What price immunity of arbitrators?

IT has long been a popular belief that arbitrators enjoy quasi-judicial immunity, and protection from disgruntled losers in arbitration, and that this perceived immunity renders them safe and not subject to review and possible sanctions. But is that really so?

In today's litigious environment, lawyers sue lawyers, principals sue lawyers, so why should arbitrators not be sued? I recall an arbitration where one of the parties exercised its own brand of justice. The arbitrators had asked at the outset for an escrow account covering the panel's potential fees and expenses. The panel convened a hearing on December 1, 1983 and the next identifiable date was March 6, 1987, the date of the award when the panel majority awarded to owners an amount of $107,940.20.

There is no written public record as far as I know, but I understand that owners were unable to collect under the award as charterers had gone into bankruptcy. When it came to paying the arbitrators' fees, counsel for charterers paid, but owners' counsel was apparently instructed not to release the arbitrators' fees.

The reasoning was that, since the arbitrators took so long in issuing their award, allowing charterers to disappear, they did not deserve their fees. Owners' reaction, based on the disappointment of a mere paper victory, is understandable, but is it justified?

Wanting to be an arbitrator has become popular and fashionable - you can set your own hours, you can charge a healthy fee and, since there are usually three arbitrators on a panel, you might even get away without doing much work. Also, generally speaking, absent any contractually imposed requirements, anyone basically can act as an arbitrator provided they possess the judicial qualification of fairness to both parties. The combination of these two aspects, and the absence of strict, external rules or control factors, makes the ad hoc arbitrator vulnerable to general second-guessing and thus requires strict self-policing.

In today's litigious environment, lawyers sue lawyers, principals sue lawyers, so why should arbitrators not be sued?

In today's litigious environment, lawyers sue lawyers, principals sue lawyers, so why should arbitrators not be sued?
The immunity of arbitrators is predicated upon the generally accepted proposition that they enjoy quasi-judicial status. It has its basis in the fact that arbitrators are judges chosen by the parties. In practical terms, the reference to an arbitrator's immunity from liability has to do with the dismissal of lawsuits alleging arbitrators' misconduct. Arbitrators have not been found liable even when their actions led to a vacatur of the award.

If arbitrators' decisions can be questioned in suits brought against them by either party, then there is a real possibility that their decisions will be governed more by the fear of such suits than by their own unfettered judgment as to the merits of the matter they must decide. Arbitral immunity, like judicial immunity, promotes fearless and independent decision-making.

interpretation of the law. Through their hands-off approach, the courts have also expressed the sentiment that the parties, because they chose the arbitration process, are bound by the benefits as well as the There is no black-and-white concept for determining immunity, and decisions with respect to immunity are made individually and subjectively.

The courts have reaffirmed over and over again the powers of the arbitrators. They have expressed their reluctance to look behind arbitrators' deliberations and decisions. Arbitration awards can be set aside, but not on grounds of erroneous findings of facts or misshortcomings of the system, which would cover perceived errors of the arbitrators.

The problem with the concept of the contractual relationship between arbitrators and their appointers is that it is based upon a dependency between the parties, and acknowledges the existence of a quid pro quo. The idea of something for something could affect or even jeopardise the independent status of the arbitrator.

Does the appointment by itself with the acceptance thereof by the arbitrator constitute a contract? Considering that an agreement to serve has been reached between the attorney on behalf of a party and the arbitrator, creating an obligation to perform a particular act, I think the answer would have to be yes. Would this relationship change once a panel has been completed, since, at this point, three arbitrators (with the chairman not having a direct nexus to the parties) have been selected to deal with the claims of two parties? Does the contract now extend to the panel collectively?

The arbitrators have the expectation that they will be paid for their services rendered. But what would the effect be if one of the panel members strays and does not properly discharge his duty. Do two get paid or none? My feeling is that the panel would collectively suffer for the wrongdoings of one of its members. This potential predicament should alert arbitrators and contribute to their awareness and vigilance. As a consequence, it might assist arbitrators in their efforts at self-policing their domain.

It appears that the focus in the past has been on arbitrators and their activities related to receiving evidence ultimately leading to the issuance of an award. But how does the conduct of arbitrators, unrelated to receiving the evidence, bear upon their status?

Implied in the request to serve as an arbitrator is the appointer's expectation that the arbitrator can sit within the near future. If time should be of the essence, then it should be incumbent upon the appointer to mention this fact to enable the arbitrator to make a realistic assessment as to his acceptance of the appointment. On the other hand, what if the respondent appoints an arbitrator who can only sit in a year's time (which would suit the defendant, but would sabotage the concept of an expedient dispute resolution anticipated by the claimant)? Is that acceptable conduct or strategy, or is it an abuse of the system which would justify a review?

I believe that there is an actual duty by the arbitrator to exercise impartiality, skill, care and diligence for his performance. But against what standard must it be measured?
Clearly, there has to be a specific and agreed expectation which will serve as a yardstick for comparison. It must be obvious that the standard cannot be established after the fact. The admonition that you should have done it faster is not acceptable, as it lacks the comparative basis. Faster than what? The determination needs to be made beforehand by agreement of the parties or the arbitrators, invoking rules promulgated by a society involved in the arbitral process.

On the other hand, if there are explicit rules or requirements, the application would be simple enough. For example, if a panel is mandated to issue an award within ninety days of receipt of the last submission, then an award issued 95 days thereafter is in violation of the requirement. Is it a breach of the arbitrators' promise? Yes, certainly. But would that infraction justify damages? Probably not.

The main problem with damages resulting from arbitrator conduct is how to quantify them. Should the damages be compensatory or punitive or a combination of both? Should there be a reprimand or a sanction? Considering that arbitrating and the success of arbitrators is based on reputation, arbitrators should be highly concerned about their demeanour and conduct so that their qualifications are not called into question.

When I started arbitrating in the early seventies, it was considered an honour to be selected by one's peers. In those days, most active arbitrators in New York were holding full-time positions. Arbitrations were conducted mainly during lunch hours and in the evenings after office hours. Arbitrators' fees were fairly nominal - the whole approach to arbitration was to pay back the industry in which one had grown up.

The acceptance of an arbitration appointment should carry with it the promise of impartiality, skill, care and diligence, standards which arbitrators must undertake to meet in the performance of their duties.

Over the years, the concepts have changed. Part-time arbitrators became full-time arbitrators, the extra spending money has grown into substantial compensation. At the same time, the complexity of cases has changed. Many of the commonplace disputes have been replaced by more technical and legalistic issues. The amounts in dispute have dramatically increased, with greater potential commercial consequences, which may explain or justify the more intensified conduct of arbitrations in general and the attempts to have arbitration awards reviewed in particular.

It can be said that the success of the system has created its own monster. Arbitration clauses are now being included in areas other than the traditional ones of admiralty, construction, etc. Arbitration clauses in employment contracts (dealing with age, sex or racial discrimination) or financial/investment agreements which, on occasion, contain a court review provision, have influenced the courts' traditional hands-off approach and led to a closer scrutiny of those awards dealing with constitutional issues. The violation of public policy has become a buzz phrase, along with the earlier standbys of arbitrary and capricious, completely irrational or manifest disregard of the law.

At this stage, the review of arbitration awards is still quite limited, with the emphasis on statutory claims rather than the commercial disputes with which most of us are dealing. But rather than relying on the continuation of this status quo, it would be more prudent to consider that changes in the courts' attitudes may occur in the future. Is there a definitive possibility to discourage review of awards for perceived negligence or misconduct of arbitrators? The only workable solution I can think of is that arbitrators do not let it come to this point, that they discharge their duties in a manner as close to perfect as possible.

I have heard arbitrators say that they are called upon to hear and decide cases, but that they are not concerned with the enforcement or collectability of awards. Whereas in the general sense arbitrators should focus on their judicial duties, there has to be an ancillary concern as to how these duties are discharged.

The acceptance of an arbitration appointment should carry with it the promise of impartiality, skill, care and diligence, standards which arbitrators must undertake to meet in the performance of their duties. Failure to adhere to those principles would flaw even the best-written and reasoned award.

On the other hand, striving for perfection in the administrative performance as an arbitrator, coupled with the issuance of sound and well-reasoned awards, should be a good start to maintaining arbitrators' immunity and protecting them from liability.