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  • Niyati Karia

Ethical Warfare: Guerrilla Tactics in International Arbitration

This article is authored by Niyati Karia, third year student pursuing the 5-year integrated course from Government Law College, Mumbai.

Guerra, or little war, evolved into the term ‘guerrilla’ during the course of the Spanish Guerra de la Independencia. The term ‘guerrilla warfare’ was since coined to elucidate a type of warfare consisting of unexpected attacks against vulnerable targets. Somewhat analogously, counsels that orchestrate and manoeuvre their way through the world of international arbitration exercising such notorious practices have been equated to the term ‘guerrilla’. With international arbitration no longer being confined to the chosen few elites, the rapid growth of proceedings has resulted in the development of a melting pot of counsels, parties, States and arbitrators with various methods of practice, diverse legal cultures and different standards of ethics. Although counsels do have ethical rules to abide by in their national jurisdictions, the same do not possess any validity or enforceability once counsels step into the international arena. Hence, as arbitration proceedings increase in number, so do the guerrillas in arbitration. When asked whether counsels or arbitrators have experienced another party making use of guerrilla tactics, 68% of practitioners answered in the affirmative. For a dispute settlement mechanism that relies heavily on procedural sensitivity, it is of utmost importance that the guerrillas in arbitration are nipped before they manage to exploit and manipulate the arbitration proceeding to tilt in their favour. Concept of Guerrilla Tactics in International Arbitration The term ‘arbitration guerrillas’ was first used by Michael Hwang who defined it as parties who “try and exploit the procedural rules for their own advantage, seeking to delay the hearing and (if they get any opportunity) ultimately to derail the arbitration so that it becomes abortive or ineffective.” A similar definition for the concept was provided by Günther Horvath, a leading scholar and author on the topic. He claimed that guerrilla tactics are “strategies employed by parties to arbitration proceedings that are ethical violations, involve criminal acts, or are ethically borderline sharp practices.” Accordingly, guerrilla tactics can be succinctly categorised as follows: (i) common forms; (ii) extreme forms; and (iii) criminal forms. 1. Common forms Delay tactics are an extremely common strategy utilised by counsels and arbitrators. This includes late filing of submissions, a blatant refusal to file submissions against the orders of the arbitral tribunal, and filing extra documents than needed to encroach on the opposing counsel and tribunal’s time. Although not illegal, this is a classic example of exploiting procedural rules to the detriment of the opposing counsel and the arbitration proceeding in its entirety. Raising frivolous challenges in bad faith is another common form. In a survey conducted by Sussman and Ebere on the kinds of guerrilla tactics practitioners and arbitrators experience, a practitioner offered an example of a challenge on the baseless ground that the arbitrator and the opposing counsel shared a bar association professional affiliation. In addition to counsels, guerrilla tactics are exercised by biased arbitrators in order to benefit the party that appointed the said arbitrator. Such arbitrators may also want to delay the tribunal by ignoring any communications made to them, arriving at a hearing underprepared, or refusing to cooperate with the co-arbitrators. They may make constant objections to procedural orders or release secret information about the deliberation process to the appointing party in order to allow the party to devise their forthcoming strategies accordingly. 2. Extreme forms Extreme forms of guerrilla tactics used by counsels involve strategies such as withholding evidence till the last minute of the arbitration proceedings so that the opposing counsel does not have enough time to review the evidence and prepare an appropriate defence. It also involves introducing new evidence through witnesses or providing wrong translations of important documents. The most extreme form of guerrilla tactics used by biased arbitrators is that of resigning right before the arbitration proceeding comes to an end so as to deter the release of the award against the party that appointed the arbitrator. Additionally, a biased arbitrator may walk-out during a hearing if the deliberations turn adverse to the appointing party. 3. Criminal forms Criminal forms of guerrilla tactics that counsels make use of commonly involve threatening witnesses via means of violence, intimidation, and harassment. Counsels often use modes of wiretapping and surveillance on witnesses as well as arbitrators to exploit the gathered information during proceedings or witness examinations. Counsels also go as far as bribery or forging documents. Existing Solution in the Form of IBA Guidelines on Party Representation and Why it is Not Effective In 2013, the International Bar Association (“IBA”) Council adopted the IBA Guidelines on Party Representation in International Arbitration (“IBA Guidelines”). The IBA Guidelines are most akin to a universal ethical code of conduct. The IBA Guidelines have effectively provided tangible solutions to multiple identified guerrilla tactics. For instance, party representatives are dissuaded from requesting documents which may cause unnecessary delay. Additionally, tribunals have been given wide-ranging powers to take any “appropriate measures in order to preserve the fairness and integrity of the proceeding”. Although the IBA Guidelines have successfully provided for a universal ethical code of conduct, it stands that they are merely guidelines and not rules. The IBA Guidelines have no authority in an arbitration proceeding. As per Guideline 1 itself, the IBA Guidelines are entirely voluntary and it is up to the parties and the tribunal whether they wish to incorporate any of the guidelines into the proceedings. Even if they choose to rely on the IBA Guidelines, they have discretion in deciding to what extent they want to rely on them. If the tribunal were met with a difficult guerrilla who takes a hard-line stance of not wanting to rely on the IBA Guidelines, the tribunal has to respect this and cannot in any way compel such guerrilla to allow reliance on IBA Guidelines. Therefore, the IBA Guidelines hold little to no relevance in an arbitration proceeding. Until the IBA Guidelines are enforced across arbitration institutions, it is the various arbitration institutions themselves that have to introduce rules on ethical conduct and remedies in order to preserve the integrity of arbitration proceedings. Solutions to Various Guerrilla Tactics There are a plethora of solutions that can be undertaken prior to or during the arbitration proceeding. The author proposes the following solutions: (i) Setting the Tone at the Outset At the very outset, arbitrators need to take charge and set the tone of the arbitration proceeding. Arbitrators should make clear what kind of conduct will be acceptable and not acceptable during the proceedings and collectively decide on the consequences of non-tolerable acts. The agreed code of conduct should be incorporated into Procedural Order No. 1. A similar solution was offered by Cyrus Benson in 2009 wherein it was proposed that prior to the arbitration proceeding, counsels of both parties fill out a nine-category checklist of ethical standards. If disparities are found in the code of conduct practiced by the counsels, the tribunal can mediate the situation and reach an agreement on acceptable conduct during the proceeding. ​(ii) Cost Sanctions It is undisputed that arbitral tribunals possess wide discretionary powers when it comes to allocating costs. Such cost sanctions should extend to cover unethical conduct by guerrilla tacticians so as to penalise them. In Pey Casado v. Chile, the tribunal instructed the Respondents to pay the Claimant’s legal costs in addition to three-quarters of the arbitration costs because the Respondents were uncooperative during the arbitration proceeding. (iii) Security to Costs Arbitration tribunals can order security for costs. These costs can be used by the tribunals in the scenario that a party employs guerrilla tactics. For instance, if a party chooses to change the location of the hearing at the last minute, then the tribunal can make use of the earlier ordered security for costs. This also effectively discourages a party from making such abrupt last-minute changes or delaying any hearings. (iv) Adverse Inferences In the event that a party refuses to disclose a certain document or refuses to call upon a witness for examination, a tribunal may draw an adverse inference and assume that the document or witness that the counsel refuses to offer up is to the benefit of the opposing party. This adverse inference may further have an effect on the decision that the tribunal takes on the merits of the dispute. (v) Refusal to Admit Evidence A tribunal can go one step further and implement an even harsher punishment of refusing to admit the evidence filed by the defaulting counsel altogether. This can, in fact, be addressed at the outset of the arbitration proceeding and written into a procedural order. By virtue of this, any refusal to admit evidence will not come as a shock to the defaulting party. (vii) Challenge the Arbitral Award on Grounds of Arbitrator Bias Although this is a strenuous solution, a party that garners reasonable beliefs that there was arbitrator bias during the arbitration proceeding and this has, therefore, resulted in an adverse award for said party, a challenge can be raised on grounds of arbitrator bias. Concluding Remarks Arbitration has become a popular dispute resolution outlet for three basic reasons: efficiency, party autonomy, and speedy resolutions. With arbitration guerrillas in the picture, the benefits offered by arbitration crumble. The most ideal solution, needless to say, would be various institutions introducing rules on ethical conduct that arbitration guerrillas are then bound by. However, in the absence of such rules, it is the arbitral tribunal that has to take control in order to dictate ethical conduct with the IBA Guidelines acting as a source of guidance. Although the level of tolerance may differ from tribunal to tribunal, it is the first line of defence available against arbitration guerrillas. An arbitrator that has a low level of tolerance for arbitration guerrillas may eventually become an unpopular choice for appointment as an arbitrator by potential parties in the future. Consequentially, this acts as a disincentive for arbitrators to take a hard-line stance against arbitration guerrillas. Nevertheless, to protect the integrity of arbitration as a dispute resolution mechanism, arbitrators will ideally have to strike a balance between taming the arbitration guerrillas and being viewed as a fair arbitrator. The harder task at hand is that of tackling an arbitrator employing guerrilla tactics, especially because challenging the arbitral award is not a desirable solution since the parties have to endure the entire arbitration proceeding before they can challenge the award and even that does not offer any certain outcomes. A conclusive answer, therefore, to the growing problem of arbitration guerrillas is the need of the hour.

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