Following in the footsteps of Lucy Reed in her Freshfields lecture, Bernardo Cremades used the Chartered Institute of Arbitrators’ Alexander Lecture last night to highlight the abuse of due process in international arbitration – saying that it has become “a real threat” to tribunals.
“The demands of due process are present in relation to any decision made by an arbitrator during […] arbitral proceedings,” the Spanish arbitrator explained. “However, relatively frequently lawyers […] raise questions of due process in a threatening way, suggesting that if the arbitrator does not accept their procedural proposals the result would be a breach of due process. The lawyers do no fail to draw attention to the consequences for enforcement of the decisions of a breach of due process.”
Indeed, he said we have reached a point where the mere mention of due process is often understood by the tribunal as a threat that if it does not agree to a procedural request, the award will be challenged and annulled.
This is particularly the case where a "weak" arbitral tribunal is "fearful of the aggressiveness of the parties' lawyers," Cremades said, referencing a presentation by French practitioner Philippe Pinsolle at this year's ICCA Congress in Mauritius.
But Cremades argued that the main criticism should be lebelled at counsel who invoke due process in support of their excessive demands – thus contributing to the "scandalous" cost of international arbitration that is the real denial of justice.
Anglo Saxon and continental traditions of due process
Introducing his subject, Cremades defined due process as “the reflection in arbitral proceedings of constitutional demands”.
In England, the term first appeared in Magna Carta. In the US, the Fourteenth Amendment of the constitution says “no state shall deprive any person of life, liberty or property without due process or law”.
In Castile and Aragon, which were united in 1494 by the marriage of Ferdinand and Isabella to form what became modern Spain, Cremades said principles of due process developed alongside the possibility of “amparo” (appeal on constitutional grounds) and were adopted in the newly discovered territories of Latin America.
Such principles are also to be found in international pacts such as the Universal Declaration of Human Rights and European Convention of Human Rights.
When it comes to the hybrid of civil and common law tradition that is international arbitration, Cremades said a “starting point” for the requirements of due process are the New York and ICSID Conventions. The requirements are further influenced by customary international law but have a significant “discretionary” element.
Two main priorities are “access to justice” and “reasonableness of the proceedings”, he said.
Where breaches of due process occur, he said the arbitral award may be annulled or enforcement refused – but only in cases in which “the most basic notions of morality and justice” have been violated.
The party who won the arbitration will then traditionally “pay the price” of the tribunal’s “defective conduct,” with no sanction on the arbitrators themselves, Cremades said.
A sword not a shield
Like Reed in her recent Freshfields lecture, Cremades noted how due process is increasingly being used as a sword not a shield in international arbitration: part of a growing movement away from gentlemanly conduct by counsel and embrace of “aggressiveness” as a virtue.
Other manifestations of this are strategic challenges to arbitrators and civil liability and criminal actions against them, he said. Arbitrators are also regularly subjected to the pressure of public opinion, thanks to law firm communication departments “generating news items which are not always to the benefit of [their] necessary neutrality”.
Counsel’s due process demands are rooted in excessive expectations, he argued: as to the length of the time they will have to complete certain parts of the process, the amount of disclosure to which they are entitled, the length of the hearing, participation of witnesses and experts and the extent to which they can challenge the other side.
The "Anglo Saxon technique of cross-examination” has some use in terms of rooting out the truth but is often mere “theatrical representation,” he said. Sometimes the lawyer appears to be less concerned with persuading the tribunal than ensuring a transcript full of interventions to satisfy the client.
The “tsunami” of document disclosure seen in many cases is equally problematic, he said – requiring arbitrators to put “gargantuan effort” into distilling the issues in the case, when the lawyers should have done this for them.
All this has led to the rocketing costs of international arbitration that prevent many parties from being able to access it despite the solution of third-party funding, Cremades argued.
Turning his focus to Latin America, Cremades noted the excessive and abusive use of the appeal of amparo on the basis of alleged violation of constitutional rights. This only serves to delay proceedings in the courts, he said.
He said Latin American scholarship is divided between those who insist on the need for constitutional control and those who want more flexibility and efficiency in arbitration. The use of the amparo also raises an ethical question: is it right to use all means within reach for the benefit of the client?
Who’s to blame?
Cremades acknowledged the problem of tribunals being insufficiently robust in the face of due process demands, saying that when one speaks of the flexibility of arbitration it “does not mean the chaotic weakness of the arbitrators in conducting the proceedings”.
However, he suggested that the real fault lies with counsel and the silence of the international arbitration community regarding their abuses is “noteworthy”.
For Cremades, this blaming of arbitrators for the sins of counsel is another disturbing trend. He noted a speech made by IBA president David W Rivkin in Hong Kong last year in which arbitrators were chastised for everything from doing Sudoku puzzles during hearings to overbooking and taking years to produce awards.
“I do not know Mr Rivkin’s experience in arbitral matters but, from reading his speech, he gives the impression of Don Quixote de la Mancha, fighting against ferocious giants which were in fact only windmills,” Cremades said.
“The great finding of the president of the IBA was the need to draw up a new contract whereby arbitrators are more exactingly committed to the parties who directly or indirectly appoint them. Perhaps he should focus more on the performance of the lawyers [...] to obtain better results in arbitral proceedings.”
Nowadays, international arbitration is “in the crossfire of international politics,” Cremades continured – owing to criticism of the process by Boliviarian states and the EU, left-wing opposition to it in the context of TTIP and other trade deals and the New York Times’ fierce criticism of its use for consumer class actions.
He also noted how arbitration has been discredited by criminal abuse of the process in the Tapie case in France.
In such circumstances, he argued the international arbitration community should be open to “constructive criticism” and take pains to distinguish between correct and abusive conduct. However, he said it is not acceptable to “single out arbitrators” for criticism while overlooking the real culprits: “Let he who is without sin cast the first stone”.
Enlace a la noticia original / Link to the news source http://globalarbitrationreview.com/article/1076348/second-leading-arbitrator-highlights-due-process-threat#disp