The use of party arbitrators is on the rise in the United States. It is now common in U.S.-based commercial arbitrations with tripartite panels that the parties each select unilaterally one party arbitrator, who then together select the third. Party arbitrators can be neutral or non-neutral but must follow standard ethical guidelines for disclosure and conduct.
Why a Party Arbitrator?
The value of being able to appoint one arbitrator unilaterally is unmistakable. It allows each side to appoint someone with expertise in the subject matter of the dispute or special knowledge of the industry or the technology involved, or special expertise in an area of the law or even with the arbitration process if that is important. Industries that continue to use non-neutral arbitrators routinely, such as insurance or maritime, will generally appoint arbitrators based on their industry or subject matter experience and their comfort with the process.
Neutral or Non-Neutral?
The first issue parties must decide is whether they intend the party arbitrators to be neutral or non-neutral. Generally, most arbitration rules state that unless there is clearly expressed intent in the arbitration clause, the party arbitrators are to be non-neutral they are presumed to be neutral. When a party arbitrator is first contacted, it is expected that counsel will discuss with the candidate his or her status; counsel will often consult with the client on this subject and sometimes with the other side. If there is a consensus, the issue can be determined at that point; if there is disagreement, the practice is for both sides to proceed as if the party arbitrators are neutral until the panel or the arbitral institution is able to resolve the issue.
Communications with party arbitrators at this stage of the proceedings are conducted ex parte, as allowed by the Code of Ethics, Canon IX. Parties are free to discuss with the candidate his or her experience, suitability to serve, availability, possible disclosures, fee structure and general knowledge of the subject matter, industry, technology and area of law involved. They may also discuss the selection of the chair and the names and qualifications of possible candidates for chair. They may not discuss the substance of the issues in dispute or the candidate’s views about any disputed issue of fact or law.
Party arbitrators, whatever their status, are required to make disclosures to the parties once the appointment has been made. A party may seek to disqualify a neutral party arbitrator based on these disclosures but may not disqualify a non-neutral party arbitrator. The disclosures a non-neutral party arbitrator makes are informational only, primarily for the benefit of the chair and the other participants.
To learn more about Party Arbitrators, please read the full article from Law.com by clicking here.