A FAAIR FIGHHT: PROFEESSIONAAL GUIDEELINES IIN INTERRNATIONNAL ARBITRATIOON Booston Univerrsity Schoolof Law Worrking Paper No. 14-53 (Octoober 7, 20144) Williaam W. Paark Boston Univeersity Schoool of Laww This papper can be doownloaded wwithout chargge at: http://wwww.bu.eduu/law/facultyy/scholarshipp/workingpappers/2014.httml Forthcoming, 30 Arbitration International 409 (2014) A Fair Fight: Professional Guidelines in International Arbitration William W. Park* I. Asking the Right Questions A. Equality of Arms 1. Standards for Lawyer Comportment Asking the right question remains vital to getting a helpful answer. ‘Do we need even more lawyer regulation?’ Such rhetorical flourish suggests an easy negative response in the debate over formalized standards to guide conduct of party representatives in international arbitration. At best, say the skeptics, such guidelines simply propound self-evident propositions. At worst they provide ammunition to sabotage proceedings or obtain award annulment. An inquiry into the optimum amount of lawyer regulation brings little insight into how to address potentially perverse effects of divergent norms for lawyer comportment on matters such as ex parte communication, suppression of document and witness preparation. Although no playing field will be perfectly level, some remain less even than others. Cross-border arbitration may appear rigged against advocates that respect procedures not observed by the other side. Not surprisingly, at least two questions beg further exploration in any discussion of lawyer behavior in arbitral proceedings. First, will codes of conduct promote equality of arms among counsel? Second, will costs of those codes outweigh their benefits? * Professor of Law, Boston University. President, London Court of International Arbitration. General Editor, Arbitration International. Copyright © 2014 William W. Park. Finely balanced arguments present themselves, implicating a dialogue calling for serious efforts at understanding competing perspectives. No side hits a home run or makes a slam dunk, even if strong opinions often differ by reason of particular experiences or divergent weight accorded the risks and benefits of varying levels of arbitrator discretion.1 Whether codes and guidelines promote the prospect of a fair fight in arbitration has been mooted most vigorously in the debate on standards for lawyer comportment contained in two sets of guidelines.2 First came the International Bar Association Guidelines on Party Representation (‘IBA Guidelines on Party Representation’).3 Close on their heels were the Guidelines annexed to the Arbitration Rules of the London Court of International Arbitration (‘LCIA Annex’), approved by the LCIA Court in May 2014.4 Each instrument implicates self-regulation of the legal profession, a matter discussed often in arbitration conferences and scholarly literature.5 1 With admirable candor, one arbitrator has acknowledged that his view of professional guidelines as ‘overkill’ derives in part from the fact that he hears only big cases in which the parties are represented by large established law firms. See interview of Karl-Heinz Böckstiegel conducted by Sebastian Perry, GAR (Global Arbitration Review), Tuesday 8 May 2014. 2 For early efforts at drawing attention to the need for professional guidelines, see V. V. Veeder, 2001 Goff Lecture - The Lawyer's Duty to Arbitrate in Good Faith, 18 ARB.INTL. 431, at 433 (2002), asking the now-famous rhetorical question, ‘What are the professional rules applicable to an Indian lawyer in a Hong Kong arbitration between a Bahraini claimant and a Japanese defendant represented by New York lawyers?’ See also John Uff, Duties at the Legal Fringe: Ethics in Construction Law, Lecture at King’s College London, 19 Jun. 2003; Jan Paulsson, Standards of Conduct for Counsel in International Arbitration, 3 AM. REV. INT. ARB. 214 (1992). . 3 International Bar Association, Guidelines on Party Representation in International Arbitration (25 May 2013). The IBA Guidelines on Party Representation should not be confused with the IBA Guidelines on Conflict of Interest in Arbitration, designed to address arbitrator ethics rather than lawyer conduct, notwithstanding an obvious overlap. 4 General Guidelines for the Parties’ Legal Representatives, Annex to 2014 LCIA Rules, appended to this essay. 5 For early recommendations that arbitral institutions adopt something like the LCIA Annex, see Catherine A. Rogers, Fit and Function in Legal Ethics: Developing a Code of Attorney Conduct for International Arbitration, 23 MICH. INT’L L.J. 341 (2002); Catherine A. Rogers, Context and 2 One of most thoughtful critiques of such memorialized standards for good behavior was issued by the Association Suisse de l’Arbitrage (‘ASA’ or ‘Swiss Arbitration Association’) which summarizes as follows its concerns about the IBA Guidelines on Party Representation. [T]here are few, if any situations concerning party representatives which require rules on party representation, applicable in the arbitration. The measures proposed [by the IBA Guidelines] do not provide adequate relief and in particular are unlikely to resolve a possible detriment to a party from situations where the playing field may not have been level. Above all, the [IBA Guidelines] risk doing considerable unintended harm, not least to the detriment of the users.’6 In particular, the ASA expresses concern that the IBA Guidelines would place on arbitrators a duty that falls beyond their traditional mandate, and risk provoking further procedural complications that would distract from the main function of arbitral proceedings.7 The qualms expressed by the ASA have been echoed and amplified by critics from other quarters.8 Many raise understandable questions about the generality of ethical codes9 and about Institutional Structure in Attorney Discipline, 39 STAN. INT’L L. REV. 1 (2002). See generally, CATHERINE A. ROGERS, ETHICS IN INTERNATIONAL ARBITRATION (forthcoming 2014, Oxford U. Press). 6 Paragraph 2.1, Association Suisse de l’Arbitrage, IBA Guidelines on Party Representation in International Arbitration: Comments and Recommendation by the Board (Vorstand) of the Swiss Arbitration Association (ASA Board), published on 20 Jan. 2014, memorializing the results of discussion at a meeting of the ASA Board on 3 Oct. 2013. 7 As an alternative, the ASA suggests that concerns about procedural unfairness be addressed by ‘improved understanding of [legal culture] differences’ and ‘if this were found to be necessary, in the context of the arbitration rules and their application….’ Id. at 5. 8 Cyrus Benson proposes that critics of guidelines might fall into three camps: denialists, laissez- faire, and (iii) skeptics. The first camp denies the existence of any issue of counsel conduct in international arbitration. The laissez-faire group believes that attempts to create guidelines destroy the benefits that come with a free system of arbitration. Finally, the skeptics believe that regulating counsel conduct will cause abuse, costs and delays that overshadow any benefits. Cyrus Benson, The IBA Guidelines on Party Representation: An Important Step in Overcoming the Taboo of Ethics in International Arbitration, 1 CAHIERS DE L’ARBITRAGE/ PARIS J. OF INT’L ARB. 47, 51 (2014). 9 Toby Landau is cited as contenting that ethical codes by their very nature will set open-textured rules too general to be of any use. See Sundaresh Menon, Some Cautionary Notes for an Age of 3 unintended consequences in the form of opportunistic challenges to derail arbitral proceedings or to serve as strategic tools to vacate arbitral awards.10 Certain observers stress perceived evils of regulation per se, warning of ‘a frightening international arbitral procedural code’ which results in ‘replacing an evil (domestic procedure) by a greater evil (international procedure).11 Yet voices supporting self-regulatory standards present forceful counter-arguments. Those urging the arbitration community to be proactive include Sundaresh Menon, Chief Justice of Singapore, bringing a mix of Asian perspective and English legal tradition.12 He chronicles the departure of days when arbitration lay in the domain of a select group with shared understandings, now replaced by an arbitration landscape that includes a diverse set of actors with uneven expectations that may challenge the integrity of international proceedings. For example, Menon notes that many Asian jurisdictions permit ex parte communications with Opportunity 79 ARB. 393 (Chartered Institute of Arbitrators 2013) at para. 31, citing Landau’s presentation Seminar on Contemporary Challenges in International Arbitration, Queen Mary College, University of London, 27 Sep. 2012. 10 See Sebastian Perry & Richard Wooley, LCIA Unveils Draft Guidelines for Counsel Conduct, GLOBAL ARB. REV. (2014). In connection with the IBA Arbitration Day in Paris, 14 Feb. 2014, Perry and Wooley report that Toby Landau (Essex Court Chambers, London) and Michael Schneider (Lalive, Geneva) warned on excessive regulation which risked robbing arbitration of its flexibility and giving parties greater scope for guerilla tactics. See also Markham Ball, Probity Deconstructed, 21ARB. INT’L 323 (2005); Martin Rauber, The Impact of Ethical Rules for Counsel in International Commercial Arbitration-Is there a Need for Developing International Ethical Rules?, 1 INT’L ARB. L. REV. 17, 27 (2014) questioning whether there is a compelling need for the development of a binding code of conduct. See generally, Jean- Christophe Honlet, The IBA Guidelines on Party Representation in International Arbitration, 30 J. OF INT’L ARB. 701 (2013). 11 Carlos Alberto Carmona, Considerations on the IBA Guidelines on Party Representation in International Arbitration: A Brazilian Point of View, 1 CAHIERS DE L’ARBITRAGE/ PARIS J. INT’L ARB. 29, 30 (2014). 12 See Sundaresh Menon, Some Cautionary Notes for an Age of Opportunity, 79 ARB. 393 (2013). See also Sundaresh Menon, Keynote Address to 2012 ICCA Singapore Congress, in International Arbitration: The Coming of a New Age?, ICCA Congress Series (Kluwer Law International 2013, in Albert Jan van den Berg ed.). On the balancing of costs and benefits in standards in arbitration, see also JAN PAULSSON, THE IDEA OF ARBITRATION 290–291 (2013). 4 arbitrators, who often take on the role of a mediator and arbitrator in the same dispute. Absent codes of conduct, parties from diverse backgrounds receive little guidance on proper behavior. Few would challenge the proposition that an arbitral tribunal has inherent power to preserve the integrity of the proceedings by taking appropriate measures against disruptive counsel.13 If one lawyer repeatedly shouts rude epithets at his opposite number, the presiding arbitrator should normally ask the offender to sit down or to leave. More problematic, however, will be those aspects of lawyering which receive varying treatment depending on the jurisdiction. In the United States, lawyers routinely prepare witnesses for testimony, while in many parts of Continental Europe such practice is considered inappropriate.14 In jurisdictions following Anglo-American models, lawyers consider themselves under a duty not to suppress documents whose production has been ordered. In other countries, the duty of counsel to a client may override obligations to the arbitral tribunal, making it less than evident that such material will be delivered. In the conflict between the duty of candor to 13 For example, according to the Swiss Arbitration Association, ‘under most if not all frequently used arbitration rules arbitrators have, expressly or implicitly, the powers to ensure the ‘fundamental fairness and integrity’ of the proceedings. If they do not always make adequate use of such powers, this would seem to be essentially a question of arbitration practice and arbitrator awareness rather than a lack of rules or guidelines’. 2014 ASA Board Report, cited supra, at para. 2.1. 14 See e.g., Art. 13 of Us et coutumes de l’Ordre des Avocats de Genève which provides ‘L’avocat doit s’interdire de discuter avec un témoin de sa déposition future et de l’influencer de quelque manière que ce soit.’ (The lawyer must abstain from discussing with a witness his future testimony and may not influence the witness in any manner.). Concerning German prohibition on interviewing witnesses, see John H. Langbein, The German Advantage in Civil Procedure, 52 U. CHI. L. REV. 823 at 834 (1985); John H. Langbein, Trashing the German Advantage, 82 NW. LAW REV. 763 (1988). By contrast, US lawyers would lack in diligence if they failed to rehearse their witnesses about questions to be asked, in theory a way to keep witnesses from being misled or surprised and arguably making testimony more accurate. See WIGMORE ON EVIDENCE (3d ed.) § 788; THOMAS A. MAUET, PRETRIAL 40 (4h ed, 1999). 5 arbitrators, and the duty of loyalty to clients, the latter often prevails in legal systems where attorneys do not see themselves as officers of the court. 2. Why and How Fairness Matters As a preliminary matter, one might well ask why it matters that there be a ‘fair fight’ in arbitration. What should the adjudicatory system care that professional obligations (for example, disclosure of documents directed by the tribunal) should be respected by lawyers for one side, but not by the other. In a similar vein, one might ask why it matters that the arbitrator be relatively free from bias.15 Before the dispute arises, neither side knows who will get the benefits of an unfair dispute resolution process. Under this ‘veil of ignorance’, contracting parties will tend to prefer dispute resolution procedures that enhance the prospect of success to the more reasonable view of facts and law.16 An uneven playing field hinders rather than furthers that objective, whether dice get loaded through biased arbitrators or counsel fighting with unequal weapons. Divergent rules, permitting some lawyers to engage in conduct forbidden to others, will mean that only one side has its hands tied by a professional restriction, thereby threatening the basic fairness of arbitral proceedings.17 15 Publicly, lawyers talk about the proverbial good arbitrator who will be honest and intelligent. Yet in evaluating candidates to sit in their own cases, they doubtlessly hope for someone well- disposed to their arguments. 16 In modern times, the phrase was popularized by the philosopher John Rawls with respect to contingencies to which a rule might apply. To be just, rules should be uninformed by existing litigation strategy. They should not be created in function of what might be called the ‘ouch test’, which looks to see who gets hurt by a particular norm. See JOHN RAWLS, A THEORY OF JUSTICE 136 (1971). 17 V.V. Vedeer, 2001 Goff Lecture: The Lawyer’s Duty to Arbitrate in Good Faith, 18 ARB. INT’L 431 (2002); Martin Rauber, The Impact of Ethical Rules for Counsel in International Commercial Arbitration – Is there a Need for Developing International Ethical Rules? 17 INT’L ARB. L. REV. 17, 22 (2014). 6 Honest debate must address which rules might be optimum in providing counterpoise between rival goals in arbitration, including fairness and efficiency. However, the broader challenge remains to promote a practice with the same rule applying to both sides. In arbitration between an American and an Austrian, one might argue for and against Anglo-American style document production. Such debate notwithstanding, it would be odd if only one side could count on effective production because counsel applied different standards on compliance to tribunal orders. Even if no clearly right rule presents itself on such controverted practices, the most basic notions of fair play and procedural justice would be offended if one legal team is permitted to engage in conduct forbidden the other side. To some extent, the debate on guidelines raises long-standing themes about the nature of law and the desirable extent of regulations in general. Those who remain skeptical about guidelines will see them as creating a risk of ‘side shows’ that disrupt proceedings. The suggestion will be made that the guidelines are not really needed. By contrast, proponents consider the codes as tools to assist those who quite rightly want to say ‘not so fast’ with objectionable conduct. The conversation evokes the so-called “bad man theory” of the American jurist Oliver Wendell Holmes, presented in a lecture delivered at Boston University in January 1897. Arguing that individuals who care little for ethics nevertheless want to avoid fines and damages, Holmes suggested that the best characterized of law would be prediction of what brings the sanction feared by the proverbial bad man. 18 Of course, there would be those who say that adherence to the law comes less from reading statutes than from an environment where adherence to certain norms remains commonplace. 18 Oliver Wendell Holmes, Jr., The Path of the Law, 10 HARV. L. REV. 457 (1897). 7 The relationship between law and ethics becomes much more complex in an international context. Indeed, research suggests that ethical decisions in foreign languages differ from those reached in one’s native tongue. Larger numbers of people will endorse rational sacrifice when moral dilemma are posed in a foreign language, presumably because effort and engagement of the reasoning process will be greater.19 B. Merging Streams Among arguments offered against codified professional guidelines, the most often presented relate to some version of the ‘not needed’ contention. For some, codes of conduct remain a response in search of a problem, with the downside of injecting undue rigidity. Good arbitrators, it is submitted, can manage cross-cultural conflicts with grace and flexibility, through established rules combined with informal understandings of how things should be done. Implicit in this vision of reality, arbitration takes its tone from a gentlemen’s club of grand old men (with one or two distinguished women, perhaps) residing in a line drawn from London through Paris and on to Geneva. If such days ever existed, they are long gone. Today, new players in the arbitral process include governments, companies, counsel and arbitrators from multiple litigation traditions. International arbitration has been democratized through participation of talented lawyers and 19 In the so-called Trolley and Fat Man Problem a train will strike five people unless switched to a different path, where only one person will die. Disaster can also be averted by pushing a fat man onto the track, so his bulk will stop the train. When polled, more people agree to pull the switch than to push the fat man, although the arithmetic (one life for five) remains the same. Reluctance to push the fat man appears as a visceral reaction, contrasted to an impersonal flip of a lever. In a study at the Spanish University of Pompeu Fabra, willingness to push the fat man increased when the question was asked in a foreign language. See ‘Language and morality: Gained in translation’, ECONOMIST, 17 May 2014. 8 arbitrators from around the world. Enlightened policy-makers in the arbitral community will learn from the past by recognizing how arbitration has evolved over the past half century. New entrants come to the arbitral process not only from different geographical regions and legal cultures, but also from varied professional paths: litigators from law firms; academics who teach contracts or civil procedure; transactional lawyers and in-house counsel; and a host of non-lawyers, including engineers, quantity surveyors, accountants, economists, insurance underwriters and government officials. Increasingly, the world of international arbitration might be compared to a series of merging streams, trickling down from different places, ultimately coming together in a single river. Each of these varied backgrounds arrives in the arbitration community through a different path, with divergent training and perspective. Thus it should not be surprising that the very nature of arbitration, and obligations to be imposed on counsel, appear through different lenses.20 In this connection, the impact of diversity in background cannot be overemphasized. The simple invocation of ‘fair treatment’ will doubtless have effect in homogeneous communities that rely on reputation bonds and shame to encourage cooperative behavior. Social pressure might work well among Jewish diamond dealers in Amsterdam, who form a relatively cohesive group with close social and religious ties.21 20 Cyrus Benson when describing his experience with ethical issues in arbitration notes that ‘these experiences do not involve scandalous or unethical conduct. Instead, they concern lawyers on different sides of the same case acting ethically but nonetheless differently on matters of importance’. Cyrus Benson, The IBA Guidelines on Party Representation: An Important Step in Overcoming the Taboo of Ethics in International Arbitrtion, 1 CAHIERS DE L’ARBITRAGE/PARIS J. OF INT’L ARB. 47, 48 (2014). 21 See Lisa Bernstein, Opting Out of The Legal System, 21 J. Leg. Stud. 115 (1992); JEROLD S. AUERBACH, JUSTICE WITHOUT LAW? (Oxford 1983). One might also look to the Puritans in colonial New England, although even these very like-minded folk had disputes which required formalized adjudication mechanisms. See Cohasset Marshlands Arbitration between Plymouth 9