Arbitrators’ Challenges In International Arbitration: Insights From LCIA Decisions

Introduction

In today's global world, international arbitration is increasingly preferred due to its qualities of speed, confidentiality, and flexibility. The most crucial element determining the effectiveness and legitimacy of international arbitration is the principle of independence and impartiality that arbitrators must possess in carrying out the arbitration process. This principle is not only a legal obligation but also a necessity for creating an acceptable and valid resolution between the parties.

Independence and impartiality, while distinct concepts, complement each other and are often difficult to distinguish due to their interconnected nature. Independence refers to an arbitrators’ ability to be free from external factors, especially the influences of the parties or third parties. In this context, an arbitrator is obligated to make decisions without being subject to any social, political, economic, or intellectual pressures. External factors influencing the appointment of an arbitrator, such as political, economic, or social pressures from the parties, may also be considered as external influences. The existence of any potential external factor threatens the fairness and validity of the decision.

On the other hand, impartiality is the arbitrators’ ability to maintain an equal distance from both parties without favoring the interests of any side. Impartiality requires that the arbitrator is free from personal beliefs and biases when making decisions. In this regard, an arbitrator must demonstrate an objective approach throughout the arbitration process, recognizing that both parties have equal rights, and each party's arguments must be evaluated fairly.

While independence refers to the arbitrators’ detachment from external influences, impartiality is more related to internal factors, encompassing the arbitrators’ ability to approach both parties equidistantly. In this context, these two principles are fundamental criteria for ensuring that the decision rendered in the arbitration process is valid and effective. If these principles are violated, the mechanism for challenging the arbitrator comes into play. When an arbitrator acts in violation of the principles of independence and impartiality, the parties acquire the right to request the removal of the arbitrator under specific conditions.

Procedures for Challenging an Arbitrator (An Evaluation Within the Scope of ICC, LCIA, ICSID, and UNCITRAL Arbitration)

Under the rules of the International Chamber of Commerce (“ICC”), the time limit for challenging an arbitrator is 30 days from the notification of the appointment or confirmation of the arbitrator, or 30 days from the date the party becomes aware of the event or circumstances that warrant the challenge. A challenge may be submitted to the Secretariat, and if the ICC Court determines that the arbitrator is unable to perform their duties or is not acting in accordance with the rules, it may replace the arbitrator sua sponte. After a challenge is made to the Secretariat, the arbitrator and the other party are given an opportunity to submit their views in writing. If the ICC Court accepts the challenge, the arbitrator will be replaced. The decision of the ICC Court is final and binding.

Under the rules of the London Court of International Arbitration (“LCIA”), a request to challenge an arbitrator must be made within 14 days of the arbitrators’ appointment or within 14 days of the date the party learns of the event that warrants the challenge. Parties may submit their requests in writing to the arbitrator, or the LCIA Court may replace an arbitrator sua sponte. The written notification of the challenge is sent to the LCIA Court, which then seeks the views of the challenged arbitrator and the other party. If the parties agree to the replacement of the arbitrator, the LCIA Court may cancel the appointment without providing reasons. If the arbitrator resigns or the parties fail to agree, the final decision is made by the LCIA Court.

According to the arbitration rules of the International Centre for Settlement of Investment Disputes (“ICSID”), each party may challenge the arbitrator immediately after learning of the event that warrants the challenge. This challenge may be based on the argument that the arbitrator lacks the necessary qualifications or that they did not possess the necessary qualifications at the time of their appointment. The decision regarding the challenge is made by the other arbitrators. If no unanimous decision can be reached on this matter, or if the challenged individual is the sole arbitrator, the decision regarding the challenge is made by the President of the ICSID Administrative Council (President of the World Bank).

Without being monopolized by any arbitral institution, the United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules, which establish standard arbitration procedures, state that if a party wishes to challenge an arbitrator, the challenge must be submitted in writing to the other party, the challenged arbitrator, and the other members of the arbitral tribunal within fifteen days from the date of the appointment of the challenged arbitrator or the date the grounds for the challenge are known. The grounds for the challenge must be stated in the notification. If the challenge is not accepted by all parties or the challenged arbitrator does not withdraw from the proceedings within 15 days of the notice, the party making the challenge must request a decision from the appointing authority within 30 days from the date the notice was made. Acceptance of the challenge by the parties or the withdrawal of the challenged arbitrator does not imply acceptance of the validity of the grounds for the challenge.

Grounds for Challenging an Arbitrator

Under the ICC Rules, the grounds for challenging an arbitrator are not specifically defined, and a claim of a lack of impartiality or independence, or any other relevant reason, is generally considered sufficient. The rules provide a broad approach, allowing challenges based on these general grounds.

Similarly, the LCIA Rules adopt a general approach, where the presence of circumstances that raise justifiable doubts about an arbitrators’ impartiality or independence is deemed sufficient grounds for a challenge. In addition, the LCIA Court may also remove an arbitrator sua sponte if it finds that the arbitrator has intentionally breached the arbitration agreement; failed to act fairly and impartially between the parties; failed to demonstrate a reasonable level of efficiency, diligence, and professionalism during the arbitration process; or has not participated in the arbitration proceedings.

Under the ICSID Rules, any situation that clearly shows that the arbitrator does not possess the required qualifications (see ICSID Rules, Art. 14(1)) is considered a valid ground for challenging the arbitrator. This ensures that any deficiency in the necessary qualifications of the arbitrator may lead to their removal.

The UNCITRAL Arbitration Rules stipulate that, when an arbitrator is appointed, they must disclose any circumstances that may give rise to justifiable doubts regarding their impartiality or independence. In this context, if there is a risk or presence of such doubts, the arbitrator is required to provide an explanation regarding the issue. The disclosure requirement is aimed at ensuring transparency and mitigating any concerns that could undermine the fairness of the arbitration process.

An Evaluation Under the IBA Guidelines

When it comes to challenges against an arbitrator, one of the most important soft law sources to consider is the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines”). Published by the IBA Arbitration Committee, these guidelines provide standards regarding when arbitrators should withdraw and when they must disclose potential conflicts of interest. The general purpose of the IBA Guidelines is to ensure consistency in practice, prevent unnecessary challenges, and avoid the removal or resignation of arbitrators without cause. In this context, the IBA Guidelines categorize the situations in which an arbitrator may or may not serve, or when disclosure is required, into four main categories:

- Green Category: Situations where it is absolutely acceptable for an arbitrator to serve, and no disclosure is required.

- Orange Category: Situations where there are circumstances that may raise doubts about the arbitrators’ independence or impartiality, and therefore disclosure is required.

- Red (Waivable) Category: Situations where there are justifiable doubts about the arbitrators’ impartiality or independence, but the parties are aware of these concerns and have expressly accepted them.

- Red (Non-Waivable) Category: Situations where it is impossible for the arbitrator to be impartial or independent, and the parties cannot waive this disqualification.

According to the guidelines, if there is any justifiable doubt about an arbitrators’ impartiality or independence, or if a third party has legitimate reasons to believe that the arbitrator cannot remain impartial or independent, or if the arbitrator falls under a red (non-waivable) category or a red (waivable) category but the parties cannot reach a consensus, the arbitrator should not accept the appointment or should withdraw from the arbitration.

The IBA Guidelines also provide specific scenarios in which an arbitrator is required to disclose their circumstances. In the Green Category, for example, disclosure is not required for situations such as when an arbitrator has previously provided services to one party, entered into a contract with a party or another arbitrator, or expressed an opinion in favor of one party on the issue at hand. In the Orange Category, disclosure is necessary when an arbitrator is actively providing services to one of the parties, holds a position in the arbitral institution managing the arbitration, or has a controlling interest in the organization that one of the parties is affiliated with. The Red (Waivable) Category involves situations where an arbitrator has a direct or indirect financial interest in the outcome of the dispute, has a personal relationship with one of the parties, or is otherwise in a position where their impartiality could reasonably be questioned, but the parties have expressly agreed to continue with the arbitrators’ appointment.

In the Red (Non-Waivable) Category, the guidelines set out situations where the arbitrator should be disqualified, and their continued participation in the arbitration is not allowed. These situations include cases where the arbitrator is acting as an advisor to one of the parties for financial gain, serves as legal counsel for one of the parties, or is directly controlling one of the parties.

The IBA Guidelines aim to set general standards for the impartiality and independence of arbitrators in international arbitration and guide the parties in making informed decisions. While these guidelines are not legally binding, they are widely cited and frequently applied in practice as a soft law source. Of course, due to the unique factual circumstances of each case, rigid rules or general standards may not always lead to fair outcomes. Therefore, in situations where there may be a theoretical conflict of interest that could affect the arbitrators’ impartiality or independence, the specific circumstances of the case will be carefully assessed to determine whether there is an actual issue of impartiality or independence.

Evaluation of Arbitrator Challenge Decisions Published by the LCIA

In line with the principle of transparency, the London Court of International Arbitration (LCIA) regularly publishes summaries of decisions regarding challenges to arbitrators. The LCIA made its first publication in 2011, summarizing 28 arbitrator challenge decisions from 1996 to 2010. Subsequently, summaries of 32 arbitrator challenge decisions from 2010 to 2017 were made available online, and most recently, in December 2024, the LCIA published 24 additional arbitrator challenge decisions. This initiative provides a valuable resource for practitioners and researchers seeking insight into the LCIA's processes for handling arbitrator challenges. The latest publication from December 2024 once again highlights the LCIA's commitment to procedural transparency, while also demonstrating the effectiveness of its arbitrator challenge mechanisms. These summaries allow for a better understanding of the reasoning behind the arbitrator challenge decisions, thereby enhancing predictability in arbitration proceedings and reinforcing trust in the institution.

The decisions published by the LCIA offer an important perspective on how institutional arbitration rules and soft law norms are applied in concrete disputes, providing insight into the situations where challenges to arbitrators are accepted or rejected. Our review of the 2024 publication reveals that of the 24 arbitrator challenge decisions issued by the LCIA between 2017 and 2022, only two were upheld. This suggests that challenges to arbitrators are considered exceptional in arbitration proceedings.

For instance, in one of the decisions published in 2024 (see Decision No. 14, dated 2019), the LCIA Court evaluated a challenge based on the claim that an arbitrator was connected to the claimant's expert. It was found that the expert had been appointed in another arbitration case by the law firm where the arbitrator had worked. However, since the arbitrator had not directly selected the expert, had no prior relationship with the expert, and the reports from the expert in the related cases addressed entirely different issues, the LCIA Court concluded that there was no link that would undermine the arbitrators’ impartiality, and the challenge was rejected. In this case, the arbitrator had initially considered resigning but decided to stay on after the parties agreed to change the expert. The arbitrators’ transparency in disclosing the relationship and readiness to resign, if necessary, was considered a positive factor by the LCIA Court.

Similarly, in a challenge against an arbitrator for having expressed firm opinions on various issues in previous cases, the LCIA Court concluded that when the parties accepted the same panel of arbitrators for similar cases, it was a natural consequence for the arbitrators to decide on similar issues in the previous case. The challenging party’s argument, based on the nemo iudex in causa sua principle, which asserts that no one should be their own judge, was not seen by the LCIA Court as an absolute loss of impartiality. Therefore, the challenge was rejected, with the LCIA Court finding no conflict with the arbitrators’ impartiality (see Decision No. 21, dated 2021). As demonstrated by the above decisions, the LCIA's approach to challenges is that the mere existence of a connection is not sufficient to justify the removal of an arbitrator. When examining the decisions alongside others, it is clear that even when an arbitrator has represented one of the parties, the disclosure of such a relationship to the parties and the LCIA Court, along with the necessary examination, is sufficient to ensure that no doubt arises regarding the arbitrators’ impartiality and independence. This approach is consistent with the categories outlined earlier. Similarly, in cases where the arbitrator is a member of a professional organization or association that also includes lawyers representing one of the parties, or where the arbitrator has attended conferences or events without informing the parties, no doubt regarding impartiality or independence was found.

On the other hand, in two challenges accepted by the LCIA in its December 2024 publication, one challenge was based on the existence of a prior employment relationship between the arbitrator and a party, a pending case between one of the parties and the arbitrator, the arbitrators’ involvement in regular academic projects with one of the party’s attorneys, and the arbitrators’ participation as a speaker in events organized by the respondent. While these situations alone would not constitute a valid challenge, the LCIA Court accepted that the subjective concerns arising from these circumstances objectively gave rise to legitimate doubts. For example, the arbitrators’ long career spent largely with one of the parties created, in the LCIA Court’s view, legitimate concerns about the arbitrators’ independence and impartiality from a third-party perspective (see Decision No. 3).

In another challenge accepted by the LCIA, the arbitrator had provided consultancy to the law firm that drafted some of the contracts in the dispute for about eight years and had frequently organized events with the law firm. The LCIA Court found that the relationship between the arbitrator and the law firm, which was allegedly involved in the dispute, raised doubts about the arbitrators’ impartiality. Although the law firm was unlikely to be directly involved in the dispute, the relationship between the arbitrator and the law firm was considered sufficient to accept the challenge (see Decision No. 19).

In summary, the LCIA Court’s decisions demonstrate that when parties accept the same arbitrator panel for different arbitrations, they also accept the associated risks. In cases where an arbitrator has previously represented one of the parties, disclosing this relationship and making the necessary notifications can alleviate concerns. The mere fact that an arbitrator has a relationship with one of the parties (such as attending events) does not, by itself, provide grounds for a challenge, and each case must be evaluated based on its specific facts. Furthermore, the LCIA Court has emphasized that challenges based solely on procedural reasons (such as an arbitrator not accepting a time extension) will fail unless there is concrete evidence of bias.

Acceptance and Rejection Criteria in Light of Published Decisions

When analyzing the two accepted challenges by the LCIA (see Decision No. 3 and No. 19 of LCIA’s 2024 Release), it becomes clear that certain circumstances, such as a significant professional connection between the arbitrator and one of the parties (for instance, the arbitrator having worked at a law firm previously representing one of the parties), or the failure to disclose critical relationships, can raise justifiable doubts about the impartiality of the arbitrator. In cases like Decision No. 3 (of LCIA’s 2024 Release), where professional connections were not disclosed, or Decision No. 19 (of LCIA’s 2024 Release), where communications between the arbitrator and a party were not disclosed, the LCIA accepted the challenge on the grounds that, from the perspective of a reasonable and informed observer, these undisclosed relationships gave rise to doubts about the arbitrators’ impartiality. As a result, the challenges in these cases were found to be valid and were accepted.

On the other hand, when reviewing rejected challenges, several important criteria emerge regarding the powers of arbitrators in arbitration proceedings. For instance, in Decision No. 2, a challenge was raised against the arbitrators’ decisions on procedural matters (bifurcation) such as scheduling and the request for security for costs. However, the LCIA ruled that these issues fell within the arbitrators’ discretionary authority. This underlines that the LCIA does not interfere with decisions made by the arbitrator unless there is a clear and justifiable reason to do so. Moreover, in cases where a challenge is based on the alleged incorrectness of the arbitrators’ decisions (either legally or factually), the LCIA maintains that it is not responsible for reviewing the substance of the arbitrators’ decisions unless there is an issue related to impartiality or independence.

In situations where the arbitrator expresses preliminary opinions or comments on specific issues, as seen in Decision No. 1, where an arbitrator mentioned that one of the parties might face difficulties in presenting evidence, the LCIA emphasized that such statements do not, by themselves, constitute grounds for a valid challenge. The LCIA noted that the arbitrator did not present this as a final decision or opinion, and thus, the challenge was not accepted. This shows that the LCIA takes a pragmatic approach and distinguishes between casual observations and definitive rulings that might affect impartiality.

The LCIA’s stance on challenges related to an arbitrators’ decisions is also evident in its approach to challenges based solely on the arbitrators’ favoring or disfavoring one of the parties. In these cases, where the challenge is based solely on the perceived bias of the arbitrator, the LCIA found that such challenges were not sufficient grounds for rejection unless there was clear and objective evidence that would lead a reasonable observer to believe that the arbitrator was indeed partial. Therefore, challenges based solely on an arbitrators’ decision that one party’s position is stronger, without further evidence of bias, were considered unfounded and were rejected.

The LCIA’s approach to arbitrator challenges emphasizes the importance of maintaining the stability and efficiency of the arbitration process. For example, in Decision No. 13, the LCIA highlighted the broad discretion that arbitrators have in making procedural decisions, asserting that procedural challenges based solely on the dissatisfaction of one party were not sufficient grounds for a challenge. This reinforces the need to respect the arbitrators’ authority and prevents unnecessary interference in procedural decisions. Similarly, in Decision No. 17, the LCIA refused to allow parties to accumulate grievances throughout the arbitration process and present them all at once as a challenge. This decision emphasized that objections should be raised in a timely manner during the process to ensure that the arbitration can proceed without disruption. The LCIA’s decision to reject such accumulative challenges further serves to protect the efficiency of the process and prevent abuse of the challenge mechanism by the parties.

In conclusion, the LCIA's decisions show a clear distinction between legitimate and illegitimate challenges to arbitrators. Challenges based on undisclosed connections or comments that raise legitimate concerns about impartiality are typically upheld, whereas those based on procedural dissatisfaction or the mere perception of bias without substantive evidence are generally rejected. The LCIA's approach aims to safeguard the integrity and effectiveness of the arbitration process by ensuring that challenges are based on substantial and reasonable grounds and by discouraging misuse of the challenge mechanism.

Conclusion

The case law of the LCIA is shaped by principles aimed at preserving the efficiency and order of the arbitration process. Upon examining the general approach of the LCIA Court, it is evident that the Court maintains a consistent stance that mere dissatisfaction of the parties with the arbitrators’ decisions cannot, by itself, serve as a valid ground for a challenge. In some cases, parties have raised objections claiming that the arbitrators’ decisions were inadequately reasoned or that the arbitrators failed to address all issues. However, the LCIA has rejected these objections, making it clear that the challenge mechanism is not intended to serve as a means for a comprehensive review of the arbitration process from start to finish.

The LCIA’s summaries of decisions regarding arbitrator challenges serve as an important guide for understanding how such objections are handled and which situations are deemed to have legitimate grounds. These summaries provide a roadmap for parties in arbitration, offering a framework for similar situations that may arise. Additionally, the publication of anonymized decisions on arbitrator challenges by the LCIA represents a significant step toward increasing transparency and accountability in international arbitration.

When considering all of these factors, it becomes apparent that challenges to arbitrators do not constitute an appeal process for the decisions rendered in the course of arbitration. In order for an objection to succeed and be accepted, there must be reasonable and tangible evidence of doubt concerning the arbitrators’ impartiality and independence, and this doubt must be substantiated with clear evidence. Speculative or tactical objections are likely to be rejected by the LCIA.

In conclusion, the LCIA’s approach emphasizes the need for challenges to be based on legitimate, evidence-backed concerns rather than dissatisfaction with the outcome of the arbitration. This approach upholds the integrity of the arbitration process and reinforces the importance of impartiality and transparency in arbitration proceedings.

Av. Çağla BARUT

Av. Dr. Ömer KESİKLİ