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Arbitration

RECONCEPTUALIZING ETHICS IN INTERNATIONAL COMMERCIAL ARBITRATION: DENATIONALISING THE CODE OF CONDUCT

Padmakshi Sharma

Introduction

In an increasingly globalised world, clashes between multifarious legal and ethical cultures are not uncommon, especially in the ever-expanding field of international arbitration. Today, the indisputably global nature of international arbitration has allowed an arbitration proceeding to be conducted in India, comprising an American counsel as a claimant, a French counsel as a respondent and an English counsel as a legal expert. Situations similar to the one mentioned above form part of what scholars refer to as an “ethical no man’s land”. The reasoning behind this classification is simple – there exists no uniform Code of Counsel in international arbitration, forcing counsels to either rely upon national ethical codes or no codes at all. The issue regarding the absence of a global uniform code of counsel can be best highlighted through the example of the infamous Bhopal Gas Tragedy in India. In 1984, after the catastrophic leakage of methyl isocyanate at the facility of Union Carbide subsidiary at Bhopal, India, which killed more than 15,000 people, masses of American attorneys flocked to the scene. These attorneys solicited distressed victims of the tragedy into signing contingent fee retainer agreements for legal actions to be taken against the United States. It is pertinent to note that most of these Indian victims did not understand English, which was the language the agreements were drafted in. Despite the outrageous ethical violations, no action was taken against the attorneys in question by either the US or the Indian bar. The primary reason behind the same was the lack of jurisdiction exercised over the attorneys by either of the authorities. While the US rules did not apply overseas in 1984, foreign attorneys were outside the purview of Indian rules as well. Admittedly, the situation has changed over the years, with countries such as the US extending their jurisdiction to attorney conduct overseas. However, due to the lack of uniformity in rules, multiple jurisdictions have given rise to diverging ethical standards, further darkening the already grey area.

Diverse ethical standards: Resultant Issues

Plenty of issues arise from diverse ethical standards, the lack of a uniform code of conduct and the global nature of international arbitration. However, for the purpose of this article, emphasis has been placed upon the two major issues mentioned below –

1. The issue of “Double Deontology”

The issue of double deontology arises when the actions of an attorney or a lawyer are governed by the legal authorities of more than one jurisdiction. This means that courts or tribunals from more than one state can assume jurisdiction over actions of the lawyer. In certain situations, different states might have different or even conflicting rules. In case of such a conflict, the lawyer will be in violation of rules of at least one of the states. This issue solidifies in cases concerning ethical rules due to diverse ethical standards across the globe. Due to a lack of clarity regarding the legal rules, there might be situations where no court or tribunal is ready to exercise its jurisdiction on a given case. This can lead international arbitration to fall into a “no-man’s land”. Either the counsel will get punished no matter what they do, or the counsel will not face any repercussions for even outwardly unethical behaviour.

2. The issue of unfair advantage

The second issue arising out of this is the issue of inequality of arms”. Due to diversity in ethical standards, there might be procedures that cause an unfair advantage to one party over the other. For instance, a case might arise where a French counsel is barred from preparing a witness, but their American counterparts are required to prepare witnesses as per their ethical standards. Situations such as these are bound to result in unfair advantage to either one of the parties and clearly cannot be recognized as ethical.

Illustration of the Issues: The Case of Geophysical Service Incorporated v. Canada

In order to illustrate the aforementioned issues in a detailed manner, one can place reliance upon the recent case of Geophysical Service Incorporated v. Canada. This case concerns the direction of the Trade Law Bureau of Global Affairs Canada (hereinafter, “TLB”) in a NAFTA Arbitration matter. In this case, the applicants, who were the claimants in the NAFTA arbitration, requested TLB to remove one of the members of the counsel representing Canada in the NAFTA arbitration. They alleged that the member in question was employed by a third-party funder of the claimants. Owing to this unique position, the member had access to certain privileged information which could negatively influence the claimant’s position in the arbitration proceedings. Thus, due to the conflict of interest, the applicants requested the removal of the counsel for Canada. However, TLB declined the request. The case was then bought before the Canadian Federal Court which further declined and refused to review TLB’s decision.

The court stated that it has no jurisdiction over the matter owing to the private nature of TLB’s decision. However, as per Article 17(3)(b) of the Federal Courts Act of Canada the court is allowed to set aside a decision of any federal body. In the present instance, the court justified this by implying that the TLB was a representative of the federal government, it was connected to the crown, and it performed as any other arbitration counsel. Further, as per Article 5 of the UNCITRAL model Law, these proceedings were outside the court’s purview owing to the parties’ voluntary waiver of their right to approach national courts.

Some might argue that a solution to this problem could be provided through arbitral tribunals instead of national courts. However, cases such as Rompetrol v. Romania and Hrvatska Elektroprivreda D. D. v. Slovenia provides   contrary findings. In both these cases, on the issue of existence of a similar conflict of interest, the tribunals emphasised upon the fact that the ICSID Rules provided parties with the right to choose their own representatives. Therefore, despite the obvious ethical issues, no resolution was reached.

Proposed Approaches

One approach is to have a uniform code created in order to avoid preference to be given to the ethical code of one state over the other. Such a code can be a hybrid between the rules of given states. An example of this approach is the IBA Guidelines on Party Representation in International Arbitration (hereinafter, “IBA guidelines”). Here, a hybrid of the 2016 Lagos Chamber of Commerce International Commercial Arbitration Rules and the 2016 Australian Centre for International Commercial Arbitration Rules was created. In order to avoid any form of bias against one set of rules over the other, an unbiased third party was invited to draft the IBA guidelines. While this approach seems to be a satisfactory solution to the issue of unfair advantage, it does not do much to solve the issue of double deontology.

Another approach which can be recommended is a creation of a uniform ethical code of conduct from scratch. This would be similar to the establishment of the international criminal law regime. While theoretically this approach seems to have the ability to solve both the issues mentioned in this article, the reality is quite different. International Arbitration is a decentralised network of distinct ad-hoc tribunals. The arbitral institutions in question do not share any form of legal relationship with each other. Further, in order to have a uniform code, all nations will have to first accept it, adopt it, and implement it in their respective national laws. Given the diverse ethical standards of different nations, it will not be possible to incorporate everything under the banner of one code. Therefore, uniform ethical regulation of international arbitration seems like an impossible task with its own unique set of challenges.

Due to this apparent shortcoming, the author recommends another approach, originally introduced by Prof. Catherine A. Rogers. This is the approach of “ethical self-regulation”. Prof. Rogers calls for the entire international arbitration community to explicitly assume primary responsibility for the ethical regulation of international arbitration. In such a scenario, the ethical management of international arbitration proceedings will be managed by arbitral institutions alone without the external interference of national regimes. The concept of self regulation already exists in international arbitration to a certain degree. For instance, the Guidelines on Conflicts of Interest for International Arbitrators (created by the International Bar Association) are the primary source of standard for arbitrator disclosure and disqualification. Self-regulation has also seeped into international arbitration through counsels and experts. An example of the same would be of pre-testimonial communication with witnesses (a practice prohibited by some national legal systems) which is now widely accepted as a fair practice in international arbitration. With the seeds of ethical self-regulation being already implanted in the international arbitration community, it is perhaps time to let go of traditional mechanisms imposed by national or local bar authorities and make way for self-imposed ethical obligations. Despite providing for a meaningful theoretical framework, this concept certainly requires clarity regarding its practical functionality. 

Conclusion

International arbitration as a field has changed drastically after the advent of globalisation. This change has also introduced new sets of challenges in dealing with foreign attorneys or exercising overseas jurisdiction, which did not exist before. Therefore, while welcoming this area of law to the new globalised world, it is essential to detach ourselves from the local cultural magnates holding us back. The proposed approach highlighted in this article, that is, “ethical self-regulation” undoubtedly has its own sets of challenges. These include – coordination amongst not just arbitral institutions, arbitrators, and practitioners but also clients and national authorities. However, this approach provides the most practical solution which transcends national borders.

The author is a B.A.LL.B student at Symbiosis Law School, Pune

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