Ethical Duties of Party-Appointed Expert(s) in arbitral proceedings

Ethical Duties of Party-Appointed Expert(s) in arbitral proceedings

The UNCITRAL Model Law on International Commercial Arbitration imposes ethical duties on arbitrators, most notably the obligations of impartiality and independence and the related duty of disclosure. Pertinently, arbitration proceedings involve disputes wherein issues require technical, scientific, legal, or financial expertise, leading parties to appoint an expert(s) to support their position and assist the arbitral tribunal.¹

In this regard, while there is guidance for the expert appointed by the tribunal², there is not a lot of guidance as to the ethical duties of the experts appointed by parties. National laws do not contain more detailed provisions on party-appointed experts either. They solely refer to tribunal-appointed experts³. The UNCITRAL Model Law on International Commercial Arbitration & the Arbitration and Conciliation Act, 1996 (India) is silent regarding the ethical duties of party-appointed experts. The aforesaid vacuum in national and institutional rules is not mirrored in soft law instruments.

Also, this silence in arbitration law and rules stands in contrast with the judicial practice as well. Courts, and their codes of civil procedures, do impose a code of conduct on party-appointed experts. For judicial proceedings, court rules in many countries establish whether (1) a party-appointed expert witness owes a principal duty to the party who engaged the expert or to the court; (2) the expert must render objective and impartial opinions in presenting evidence and opinions or can instead act as an advocate for the instructing party; and (3) the expert has to act in accordance with the principles of independence and impartiality.⁴

Guidelines for party appointed experts: Arbitral Institutional Rules and National Rules

Pertinently, party-appointed experts have been recognized by arbitral institution rules and national laws, which either allow parties to appoint experts or refer to the possibility to have expert witnesses (e.g., Section 20 (3), Section 27 (2) of the Arbitration and Conciliation Act, 1996 and Article 27(2) of the 2013 UNCITRAL Rules, Article 25(2) of the 2021 ICC Arbitration Rules, Article 20(1) of the 2020 LCIA Arbitration Rules, Article 33(1) of the 2017 SCC Rules, Article 25(1) of the 2016 SIAC Rules 2016). However, the aforesaid acknowledgment is not accompanied by a set of obligations/guidelines for the party appointed experts.⁵

Guidelines for party appointed experts: Soft Law Instruments

The Spanish Arbitration Club refers to the party-appointed expert’s ‘declaration of objectivity and independence’ (Article 137) and contains a template statement. Party-appointed experts must “disclose any circumstance which … may give rise to justifiable doubts as to their objectivity and independence” (Article 140). Such duty is “ongoing” (Article 141). Further, there is a preference in favour of disclosure should an expert be “unsure whether a circumstance can reasonably give rise to justifiable doubts about his or her objectivity and independence” (Article 143). Articles 152-153 of the said code oblige party-appointed experts to “keep confidential any information that they learn in the arbitration proceedings”. As per Articles 150-151 of the professional fees which the parties pay to the party-appointed expert shall in no case “have a variable component that depends upon the outcome of the arbitration”.

IBA Rules on the Taking of Evidence, 2010 (Article 5.2): IBA Rules require a statement of independence to be submitted with the expert report. That statement must contain inter alia, a statement of the expert’s independence from the parties, their legal advisors and the arbitral tribunal (article 5.2(c)). It has been further clarified in the Commentary to the IBA Rules “for example in the sense that he or she has no financial interest in the outcome or otherwise has relationships that would prevent the expert from providing his or her honest and frank opinion”.

CIArb Protocol for the Use of Party-Appointed Expert Witnesses in International Arbitration, 2007: This protocol requires the expert’s report to include inter alia a declaration confirming that the opinions expressed are his or her own and that they are impartial and objective⁶. The template for the expert declaration in Article 8 of the CIArb Protocol also requires that the party-appointed expert submits a declaration attesting to the expert’s objectivity. Article 4(2) of the CIArb Protocol specifies that “payment by the appointing Party of the expert’s reasonable professional fees for the work done in giving such evidence shall not, of itself, vitiate the expert’s impartiality.”

UNIDROIT Principles of Transnational Civil Procedure, 2006: The said principles mention the objective behind the appointment of an expert. The rules state that an expert, whether appointed by the court or by a party, owes a duty to the court to present a full and objective assessment of the issue addressed⁷. UNIDROIT Principles include the party-appointed expert’s fees in the costs of the arbitration which may be awarded to the winning party (Article 25.1)

In light of the above, the IBA Rules on the Taking of Evidence (IBA Rules), the UNIDROIT Principles of Transnational Civil Procedure 2006, the CIArb Protocol for the Use of Party-Appointed Expert Witnesses in International Arbitration 2007 and the Code of Best Practices in Arbitration of the Spanish Arbitration Club, 2019⁸ provide guidance on the ethical duties concerning party-appointed experts.

Furthermore, professional organizations to which experts belong have a code of conduct that sets out the ethical rules for their members when serving as witnesses in dispute resolution proceedings. For instance, the Academy of Experts, the Expert Witness Institute and Euro Expert, have jointly promulgated the Code of Practice for Experts, 2001 which imposes duties on experts, whether tribunal- or party-appointed, of “impartiality, objectivity and integrity” as well as the duty to “take no act that would compromise the expert’s duty to the arbitral tribunal”. Pertinently, several professional organisations like the American Society of Civil Engineers, the American Institute of Certified Public Accountants and the American Society of Appraisers have all published such codes of conduct.

Remedies against Party-appointed Experts: A question to be considered by the arbitral tribunal

In the absence of specific remedies against party appointed experts, if a party intends to challenge the appointment of the said expert, it is for the arbitral tribunal to assess the evidence brought by the parties and decide if a disqualification measure is appropriate.

Various grounds have been taken by parties to challenge the appointment of a party-appointed expert which include inter alia, access to confidential and privileged information⁹, bias¹⁰, lack of qualifications¹¹, lack of independence¹² and impartiality¹³. Although the standard considered in determining these grounds is not clear, actual bias as opposed to apparent bias is required¹⁴. In this regard, arbitrators often take guidance in soft law instruments to determine if a case for disqualification has been made.¹⁵

Arbitral tribunals either acknowledge their competence to decide on disqualification requests or decide to tackle this issue as part of the assessment of the evidence presented by the parties. For instance, arbitral tribunals have based their competence to decide on requests for disqualification of expert witnesses under Rules 19 and 34(1) of the ICSID Arbitration Rules¹⁶. The tribunal can also decide that it does not have the competence to decide on the issue of challenge to the expert appointed by a party¹⁷.

The ICSID Annulment Committee which annulled an award for the first time on grounds of the improper constitution of the tribunal, rendered a finding that one of the arbitrators failed to disclose a relationship with the claimant’s damages expert, creating an appearance of actual bias (Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain¹⁸). Pertinently, the Committee did not express any view on whether the expert had an obligation to disclose a relationship with the Claimant’s damages expert, since even if the expert had done so, this would not have relieved the arbitrator from his disclosure obligations as an arbitrator¹⁹. A similar application for annulment was made in the case of TECO Guatemala Holdings, LLC v. Republic of Guatemala²⁰, for which however the Annulment Committee’s decision has not yet been made public.

Conclusion

In light of the above, it is stated that the role of party-appointed experts is to assist the tribunal in reaching a decision on complex and technical issues beyond its expertise. Moreover, arbitrators can establish practical parameters for the conduct of party-appointed experts such as (1) a duty regarding disclosure (2) a duty to include in any written and oral evidence and all material information, whether supportive or adverse; and (3) a duty to assess the reasonableness of assumptions on which the expert relies in the expert evidence. A suggestion was given in this regard by Dr. Klaus Sachs.

Dr. Klaus Sachs proposed at the 2010 ICCA annual conference in Rio De Janerio that the opposing parties in an arbitration could propose lists of possible experts. The tribunal would then select one expert from each list to serve on an ‘expert team’. That team would be appointed by and responsible solely to the tribunal and compensated out of the common arbitration deposits (‘Sachs Proposal’).

Accordingly, experts even when appointed by a party should be objective and independent and present an unbiased view to the tribunal, otherwise tribunals risk grounding their decisions on flawed opinions or disregarding the expert report altogether. In this context, a clear body of rules addressing the duties and obligations of party-appointed experts would result in more remedies for the parties and as a consequence, strengthen their role and the value of their testimonies and reports which tribunals could safely rely upon.