Att. Gökberk TEKİN, LL.M., FCIArb
Arbitration has emerged as one of the most efficient and popular alternative dispute resolution methods and simply offers to the parties the chance to resolve their differences in accordance with the law, procedures, and by “judges” they selected. It is important to emphasize herein that the “selection/appointment arbitrators” are often considered as one of the most important points of the arbitration process.
However, in recent years, being an important part of these “foundations”, party-appointment system has been heavily criticized. In this context, the criticisms in this regard, include subjects as diversity problems, repeated appointments, problems in multi-party cases, etc.
Having noted these points, in this paper, the party appointment system will be critically evaluated from the aspect of “independence and impartiality”. In other words, it will be critically evaluated whether “the party-appointment system” causes bias for arbitrators towards the appointing party, as it is suggested by some authors and critics.
Appointment of Arbitrators
In this context, as for the appointment of arbitrators, it is possible to encounter different appointment procedures in different systems. However, it is possible to note that except for the cases in which a sole-arbitrator is appointed, the parties typically appoint at least one arbitrator which is indeed often considered as one of the most important decisions in the arbitration process.
As for the arbitration proceedings in Turkey, the Law Nr. 4686 on International Arbitration should be referred to first which regulates the international arbitration in Turkey. Article 7/3 of the said law regulates that unless otherwise agreed by the parties, in international arbitration proceedings seated in Türkiye “In an arbitration case with three arbitrators, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint the third arbitrator. (…)” Therefore it can be said that the arbitration legislation in Turkey complies with the global trends.
Similarly, the rules of arbitral institutions in Turkey adopt a parallel approach. For instance, the Istanbul Arbitration Centre (ISTAC) outlines in Article 14/2 of its rules that, “In cases where the dispute shall be resolved by an Arbitral Tribunal, each of the parties shall choose one arbitrator in the Request for Arbitration and the Answer to Request for Arbitration respectively.”
Istanbul Chamber of Commerce Arbitration and Mediation Center (ITOTAM) also takes a similar approach in its rules regulating that “If the dispute is to be referred to three arbitrators, each party shall nominate in the Request and the Answer, respectively, one arbitrator for confirmation.”
Independence/Impartiality of the Arbitrators
It is a well-established principle and crystallized in many regulations/rules that the arbitrators, regardless of the appointment, shall be independent and impartial. Herein it should also be stated that being appointed by one of the parties does not relieve the arbitrator from independent and impartial. Regarding this issue, in the “Alejandro Valverde Belmonte v. Comitato Olimpico Nazionale Italiano (INOC) and others” decision the Swiss Federal Court has successfully emphasized the following points:
“Yet the so-called system of the party-arbitrator must be ruled out, in which the party-appointed arbitrator would not be subject to the same requirement of independence and impartiality as the chairman of the arbitral tribunal. The idea that the arbitrator may merely be the advocate of “his” party within the arbitral tribunal must be categorically rejected, failing which the very institution of arbitration would be jeopardized.”
Herein it should also be noted that the “bias” referred in this paper should also not be perceived as the closeness to the case of the appointing party. Since as asserted by Hunter and Paulsson “the parties will wish to choose persons who are in a very general sense likely (in their view) to be sympathetic to their respective cases (…) This is obvious, and it is perfectly proper.” Therefore, the bias referred to in this paper should be understood as any inclination stemming from the “appointment” itself..
The “Dilemma” and the Analysis
Having noted some fundamental points, the problem and relevant arguments should be presented. First of all, analysis of the question which is referred to in this paper poses important hardships because the discussions of the arbitral tribunals and in most cases the whole decision-making process is confidential. However public documents issued especially during investment arbitration cases and experimental researches may still be benefitted.
First of all, the important experimental studies proving the attitude of party-appointed arbitrators should be emphasized. For example, the analysis carried out by Sergio Puig and Anton Strezhnev shows that the arbitrators given the knowledge of the appointing party are inclined to make decisions in favor of the appointing party, in the scenario provided to them for deciding on costs.
In addition to that technical analysis of the dissenting opinions may also provide an opinion regarding the issue. In this sense, Jan Paulsson notes that the vast majority of the dissenting opinions, if not all, are written by the arbitrator appointed by the losing party.
Therefore, given the above-presented information, one may conclude that the arbitrators are –at least- inclined to make decisions in favour of the appointing party.
On the other hand, it is also asserted widely that changing the party appointment system as a solution to this problem would radically impact the “international arbitration” and result in deprivation of the parties from one of the most fundamental opportunities in the process. This would seriously impair the raison d’etre of the arbitration.
Moreover, it has also been asserted and discussed that the party-appointment system is the reason for the majority of the parties to recourse to the arbitration.
Proposals in Lieu of Conclusion
In the face of information provided so far, one may conclude that the party-appointed arbitrators may (at least) show bias towards the appointing party. Even more, the empirical studies show that the bias may increase as the appointments of the same party increases. Being noted this point; this paper is far from asserting that the party-appointed arbitrators act “biased” on purpose. On the contrary, the referred implicit bias may operate as a result of non-cognitive processes.
Moreover, as presented above, although there is enough evidence to believe that party-appointed arbitrators “may be” biased towards the appointing party, moving away from the party-appointment altogether would seriously impair the process and such a solution is not realistic at least for the short term.
However, the problem referred to in this paper and solutions should not be held as a dichotomy. In other words, it is still possible to list some proposals to avoid the bias of the arbitrators while keeping the fundamental “party-appointment system” as an integral part of the process.
Having noted this, precautions such as prevention of repeated appointments, enlarging the pool of arbitration, different procedures like “list system” blind appointment”, establishmentof more procedural safeguards may serve us in avoiding the dangers of the “bias” posed by the party-appointment system while keeping this fundamental feature as a part of the system.
Abdel Wahab M, ‘The Arbitral Tribunal: Independence And Impartiality’ (Lecture in CIArb Diploma in International Arbitration, 2020)
Blackaby N and others, Redfern & Hunter On International Arbitration (6th edn, 2015)
Branson D, ‘Sympathetic Party-Appointed Arbitrators: Sophisticated Strangers And Governments Demand Them’ (2010) 25 ICSID Review
Giorgetti C, ‘Who Decides Who Decides In International Investment Arbitration?’ (2014) 35 University of Pennsylvania Journal of International Law
Hunter M and Paulsson J, ‘A Code of Ethics for Arbitrators in International Commercial Arbitration?’ (1985), 13 Int. Bus. Law.
Muntañola A, ‘Party-Appointed Arbitrators In International Commercial Arbitration’ (PhD Thesis, Queen Mary University 2013)
Shany Y, ‘Squaring The Circle? Independence and Impartiality of Party-Appointed Adjudicators ın International Legal Proceedings’ (2008) 30 SSRN Electronic Journal
Paulsson J, ‘Moral Hazard In International Dispute Resolution’ (2010) 25 ICSID Review
Puig S, and Strezhnev A, ‘Affiliation Bias In Arbitration: An Experimental Approach’ (2016) 46 SSRN Electronic Journal
Redfern A, ‘The 2003 Freshfields – Lecture Dissenting Opinions In International Commercial Arbitration: The Good, The Bad And The Ugly’ (2004) 20 Arbitration International
Waibel M, and Wu Y, ‘Are Arbitrators Political?’  SSRN Electronic Journal
Alejandro Valverde Belmonte v Comitato Olimpico Nazionale Italiano (INOC) and others  Swiss Federal Tribunal First Civil Law Court, 4A_234/2010 (Swiss Federal Tribunal First Civil Law Court)
LEGISLATION AND RULES
UNCITRAL Model Law on International Commercial Arbitration 1985
UNCITRAL Arbitration Rules 2013
 Nigel Blackaby and others, Redfern & Hunter On International Arbitration (6th edn, 2015), p. 355.
 Chiara Giorgetti, ‘Who Decides Who Decides In International Investment Arbitration?’ (2014) 35 University of Pennsylvania Journal of International Law, p. 440.
 Although the discussions have increased, the issue in question has a long history. See: Tom Arnold, “The Unacceptable Common Partiality of ‘Neutral’ Party Appointed Arbitrators”, in The Commercial Way to Justice – The 1996 International Conference of the Chartered Institute of Arbitrators, Kluwer Law International, 1997, pp. 162, and 152. cited in Alfonso Gómez-Acebo Muntañola, ‘Party-Appointed Arbitrators In International Commercial Arbitration’ (PhD Thesis, Queen Mary University 2013), p.88.
 Giorgetti (n 2) p. 454.
 Muntañola (n 3) p.73.
 Sergio Puig and Anton Strezhnev, ‘Affiliation Bias In Arbitration: An Experimental Approach’ (2016) 46 SSRN Electronic Journal, p.372.
 Blackaby and others (n 1) p. 240.
 Giorgetti (n 2) p. 442.
UN Model Law 11/3-a reads that “(…) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator (…) see: ”UNCITRAL Model Law on International Commercial Arbitration 1985.
UNCITRAL Arbitration Rules art.9/1 reads that “(…) If three arbitrators are to be appointed, each party shall appoint one arbitrator. (…)” see UNCITRAL Arbitration Rules 2013.
 UNCITRAL Model Law on International Commercial Arbitration 1985, art.11/5.
 Yuval Shany, ‘Squaring The Circle? Independence And Impartiality Of Party-Appointed Adjudicators In International Legal Proceedings’ (2008) 30 SSRN Electronic Journal, p. 483.
 Alejandro Valverde Belmonte v Comitato Olimpico Nazionale Italiano (INOC) and others  Swiss Federal Tribunal First Civil Law Court, 4A_234/2010, 3.3.1.
 Martin Hunter and Jan Paulsson, ‘A Code of Ethics for Arbitrators in International Commercial Arbitration?’ (1985) 13 Int. Bus. Law., p. 153 cited in Muntañola (n 3).
 D. Branson, ‘Sympathetic Party-Appointed Arbitrators: Sophisticated Strangers and Governments Demand Them’ (2010) 25 ICSID Review.
 Puig and Strezhnev (n 6) 373.
 J. Paulsson, ‘Moral Hazard in International Dispute Resolution’ (2010) 25 ICSID Review, p. 348.
 Giorgetti (n 2) p.536,537.
 Shany (n 10) 480.
 Giorgetti (n 2) p. 443
 Michael Waibel and Yanhui Wu, ‘Are Arbitrators Political?’  SSRN Electronic Journal, p.36.
 Puig and Strezhnev (n 6) 375.
 J. Paulsson, ‘Moral Hazard in International Dispute Resolution’ (2010) 25 ICSID Review, p.349.
 Giorgetti (n 2)p. 437.
 Giorgetti (n 2) p. 480.
 List system refers to the procedure in which “each party compiles a list of three or four persons considered to be acceptable arbitrators, (…). The lists are then exchanged in an attempt to reach an agreement.” See Blackaby and others (n 1) p. 241.
 Blind appointment procedure refers to the procedure in which the arbitrators are not provided the information regarding which party appointed them. See Puig and Strezhnev (n 6) 373.
 Giorgetti (n 2) p. 474.