INTERNATIONAL ARBITRATION: An Introduction to UK-wide
One Way Sharpen the Teeth of an Arbitral Tribunal
The Judgment
The judgment of Mr Justice Knowles in Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm) shot to fame when it was handed down in late October 2023. (Sometimes, the case is referred to briefly as FRN v P&ID.)
Dramatic in content, startling in its findings and trenchant in its criticisms, the judgment has for all the right reasons provoked reflection and debate among those who use and practise international arbitration.
The Judge found that FRN had established that three arbitration awards obtained against it by P&ID, eventually worth US$11bn, had been obtained by fraud and contrary to public policy within the meaning of section 68(2)(g) of the Arbitration Act 1996.
To obtain these awards, the Judge found (in summary) that:
• P&ID had improperly obtained privileged and confidential documents belonging to FRN
• P&ID’s English solicitor and leading counsel took possession of and relied on those documents
• P&ID’s CEO lied when giving evidence
• P&ID had bribed a Nigerian official during the arbitration to buy her silence that she had been bribed earlier, when the underlying contract was entered into.
The Judge found that the arbitral tribunal had known nothing of this. Had it done so, the ‘entire picture would have had a different complexion.’
The Judge said he would be referring a copy of his judgment to the professional regulators of P&ID’s solicitor and leading counsel. He said ‘I trust that these two regulators of the legal profession in England & Wales will consider the professional consequences of [their] conduct…’. (It is fair to note that both individuals have since stated they have not behaved unprofessionally, and the professional regulators have not made any decision at the time of writing.)
The Judge observed whether, in high value cases involving a sovereign state, aspects of the arbitration process needed ‘further attention’. They included:
• Adequate robust document disclosure
• Adequate legal representation
• Greater transparency to ensure the integrity of the arbitral process
The Implications
No-one seriously questions the reasonableness of this observation about high value claims involving a state. Yet, it seems to me that none of what the Judge said is confined to such claims. It applies to all arbitrations. After all, a witness can lie in a GBP 1milion case as readily as a GBP11 billion one. A legal representative can act without professional integrity in any case, including misusing documents. It is the individual who abuses a process, not the other way around.
The observation about robust document disclosure is unsurprising from an English High Court Judge immersed in the common law culture of accurate document disclosure found there. But the need for proper document production in arbitration is not new, and neither is awareness of the professional obligations on those advising clients to bring that about. For example, Article 27 of the 2013 UNCITRAL Rules give a tribunal a wide discretion to ‘require the parties to produce documents’. Article 22 of the 2020 LCIA Arbitration Rules empowers any arbitral tribunal either on application or on its own initiative, to order document production.
A corollary of these powers is a corresponding ethical obligation on those against whom they are exercised to obey them including (perhaps more obliquely) to manage the acquisition and retention of potentially disclosable documents properly.
In the case of legal representatives, that ethical obligation is amplified by their own professional ethical standards and obligations (which need not bind their lay clients). English & Welsh solicitors, for example, are bound by the SRA Principle to act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice. They are bound by the SRA Principles to act with honesty and integrity, and in a way that upholds public trust.
The arbitral process requires the parties and those who represent them to abide by the rules of the game they elect to play. (In fact, this applies to any dispute resolution process that places procedural obligations on the parties to produce documents even those which may be prejudicial of their case.)
If the parties or their lawyers abuse that trust, then the process degrades, and unfairness and injustice may result. But this is not new or surprising. It was ever thus. The FRN case, it seems to me, is simply the most recent, most vivid, and perhaps most deplorable example of what happens when a party and its lawyers are found by a court not to have decided to degrade their own standards and those expected of them by others.
The Response
What might usefully be done by arbitral tribunals to respond to the spirit if not the letter of the Court’s invitation in FRN? It seems to me that there is, already, no shortage of arbitral seats and institutions which enable parties to obtain disclosure of all relevant evidence in order fairly to resolve their dispute (with, I would argue, the ancillary ethical obligation on the disclosing party to acquire and manage those documents properly). Perhaps more care needs to be exercised to select those seats with the greatest powers of court oversight. But the problem lies not so much in the letter of the rules, but those to whom they apply.
The deeper issue to be addressed is the ethical integrity of the parties and, more saliently, those advising them.
One practical step, I suggest, is for arbitrators to be frank from the outset with the parties and their lawyers about their ethical expectations of them. This is almost never done. It can be said at the outset of a case without rancour or disrespect. Its chief purpose is to set the ethical tone of the case (which in itself can have a salutary effect). It also arranges the furniture in such a way that if, later on, people become concerned about the way a case is being conducted, the arbitrators can do something about it.
Article 18 of the LCIA Arbitration Rules empowers the Arbitral Tribunal (i) to decide whether a party’s legal representative has violated the General Guidelines annexed to the Rules and (ii) if it finds it has, impose one or any of three types of sanction prescribed in Article 18.
The LCIA has thus attempted to regulate the conduct of legal representatives that misbehave. Article 18 has been around for a number of years. The purpose would appear to be ‘to promote the good and equal conduct of the authorised representatives of the parties appearing within the arbitration’ (Annex paragraph 1).
A Question
However, I wonder whether it is enough. First, Article 18 only applies to arbitrations commenced under the LCIA Rules (and any similar provisions in other instructions, under those). Secondly, it is arguable what, if any, legal or regulatory effect such a sanction would have on those intent on wrongdoing. Thirdly, some arbitrators may consider themselves unqualified or inexpert in judging professional conduct, especially of those from other jurisdictions than their own. Fourthly, if, the arbitral tribunal were ever to make the wrong decision about the conduct of a legal representative (and for example to apply a sanction incorrectly), it is easy to see how it might be said that bias and unfairness had crept into the proceedings. Things may get a lot worse, very quickly.
Perhaps arbitral tribunals need to step to the side (to avoid all this), then take a step forward (to achieve the same or similar outcome). Rather than embark on what might be a difficult quasi-regulatory exercise in judging professional or unprofessional conduct in the middle of a fractious arbitration, the simpler route, and one with sharper teeth, is to warn of a possible report to a regulator and then, if necessary, to do it. (One collateral benefit is that it would be the regulator, not the arbitrator, who would decide whether conduct has been unprofessional or not. That, some might say, is how it should be.)
I see nothing remiss in the arbitral tribunal even-handedly warning the parties of this at the outset of a case if that is what it considers it should do. Moreover, if an arbitral tribunal later has reason to suspect professional misconduct, it should not feel constrained to act on that report the matter to the relevant regulator. How and when is beyond the scope of this short paper. My point is that if arbitral tribunals want sharper teeth, this is one way to get them.
This, to my knowledge, is never done. It is not a complete answer to the problems illustrated by FRN but it might well be a step in the right direction. Perhaps now it should be done, in order further to protect the integrity and reputation of the arbitral process in particular and international arbitration in general which the Judge in FRN generously described as ‘of outstanding importance and value in the world’.
Dominic Spenser Underhill is an International Arbitrator, a Senior Associate Lecturer in the ethics of international arbitration at Queen Mary, University of London, and a Solicitor.