Mondaq | 24 October 2023
India: Double hatting in international arbitration
by Deeksha Dev Singh and Zoeb Cutlerywala
Arbitration, historically, has been a field that finds its roots in the idea that parties should be able to choose their own judges in a matter. While the principal is indeed a virtuous one, it presents a multitude of issues in practicality. One such issue is that of double hatting in this field and practice of law. This article aims to explore the issue of double hatting in the field of arbitration in the context of recent developments in the field of international arbitration and the critique against it.
What is Double Hatting?
In essence, double hatting is a term coined by Professor Phillip Sands and refers to the practice of a legal professional acting as both, an arbitrator and an arguing or advising counsel to parties. This would include scenarios where an arbitrator has acted as legal counsel for one of the parties in a dispute being adjudicated by him, or where a legal counsel has acted as arbitrator in a case involving his client.
As international arbitrator Yasmine Lahlou aptly notes, “when two thoughtful arbitrators and academics such as Professors Philip Sands KC and William ‘Rusty’ Park raise concerns about that practice, we ought to listen, take stock of the concerns and explore the means of addressing them, And this has, to a large extent, been done: the decisions addressing arbitrator disqualification show that the common wisdom has shifted from a dismissive determination that double hatting, as the norm, cannot be problematic, to a gradual acknowledgement that, in some cases, such a double engagement may raise actual or apparent conflicts. On that basis alone, the so-called controversy has been beneficial.”1
The biggest issue, when we talk about double hatting is that of an arbitrator’s ability to remain independent, fair, and impartiality when dealing with parties that he may have represented or arbitrated for. The UNCITRAL Model Law, which is arguably one of the basis of arbitration jurisprudence, ingrains the concept of an arbitrator’s independence and impartiality in Article 12 which reads as follows –
“Article 12. Grounds for challenge:
- When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence, an arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him.
- An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.”
Therefore, it is sine non qua for an arbitrator to be impartial and independent in his dealings. Now double hatting is an issue that hits at the very heart of this requirement of independence and impartiality of an arbitrator.
Double Hatting and Justifiable Doubt
The global arbitration community seeks to trust their arbitrators. However, when an arbitrator engages in the practice of double hatting as an arbitrator and legal counsel, it can create a scenario where it is difficult for parties to instil their trust in him/her. Consider the following scenarios –
- A person has acted as legal counsel to a party in the past. The same party has nominated that person to a panel of 3 arbitrators. The mere fact that the person was once part of the same organisation of the party can give rise to justifiable doubt in the minds of the opposite party.
- A person who has expressed his views on a particular subject as an expert witness in an international arbitration is called upon by a party to preside over a commercial dispute. The opposite party can reject his appointment on the ground that he has already expressed his views on the subject matter of the dispute and therefore, cannot be trusted to be unbiased when deciding the dispute at hand.
The most important phrase, when we discuss double hatting is “justifiable doubt.” A party that is opposing the appointment of an arbitrator only needs to show justifiable doubt with respect to the arbitrator’s past conduct of double hatting. Whether or not bias is actually present is immaterial. It is the author’s contention that double hatting can often lead to situations that can create justifiable doubt in an opposing party’s perception.
The case of Telkom Malaysia v. Ghana2 is a fine example of how double hatting manifests in practice. The arbitrator for the case was acting as legal counsel for the claimant in a distinct proceeding. Even though the arbitrator had made necessary disclosures regarding his appointments as legal counsel, his appointment was challenged in that matter. On challenge before the Hague District Court, the arbitrator was instructed to resign from either one of the positions.
Despite the obvious demerits of double hatting, it is, unfortunately, difficult to put an end to the practice entirely. One simple reason of many is that the field of arbitration, especially international arbitration, is a clique that only consists of an elite group of legal professionals. Given the number of arbitral cases cropping up every day, it would become difficult to find arbitrators that do not act as legal counsel. It would be next to impossible to find a “full-time” arbitrator who does not double hat as a legal counsel, an expert witness, or a scholar who expresses his views and notions on particular issues. Another argument that can be extended is that young professionals that wish to pursue a career as arbitrators must work as legal counsel for financial security, else they would not be able to sustain themselves.
Suffice it to say that the global arbitration community is split over the issue of double hatting. While some organisations and polities such as the European Union are considering a complete ban on the practice of double hatting, other organisations such as the UNCITRAL are in the works of introducing some form of limitation on the appointment of arbitrators that also work or have worked as legal counsel. A blanket ban may not be a practical approach and therefore it is vital that this issue is addressed by the concerned institutions with a framework which is more permissive. The objective of these provisions is to eliminate all possible forms of bias or even suspicion of bias in the arbitration process, while at the same time not denying the opportunity for persons to function both as arbitrators and counsels. The way forward remains to be decided.
1. Will the controversy over double hatting ruin arbitration? in Leadership, Legitimacy, Legacy: A Tribute to Alexis Mourre, 2022, p. 158.
2. Telekom Malaysia Berhad v. The Republic of Ghan, PCA Case No. 2003-03