The conduct of the parties in international arbitration: the current state of play
Mayer Brown, London
Mayer Brown, Paris
Standards of conduct in international arbitration
Parties in international arbitration strive for success and their desire to get the ‘right’ result and win may create the risk of crossing boundaries, whether directly or indirectly. However, when it comes to conduct issues in international arbitration, there is no uniform code of conduct or global practice that applies in every scenario. Legal representatives’ professional conduct may be governed by multiple sources, including the ethical rules outlined:
- by the regulatory authorities in the jurisdiction in which they are licensed;
- in national arbitration laws; and
- in international institutional rules and guidelines (which may be agreed by the parties or imposed by the Tribunal).
These different ‘layers’ create complexity in international arbitration not least because they often generate multiple, divergent standards of professional conduct (for example, in relation to witness preparation or document production) and there are no clear rules of priority. Partly due to this tension, certain international ethical rules and guidelines have been created with a view to providing a set of uniform standards of conduct for counsel and non-legal representatives. These rules and guidelines form the focus of this article.
Remedying representative misconduct: A job for arbitrators?
The legitimacy of international arbitration depends on the honesty, truthfulness and professionalism of those who participate in the arbitral process but where this fails, can we count on arbitrators to rectify the situation within the arbitral process? And do they have effective powers of enforcement particularly against parties adopting guerrilla tactics which are determined to undermine the arbitration and are contemptuous of the Tribunal’s authority?
Despite not traditionally being the case, in recent times, many courts have expressly recognised that remedying a party’s misconduct falls within the competence of arbitrators (as opposed to resting solely with disciplinary authorities and national courts). The final proposed draft of the Restatement of the U.S. Law of International Commercial and Investor-State Arbitration could not be clearer on this point: “Courts generally refer to the arbitral tribunal issues regarding disqualification of counsel or alleged misconduct that occurs within or is directly related to the merits or procedures of an arbitral proceeding".
Indeed, there is arguably now an expectation that arbitrators will effectively address representative misconduct. In Stati v Kazakhstan, expert witness Catherine Rogers opined that “the IBA Guidelines on Party Representation and the LCIA Annex … confirm that arbitral tribunals are increasingly expected to perform a quasi-regulatory function by responding to counsel misconduct that affects the efficacy and fairness of arbitral proceedings.”
Two important tools: the LCIA Rules and Annex and the IBA Guidelines on Party Representation in International Arbitration
The LCIA Arbitration Rules (2014) introduced new provisions on party representatives which are binding on the parties by virtue of their agreement to LCIA arbitration. The 2014 rules apply to legal representatives only but the LCIA’s 2020 Arbitration Rules (the “LCIA Rules”) apply to all authorised party representatives. Article 18.5 requires each party to ensure that all of its named representatives have agreed to comply with the general guidelines contained in the Annex to the LCIA Rules. In permitting its representatives to appear, the party thereby represents that the representatives have agreed to such compliance. These guidelines are intended to promote the good and equal conduct of the parties’’ representatives; they do not “derogate from any mandatory laws, rules of law, professional rules or codes of conduct if and to the extent that any are shown to apply to [a party]… representative”.
Similarly, in 2013 the International Bar Association (“IBA”) issued Guidelines on Party Representation in International Arbitration (the “IBA Guidelines”) which provide a code of conduct for party representatives. The IBA Guidelines are non-binding guidelines which apply in any arbitration when the parties agree or where the Tribunal wishes to use them when it considers it has the authority to rule on matters of party representation. They do not override mandatory rules of national law governing conduct and so they exist alongside national standards.
The IBA Guidelines have been well-accepted by the global international arbitration community. For example:
- The ICC has taken the “the bold decision of endorsing the IBA Guidelines … by encouraging arbitrators and parties to adopt or draw inspiration from them”. The ICC’s 2021 Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration states that “[p]arties and arbitral tribunals are encouraged, where appropriate, to adopt or otherwise be guided by the IBA Guidelines…” (paragraph 67). Paragraph 68 then directly enshrines a key provision from the IBA Guidelines in relation to ex parte communications.
- Under the Arbitration Rules of the Australian Centre for International Commercial Arbitration 2021 “each party shall use its best endeavours to ensure that its legal representatives comply with the [IBA Guidelines]…” (Article 7.2).
- The Lagos Chamber of Commerce Arbitration Rules 2016 also directly incorporate the IBA Guidelines (Article 7(3) and Annex II).
The IBA Guidelines are now commonly used as guidance for parties, counsel and arbitrators: during the 15th ICC Miami Conference, when asked if they had seen the IBA Guidelines referenced in the Terms of Reference and/or the first procedural order, 75% of the attendees responded affirmatively.
Statistics from Queen Mary University of London’s (“QMUL”) 2015 International Arbitration Survey, which had over 860 diverse respondents (including counsel, arbitrators, experts, third-party funders and institutional staff), reveal that:
- 85% of respondents had either seen the IBA Guidelines and used them in practice (24%) or were aware of them but had not seen them used in practice (61%);
- 69% of respondents considered the IBA Guidelines to be “effective” (28%) or “neutral” (41%); and
- 62% of respondents considered that the best way to regulate party representative conduct was through the effective use of sanctions in institutional rules such as the annex to the LCIA Rules (35%) or through guidelines such as the IBA Guidelines (27%).
While worded differently, the conduct covered by the IBA Guidelines and the LCIA Rules is essentially the same and is characterised broadly. Both cover conflict-related issues, namely notifying a change in party representation and the circumstances in which the Tribunal may withhold its approval of that change for conflict reasons. They also prohibit the following behaviour:
- ex-parte communications with arbitrators (save for limited exceptions), any tribunal secretary (in LCIA cases only) and the LCIA Court (in LCIA cases only, prior to the Tribunal’s formation);
- making knowingly false submissions of fact to the Tribunal;
- using document production for an improper purpose and concealing documents;
- improper conduct in relation to witnesses and experts; and
- obstructive activities and other tactics intended to jeopardise the finality of any award including repeat jurisdictional and arbitrator challenges.
Under the IBA Guidelines, in addition to covering any breach of the IBA Guidelines, misconduct also covers “any other conduct that the Arbitral Tribunal determines to be contrary to the duties of a Party Representative”, a potentially useful catch-all provision for Tribunals.
Similar sanctions are available under the IBA Guidelines and the LCIA Rules, although the IBA Guidelines go further.
In the event of a party complaint against another party’s representative, Article 18.6 of the LCIA Rules empowers the Tribunal to decide, after providing him/her with a reasonable opportunity to answer the complaint, if the guidelines have been violated and, if so, to impose sanctions. The Tribunal may order any or all of the following sanctions:
- a written reprimand;
- a written caution as to the future conduct of the arbitration; and
- any other measure necessary to fulfil the Arbitral Tribunal’s duties to act fairly and impartially and to adopt procedures suitable to the arbitration, so as to avoid unnecessary delay and expense.
Further, arbitrators are expressly empowered, by Article 28 of the LCIA Rules, to take parties’ and their representatives’ conduct into account when awarding costs.
In a similar vein, the IBA Guidelines provide that the representatives’ conduct may be considered when apportioning costs and they permit admonishment of the representative. The IBA Guidelines also permit the Tribunal to draw adverse inferences in assessing the evidence or the legal arguments, a sanction not seen in the LCIA Rules, and to “take any other appropriate measure in order to preserve the fairness and integrity of the proceedings”.
Scherer, Richman and Gerbay opine that it might be possible to exclude representatives from the arbitration under the LCIA Rules if the measure is “necessary” to fulfil their duties (even though the sanction is not directly referred to in the LCIA Rules or Annex). An example may be if a representative forges documents such that the enforceability of the award is put at risk if the representative remains on the case.
Neither Article 18 of the LCIA Rules nor the IBA Guidelines contain any details on the form of a Tribunal’s sanction decision, although it is likely to be a procedural order and it is best that reasons are given in order to minimise the risk of challenge to the Tribunal or the award.
Other institutional rules and guidelines also deal with party default and hence enshrine standards of expected behaviours with consequences for non-compliance. The below examples demonstrate an overlap with many of the sanctions seen in the IBA Guidelines and the LCIA Rules:
- ability to draw adverse inferences if a party does not comply with an order or instruction of the Tribunal (Article 10, Prague Rules on the Efficient Conduct of Proceedings in International Arbitration; and Article 27, JAMS International Arbitration Rules 2021);
- ability to draw adverse inferences if (i) a witness of fact or party-appointed expert fails to appear for testimony or (ii) a party fails to produce or make available documents or requested evidence (Articles 4, 5 and 9, IBA Rules on the Taking of Evidence in International Arbitration);
- power to proceed with the arbitration notwithstanding the failure or refusal of any party to comply with the rules or with the Tribunal’s orders or directions or any partial Award or to attend any meeting or hearing, and to impose such sanctions as the Tribunal deems appropriate in relation to such failure or refusal (Article 27, SIAC Rules 2016); and
- ability to take into account parties’ conduct when deciding on the allocation of costs (Article 11, Prague Rules on the Efficient Conduct of Proceedings in International Arbitration; Article 38(5), ICC Rules 2021; Article 9(7), IBA Rules on the Taking of Evidence in International Arbitration; and Article 30.2, JAMS International Arbitration Rules 2021).
Assessing the state of play
The sanctions outlined in this article appear, on the face of it, to be wide and varied. But how effective are they in practice? The current state of play gives rise to the following issues.
Limited insight into the application of ethical rules
The private nature of commercial arbitration means it is challenging to know if Tribunals are addressing representative misconduct and how they are doing so. For example, while the LCIA Rules and the Annex provide a framework within which party representative conduct can be effectively managed, we do not know how often these rules are referred to in LCIA arbitrations and whether they are making much difference to the conduct of party representatives.
Similarly, while a small number of publicly known awards refer to the IBA Guidelines, it is also difficult to understand the extent to which (i) parties agree to their use, (ii) Tribunals impose them (even when parties do not agree), and (iii) sanctions are issued under them.
This contrasts with the transparency of litigation. From the perspective of the English courts, judges seem to be clamping down on party misconduct (and perhaps, therefore, that of their representatives) when circumstances merit it. One such example being the Dana case in which the defendant was prevented from relying on its expert report after the expert conversed directly with, and obtained information from, its instructed party when in purdah (without involving their solicitors).
The crucial question is whether Tribunals are doing enough or whether they should be doing more? In this regard, the following information is salient:
- 50% of attendees at the 15th ICC Miami Conference (held in late 2017) said that they had raised ethical misconduct before the Tribunal but that in 75% of cases, the Tribunal did nothing in response to ethical violations;
- QMUL’s 2018 International Arbitration Survey referenced arbitrators’ lack of proactiveness in dealing with dilatory tactics and conduct related matters. A number of respondents referred to the “due process paranoia ” of arbitrators as a probable reason for the continued lack of proactiveness, also reported in their 2015 survey. QMUL’s 2015 and 2018 surveys reported that the “lack of effective sanctions during the arbitral process” was perceived as the second worst characteristic of arbitration. A considerable number of respondents wanted arbitrators to be encouraged to make better use of the sanctioning powers available to them (some wanted broader powers for arbitrators too); and
- according to the April 2019 ICC Commission Report on Emergency Arbitrator Proceedings, “a review of the ICC [emergency arbitration (“EA”)]… Orders provides little evidence that specific soft law norms [including the IBA Guidelines] have been specifically applied to EA proceedings or used as guidance”.
While the above can do no more than provide an indication of what is happening behind closed doors, it does tend to suggest that Tribunals are not being consistently proactive in terms of managing party conduct issues.
Contractual nature of the IBA Guidelines may be problematic
Some publicly known awards referring to the IBA Guidelines highlight that where parties have sought to rely on the IBA Guidelines after misconduct has arisen, they have not always been successful.
In one PCA case, the respondent alleged that the claimant’s late production of a witness statement (attached to its statement of reply) referred to the facts claimed in the statement of claim and hence should have been produced with that pleading, since evidence annexed to the statement of reply was limited to responsive evidence to the statement of defence under the procedural order in question. It argued this amounted to misconduct, hence the sanctions in the IBA Guidelines should be applied and the witness statement should be declared inadmissible. The Tribunal dismissed all such points, briefly stating that it did not consider the Claimant’s behaviour to amount to misconduct and that, in any case, the IBA Guidelines were “not applicable” since the parties “did not settle on” their application.
Decisions like this emphasise the importance of party agreement and highlight that parties should be addressing the use of the IBA Guidelines early on in the case (ideally in the first procedural order or Terms of Reference), even if they are referred to act purely by way of guidance and not to be prescriptively applied, so as to allow for their applicability later on when misconduct arises.
The deterrent effect
On a positive note, we believe that the existence of these sanctions could act as a useful deterrent against unreasonable behaviour by a party. The more that is publicly known about the practical reliance on and application of sanctions the stronger the likely deterrent effect. It is for this reason that we believe that the issue of party misconduct must continue to be openly discussed and debated in the international arbitration community.
When considering the state of play, in our opinion two important factors ought not to be forgotten or underestimated:
- by virtue of the sheer number of arbitration cases in recent times, most arbitrators in international arbitration have significant experience acting as an arbitrator; and
- arbitrators have inherent powers, enshrined by law, granting them significant leeway to grant appropriate relief; such powers are also very often incorporated into the Terms of Reference or procedural orders.
Combined, both these factors mean that arbitrators undoubtedly have the (discretionary) power and, in many cases, the experience effectively to deal with misconduct and a party’s use of guerrilla tactics whilst ensuring that they adhere to their obligations to provide a fair and reasonable procedure. It should not be controversial that a fair procedure, which ensures that each party has a reasonable opportunity to present its case, can also include a discussion about, and possible orders relating to, behaviour which the tribunal considers has crossed ethical boundaries.
Further, arbitrators also have the knowledge and the resources at their disposal to sensibly apply whichever sanction is relevant in the circumstances. For example, reports such the ICC’s Report “Decisions on Costs in International Arbitration” are insightful; a significant section of this report is devoted to cost allocation on the basis of improper conduct or bad faith of the parties. It highlights the various different types of misconduct that may be taken into account by the Tribunal when apportioning costs between the parties including: improper conduct during procedural stages and/or in document production phase, false witness or expert evidence, false submissions to the tribunal, aggressive conduct, lack of professional courtesy and unsubstantiated fraud allegations. It is hoped that reports such as these can also serve to deter parties from improper conduct.
A final observation on the issue of sanctions is that, in a couple of U.S. cases, a jurisdictional basis was found for awarding monetary sanctions against attorneys. In our view, these are unlikely to be adopted in international arbitration; rather, cost sanctions are likely to be directed at the parties to the arbitration.
Potential means for improvement
The present situation may potentially be improved by obtaining further data from institutions and arbitral users on the practical application of these conduct rules and guidelines to determine an appropriate course for potential resolution of the issues addressed above.
A call to action
The international arbitration community is fortunate to benefit from insightful surveys on a variety of issues, QMUL’s International Arbitration surveys being a prominent example. At present, this community would benefit from a further empirical survey or statistical report covering the following issues:
- in relation to the LCIA Rules:
- the extent to which Articles 18.5 and 18.6 of the LCIA Rules and the Annex to those rules are relied on by parties (including how many complaints have been raised each year since 2014);
- the extent to which sanctions under the Annex have actually been granted in LCIA cases; and
- examples of circumstances in which each type of sanction has been granted.
- in relation to the IBA Guidelines:
- the extent to which parties agree to their use in commercial arbitrations (data in relation to investment arbitrations would also be insightful);
- the extent to which Tribunals impose them (even when parties do not agree); and
- how frequently each of the different types of sanctions has been issued by Tribunals, with examples of the circumstances in which they have been granted.
This information would genuinely help users understand if the conduct rules and sanctions are meaningful tools which arbitrators feel comfortable using or, conversely, if the sanctions are rarely granted; for example, for fear that the award may be challenged (i.e. the “due process paranoia” referred to in the QMUL surveys).
In our opinion, careful consideration should also be given to what further sanctions should be introduced, particularly into the rules of other arbitral institutions which do not currently address party conduct. The LCIA Rules and Annex and/or the IBA Guidelines may be a useful starting point in this regard.
Arbitrators have numerous tools in their toolbox in order to effectively manage and sanction parties for unreasonable conduct by virtue of soft law norms (the IBA Guidelines) and institutional rules such as the LCIA Rules. Tribunals should be using these tools to proactively deal with improper conduct but the information currently available suggests that this may not consistently be the case and therefore more intervention by Tribunals may be required.
§3.9 Attorney Conduct in International Arbitration, Restatement (Third) U.S. Law of International Commercial and Investor-State Arbitration, Proposed Final Draft (April 24, 2019).
Ascom Group S.A., Anatolie Stati, Gabriel Stati and Terra Raf Trans Traiding Ltd. v. Republic of Kazakhstan, SCC Case No. 116/2010, Witness Statement of Catherine Rogers dated 17 January 2021, paragraph 109.
Paragraph 1 of the Annex to the LCIA Rules.
They have been relied on in commercial arbitrations as well as in ICSID cases for example before ad hoc committees in annulment proceedings (e.g. Pey Casado v Chile, Decision on annulment, 8 January 2020).
Alexis Mourre, President of the ICC International Court of Arbitration, “Message from the president” in ICC Dispute Resolution Bulletin 2021 Issue 2.
An arbitrator or prospective arbitrator shall not engage in ex parte communications with a party or party representative concerning the arbitration save in two limited scenarios (i) to determine his or her expertise, experience, skills, availability, acceptance and the existence of potential conflicts of interest and/or (ii) for the purpose of selecting the president of the tribunal and, in both cases (i) and (ii), an arbitrator or prospective arbitrator shall refrain from expressing any views on the substance of the dispute.
Information extracted from the ICC’s Digital Library.
This results from a change to paragraph 6 of the Annex pursuant to the 2020 LCIA Rules, there being no such reference to tribunal secretaries under the Annex to the 2014 Rules.
Specifically, unilateral communication is prohibited with “any member of the LCIA Court exercising any function in regard to the arbitration” (paragraph 6 of the Annex).
Article 28.4. See also https://www.lcia.org//adr-services/lcia-notes-for-arbitrators.aspx#6.5%20Conduct%20of%20the%20parties%20and%20their%20legal%20representatives, paragraph 40.
Arbitrating under the 2020 LCIA Rules: A User’s Guide by Maxi Scherer, Lisa Richman and Rémy Gerbay, paragraph 63.
See Arbitrating under the 2020 LCIA Rules: A User’s Guide by Maxi Scherer, Lisa Richman and Rémy Gerbay, paragraph 66.
In addition to the IBA Guidelines and the LCIA Rules, other similar ethical guidelines have been produced by Arbitrator Institutes. These include the Singapore Institute of Arbitrators’ Guidelines on Party-Representative Ethics and the Chartered Institute of Arbitrator’s Code of Professional and Ethical Conduct, to which members of those Institutes must adhere.
Dana UK AXLE Ltd v Freudenberg FST GmbH  EWHC 1413 (TCC) (26 May 2021), paragraph 40.
Information taken from ICC’s Digital Library.
This term stems from QMUL’s 2015 International Arbitration Survey (http://www.arbitration.qmul.ac.uk/media/arbitration/docs/2015_International_Arbitration_Survey.pdf), defined as “the perceived reluctance by tribunals to act decisively in certain situations for fear of the award being challenged on the basis of a party not having had the chance to present its case fully.”
Sterling Merchant Finance Ltd v. Government of the Republic of Cabo Verde, PCA Case No. 2014-33.
Sterling Merchant Finance Ltd v. Government of the Republic of Cabo Verde, PCA Case No. 2014-33, Final Award dated 27 November 2015, paragraphs 48 and 49 (https://jusmundi.com/en/document/decision/en-sterling-merchant-finance-ltd-v-government-of-the-republic-of-cabo-verde-final-award-friday-27th-november-2015).
For example, Bak v MCL Fin Group Inc., Court of Appeal of California, Fourth District, Division Three (January 30, 2009) and Polin v Kellwood, United States District Court, S.D. New York, June 29, 2000.