual provision regarding delay damages, present value adjustments,
interest accrual, offsets to damages, liability caps and other contractual
provisions governing the assessment of damages that may not have been included or properly reflected in a party’s damages submission. For arbitrations subject to the International
Chamber of Commerce (ICC) Arbitration Rules, Category 5 and Category 4
inquiries are consistent with Article 21(2), which provides that “[t]he
arbitral tribunal shall take account of the provisions of the contract, if any,
between the parties and of any relevant trade usages.”[7]
Category
6: Neutral Evaluator or Arbitrator in Mock Arbitration
In
mock arbitrations or neutral evaluations performed as arbitration preparation
in complex disputes, arbitrators are given great leeway to participate in the arbitration. Arbitrators are encouraged to ask wide-ranging questions that may favor one party over another, point out discrepancies and
deficiencies in the arguments of a party and highlight the strengths and
weaknesses of the dispute. In this limited forum, arbitrators may freely issue
inquiries requesting information that favors or disfavors a party since the
legal authorities regarding arbitrator neutrality are not applicable in this
mock setting.
General Principles Regarding Arbitrator Inquiries
Although
arbitrator inquiries may be extremely helpful in arbitral proceedings, several general
principles are useful to determine the appropriateness of their content and their
timing.
Principle
1: Do not issue arbitrator inquiries until both sides have had an opportunity
to present on the issue.
Many
questions that arise at various stages of an arbitration should be clarified or
addressed after the parties have presented their respective positions. An exception might be in a complex dispute where
the receipt of additional information regarding the parties and their
relationships, the transaction flow or structure, or other factual matters might
initially be required to understand the dispute. In this situation, arbitrator inquiries might
be appropriate prior to the presentation of both parties' cases.
Principle
2: Do not ask questions that may raise possible additional claims.
There
is a distinction between an arbitral inquiry that sheds light on a claim that
has already been raised and one that raises a new claim not previously alleged
by a party. Arbitrator inquiries should not introduce new claims.
Principle
3: Do not ask questions that may raise issues of affirmative defenses.
During
many arbitrations, the arbitrator may already know typical defenses to certain
claims based upon their knowledge, experience and analysis of the facts and
circumstances of the claims. However, if such defenses to a claim have
not been raised and affirmatively pursued by a party, it would be inappropriate
for an arbitrator to inquire regarding it. Examples of inappropriate inquiries include
those related to the statute of limitations, impossibility, statute of
frauds, unclean hands, release, accord, satisfaction or any other affirmative
defense not raised and pursued by a party.
Principle
4: Ask questions in an impartial manner.
If
the arbitrators make an inquiry in an arbitral proceeding, it generally
reflects an issue that they deem to be important. Although the party’s response
to such inquiry will usually favor one party over the other, the inquiry itself
should be asked or written in a manner that does not favor one party and
maintains the arbitrators’ neutrality and impartiality.
Conclusion
Properly exercised, arbitrator inquiries are effective tools with ample legal authorities that support the power of arbitrators to make inquiries during arbitral proceedings. However, in making such inquiries, arbitrators must avoid asking questions that may be construed as providing professional advice or favoring one party over the other, or may be misconstrued as an inquiry that should be made by party counsel instead of the arbitrators. Thus, the arbitrators’ analysis of the pivotal preliminary internal inquiry, to ask or not to ask, is always relevant and a prerequisite to asking any question or issuing any arbitrator inquiry.
Lisa D. Love, Esq., FCIArb. is an accomplished arbitrator, mediator and neutral evaluator with JAMS who brings to her work as a neutral extensive experience as a complex commercial transactions attorney. Ms. Love has served as a neutral in a wide range of complex commercial transactions and legal disputes, including those focused on investments, corporate finance, securities, mergers and acquisitions, construction and infrastructure projects and development, energy, life sciences, licensing and technology transfers, franchises, commercial real estate, antitrust, government and public agency, and corporate governance matters.
Disclaimer: The content is intended for general informational purposes only and should not be construed as legal advice. If you require legal or professional advice, please contact an attorney.
[2] See New York State Unified Court System
Rules Ethical Standards for Arbitrators and Neutral Evaluators – Ethical
Standard I – Impartiality.
[3] Id., Standard VI – Quality of the
Process, Ethical Consideration No. 4.
[4] See American Bar Association/College of
Commercial Arbitrators Annotations to the Code of Ethics for Arbitrators in
Commercial Disputes Canon IV(E)
[5] Id., Canon I(D).
[6] Id., Canon I(E).
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