Do arbitrators have the power to sanction a party or its counsel for its conduct?

International arbitration proceedings suffer from some of the same ills that plague litigation in domestic courts.  Parties are sometimes intransigent, and counsel sometimes acts unprofessionally or unethically.  A 2015 study found that nearly half of respondents thought that the lack of effective sanctions was one of the three worst characteristics of international arbitration.  That same study found that respondents believed sanctions were the best way to curb misconduct. 

So, what powers do arbitrators have to police the conduct of parties and counsel?

The problem

International arbitration is not governed by one set of ethical rules. Instead, each lawyer is governed by their licensing jurisdiction’s professional rules of conduct. And different cultures and legal traditions draw different lines between ethical and unethical conduct.

For example, civil law typically does not permit counsel to prepare witnesses before trial. But common-law systems encourage the practice. As a result, two witnesses in the same arbitration may have vastly different levels of preparation depending on the jurisdiction in which counsel is qualified.

Document production presents similar problems. Common-law and civil-law countries view document production from very different perspectives. The former see exhaustive discovery as a means of getting to the truth; the latter often deem document production wasteful and unnecessary. Lawyers from some civil-law jurisdictions are unaccustomed to extensive discovery and may not feel obligated to preserve documents.

The potential for confusion is exacerbated by the uncertainty about which rules of professional conduct apply. It might be natural to assume that the rules of the country where the arbitration takes place apply, even to foreign lawyers. But the rules of a lawyer’s home bar might just as well apply, even to arbitrations seated abroad.

Without clear choice-of-law rules, lawyers in the same arbitration may end up playing by different ethical rules. One side may, in good faith, withhold documents from the other. Some witnesses may be unprepared merely because of where a lawyer lives and works. Or one lawyer may use tactics deemed unacceptable under another lawyer’s standards. The result is often an uneven playing field.

Levelling the playing field

Some lawyers purposefully exploit this uneven playing field through so-called “guerrilla tactics.”  In extreme form, these tactics might include outright witness bribes or forged documents.  More often, opportunistic lawyers resort to less drastic means, such as purposefully filing late submissions, reneging on deposits, or knowingly withholding documents.

There have been some efforts to level the playing field.  In 2013, the Interna­tion­al Bar Association (IBA) published its Guidelines on Party Representation in International Arbitration.  The Guidelines strive to create standards parties can adopt to reduce uncertainty and encourage civility.  Additionally, the Guidelines (if agreed to by the parties) arm arbitrators with the power to remedy attorney misconduct. 

Most institutions, however, have been timid, setting out only vague guidance or merely encouraging conformity with the IBA Guidelines.  The London Court of International Arbitration (LCIA) broke this trend in 2014.  Its revised Arbitration Rules gave arbitrators an explicit power to impose sanctions on counsel.  They empower an arbitrator to issue written reprimands and cautions and to take “any other measure necessary to fulfil the general duties required of the [arbitrator].” 

Even these modest measures, however, have incited intense pushback from some practitioners.  Allowing arbitrators sanction powers is still not the institutional norm.  So where does this leave parties and advocates?  What solutions are available today to curb misconduct? 

Monetary sanctions as a policing tool

Aside from the LCIA, a few institutions now authorize sanctions or set ethical standards.   The Lagos Chamber of Commerce International Commercial Arbitration Centre (LACIAC) issued new rules in 2016 setting attorney misconduct procedures.  They incorporate the IBA Guidelines’ definition of “misconduct,” empower arbitrators to require from the alleged offender a written response, and warn advocates that misconduct may be reported to domestic professional regulators.  The 2016 Australian Centre for International Commercial Arbitration rules similarly require compliance with the IBA Guidelines.

But even institutional rules that do not explicitly mention sanctions or set ethical standards typically permit arbitrators to consider lawyer conduct when allocating legal costs.  The ICDR rules allow an arbitrator to “award arbitration costs to a party to compensate for misconduct in the arbitration.”  The United Nations Commission on International Trade Law rules also contemplate arbitrators’ considering of misconduct when apportioning costs. 

Allowing arbitrators to tag misbehaving parties or counsel with costs is a good start.  But it is not enough.   

There are a few steps a party can take when expecting the other side to use guerrilla tactics.  Most importantly, it should retain outside counsel with deep expertise in international arbitration.  Drawing on counsel’s experience, a party should also aim to appoint arbitrators known to take a firm stance on misconduct.  Parties should steer clear of arbitrators known for trying to please all parties. 

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