ADR CORNER
Arbitrator Selection
DARIA PUSTILNIK
Should you roll the dice when selecting a neutral arbitrator 1 and why the selection method matters
We have all been there : an arbitrator looks great on paper but proceeds to dislike your client or make irrational decisions . I arbitrated one client ’ s identical agreements in two separate proceedings under the same rules and with the same arbitrator . He gave opposite rulings on the same discovery issues . Recently , without any input from the parties , a court appointed a neutral who had made public comments adverse to our position , but the neutral has been fair thus far . Therefore , it sometimes appears that it is easier and cheaper to roll the dice on the arbitrator . However , another school of thought is that the careful selection of an arbitrator is important as it allows the party to retain some control .
Selection vs . unilateral appointment
Agreement of the parties is the most obvious way of arbitrator selection . Otherwise , the basic methods are : ( 1 ) selection from a list where the parties strike or rank the arbitrators the institution proposed , and ( 2 ) unilateral appointment by the authority (“ rolling the dice ”). 2 Widely-used rules use both methods . 3 Generally , U . S . - centric institutions prefer the list selection process , and international institutions and UNCITRAL favor unilateral appointment . 4 Unilateral appointment may save costs because negotiations are minimized , but the downside is the lack of control . If you prefer not to roll the dice , helpful information is available .
Ex parte pre-appointment interviews and considerations in arbitrator selection
The arbitrator ’ s independence , impartiality , qualifications , willingness to serve , and security measures taken to protect the parties ’ data are paramount . These factors either must be disclosed or can be discovered through the institution or preappointment interviews . Unless prohibited by the arbitration clause or applicable rules , limited ex parte communications with the arbitrator may be permissible . 5 These should be relevant to the appointment process and exclude discussions of the merits . 6 For example , a party may ask whether the arbitrator represented a certain government or party even if they are not in the case , and had past business or professional relationships or current involvement in other arbitrations with the opposing party or counsel .
Other aspects that are harder to discover are also important : efficiency of case management , speed of resolving cases , past discovery rulings , average claim and award amounts , and percentage of preaward settlements . Services have started to offer reports on arbitrators . As the volume of data increases , these reports will become more useful .
Award enforcement proceedings confirm that arbitrator selection process matters
Inappropriate arbitrator selection may undermine the award . For example , in PoolRe Insurance , the disputes were governed by two contracts , one requiring AAA arbitration , and the other an ICC arbitration with the Director of Insurance in Anguilla selecting the arbitrator . 7 The Director of Financial Services Commission of Anguilla advised that there was no such official and designated the arbitrator acting under the first contract to make the selection . 8 The arbitration proceeded under the AAA rules over objections . 9 The district court vacated the award under both contracts and the Fifth Circuit upheld on two grounds : ( 1 ) the arbitrator selection process was not followed , and ( 2 ) the arbitrator exceeded his authority by applying AAA instead of the ICC rules . 10 In a footnote , the court addressed the fact that because no Director of Insurance existed in Anguilla , the ICC arbitration clause could not have been followed , and noted that the Federal Arbitration Act allowed a party to ask the district court to appoint the arbitrator . 11 Thus , the proper method of arbitrator selection is critical and mistakes in arbitration clauses can be fixed early .
In sum , there are two schools of thought on arbitrator selection : unilateral appointment by the institution and selection by the parties . Unilateral appointment comes with potential savings but less control . Helpful tools exist for uncovering critical information but failing to follow the proper process will undermine the award . Relatedly , Anguilla is a lovely destination in the Caribbean where rolling the dice may not be too bad .
PBCBA BAR BULLETIN 6
Daria Pustilnik is a lawyer with Kobre & Kim , a disputes and investigations firm with offices worldwide . Daria has represented clients in their domestic and cross-border complex commercial disputes in state and federal courts ; under the rules of the American Health Lawyers Association , American Arbitration Association , International Centre for Dispute Resolution , and the London Court of International Arbitration ; and in arbitrationrelated litigation , such as arbitration award enforcement cases . Daria is experienced in handling matters involving simultaneous arbitration , bankruptcy , civil and agency proceedings in multiple jurisdictions , such as the U . S ., UK , BVI and Russian Federation . Before joining Kobre & Kim , she practiced at Shutts & Bowen LLP , and served as a law clerk for Judges Kenneth A . Marra and James M . Hopkins in the Southern District of Florida . Daria can be reached at daria . pustilnik @ kobrekim . com or 347-899-0423 .
For additional ADR tips and resources go to https :// www . palmbeachbar . org / alternativedispute-resolution-committee /
1
This brief article focuses on selection of a neutral arbitrator as opposed to nonneutral party-appointed arbitrators . 2 Another method is for the parties to appoint two arbitrators who then select the presiding member of the panel . This process merits a separate discussion that is beyond the scope of this article . 3
4 In the unilateral appointment cases , a party can usually still
challenge an appointment where necessary . 5 The College of Commercial Arbitrators , Guide to Best Practices in Commercial Arbitration ( 4th Ed .), James M . Giatis ( Editor in Chief ) ( 2017 ), Ch . 2 . 6 Id .
7
PoolRe Ins . Corp . v . Organizational Strategies , Inc . 783 F . 3d 256 , 258-65 ( 5th Cir . 2015 ). 8 Id .
9
Id . 10
Id .
11 Id ., fn . 12 .