Immunity of Arbitrators.
Anastasia Tsakatoura, 20 June 2002. All Rights Reserved.
Dworkin, one of the most important legal philosophers of our times, in the
preface of his book “Law’s Empire”
stated: “we live in and by the law. It makes as what we are: citizens
and employees and doctors and spouses and people who own things… we are
subjects of law’s empire, liegemen to its methods and ideals bound in
spirit while we debate what we must therefore do.” This has long been
one of my favourite phrases, justifying why legal studies are so
important. If we attempt to adjust it to the context of international
commercial arbitration there is one question that crosses ones mind. Since
we are all “subject’s of law’s empire”, how come and arbitrators
are immune of legal liability in England, the United States and other
common law countries or by the regulations of some arbitral institutions
such as the ICC?
concern of this essay would be to investigate the underlying principle of
such immunity as arisen by case law and supported by legislation and
various commentators. We will attempt to evaluate the arguments for and
against the immunity and conclude on whether it is desirable to sustain
such a principle. However, due to the restricted size of this essay we
will not scrutinize in details the legal relationship between the
arbitrator and the parties, neither shall we analyze the duties owed by
the arbitrator to the parties in depth. Furthermore, since this essay does
not refer simply to English domestic arbitration but is extended to the
field of international commercial dispute resolution it seems to be
essential to refer briefly and without a very deep analysis to some other
jurisdictions so as to get a more integral idea of the subject. Also,
although there will be some reference to theories concerning the nature of
the arbitration as a general concept, this analysis shall not be
concentrated on the theoretical evaluation or re-evaluation of those
theories and will only cite them as the jurisprudential background of the
existing attitude towards the immunity of arbitrators in various common
law systems or the opposite view taken by civil law systems.
with, it appears to be useful, to provide with some information for the
historical background of arbitration and the evolution of the concept in
the contemporary reality.
past, when arbitration was not as commonly used a dispute resolution
regime, as it is today, the appointment of a professional to act as an
arbitrator by one’s peers had been regarded to be an honour for that
person. It was an indication of his standing in the community, a sign of
his success in the field of his profession. The remuneration of such
arbitrators had been more of a nominal compensation of the time they
devoted to the case at issue, rather than a fee for the services they
provided. Arbitrators were not professionals; their livelihood did not
depend on the fees they received for stating their expertise opinion on
the subject matter of the dispute. “Arbitrations were conducted
mainly during lunch hours and in the evening after office hours” as
a practicing arbitrator Manfred A. stated in one of his article. Back then, the issue of
whether an arbitrator should be accountable of his conduct was hardly a
matter for consideration. The existence of immunity was somewhat axiomatic
and “the question of enforcing remedies against an unsatisfactory
arbitrator would rarely arise.”
this position has changed during the years. In the complex contemporary
society with the arbitration assuming a role of enormous importance in
dispute resolution and unprecedented power, the situation is hardly
self-evident. Still, it is considered to be an honour for an arbitrator to
be selected to resolve a particular dispute, but in most cases arbitrators
are full-time professionals. A number of institutions have been
established so as to regulate commercial arbitrations more effectively and
the fees charged to do so are barely nominal. In the contrary, the cost of
such a procedure is rather substantial and the expectations of the parties
for the skill and experience of the arbitrator or the arbitral tribunal
are considerably high. In many occasions the parties expect that the
arbitrators owe them a duty of diligence and that they will act
accordingly. Merely, that an incompetent arbitrator can be removed form
his position or have his award nulled does not compensate for the loss
they might have suffered until then.
The question arising seems to be rather crucial: why then should
arbitrators be excluded from liability towards those parties?
of the immunity
the word international commercial arbitration one might expect to find a
uniform international law regulating this field. However, such a uniform
law does not exist with the sole exception of the UNCITRAL Model Law,
which has only been adopted by a limited number of nations and in general
does not deal with the matter. Therefore, since international instruments
are not coherent or sometimes are even silent on the question of the
arbitrator’s liability, the legal rules regulating the immunity of
arbitrators are mainly depended upon the different legal systems and much
still remains to be determined by the area of law designated as
‘conflict of laws’ and of private international law. It is not the
purpose of this essay, however to inquire into questions raised by private
international law but merely to attempt and provide for a basic
investigation of the approach taken by common law and civil law countries
in general towards the issue of immunity of arbitrators.
theories as a feedback to immunity
There is a
vast literature in analyzing, contrasting, developing and contemplating
those theories in regard to arbitration and its nature. However, as we
have already mentioned is not possible to get into much a detailed
analysis in this paper. It seems though to be crucial to quote them so as
to roughly get an idea on wherefrom different jurisdictions derive their
attitude towards the arbitrator’s liability.
years three individual analyses became apparent vis-à-vis the juridical
nature of arbitration, namely, the contractual, the jurisdictional and the
mixed or hybrid theory. Subsequently, the autonomous theory had been added
to those three.
the contractual theory evolved from Merlin’s
perception on the subject, as early as in the 19th century,
where he supported that the arbitration agreement has the character of a
contract. In few words, Adam Samuel in his book
summarizes the classical contractual theory as follows: “it is the
agreement to arbitrate that alone gives the arbitrators the authority to
make the award. They, in turn, in resolving the dispute, are acting as the
agents or ‘mandataires’ of the parties.” According to that
theory an arbitrator cannot be regarded as a judge since his function is
not of a public character. The parties’ will is of paramount importance
and his powers do not emanate from the state’s authority. This theory
has been supported or criticized a lot in the subsequent years and many
arguments were presented for and against it. However, the theory left
unanswered many questions and it was rather vague in many aspects.
Therefore even those who followed it modified it so as to embrace some of
the elements left out by the traditional theory. Bernard, attempted to
analyse the relationship between the arbitrator and the parties, and it is
his analysis that more or less has been followed by civil law
jurisdictions. According to him, the arbitration agreement is still a
contract but which is determined by special rules. The arbitrator’s
authority stems from the agreement of the parties, which have the right to
limit it in time. Nevertheless, the arbitrator is not considered to be an
agent of the parties, since the duty determine the mutual obligations of
the parties cannot be fitted to that of the agent’s duties. He went on
by defining the nature of this ‘special contract’ as “a contract
sui generis, governed by the rules appropriate to it and which must be
dealt with by taking into account both the principles of the contract and
the particular nature of the function exercised by the arbitrator”
theory has been divided into two different schools of thought as well.
On the one hand are those who regarded the arbitrator similar to a judge
and the arbitral award ‘an act of jurisdiction’ (judgment theory)
while, on the other hand where the arbitrator is performing a public
function as a temporary judge (delegation theory). The jurisdictional
theory has been the one adopted by jurisdictions that support the immunity
of the arbitrators and we will further examine it later in this essay when
looking into those jurisdictions.
mixed or hybrid theory encompasses a mixture of the above two. The
commentators who support it believe that the reality lies somewhere in the
middle of the contractual and jurisdictional theory, namely, that neither
the arbitrator performs a legal function nor that the award is a contract.
“The parties, by their agreement, created and fixed the limits of
their private jurisdiction”
The arbitrator’s duty is to judge but the power to do so is conferred to
him by the agreement of the parties.
the most recent theory is the autonomous one, whereby the main idea
was roughly that arbitration should be detached from all the above
theories and acquire an autonomous character. As described by
Rubellin-Devinchi: “in order to allow arbitration to enjoy the
expansion it deserves, while all along keeping it within its appropriate
limits, one must accept that its nature is neither contractual, nor
jurisdictional, nor hybrid but autonomous.”
Nevertheless, this theory does not seem to have any practical application
by any jurisdiction; therefore, even if its content seems to be appealing,
technically, there are many problems in its appliance, because it implies
a partial surrender of legal sovereignty.
these are in basic lines the main theories for the nature of arbitration
that influenced consequently the attitude towards the arbitrators, other
theories, variants of these, have emerged during the years and many
jurists spent a lot of time and paper to analyse them. However at this
point it seems vital not to insist on analyzing them but go on further to
attempt to investigate what is the present reality technically in various
different nations concerning the liability or immunity of the arbitrators.
in England and the USA
jurisdictions that support the exclusion of liability for the arbitrators
have traditionally based the justification for it, on the ground that
arbitrators should be treated akin to judges.
as well as in the USA there is a long tradition of that reasoning hence,
granting them immunity from suit in the absence of bad faith in England
and; full immunity for all actions undertaken in fulfilling their duties
as arbitrators in the USA. The new Arbitration Act 1996 in England by sec.
29 illustrates and sustains that tradition. The question raised is whether
this presumed analogy with the judiciary is sufficient to justify the
exclusion of liability.
Schiffbau v. South India Shipping Corp. Ltd.
Donaldson J asserted that “courts and arbitrators are in the same
business, namely the administration of justice”. Even though a number of
commentators’ articles and statutory provisions relied on that
assumption, there are many and not trivial differences between the two
point for comparison lies in the source of the power of the judges
as compared to that of the arbitrators. A judge’s power derives directly
from the State (or the Crown in the UK) and the general law of the nation.
On the contrary, an arbitrator’s jurisdiction derives directly from the
agreement of the parties. Secondly a judge is neither nominated nor
remunerated by the parties, while an arbitrator is. As Lord Kilbrandon in
a descending opinion in the seminal case of Arenson v. Arenson &Casson
Beckman and Ruttey & Co.asserted
“the citizen does not select the judges in this system, nor does he
remunerate them …the judge has no bargain with the parties…he pledges
them no skill…his duties are to the state.” Taking into
consideration all these disparities outlined, on what ground could such
correlation be made? By applying the assumption that an arbitrator should
be impartial and independent like a judge, and the judge in so doing
should be immune of liability, commentators assimilated the two, and
concluded that, thus, an arbitrator should be immune as well. In the
leading case Sutcliffe v. Thakrah
this contemplation was underlined by Lord Salmon: “it is well settled
that judges, barristers, solicitors, enjoy an absolute immunity from any
form of civil action being brought against them in respect of anything
they say or do in court during the course of a trial” and this
presumption has been equally applied to arbitrator’s on the grounds of
As it has
been argued an arbitrator “should be able to perform his task without
constantly looking over its shoulder in the fear of being challenged
through legal process.”
Nevertheless, it is rather self-evident that the reasons for the existence
of the judicial immunity are significantly different than those supporting
arbitral immunity. A judge shall not be personally accountable for the
decision he reached in a particular case to the litigants, because, to put
it straightforwardly he is supposed to be only accountable to the State.
However, his decisions could be reversed or rectified upon appeal and
therefore his duty to apply the law of the state should not be disrupted
by a fear of personal liability. A judge’s independence should be shield
against the chance of personal implication to litigation based merely to
the dissatisfaction of a loosing party, so that the judiciary could
effectively enforce the law of the state.
an experienced arbitrator, in an attempt to rebut the presumption of the
‘judicial character of the arbitrator’ he distinguished between
‘public’ and ‘private’ justice. He defended that the term justice
does not have an identical meaning to the two domains, and he went further
by citing the words of Rene David,
a French comparatist who believed that “when parties resort to
international commercial arbitration, it is in general because they wish
to have ‘another kind of justice’ “.
To sum up,
it seems to be true what Mustill and Boyd argued in their book, namely
that “the analogy between an arbitrator and a judge is tempting, but if
pressed to far can lead to false conclusions”.
going further to assess and contrast the law regarding arbitral immunity
in other jurisdictions, it seems to be essential to point out the
provisions of professional liability in those jurisdictions and
summarize the duties owed by the arbitrator to the parties.
traditional approach in England has long established a requirement of
reasonable skill and care to be exercised by professionals as regard their
field of expertise. That could be materialized either by the law of
obligations and contract or by tort proceedings. As Lord Kimbrandon stated
in Arenson: “…the result, whether in tort or in contract, is
However, in contract law the duties of the arbitrator towards the parties
could be taken as an implied term to the, in-between them contract, while
in tort a claim can merely be brought for breach of duty of care. In
particular in tort the notion of professional liability has been affirmed
and expanded after the two seminal rulings of the House of Lords in Donogue
and Hedley Byrne &Co. Ltd v. Heller & Partners Ltd
where, by the former, a general cause for action has been established and
by the latter, a cause for negligent misstatement has been founded. In the
contemporary society where the laws of negligence have been expanded to
embrace an ever-growing legislation on medical negligence it seems to be
rather awkward why arbitrators should remain immune. As Tindal CJ asserted
in Lamphier v. Phippos as early as the 19th
century: “every person who enters into a learned profession
undertakes to bring to the exercise of it a reasonable degree of care and
indisputably practicing arbitration is a full-time profession which is
also remunerated very generously.
some commentators, therefore, such as Veeder J.
who supported that there seems to be no reason why arbitrators should be
immune from liability in negligence, whereas other professionals are not,
since, according to his opinion, ‘arbitrators provided what was
surely a service as defined by the Supply of Goods and Services Act 1982’.
Furthermore, arbitrators undeniably, have a range of obligations towards
the parties to the arbitration. Those obligations include, the duty to
take care, to act impartially and to proceed diligently. Nevertheless, in
contrast with other professionals, those duties are unenforceable due to
their immunity and consequently a suffering party might be left with no
line of reasoning on the issue of professional liability has been adhered
to, in the USA. There, negligence is more objectively measured against the
yardstick of the ‘reasonable competent member of that profession’
and professional liability has gained increasing recognition.
Notwithstanding, arbitrators are granted full immunity even in cases that
bad faith can be founded. This is obviously because the American courts do
not perceive arbitrators as professionals when exercising their skills.
They have strongly emphasized on the analogy of their functions and that
of a judge’s. The justifications for that attitude seem to have the
purpose of encouraging the continuing use of arbitration and expansion of
The court in the USA indicated in a line of cases a growing interest in
arbitration as a “desirable method of dispute resolution,
particularly in international transactions”
and therefore by granting immunity, they wished to induce individuals to
“volunteer to arbitrate disputes” without having to be “caught
up in the struggle between the litigants and saddled with the burdens of
defending a lawsuit”.
It seems to be rather unconvincing, though, why will liability deter
arbitrators, who are paid large sums of money for a full time job and did
not have the same effect on i.e. doctors and architects.
noteworthy, however that, while in the USA arbitrators have full immunity,
in contrast, the Arbitration Act 1996 has limited that immunity to acts
and decisions taken in bad faith.
Therefore, if judges are immune from suit for fraud, and English
jurisprudence supports the analogy of judges and arbitrators, how come and
arbitrators do not experience the same immunity?
jurisdictions, the situation is somewhat different than that adopted in
the UK and the USA, especially in civil law countries, where the
relationship between the arbitrator and the parties is mostly based on the
contractual theory. In such countries, there is not any presumed analogy
among the arbitrators and judges. Judges are public officials whereas
arbitrators are solely professionals that may be held liable in damages
where their wrongful conduct caused loss to the parties.
there is not any legal provision concerning the liability of the
arbitrators in particular. Judges and arbitrators are clearly
distinguished. Hence, the arbitrator is fully liable for his acts.
However, there is a precondition as to the admissibility of a claim for
liability against an arbitrator: there should be no other remedy against
This full liability is based on the contractual nature of the relationship
between the parties and the arbitrator. The contract makes the arbitrator
liable to the parties, if he fails to fulfill the terms of his reference.
Furthermore, in tort, an arbitrator can be found liable under art. 1382 of
the Civil Law, as against claims of third parties. Nevertheless,
complexities arise regarding a bad decision included in the award.
similarly, the relationship is of a contractual nature, although it has
been argued that in practice arbitrators are conferred a large degree of
In Austria, damages could be claimed by the injured party for any
loss caused by intent, negligence or gross-negligence, where as in Germany,
arbitrators are accountable for willful conduct and negligence. In Greece,
by the very recent law in International Commercial Arbitration
which implements UNCITRAL Model Law, and articles 12 and 13 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 on by the parties to the
as Lew argued there seems to be no jurisdiction in which arbitrators are
fully liable for any error of view or judgment in the decisions they
reach. “Between, the state of absolute immunity and absolute
liability, the state of qualified immunity arises in respect of acts
performed by arbitrators in the exercise of their functions and of which
they will or should exercise judgment and discretion within the terms of
the law and the applicable arbitration rules.”
Various, countries, such as Austria, Germany and Norway, have adopted that
qualified middle way, whereas others, as France, Spain Sweden, shift
towards greater liability.
presented briefly the main arguments concerning the legal relationship of
arbitrators and judges in various jurisdictions and having examined the
views of various commentators, many questions still remain unanswered.
Should the arbitrators be completely immune from liability or should they
be fully liable as any other professional? Is it preferable to follow the
purely contractual and quasi-contractual approach or the judicial and
P.Lalive argues in his article, when the parties consciously preferred to
resolve their dispute in arbitration rather than through litigation, they
have knowingly accepted the underlying risks of such a procedure. Such
risks as the finality of the award, the choice of arbitrators, however, do
not seem to cover cases of fraud, corruption and gross-negligence. “Human
nature being what it is, the irresponsibility of arbitrators, especially
if absolute immunity applies, is likely to encourage the carelessness or
negligence of arbitrators”.
Is then preferable in the name of immunity to leave injured parties
without a remedy in such cases? Public policy does not normally tolerate
exclusion of liability in fraud. Why should this be the case in
arbitration? A mere setting aside of the award or a removal of the
arbitrator does not compensate for the time and money lost since
“justice delayed is justice denied”. On the other hand, would it be
desirable in the name of justice for the wronged, to harass arbitrators
with unjustifiable claims that will undermine the finality of the award by
having the case eventually re-litigated and which discourage people
volunteering to arbitrate?
commentators have presented of several possible solutions to those
hurdles. Mr. Li, an Australian jurist, proposed a model in which
arbitrators would be obliged to join one professional institution.
Arbitrators, in that model, could be immune from liability, whereas the
institution would take the responsibility for the claims against them. In
a case where they would be found liable, the institution shall take
disciplinary procedures against them. The question is whether this
‘institutionalization’ undermines consequently, the ad hoc
arbitration. Another objection to this proposal might be found in the
contemporary tendency of arbitral institutions to exclude liability, not
only on behalf of their arbitrators but also their employees (an example
is presented by art. 34 of the ICC rules) . Will it be possible to
change the practice of the institutions so as to embrace the model
proposed by Mr. Li?
other commentators have proposed the creation of an international court
that could challenge the liability of the arbitrators among other matters
relevant to arbitration. Whether this could be feasible in an
international context and after taking into consideration the significant
differences of various nations on the subject-matter, still remains to be
investigated. It is essential though, in order for an international court
to exist, a uniform law on arbitration to be adopted beforehand.
opinion, consequently, the most attractive solution seems to lie neither
in excluding immunity totally, nor in restricting liability in full. The
middle way of ‘qualified immunity’, whereas arbitrators are immune
from unjustified claims (as judges) and could only be held liable in cases
of fraud and negligence (as professionals), appears as a more of an ideal
answer to the questions aroused. Yet, which of the four jurisprudential
theories will back up such a model? Not the contractual, and
jurisdictional, nor the autonomous seem to be adequate. It looks as if the
mixed theory is more of application here. However, a mixed theory of a
slightly different nature: having as a basis the jurisdictional theory and
completing the inadequacies by the contractual theory. Hopefully then,
neither the arbitrators nor the parties would feel insecure in practicing
or preferring correspondingly, commercial arbitration as a dispute
20 June 2002. All Rights Reserved.