Choosing your arbitrator

A RECENT article in Lloyds List debated "Why arbitrators must be from a wider market". Two points attracted my attention. First, John Adams of Queen Mary & Westfield College noted that, under the Arbitration Act 1996, experts can now be appointed by a tribunal to explain difficult areas of the shipping industry to that tribunal. He suggested that it would be better to let the experts sit as arbitrators instead.

The second observation was by arbitrator Clive Aston, who said, "A maritime arbitrator should have appropriate skills to deal with maritime disputes." Mr Aston reportedly would not comment on what those skills were, or how they were to be acquired.

It so happened that, independently, I had thought about those specific points when preparing this article, rejecting one and wondering about the other.

Arbitration has been described as a commercially fair and equitable process to resolve disputes. When I started arbitrating close to thirty years ago, there seemed to be a cosy and comfortable atmosphere about the process. Commercial arbitrators were doing the right thing by remedying in their own way the wrongs which owners and charterers inflicted upon each other. There were those who then advocated that commercial arbitration should be carried out by commercial arbitrators, without lawyers (or at least lawyers only in a limited role) and without the invasive force of the law dispute resolution by peers.

A few years ago, I discussed this matter with a lawyer friend of mine, Robert Fougner, and he, being cynical by nature, did his best to destroy some long-cherished notions. It was sufficiently stimulating for us to write a joint paper for ICMA VIII in Madrid in October 1987 on The Selection of an Arbitrator and/or Chairman.

On the premise that attorneys approach the arbitral process with a much narrower focus than arbitrators do, and with the ultimate objective of obtaining the most satisfactory result for their client, the intellectual challenges posed by the issues in the pursuit of this endeavour are merely a means to an end. Whereas arbitrators will consider the impact of their decision on the industry, the advocate relegates such considerations below the interest of the client. Although counsel must address the broader interests, it is only done for the sake of artful persuasion.

Robert Fougner challenged those who believe that their disputes can be trusted to any "fair" arbitrator, pointing out that indeed much research is being done on an arbitrator's track record to establish not only prior decisions on the same or similar issues, but also to get an understanding of the arbitrator's evident sympathies and predispositions. In his opinion, it is not enough today that an arbitrator understands the underlying facts and commercial issues. Rather, the arbitrator must also understand the process itself and the manner in which it is frequently manipulated to achieve the best results.

The arbitrators must be able to tame some of counsel's gladiatorial tactics, however, without muzzling their right to be heard. This requires an insightful eye which can discriminate between the substantive and the frivolous. Experience is the master, and counsel representing clients cannot gamble on newcomers or give them a chance to learn at the client's expense. Clearly, this is a catch-22 situation - how can you have or gain experience if you don't get a chance to learn?

Robert Fougner did concede that, when addressing a relatively simple dispute, counsel can be a bit more relaxed and flexible in their recommendations of arbitrators. If the case is fact-intensive, the peer approach might possibly still work, but if the arguments are mainly legal, the arbitrator must be willing to subordinate the highly subjective notions of "equity" and "fairness" to conclusions of law. When arbitrators are selected for major cases, i.e., cases where either the magnitude of the sums or the type of relief sought will have a substantial impact on the economic viability of the parties, there is no room for beginners, and counsel must rely on the most experienced arbitrators available.

You don't need a specialist panel to hear a particular case

From the commercial arbitrator's standpoint, matters are certainly easier - unless the idea of wanting or having to please one's appointer with a win or dissent enters into the equation.

Attorneys have to win arbitrations for their clients. Arbitrators, generally speaking, are only concerned with the result or the esoteric process of arriving at the decision. Attorneys may recommend a certain course of action, but arbitrators only receive and consider the evidence and then pass judgment. Since counsel are judged by their record of success and not really by whether they had a good or bad hand, winning a case must be the main concern for their own self-preservation and career advancement. Arbitrators, on the other hand, don't feel the same economic and professional pressure, and enjoy the olympic spirit in which participating is more important than winning.

Different parties have different expectations as to an arbitrator's required qualifications.

I remember a case which dealt with the interpretation of a specific charter party clause which had been drafted by Mr A (a broker, an active member of the Society of Maritime Arbitrators, and a long-time arbitrator). I served as chairman on a panel which unanimously rejected the broker's interpretation. The point was made that, if the arbitrators had been brokers, they would have reached a different conclusion.

To this date, more than twenty years later, I have not been able to understand that comment - beyond the fact that it could have been sour grapes - because the contract language is to be unambiguous, irrespective of who reads it, whether the reader is a chartering broker, operations person or insurance specialist.

In another case, the president of the SMA was asked to propose a list of candidates, including their daily fee/expense level, to hear a complex shipbuilding case which would require approximately fifty hearing days. The parties had requested that the potential arbitrator list include individuals with shipbuilding/ shiprepair/shipyard experience, as well as commercial arbitrators.

The three arbitrators ultimately selected were not the cheapest and, by background - other than from prior arbitration experience - had no direct connection with ship construction or shipyard operation. All three were past presidents of the SMA, experienced arbitrators and, moreover, individuals who had the ability to understand, digest and apply the arguments and principles presented to them during the proceedings.

Some of the candidates with engineering/shipbuilding background groused a bit, maintaining that they had the prerequisite industry knowledge and probably could have written the conversion specifications for that particular case.

You don't need a specialist panel to hear a particular case, since the burden of persuasion is upon counsel representing the parties. They have to convince you as to the correctness or probability of their position, for which they retain experts. Of course, it helps to have a basic understanding of the speciality involved, but I consider it potentially dangerous to have a panel of specialists who at one point might second-guess the expert and apply their own knowledge over that of the witness.

These concerns are less crucial when the arbitration clause specifies the qualifications required or who should serve as an arbitrator. The New York Produce Exchange form states that "arbitrators shall be commercial men conversant with shipping matters". The Vegoilvoy specifies that the arbitrator shall be a merchant, broker or individual experienced in shipping, with the requirement that the third arbitrator, if needed, shall be an admiralty lawyer.

When looking at other arbitration clauses I came across the Savannah Charter Party - Lump Sum, which imposed the qualification that the dispute should be referred to the arbitration of two indifferent persons (ship agents and/or merchants and/or shipmasters). "Indifferent" somehow seems to be the wrong choice of word for the qualification of an arbitrator. The parties were probably looking for "impartial persons" and not individuals who were "incurious, unwilling, insensible or unconcerned".

But what do you look for when no requirements or qualifications are specified? There are no statutory provisions which determine the qualifications of arbitrators. Therefore, the capacity required of a person to be an arbitrator is generally that of being able to transact. The person should have eyes to see and read, ears to hear and be able to comprehend. This is an over-simplification, but it should make a point.

The term "arbitrator" is an all-encompassing description. It doesn't imply any specific qualifications, nor does it limit the overall spectrum from which the arbitrator may be selected.

If I were to stipulate what I was looking for in an arbitrator, I would say that I would look for someone who has the mental capacity to understand the problems presented, someone who can co-exist with others, someone who must be capable of actively and constructively participating in the decision-making process, and someone who can be persuasive. Above all, I would look for people who cannot afford to make fools of themselves.