Arbitrator independence is always important, but a court in Malaysia has gone further than usual in convicting an arbitrator to prison for making a false statement of independence.
A British arbitrator was sentenced to six months in prison for making a false declaration of independence, as reported by the Global Arbitration Review . According to the Malaysian court, the arbitrator misled the Kuala Lumpur Regional Center for Arbitration (“KLRCA”) into appointing him as an arbitrator on the basis of a false statement of independence. According to the Global Arbitration Review, the prosecutor described the facts as “a dishonest, insincere and selfish act” that negatively affected the image of the KLRCA.
The KLRCA Rules do not expressly state that the arbitrator must make a statement of independence. However, the Rules provide at Article 5 that an arbitrator may be challenged if circumstances exists that give rise to justifiable doubts as to the arbitrator’s impartiality or independence or if the arbitrator does not possess any requisite qualification on which the parties have agreed. The Rules provide that the appointing authority shall have to secure the appointment of an independent and impartial arbitrator:
“ Article 6. Designating and Appointing Authorities […]
7. The appointing authority shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and shall take into account the advisability of appointing an arbitrator of a nationality other than the nationalities of the parties.”
By contrast, the ICC Rules of arbitration provide specifically that the arbitrator must be independent and that it must disclose any circumstance concerning its independence that may arise during the arbitration:
“Article 11: General Provisions
1) Every arbitrator must be and remain impartial and independent of the parties involved in the arbitration.
2) Before appointment or confirmation, a prospective arbitrator shall sign a statement of acceptance, availability, impartiality and independence. The prospective arbitrator shall disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality. The Secretariat shall provide such information to the parties in writing and fix a time limit for any comments from them.
3) An arbitrator shall immediately disclose in writing to the Secretariat and to the parties any facts or circumstances of a similar nature to those referred to in Article 11(2) concerning the arbitrator’s impartiality or independence which may arise during the arbitration.”
Similarly, the UNCITRAL Arbitration Rules provide for a disclosure of circumstances that might affect arbitrator’s independence through the arbitral proceedings.
When a person is approached in connection with his or her possible appointment as an arbitrator, he or she shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. An arbitrator, from the time of his or her appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties and the other arbitrators unless they have already been informed by him or her of these circumstances.”
Under Malaysia’s penal code false declarations are punishable with five years in prison or/and a fine.
“Punishment for cheating
417. Whoever cheats shall be punished with imprisonment for a term which may extend to five years or with fine or with both.”
This conviction of an arbitrator comes in a context where arbitrators are increasingly subject to potential imprisonment in some jurisdictions in relation to their duties. For example, a biased arbitrator may be imprisoned in the United Arab Emirates under an amendment to the UAE penal code.
“Article 257. An expert, arbitrator or translator or investigator who is appointed by a judicial or an administrative authority or elected by the parties, and who knowingly issue a decision or expresses an opinion or submits a report or presents a cause or proves an incident, in favour of a person or against him, contrary to the duty of fairness and unbiasedness, shall be punished by temporary imprisonment. The aforementioned categories shall be precluded from performing the duties they were charged with in the future.
Provisions of Article (255) of this Law shall apply thereto.“
Arbitrator independence is always important, but the Malaysian court ruling also shows that there can be serious consequences for a perceived lack of independence in certain jurisdictions.