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Cannons of Propriety for Arbitrators

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Cannons of Propriety for Arbitrators

By

GIRISH BHATNAGAR

Retired General Manager, East Central Railway, Hajipur

 A large number of Contracts are now a days ending in arbitrations. Naturally many Railway officers are getting nominated to act as arbitrators. Unlike evaluators of written papers in promotion examination of employees – who are provided with detailed guidelines, no guidelines are given and arbitrators are left to fend for themselves.

Although an Arbitrator is a quasi-judicial institution, yet an arbitrator appointed by Railway is still answerable to the Administration as a Railway Servant for his conduct during Arbitration. But legal grounds are slippery if he is to be questioned by any wing of Railway for giving a particular award, though Railway is free to question the award in a court of law – to the extent provided in the new Arbitration Act.

Technical issues of conducting arbitration apart, the questions of ethics are very thorny and potentially full of dangers. Unlike tender cases, there is no guideline for the handling of Arbitration work. Therefore in case of misdemeanour of Arbitrator there is no violation of specific guidelines (except for generalities) for which he could be held responsible.

Railway could consider issuing “Cannons of Propriety for Arbitrators” and also amend Service Conditions and Vigilance Manual to take care of these issues. There is also need to modify the “Arbitration Clause” in Railway Contracts to address certain lacunae pointed out below. It will also be helpful, if Railway issues a set of “Rules for Conducting Arbitration” – on the lines of “Rules for Entering into Contracts” issued by Stores Directorate.

Following seven “Cannons of Propriety for Arbitrator” could be a starting point. These are based on my own experience and similar guidelines prevalent in other countries. Cannons by nature are generalised and do not go into specifics but are broad and generic enough to cover most of the situations that may arise in actual practice.

 I           Acceptance/ Withdrawal of Appointment of Arbitrators

 1.1       For arbitration to be effective there must be broad public confidence in and understanding of the integrity and fairness of the process. Bedrock for achieving this is – appointment of appropriate persons as Arbitrators. In case any of following cannons is violated the person should not accept the nomination. If the violation occurs or is likely to occur during the course of the arbitration, he should abdicate with the permission of the appointing authority and with due notice to the parties concerned.

 1.2.      It may be inconsistent with the integrity of the arbitration process for persons to solicit appointment for themselves. However, persons may indicate a general willingness to serve as arbitrators, e.g., by listing themselves with Railway.

1.3       Whenever an arbitrator is appointed his consent should either be taken beforehand or it must be an obligatory duty in his service conditions. This is not done in Railway and needs to be addressed by amending service conditions.

 1.3.      Arbitrator should neither have dealt with, in recent past, nor should have any business dealings with the opposite party during the currency of arbitration – not only in the subject case but also in any other case. This (dealing with party during the currency of Arbitration) is not yet followed in Railway and rules need to be modified in this regard.

 1.4       If an arbitrator is asked by all parties to withdraw, the arbitrator shall do so; however for arbitrators appointed by Railway, the arbitrator shall inform the appointing authority of the request and shall comply with Railway’s orders. Our Arbitration Clause needs to be modified to incorporate this aspect of dealing with unanimous challenge to the Arbitrator. If an arbitrator is asked to withdraw by less than all of the parties because of alleged partiality or bias, the arbitrator shall withdraw unless any of following circumstances exists:

  1. a)If the parties' agreement, or arbitration rules to which the parties have agreed, establishes procedures for determining challenges to arbitrators, those procedures shall be followed.
  2. b)Unlike neutral arbitrators, arbitrators appointed by Railway are not obliged to withdraw if asked to do so by other party. They can themselves determine that the reason for the challenge is not substantial, and that he or she can nevertheless act and decide the case impartially and fairly, and that withdrawal would cause unfair delay or expense to another party or would be contrary to the interest of justice.

 II.        Avoid and Disclose interest or relationship likely to affect impartiality or which might create an appearance of partiality or bias.

 2.1       Persons asked to serve as arbitrators shall, before accepting, disclose:

  1. a)Any direct or indirect financial or personal interest in the outcome of the arbitration; 
  1. b)Any existing or past financial, business, professional, family or social relationships which are likely to affect impartiality or which might reasonably create an appearance of partiality or bias. They shall disclose any such relationships which they personally have with any party or its lawyer. They shall also disclose any such relationships involving their spouses or minor children residing in the household or their current employers, partners or business associates; and

 2.2       The obligation to disclose interests or relationships described above is a continuing duty which requires a person accepting appointment as an arbitrator to disclose, at any stage of the arbitration, any such interests or relationships which may arise, or which are recalled or discovered.

 2.3       Disclosure shall be made to all parties unless other disclosure procedures are provided in the rules or practices of an institution. Where more than one arbitrator has been appointed, the other arbitrators shall be informed of interests and relationships which have been disclosed. Railway needs to legislate about this aspect, since this is not being done at present.

 2.4       After accepting appointment and while serving as an arbitrator, a person shall avoid entering into any financial, business, professional, family or social relationship, or acquiring any financial or personal interest likely to affect impartiality or which might reasonably create the appearance of partiality or bias. For a reasonable period after decision of a case, persons who have served as arbitrators shall avoid entering into any such relationship, or acquiring any such interest, in the circumstances which might reasonably create the appearance that they had been influenced in the arbitration by the anticipation or expectation of the relationship or interest. This needs to be covered in the service conditions and Vigilance manual.

 III.       Avoid impropriety or the appearance of impropriety in communicating with parties.

 3.1       The Arbitrator shall not enter into any written, verbal or electronic communication with any party regarding any aspects of the case except in the presence/ participation of the other party. However date and time and other felicitation of hearings may be discussed.

 3.2       Whenever an arbitrator communicates in writing with one party, the arbitrator shall send a copy of the communication to other parties at the same time. Whenever the arbitrator receives a written communication concerning the case from a party which has not already been sent to other parties, the arbitrator shall send that communication to other parties.

 3.3       If there is more than one arbitrator, then all communications shall be done with the agreement and knowledge of all arbitrators, unless procedures and rules for conduct of Arbitration (which must be settled before start of Arbitration) authorise exception to this.

 IV. Conduct proceedings fairly and diligently.

 4.1.      Arbitrators shall conduct themselves in a way that is fair, in word and action, to all parties and must not be swayed by outside pressure, public clamour and fear of criticism or self-interest.

 4.2       An arbitrator shall conduct proceedings in an even-handed manner and treat all parties with equality and fairness at all stages of the proceedings.

 4.3       The arbitrator shall not exceed his authority nor do less than required to exercise that authority completely. Where procedures/ rules have been set forth to be followed in conducting the arbitration the arbitrator must comply with such procedures or rules.

 4.4       An arbitrator shall make all reasonable efforts to complete the Arbitration in a reasonable timeframe and should prevent delaying tactics, harassment of parties or other participants, or other abuse or disruption of the arbitration process.

 4.5       An arbitrator shall be patient, diligent, dignified and courteous to parties, their lawyers, witnesses, and all others with whom the arbitrator deals in that capacity and shall encourage similar conduct by all participants in the proceedings.

 4.6       Unless otherwise agreed by the parties or provided in arbitration rules to which the parties have agreed, an arbitrator shall accord to all parties the right to appear in person and to be heard after due notice of the time and place of hearing. An arbitrator shall not deny a party the opportunity to be represented by counsel.

 4.7       It is not improper for an arbitrator to suggest to the parties that they discuss settling the case; however he may not pressure a party to settle. An arbitrator may not be present or otherwise participate in settlement discussions unless asked to do so by all parties.

 4.8       Where there is more than one arbitrator, the arbitrators shall afford each other full opportunity to participate in all aspects of the proceedings.

V.        Make decisions in a just, independent and deliberate manner.

 5.1       An Arbitrator shall base his decisions only on facts and arguments about which both parties have had reasonable and adequate opportunity to discuss. He shall not base his decision on anything other than these.

 5.2       An arbitrator shall, after careful deliberation, decide all issues submitted for determination. An Arbitrator should not leave any submitted issue undecided. An arbitrator may decide no other issues.

 5.3       An arbitrator shall decide all issues justly, exercising independent judgment, and shall not permit outside pressure/ influence or consultations to affect the decision.

 5.4       An arbitrator shall not delegate the duty to decide to any other person, unless the parties agree to such delegation.

5.5       If all parties agree to settle issues in dispute and ask an arbitrator to embody that agreement in an award, an arbitrator may do so but is not required to do so unless satisfied with the propriety of the settlement terms. Whenever an arbitrator embodies the parties' settlement in an award, the arbitrator shall state in the award that it is based on the parties' agreement.

 VI. Confidentiality & payments

 6.1.1    An arbitrator is in a relationship of trust to the parties and shall not at any time use confidential information acquired during the arbitration proceeding to gain personal advantage or advantage for others or to affect adversely the interest of another. However, subsequent to settlement of the case, the Arbitrator may use the details of the case for Professional or Academic writings - provided the broad identities of Parties are protected.

 6.1.2    Unless the parties agree otherwise, or the law or applicable rules require, an arbitrator shall keep confidential all matters relating to the arbitration proceedings and decision.

It is not proper at any time for an arbitrator to inform anyone of the decision before it is given to all parties. Where there is more than one arbitrator, it is not proper at any time for an arbitrator to inform anyone concerning the arbitrators' deliberations. After an arbitration award has been made, it is not proper for an arbitrator to assist in post-arbitral proceedings, except as required by law, or as agreed by the parties.

 6.2       Where payments of Arbitration Fees are to be made, all persons asked to serve, or who serve as arbitrators, shall be governed by the same high standards of integrity and fairness as apply to their other activities in the case. Accordingly, such persons shall scrupulously avoid bargaining with parties over the amount of payments nor create an appearance of coercion or other impropriety. It will help to preserve the integrity and fairness of the arbitration process if:

  1. vRailway Administration should make it known to all parties the scale of Arbitration Fees laid down as per its rules. Railway Administration should also take upon them to collect the fees to relieve the embarrassment to the Arbitrators in collecting payment. 
  1. vIn any case it is preferable that any discussions with arbitrators concerning payments take place in the presence of all parties and should be done before the Arbitration proceedings start tackling brass tacks.

 VII. Ethical considerations relating to arbitrators appointed by Railway.

 7.1       The arbitrators appointed in Railways are not neutral but are Railway Officers. They are naturally perceived by the opposite party as not neutral or independent. At the same time any leniency towards the other party would attract Railways’ displeasure. Hence they have much more tight-rope walking to do and have higher responsibility to uphold the cannons mentioned above. They should not present arguments on behalf of Railway. They themselves shall not engage in delaying tactics or harassment of a party or witness and shall not knowingly make untrue or misleading statements to other arbitrators.

 7.2       Railway appointed arbitrators should not communicate with the other Officers/ Administration concerning any other aspect of the case. However, in an arbitration in which two party-appointed arbitrators are expected to appoint the third arbitrator, it would not be a violation of these cannons if Railway appointed arbitrators may consult or receive directions from the Railway Administration concerning acceptability of persons under consideration for appointment as the third arbitrator.

Last Updated ( Tuesday, 12 August 2014 16:15 )  
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