The agony of choice

 MARKET VIEW – LITIGATION 

Bär & Karrer partners Daniel Hochstrasser and Nadja Jaisli Kull discuss the dos and don’ts to be considered when appointing arbitrators

For all of its emphasis on privacy, procedural flexibility and the reassurance that comes with a widely-adopted enforcement regime in the form of the New York Convention, parties remain attracted to international arbitration for a sometimes-overlooked, but equally important, factor: the ability to select their own decision-makers. In some ways, however, being spoilt for choice can make picking one’s candidate that much more difficult. Do you go for the expensive ‘name’ arbitrator? The Big Law associate tipped for great things but with comparatively few appointments to their name? Or, for counsel and arbitrators of a certain generation, the most unthinkable move of all – a woman?

‘An arbitrator appointment is always a risk,’ says Daniel Hochstrasser the head of international arbitration at Zurich-headquartered law firm Bär & Karrer. ‘If you as counsel have dictated the choice of arbitrator without the client’s input and approval, and the hearing doesn’t seem to be going well, the blame falls largely on you,’ adds Hochstrasser, whose practice has for the past 15 years balanced counsel and arbitrator appointments, predominantly in proceedings conducted under the ICC and Swiss Rules, in addition to cases at the DIS, the SCC and the VIAC.

In addition to the criteria discussed throughout this supplement – nationality, familiarity with the applicable law and industry-specific knowledge, among others – Hochstrasser places particular emphasis on a potential appointee’s willingness to devote time to the case, regardless of its size or complexity. (His current cases range in value from €3m to more than €1bn.) He is hardly alone in such thinking. Indeed, more arbitrators than many would care to admit continue to accept appointments, skim read the file, sleep walk through the hearings and simply endorse the chairman’s conclusion. Although an accusation seldom aimed at the industry’s doyens, they too are often unable to devote sufficient time to relatively small matters – given that for the likes of Johnny Veeder, Emmanuel Gaillard or Gary Born, a dispute valued at $50m would likely be considered a trifling sum. (A case in point: a Shearman & Sterling team led by Gaillard and Yas Banifatemi in July won a $50bn-plus arbitral award for the shareholders of Yukos, the largest ever such ruling by a factor of more than 20.)

‘I am convinced the playing field will continue to even out and result in more appointments for female lawyers.’
Nadja Jaisli, Bär & Karrer

How, then, to begin? An initial long list of appointees, compiled following a series of conversations with the client as to their preferred arbitrator profile, will in Hochstrasser’s case normally exclude the elderly and the fresh-faced alike, despite the relative merits of both groups of practitioners. Regarding the former, while international cases are seldom now presided over by a trio of aging Swiss professors, dispute resolution remains an older man’s game; see Sir Sydney Kentridge, 90, who could be found pleading before the UK Supreme Court as recently as last year, or the globe-trotting Swiss adjudicator embodied by Pierre  Tercier, still going strong at 71. ‘I would not usually appoint an arbitrator above the age of 65,’ says Hochstrasser – who, at 54, sits within the decade that is widely considered to be an arbitrator’s prime. Noting that chairmen have a little more leeway in this respect, given that grey – or, indeed, no – hair is often a prerequisite for the role, Hochstrasser says he would nevertheless be extremely reluctant, and would advise both clients and co-arbitrators against, appointing anybody over 70 years old.

On the other hand, how young is too young depends largely on the client. While certain societies still consider age to be the ultimate proof of wisdom, whose corporates will slap down the idea of appointing a 36-year old to their tribunal, many general counsel – those working in the European financial services industry, say – are used to seeing positions of power within their organisations shared across the generations. Even then, however, a party’s willingness to appoint a talented up-and-comer may be torpedoed by the opposing party’s choice of a senior statesman. ‘In those cases, I would tend not to appoint a 38-year old rookie, even though they might be highly intelligent and already have a considerable amount of experience,’ says Hochstrasser, who received his first arbitrator appointment aged 39. Indeed, despite opting out of the element of gamesmanship that colours many appointment processes – an otherwise sensible approach that begins to look rather less so when the other side plumps for Jan Paulsson – the danger in such cases is that the youngest member of the tribunal will quickly become marginalised due to their perceived inexperience and lack of industry-wide reputation.

Chairman of the board

If the once-prevalent American approach to appointments – in which the role of arbitrator and advocate were one and the same – has now become damaging to a party’s case, and thus rarely if ever adopted in the international context, what does the model arbitrator look like in 2014? ‘An arbitrator will have done a good job if the client is given the impression that they are interested in the case, have read and understood the file, are present and active during the hearing and, where appropriate, ask the right questions of counsel and the tribunal,’ explains Hochstrasser.

That is not to say every answer will be to the general counsel’s liking, even when a discussion has been initiated in good faith. ‘In some cases, the client will wonder why the arbitrator we appointed asked a question that proved to be hurtful to us,’ he adds. ‘I will explain that he just so happened to stir the pot in a way that wasn’t helpful for our side, not because he wanted to hurt us but because he was interested in getting a better understanding of the issues at stake.’ Less forgivably, he may allow the other side’s nominee to take an unduly active role in proceedings, displacing the chairman and serving in the client’s eyes to highlight his own arbitrator’s acquiescence.

‘There is very little you can do when faced with a chairperson who isn’t doing the job.’
Daniel Hochstrasser, Bär & Karrer

Selecting a chair capable of managing precisely such situations is the key to a well-functioning tribunal, with the result that case management skills are prized above all else when selecting for that role. As such, reputations travel – and stick. Belgian arbitrator Albert Jan van den Berg, who is currently presiding over the procedurally nightmarish Abaclat case, brought at ICSID by more than 60,000 Italian bondholders, is renowned in this regard, as are Yves Fortier, a member of the above mentioned Yukos tribunal, and William Rowley QC of 20 Essex Street in London. By contrast, Hochstrasser recalls several recent occasions when he and his co-arbitrator vetoed possible chair appointments on the basis of poor market reputation, whether experienced first-hand or – more damagingly for the person concerned – through word of mouth.

‘As a co-arbitrator I want to be on a tribunal that operates properly, does the job efficiently and does so in an equitable and diligent manner. The person who is instrumental in ensuring that it happens is the chairperson,’ says Hochstrasser. ‘I’ve not come across a situation where my co-arbitrator didn’t feel the same way, given that it is in everyone’s interest to have a properly functioning tribunal,’ he adds. ‘There is very little you can do when faced with a chairperson who isn’t doing the job. You can encourage them to take a more proactive role, but without the willingness on their part there is often very little that can be done.’

The female of the species

Despite ongoing efforts to widen its gene pool, with networks such as ArbitralWomen providing both a talking shop and mentoring platform for female lawyers of all ages and backgrounds, at the appointment level international arbitration still remains largely male, pale and stale. Some institutions – the LCIA and SCC being among the most prominent – push to include women on their tribunals. Both organisations, perhaps coincidentally, are led by female lawyers.

For her part, Nadja Jaisli Kull, who joined the Bär & Karrer partnership earlier this year and has recently taken on her first cases as arbitrator, cites the growing number of female practitioners in the junior- and mid-range PQE brackets as reason to believe that appointments will start to come through with greater regularity. ‘In Switzerland, women make up a strong percentage of dispute resolution practitioners aged between 35 and 45,’ says Jaisli. ‘I am convinced the playing field will continue to even out and result in a greater number of appointments for female lawyers.’

That may take some time, however, given that most in the industry eschew arguments in favour of a quota system such as have been adopted in the context of female representation on the boards of publicly listed companies. Rather, Jaisli and Hochstrasser offer the same guidance to wannabe female arbitrators – pull each other up by the coattails. Hochstrasser explains. ‘When I was a young practitioner, my peers and I made a deliberate attempt not always to appoint the same experienced senior arbitrators to the tribunal, but instead would look to choose younger candidates wherever possible. And it worked: ten years later, I regularly see those names on shortlists. Women should do the same thing.’ That is not to say efforts to promote women resonate across the board. Certain clients – those originating from the more conservative parts of the Middle East or Asia, for instance – will often baulk at the thought of having a woman decide their dispute. Others have been known to ask that female associates working on a high-value matter be replaced by their law firm’s male counterparts, a request which is almost always denied by European lawyers, Hochstrasser included. (In his case, the client was a German multinational.) Yet he cautions against attempting to change a client’s political or sociological views as regards female advancement. ‘That’s not my job. A client comes to me for dispute resolution advice, not to be lectured on how to view the world,’ he says.