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Appointment angst

06 September 2018

Appointment angst

This year’s GAR Live Istanbul considered arbitrator appointments – including what parties can do to ensure an institution chooses well on their behalf and whether the quality of the arbitrator depends on what you pay.

“Everyone knows that if you have a bad case you appoint a lousy arbitrator, and if you have a good case then you appoint a good one,” declared Roger Stewart QC of 4 New Square in London introducing the first topic, but “the universal fear” is ending up with an institutional appointment. What can be done to ensure the choice is suitable?

British arbitrator Lucy Greenwood agreed that arbitrator appointments are often a leap of faith. “It is unarguable that the single most important thing you do as counsel in a case is appoint an arbitrator, and yet it is the thing you do with the least available tangible information”.

Christophe Bondy, special counsel at Cooley in London, said that the best approach is to request the administering institution or appointing authority to produce a list. The parties can then strike certain people from the list and rank the remaining ones so at least they retain some control over the appointment

Mehmet Karli of Kabine Law Office in Istanbul and the University of Oxford argued that the “rank and strike” system of which Bondy spoke could be improved by the parties agreeing on certain required criteria that the listed arbitrators should have.

“Maybe for someone to appear on the list they would have to have been a chairperson in the last two years? Criteria such as this can help the institution,” he said.

However, Ismail Gökhan Esin of the Esin Attorney Partnership in Istanbul said that it might be unwise for counsel to show their hand in this way. “Counsel are the ones developing the strategy. If they share the criteria they are looking for in arbitrators, this might be a clue as to their strategy”.

Siegfried Elsing, a partner at Orrick Herrington & Sutcliffe in Dusseldorf, said that in any case getting the parties to agree on joint abstract criteria is unlikely. He said that he recently had a case where the president of the International Court of Justice was the appointing authority. “Rather than going back to counsel, the president asked the co-arbitrators to come up with a list of criteria they wanted in a chair and, based on that, produced a three-name list. So maybe we should ask the co-arbitrators to develop the criteria?”

The discussion took place during the “symposium” session of GAR Live chaired by Greenwood and Esin, which considers questions submitted by audience members in advance. Stewart was also behind the next question – to what extent is the quality of the arbitrator dependent on what you pay him or her?

Stewart explained that it is common knowledge that when you appear as an arbitrator in cases at the ICC International Court of Arbitration, you get “endless requests” to declare the number of hours you work, as part of the institution’s drive to compete with others to keep costs down.

In ad hoc arbitration, there is no such pressure – meaning arbitrators can command greater fees.

“If you accept a job, you accept the rates,” Stewart said. “But I do think that in certain cases the pressure to charge no more than a notional hourly rate may inhibit the quick and effective resolution of a dispute – an ad valorem rate acts as an incentive to efficiency but that incentive is removed if you just get an hourly rate anyway.”

Karli agreed that the ICC model of paying arbitrators is causing problems, as it is becoming hard to appoint a tribunal for complex cases where the candidates may want higher remuneration. He said that quite a few experienced arbitrators are now avoiding complex construction cases on this basis.

Esin highlighted another potential effect of institutions’ efforts to keep fees low. He said he was once contacted by a lawyer to ask if he would consider an arbitral appointment and asked “will you expect further payments from us?” Because the fees of the institution in question were not particularly high, the lawyer explained that every potential arbitrator they had contacted until that point had asked for additional payment.

Esin related how he accepted the appointment in the case, but was shocked at the requests made by the other potential arbitrations, and of course declined any additional payment. He did not need to spell out to his audience the potential grey area that exists between such supplementary payments to cover time genuinely spent on the case and bribes.

Summing up, Greenwood said that as a trainee in London she once met a supervisor who said: “if you pay peanuts, you get monkeys.” Despite this, she did not think the quality of the arbitrator is dependent on an hourly rate. “Junior arbitrators may start off not wanting to price themselves out of the market, while someone more senior may be able to command higher fees,” she said, going on to say that in her experience “the quality of the work was not impacted at all by the different rates charged.”  

GAR Live Istanbul was held on 21 June at the Shangri-La Bosphoros. Sponsors included ISTAC, Akinci Law Office, Cooley, Coşar Avukatlık Bürosu, Kabine Law Office, FTI Consulting, 4 New Square, Göksu | Aydın Attorneys at Law, Paksoy, Esin Attorney Partnership, Erdem & Erdem and was supported by the Istanbul International Law Association.

 

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