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Paranoia about paranoia? GAR Live Atlanta looks at due process

27 March 2018

Paranoia about paranoia? GAR Live Atlanta looks at due process

From L to R: Carita Wallgren-Lindholm, Derek Soller, Annet van Hooft and Rachel Thorn

A panel at GAR Live Atlanta discussed “due process paranoia” – asking whether it is a real problem or there is just “paranoia about paranoia” and, if it does exist, whether it is guided by genuine concern about awards being challenged or by arbitrators’ economic interests.

Glenn Hendrix, a partner at Arnall Golden Gregory in Atlanta and regular arbitrator of ICDR cases, began by reminding delegates of the “well-received” lecture by National University of Singapore professor Lucy Reed in 2016, describing how complaints about due process in arbitral proceedings are now used “as a strategic sword” as well as a shield.

“We have all read or heard about how routine, incessant and shrill complaints are being used as a brazen strategy to pressurise arbitral tribunals,” Hendrix said, quoting Reed. Respondents to the 2017 Queen Mary survey suggested that tribunals were being “overly cautious” as a result.

Hendrix asked the panellists if they felt there has been an increase in occasions when parties assert their rights to due process and whether this is a problem in their eyes.

Rachel Thorn, partner at Cooley in New York, said she has observed due process paranoia in cases where one party is being “overly litigious” at a stage where it looks like the award is not going their way on the merits – leading the tribunal to become concerned about challenges and look to “insulate” the award by accommodating every procedural request.

But some suggested arbitrators may have reasons for acceding to such requests other than fear of the award being set aside. Finnish arbitrator Carita Wallgren-Lindholm, for example, argued that many arbitrators who accept such requests may do so simply because they are insufficiently familiar with the case to have good grounds for refusing them.

“The more prepared arbitrators are, the less insecurity you see in their decisions,” she said.

Derek Soller, a partner at Baker McKenzie in New York, said he was on the fence about the premise behind Reed’s article, suggesting that not all parties and counsel are trying “to game the system” and many make procedural requests “in good faith” with little to gain from prolonging the case unnecessarily.

As for arbitrators’ reasons for allowing such requests, he said: “Why wouldn’t [they] hear more arguments, add a couple of weeks to the proceedings and get more money, while averting the risk of a challenge to the award at the same time?”

It is simply easier for a tribunal to accede to the request than to argue it is so confident about an issue, it does not need to hear the counsel’s perspective, he said.

Audience member John Watkins, senior counsel at Thompson Hine in Atlanta, also highlighted counsel and arbitrators’ monetary incentives for making and acceding to such requests.

“When we talk about due process and longer proceedings, aren’t we really talking a lot about people’s economic interest?” he asked.

Hendrix recognised that economic interest could influence conduct – but not necessarily in the manner suggested by Watkins, reminding delegates that arbitrators also have an interest in protecting their reputation as both “decision-makers” and “guardians of fair process". An arbitrator who allows proceedings to drag out might benefit economically in the short term, but will lose appointments over the long term.

“In the marketplace for arbitrator appointments, the reputational value of being viewed as an effective manager who can move the process along is extremely valuable, and to be viewed otherwise can hurt you economically,” he said.  While a judge does not need to worry about whether he is liked or not, an arbitrator succeeds or fails because of reputation.

This was backed by Wallgren-Lindholm, who pointed to arbitrators’ concern about their standing in the arbitration community and said “there is one thing you cannot lose – your reputation for doing the right thing.

But again “playing devil’s advocate”, Soller argued that being seen to care about due process is more important reputationally than moving proceedings along fast.

“If you’re inefficient as an arbitrator, that might not be written down in one of these surveys. But if the parties don’t get a chance to plead their case, that’s much more likely to leave a lasting mark,” he said. 

Arbitrators do not necessarily benefit economically from longer proceedings, Wallgren-Lindholm stressed, since many are paid ad valorem, based on the value of the dispute rather than the time expended on the case.

Annet van Hooft, who recently left Bird & Bird in Paris to practice as an independent arbitrator, agreed that there was a higher interest of arbitrators, counsel and arbitral institutions in preserving the legitimacy of the arbitration process, which tempers pure economic motives and of course is in everyone’s longterm economic interest.

“Whether the proceedings are organised ad valorum or not, as an arbitrator you can let proceedings drag on and you can be paid more in fees, but you may never get another case again,” she said.

Every time an arbitration goes off the track, or takes longer than it should, it “injures the whole arbitral regime”, said Shelby Grubbs of Atlanta Law firm Miller & Martin – and counsel and arbitrators who entertain unnecessary requests are not “acting on behalf of the regime”.

Institutions apply “pressure to move things along”, it was noted, leading tribunals to take a firmer stand on procedural requests made in the name of due process – and some institutions, such as the ICC International Court of Arbitration, now even enforce “reassuring” time limits for the issue of awards.

Yet, when it comes to the crunch, Soller said that for a lawyer, “your client and your case, not the protection of the regime, has to take precedence.”

The inaugural GAR Live Atlanta was held at the Atlanta Centre for Mediation and Arbitration at Georgia State University College of Law on 6 March. Chaired by Grubbs and Wallgren-Lindholm, the event was sponsored by Arnall Golden Gregory, Alston & Bird, Kilpatrick Townsend, King & Spalding, Miller & Martin and Orrick.

GAR Live was preceded by an ICC training event, "When the ICC met Atlanta", which provided guidance on international arbitration and the ICC arbitration rules and procedure. It was followed by a speech by ICC International Court of Arbitration president Alexis Mourre calling for greater cooperation by arbitral institutions.

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