Shape-shifting parties in arbitration: the view from the panel
August 2016 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION
During the pendency of arbitration proceedings, many circumstances could arise that would cause the representation of a party before the tribunal – or its appearance altogether – to be amended to adapt to new developments.
Some of these developments may be voluntarily crafted by the party, but others could just as well be involuntary or even disputed by it. The wide range of potential shape-shifting events can affect either claimant or respondent parties, and physical or legal persons are both subject to problems of this type.
While the manifold events that could reach these consequences would be too varied and disparate to even attempt the exercise of listing them exhaustively in these pages, a useful catalogue would distinguish between events that cause the cessation of the existence of a party (ranging from the death of an individual party to the dissolution of an entity), events that cause changes in that party’s ability to manage or dispose of its assets (which would include incapacitating illnesses or accidents in the case of individuals, but also most forms of financial or regulatory distress resulting in the involvement of trustees, liquidators, receivers or other court or similar appointees), and events related to the specific or general transfer of assets or liabilities of a party. Interestingly, from a different angle, these events could also be divided into permanent or transient developments, which will also be relevant for our purposes.
The derived procedural effects can also vary widely. Most cases involving termination of the existence of the party or the transfer of the relevant assets or liabilities will lead to a replacement of the proper party in the proceedings by its successor in interest, with a minority simply resulting in a termination of that interest or the dispute becoming moot where no successor exists. Meanwhile, most cases involving changes in a party’s ability to conduct its business will result in a change (through replacement or addition) in its representatives in the proceedings, which may or may not include a change of counsel.
Certainly, some developments would conjoin legal effects falling into more than one of the categories above, as would be the case upon the death of an individual party who is succeeded by a minor heir who, pending its coming of age, is represented by a guardian with the assistance of a court. Adding to the complexities, many times the event will mostly or exclusively be governed by laws of one or more jurisdictions which are neither the substantive law applicable to the dispute, nor the law of the seat of arbitration.
It is against this backdrop of multi-tiered complications that we come to the key question: what can, or must, an arbitrator do when faced with these events?
As a starting point, the tribunal must do all within its powers to safeguard the integrity of the proceedings and eventually issue a valid, enforceable award. The extent of those powers differs from jurisdiction to jurisdiction, and also based on the specific arbitration rules or any particular agreements between the arbitrating parties, but a general power to adopt measures tending to preserving the integrity of the proceedings is usually found in every major set of rules and in the arbitration laws of most jurisdictions. In addition, the International Bar Association has recently adopted the IBA Guidelines on Party Representation in International Arbitration (the Guidelines), which provide tribunals with certain de minimis tools available under any rules and in any jurisdiction – subject to any applicable public policy considerations, whenever the parties agree to apply them or the tribunal “after consultation with the Parties, wishes to rely upon them after having determined that it has the authority to rule on matters of Party representation to ensure the integrity and fairness of the arbitral proceedings”.
Under the Guidelines, party representatives are under an active duty to inform the tribunal and any other party of changes in their representation of the party – which would arguably exist if any changes in the identity or necessary representatives of the party were to occur, and to refrain from making “any knowingly false submission of fact to the Arbitral Tribunal”. However, at first sight it would seem that changes in the specific requirements for remaining before the tribunal might not imply a change in the representation of a party for purposes of §1 of the Guidelines, in practice arbitrators typically receive submissions by counsel under the formulation that “[Claimant/Respondent] submits that […],” which would mean that in every stance before the tribunal, the appearing counsel is submitting that the position is in fact being (validly) posited on behalf of that party, which would trigger the application of §4 of the Guidelines.
Thus, absent idiosyncratic prohibitions in the applicable law, rules or arbitration agreement, a tribunal will be acting within its mandate in erring on the side of caution in the face of information or suspicions that a shape-shifting event has occurred which has resulted in changes in the identity or requirements for the representation of a party. That said, to avoid breaching the equality of arms between the parties, such tribunal action should ideally consist in – or commence by – enquiring the party affected about the informed or suspected event, followed by providing any other parties with an opportunity to comment.
If the issue could not sufficiently be brought up during the debate between the parties, or the tribunal remains in doubt as to certain issues regarding the proper identity or representation of the parties, it is not uncommon, and actually reflects best practices, for the tribunal, shortly before the issuance of the final award, to ask each party to confirm and ratify its contact particulars – including the list of all representatives of record – in order to include any updated information in the award. This exchange will lend itself to providing a final chance for the tribunal to dispel any concerns about the proper identity or representation of each party.
Naturally, as in any earlier instances, the tribunal shall pay close attention to any unusual or suspicious ambiguities in this last exchange, which may very well lead to a request for clarifications or additional information by the parties.
Diego Brian Gosis is a partner at GST LLP. He can be contacted by email: email@example.com.
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Diego Brian Gosis