Ethics In International Arbitration

There is a psychological condition that sometimes overtakes travellers. They feel invincible in a foreign country, as though, being away from home, the normal restraints on their conduct no longer apply. Any rational observer would know that this approach is naive and fraught with potential danger, but somehow, being away from the familiar constraints of the home jurisdiction is dangerously liberating.

There may be some element of this syndrome which applies to lawyers who practise occasionally in other jurisdictions. Each jurisdiction has its own set of ethical rules and codes of conduct. There are many common elements among them. But much of what constrains and shapes conduct derives from shared values of the bar in which the lawyer typically practises. When operating outside that environment, some of the unwritten pressures which come from the shared values may seem less pressing. This is particularly true in international arbitration. As Professor Catherine Rogers has said in "Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration" (2002, 23 Michigan Journal of International Law 341), "international arbitration dwells in an ethical no-man’s land" because the extra-territorial effect of national ethical codes is murky, particularly in a non-judicial forum such as arbitration. This is compounded by the fact that there is no supra national authority governing lawyers in these settings.

Divergent Ethical Norms

In times past, when those practising in the field of international arbitration were part of a relatively small community, there were implicit understandings and shared values which informally regulated the ethics of that bar. With the explosion of international arbitration and the expansion around the world of lawyers appearing before international arbitration tribunals, it is argued by many that informal regulation of ethics is inadequate. But formulating and enforcing ethical norms is a tremendously daunting problem.

Professor Rogers uses the example of a German attorney who could be criminally punished for communicating with the witness before a hearing and a British barrister for whom such contact would be a breach of ethics. In contrast, a North American lawyer would consider it a dereliction of duty not to prepare a witness before putting her on the stand, often to the extent of videotaping mock direct and cross examinations.

Other divergences arise in many areas. For instance, on issues of privilege, in-house counsel in many European systems do not enjoy privilege. North American in-house counsel do. One’s obligation to produce documents involving in-house counsel will be very different, as will one’s approach to communications with a corporate client, depending on which norms apply.

In jurisdictions like Italy and Portugal, communications from other lawyers, including opponents, may be required to be kept confidential, even from one’s client, if designated confidential. In the North American practice, a lawyer is obliged to keep his client informed and ought not, except in very limited circumstances, agree to receive information on the basis that it will be kept from the client.

Even styles of argument can raise ethical issues. A creative American jury lawyer may be seen to be unprofessional in the eyes of an opponent (or even worse, an arbitrator) who comes from a jurisdiction where lawyers apply the law as opposed to shape and mould the law in new directions (à la Lord Denning). There is also the fundamental divergence between systems that permit contingency fees and those that do not. Indeed in my own jurisdiction, until recently, contingency fees were prohibited and considered completely unethical. They are now permitted and, almost overnight, are in very common use in class actions.

There are tricky problems in determining what standards apply to lawyers licensed in one jurisdiction who are increasingly engaged in litigating or providing advice to clients in other jurisdictions. How are those lawyers disciplined? What standards are they held to? The debate seems endless on how to fashion choice of law rules to solve conflicts among jurisdictions with some connection to the lawyer or the lawsuit. There is no clear rule to cover the transnational practice which answers the question what standards apply to the lawyer engaged in international litigation.

Tackling the challenge of regulating international ethical issues is significant.

The Limitations of Universal Norms

At the conceptual level, all systems adhere to universal norms which inform all legal ethics. A lawyer from any jurisdiction would agree she is to be truthful, fair, independent, loyal and must keep confidences. Lawyers would even agree, at the next level of detail, that truthfulness means avoiding perjury, not assisting a client to perjure himself and not misrepresenting to the tribunal. But as in most legal matters, the devil is in the detail and there is limited utility to these seemingly universally held norms. Issues arise in connection with witness preparation, argumentation, communication with the Tribunal, independence of the bar, confidentiality and even loyalty.

Professor Rogers argues that because of divergent ethical norms, the individual codes of ethics cannot peacefully co-exist in the absence of a code that applies in international arbitration. She proposes that such a code be developed and provides a scholarly analysis of the conceptual framework for such an undertaking. Again, despite the scholarship, in which she so brilliantly articulates the problems arising from the diverse ethics which apply from country to country, the practitioner is without an immediate solution. The development of a comprehensive solution will be decades in the making. The practitioner must still cope with the challenge of gingerly navigating the ethical quicksand of international arbitrations. Are there any stop gap measures that help us today?

Stop-Gap Measures: Alternatives

CCBE Code

The 1988 Code of Conduct in the European Union, a 16-page document, outlines general principles and relations with clients, courts and amongst lawyers. Considering that the Model Rules of Professional Conduct of the American Bar Association runs 123 pages, and that the Ontario professional conduct handbook runs 100 pages, one can see that a code such as the CCBE dictates a level of generality and abstraction. There is not the commentary and interpretation found in codes like the ABA and the Ontario professional conduct rules, since there is not a body of published jurisprudence on ethical issues in international arbitrations. Nevertheless, the CCBE code provides a starting point and a basic ethical framework that parties can voluntarily adopt and agree as binding in their arbitrations.

Significant issues in the CCBE will need to be resolved. For example, Article 2.3, Confidentiality, requires that the lawyer maintain confidentiality. However, different jurisdictions have different norms for what is confidential—not defined by the CCBE Code—so parties would need to agree on the norms that would govern in a given case.

The Code’s drafters approached the core issues somewhat tautologically. Clause 2.4 requires lawyers to inform themselves "as to the rules which will affect them in the performance of any particular activity"—this does not define which ethical codes apply. Clause 4.2 provides that "to the extent not prohibited by law a lawyer must not divulge or submit to the court any proposals for settlement of the case..."—again, what law governs this conduct is precisely the issue.

There are compromises throughout the Code. For example, Clause 3.3 tolerates contingency fee arrangements "if this is in accordance with an officially approved fee scale" in the lawyer’s jurisdiction and the fees are "in proportion to the value of the matter handled by a lawyer." This would shock Continental lawyers and disappoint Texan trial attorneys, but would be consistent with rules of the Paris bar and Portugal.

Article 5.3 presents a practical solution to lawyer correspondence, providing that "if a lawyer is sending a communication to a lawyer in another Member State and wishes it remain confidential or without prejudice he should clearly express this intention when communicating the document." When the Code was first published in 1988, lawyers could not withhold confidential correspondence from their clients in Denmark, Germany, Netherlands, the U.K. and the U.S., whereas Belgium, France, Greece, Italy, Luxembourg, Portugal and Spain required lawyers to withhold such correspondence from their clients.

The IBA council’s Rules on the Taking of Evidence in International Commercial Arbitration were adopted on June 1, 1999 "to supplement the legal provisions and the institutional or ad hoc rules according to which the Parties are conducting their arbitration", adding in Article 2(4) that if the IBA Rules and general rules "are silent on any matter concerning the taking of evidence and the Parties have not agreed otherwise, the Arbitral Tribunal may conduct the taking of evidence as it deems appropriate..."

The IBA Rules outline a document-production procedure where each party submits documents "including public documents and those in the public domain." Either party can request to obtain further documents, reject requested documents, and obtain documents from third parties. The approaches to lawyers’ requests to produce will be different in North America and the Continent, but the process is under the control of the arbitral tribunal, so that decision-makers, not ethical norms, will govern.

Article 4(3) stipulates that a party, its officers, employees, legal advisors or other representatives may interview its witnesses or potential witnesses. It may be difficult for lawyers in some jurisdictions to get accustomed to this, but the rule is clear.

Article 5 mandates that the tribunal may order party-appointed experts who have submitted expert reports on the same or related issues to meet, confer, try to reach agreement on contentious issues and record in writing their agreed-upon issues.

Lawyers accustomed to unbridled cross-examination will have to make further adjustments. Article 8 gives to the Arbitral Tribunal on evidentiary hearings "complete control" over evidence, allowing it to exclude irrelevant or objectionable questions or answers. Article 9 lists objections (including the "special political or institutional sensitivity" objection and "considerations of fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling"). Lawyers who make "impassioned addresses" may also need to moderate their examination style.

If a document is not produced or testimony not made available, the Tribunal may draw an adverse inference.

There are gaps in the rules for developing and putting evidence before the Tribunal. Using the ethics code of a single country is an inadequate solution: it gives an unfair advantage to the person from the chosen jurisdiction, and more importantly, a foreign lawyer cannot operate effectively following unfamiliar ethical rules. It may be more realistic for parties to adopt both the CCBE Code and the IBA Rules and resolve to articulate specific ethical issues that could arise in their particular arbitration, proposing rules to fill gaps. American attorneys will likely propose American-type rules; European lawyers will favour their procedures. But each side could advocate a particular position, rather than have issues remain unarticulated.

A single code of ethics for all international arbitrations is not likely to appear in the near term. Jurisprudence, developed over decades, breathes life and utility into a code. A practical approach would be for the CCBE Code to be expanded and annotated over time along with a body of jurisprudence. International gatherings of practitioners and arbitrators could supplement the academic scholarship by including an ethics component in their programs. Practitioners should start collecting an informal library of ethics vignettes to be included in the ethics components of IBA and other international educational gatherings.

To control unethical behaviour before them, arbitrators must identify conflicting ethical and cultural norms and find ways to control abuse by lawyers appearing before them. In common law courtrooms, where lawyers are expected to direct the action and shape testimony before the court, controlling abuse is becoming difficult. Part of the problem may be the loss of civility at the bar in several jurisdictions because of the high stakes involved in litigation: lawsuits are costly and clients expect a ‘no holds barred’ approach.

Two celebrated cases in Canada have highlighted the issue of achieving well-ordered proceedings: Marchand v. Public General Hospital of Chatham, an infant brain-injury case in Ontario tried before the superior court for 165 days over two years, and The Queen v. Felderhof, a criminal prosecution in the international Bre-X gold mine fraud. In both cases, protracted hearings were marred by excessive attacks by defence counsel, which the courts seemed powerless to control. The Court of Appeal in Marchand said the conduct of the case "tarnished the reputation of the administration of justice."

Could such issues arise in the civilized precincts of international arbitration? International arbitration is not ‘safe’ from abuse: in both Marchand and Felderhof, the counsel were significant players in their practice areas, with substantial reputations. Judges recognize, under the common law system, that clients are entitled to vigorous representation; they cannot interfere with cross examination; and they must give counsel leeway or face reversal by the Court of Appeal. This has led to some lack of control in the courtroom.

International arbitrators can better control abuse: they seldom have to worry about appeals; procedures for hearings give more control to the tribunal; arbitrators do not feel passive—indeed, they feel free to ask questions that counsel avoided putting to the witness; and they can cut off examinations and control the question and argument time frames.

In an ideal world, there would be a single international arbitration bar with shared values and clearly delineated ethical norms. But at the moment, the international arbitration bar is a glaring misnomer. Practitioners in the field are a random collection of lawyers from around the world with no central organizing authority, but whose role and challenge are to do what well-schooled judges in respected judicial systems still struggle with: to impose from the arbitrator’s ‘bench’ sufficient control over the conduct of counsel, so that ultimately, they provide the right combination of control and opportunity to plead. When done well, even the losing party will leave the arena with the sense that his story was told and the process was fair.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.