Choosing a Safe Seat of Arbitration—an Ethical Decision?

Published on: 27/04/2022

Written by Barry Fletcher, Member of the LIDW Strategy Group and Head of Arbitration and Head of the Dispute Resolution Group at LexisNexis

 

This year’s LIDW theme (Dispute Resolution: Global, Sustainable, Ethical?) prompted me to think a little more about the role ethics and human rights do and/or should play when it comes to selecting a seat (or legal place) of international arbitration.

 

As a thriving centre for global trade and commerce, London has a long, rich history of international arbitration, which continues to the present day. Indeed, one of London's great strengths as an arbitral seat and centre for arbitration is its diverse offering for parties—all forms of arbitration thrive in London, resolving disputes across the full spectrum of industries and sectors. London, while arguably unique in its overall offering, is far from the only choice for parties selecting a seat of arbitration. Other centres, like Paris, New York, Geneva, Singapore and Hong Kong, are also generally thriving, and new arbitral institutions and regional hubs are springing up all the time.

 

Choosing a safe, reliable seat of arbitration is of fundamental importance for parties and those who advise them. In brief, the seat of arbitration is the jurisdiction in which an arbitration is deemed legally to take place and the award issued, regardless of the geographical location of the tribunal and/or any hearings. The seat also determines the legal system that, generally, provides the arbitration’s procedure and which courts have supervisory jurisdiction over the arbitration. As Mr Justice Butcher noted in Process and Industrial Developments Ltd v Federal Republic of Nigeria [2019] EWHC 2241 (Comm), the seat ‘indicates a link between the arbitration and a system of law’.

 

When faced with the task of choosing a seat, parties can turn to some useful tools and guidance in the market. In 2015, the Chartered Institute of Arbitrators (CIArb) notably promulgated the ‘London Principles’, i.e. 10 principles necessary for an effective, efficient and ‘safe’ seat for the conduct of international arbitration, a project which it has subsequently started to build on with a seat index. A similar initiative from recent years is the Delos Guide to Arbitration Places.

 

Both CIArb and Delos identify ‘ethics’ as an important criteria when it comes to selecting a seat of arbitration. For CIArb’s London Principles, ethics means ‘Professional and other norms which embrace a diversity of legal and cultural traditions, and the developing norms of international ethical principles governing the behaviour of arbitrators and counsel’. Delos adopts a very similar definition. I fully agree that having high ethical standards in this sense is important and should form part of an overall assessment when choosing a seat. But should parties expand their assessment of ethics to consider a juridical seat’s broader ethical and human rights position?

 

As the programme for this year's LIDW amply demonstrates, many parties (commercial or otherwise) and their advisers have made (or will do so) very public commitments to maintaining high standards on ESG (environmental, social, and governance) matters, and it is arguable that such commitments should influence seat choice (if they don’t already) as they do other decision-making.

 

A party committed to, for example, making ethical decisions about its supply chain, ensuring factory workers in another country are treated properly and paid appropriately, should also be paying  attention to how and where its disputes will be resolved (physically and/or legally). This involves looking beyond the usual criteria for an effective, efficient and safe seat and considering what a choice of governing legal regime for an arbitration means for the parties, their dispute and the lawyers and other advisers who are often called upon to assist as they reach for their goals. In addition to being efficient, effective and safe, is the choice of seat itself ethical? Does the jurisdiction of the seat offer adequate protection for all human rights (not just some), for example?

 

An unethical seat choice may have direct, human consequences in a particular case: will counsel receive equal treatment under the law if they attend in person hearings at the seat? If not, another choice may be better aligned with the party's ESG commitments. Of course, the consequences of an unethical seat choice may be more indirect in a world of remote hearings where physical persecution may be avoided: for example, the tacit endorsement for a legal system that is oppressive to its subjects. Again, making an unethical choice of seat may be difficult to square with a company’s business human rights and/or ESG commitments.

 

Choosing not to endorse, even indirectly, an unethical seat of arbitration may be a hard sell for some who want to keep commercial disputes separate from political or other interests. But corporate choices are being informed by factors that would have never had been raised, never mind influential, a few short years ago. While there is no one way to assess a jurisdiction’s ethical and human rights record (and challenges around definitions, among other matters), there are many useful public sources of information[1].

 

As such, if the international disputes community and its clients are committed to ESG, do we need to broaden our views as to what constitutes a ‘safe’ seat of arbitration? I look forward to developing my thinking on this topic at LIDW this May 2022.

 

As a member of the LIDW Strategy Group, Barry has been focused on the conference’s keynote addresses and the session: London: Leading or Lessons Learned? (Wednesday 11 May at 17:00 BST). The speakers for that session are: Sylvia Noury QC (Chair) Partner, Freshfields Bruckhaus Deringer; Frank Ilett, Managing Director, Kroll;  Michelle MacPhee, BP; and, Laurence Shore, Of Counsel, BonelliErede.

 

[1] Human Rights Watch (Countries | Human Rights Watch (hrw.org)), UN Human Rights, Office of the High Commissioner (OHCHR | Countries), World Population Review Freedom Index (Freedom Index by Country 2022 (worldpopulationreview.com))