GSB Vol. 17, NO. 4, Pg. 12. Ethical Considerations in Arbitration.

Authorby John A. Sherrill

Georgia Bar Journal

Volume 17.

GSB Vol. 17, NO. 4, Pg. 12.

Ethical Considerations in Arbitration

GSB JournalVol. 17, NO. 4December 2011Ethical Considerations in Arbitrationby John A. SherrillWhile the high cost in delays experienced in federal and state court litigation today is driving many business users to use alternative dispute resolution procedures, mediation continues to be the preferred method of ADR for business disputes,(fn1) and the use of arbitration is a much more deliberative process for most business users, generally being favored by those who have more experience with it and agree in advance that it will be the means of resolving any disputes. This is true for many reasons, including the relative finality of the result in arbitration, the higher level of confidentiality involved, the ability to select qualified neutral arbitrators and many other business reasons that may vary from case to case and affect different industries in different ways.

This is also the case because one choosing arbitration cannot expect the full panoply of procedural and substantive protections offered by a court of law, despite the fact that arbitrators enjoy a "quasi-judicial immunity" for performing judicial-like services.(fn2) Moreover, precisely because of these differences between litigation and arbitration, the ethical considerations and guidelines for all persons engaged in an arbitration proceed-ing-whether as parties, advocates or arbitrators - are important to consider in evaluating the decision of whether to use arbitration.

This article will examine the applicability of the ethical regulations that confront those who participate in arbitration proceedings, which are collectively contained in several different sources.


The Federal Arbitration Act

The Federal Arbitration Act (FAA),(fn3) originally enacted in 1925, governs interstate as well as international arbitrations. The FAA reflects a strong public policy favoring arbitration when arbitration has been selected by the parties. Although the FAA neither contains nor prescribes specific ethical standards, several of the FAA's provisions set forth or incorporate minimum ethical standards of behavior that arbitrators must follow if their award is to receive judicial recognition and enforcement. In fact, the very limited grounds for vacating an arbitration award, found in § 10(a) of the FAA, primarily involve ethical violations by the arbitrators, including: (1) where the award was procured by corruption, fraud or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.(fn4)

As will be discussed in more detail, these limited review standards have resulted in the requirement that arbitrators conduct the arbitration procedurally and sub-stantively in an impartial, professional and ethical manner, and that arbitrators carefully research and disclose any potential conflict that might create even the appearance of partiality or impropriety.

Georgia Arbitration Code

The Georgia Arbitration Code (GAC),(fn5) enacted in its present form in 1978, is even more bare-bones procedurally than the FAA, although the grounds for vacating an award under the GAC are very similar to the FAA. Georgia arbitration awards shall be vacated only on the application of a party who either participated in the arbitration or was served with the demand for arbitration, if the court finds that the rights of that party were prejudiced by:

(1) Corruption, fraud or misconduct in procuring the award; (2) Partiality of an arbitrator appointed as a neutral; (3) An overstepping by the arbitrators of their authority or such imperfect execution of it that a final and definite award upon the subject matter submitted was not made; (4) A failure to follow the procedure of this part, unless the party applying to vacate the award continued with the arbitration with notice of this failure and without objection; or (5) The arbitrator's manifest disregard of the law.(fn6)

The GAC also provides certain parameters that arbitrators are ethically mandated to follow in the conduct of the evidentiary hearing. The arbitrators must notify the parties in writing not less than 10 days in advance of the setting of the time and place for the hearing, and that the parties are "entitled to be heard; to present pleadings, documents, testimony, and other matters; and to cross-examine wit-nesses."(fn7) Also, a party has the right to be represented by an attorney; the hearing shall be conducted by all of the arbitrators unless the parties agree otherwise; and the arbitrators are obligated to maintain a record of all pleadings, documents, testimony and other matters introduced at the hearing.(fn8)

Rules of the Administering Agency

In most instances, parties either will be required to have or will want to have a particular arbitral organization administer the arbitration. Most such arbitral organizations have promulgated their own rules of procedure that contain provisions related to ethical obligations of the participants. ADR parties and the public are entitled to fair processes and impartial forums, and as justice providers, ADR provider-organizations have an obligation to take all reasonable steps to ensure the impartiality and fundamental process fairness of their services. Key indicia of fair and impartial processes include: competent, qualified, and impartial neutrals; rosters of neutrals that are representative of the community of users; joint party selection of neutrals; adequate representation; access to information; reasonable cost allocation; reasonable time limits; and fair hearing procedures.

The two most common administering agencies nationally are the American Arbitration Association (AAA) and JAMS, and their rules will be summarized to provide typical examples.

American Arbitration Association(fn9)

Although most of the AAA rules deal with the specific procedural aspects of arbitrations conducted thereunder, numerous ethical implications can be drawn from their provisions.

Rule R-16 deals with disclosure, and provides that any person appointed as an arbitrator shall disclose "any circumstance likely to give rise to justifiable doubt as to the arbitrator's impartiality or independence, including any bias or any financial or personal interest in the result of the arbitration or any past or present relationship with the parties or their representatives." It cannot be overstated from an ethical perspective how important it is for an arbitrator to fully satisfy this disclosure requirement. Not only is failure to disclose the most common basis for overturning an arbitration award, but the fairness and impartiality of the arbitration process hinges on the actuality, and the parties' perception, of the neutrality and unbiased perspective of persons serving as arbitrators.(fn10) In other words, the obligation of the arbitrator is to disclose, disclose, disclose, and then let the parties themselves reach a conclusion as to whether the information disclosed could affect the arbitrator's impartiality.

Rule R-18 makes it...

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