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Impact of Human Rights on Arbitral Proceedings
During the second half of the XX century, human rights extended their influence on various legal areas previously seen as completely separate and independent. One of these areas was commercial arbitration, which used to be regarded as entirely unrelated to human rights due to its economic and contractual nature. The perception of the relationship between these two systems started changing in the second half of the 1980s, and in the last three decades, the case law of the European Court of Human Rights has been showing that arbitral proceedings are clearly affected by fundamental legal safeguards laid down in the European Convention on Human Rights. This article is an attempt to make a short overview of the last findings of the European Court of Human Rights based in Strasbourg, which apply to arbitral proceedings standards, particularly to the independency and impartiality of arbitrators. It would also be appropriate to first provide a brief introduction to its general approach to the intersection between human rights and arbitration.
European Convention on Human Rights Applicable to Arbitration
Most arbitration-related cases before the European Court of Human Rights concerned an alleged violation of Article 6(1) “Right to a fair trial” during arbitration proceedings. Although in these cases other articles of the Convention are also referred to, in particular Article 13 “Right to an effective remedy” and Article 1 of Protocol 1 “Protection of property”, Article 6(1) is the most frequently invoked by applicants to the ECtHR. The civil limb of the article provides: “in the determination of his civil rights and obligations […], everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. According to the interpretation of the ECtHR, based on its approach to the Convention as “a living instrument”, Article 6(1) contains certain fundamental procedural guarantees, including the right to access to an independent and impartial tribunal, the right to a fair and public hearing, the right to a judgment within a reasonable time, etc.
At present, it is undisputed that the European Convention on Human Rights is applicable to arbitration. As the European Commission of Human Rights admitted in one of its earliest arbitration-related cases, namely Bramelid et Malmström v. Sweden, the arbitration procedure did have a direct bearing on private civil rights and obligations and, accordingly, concerned civil rights and obligations within the meaning of Article 6, paragraph 1. In the often-cited case Lithgow and Others v. the United Kingdom, the ECtHR stated that access to a court under Article 6(1) of the Convention is not necessarily to be understood as access to a court of law of the classic kind, integrated within the standard judicial machinery of the country; thus, a “tribunal” may be a body set up to determine a limited number of specific issues, provided always that it offers the appropriate guarantees. Later, the ECtHR added that Article 6 does not preclude the setting up of arbitration tribunals in order to settle disputes between private entities. Contractual arbitration agreements present undeniable advantages for the individual concerned as well as for the administration of justice.
Different Approaches to Compulsory and Voluntary Arbitration
While recognizing the establishment of arbitral tribunals to be in line with the provisions of the Convention, the ECtHR draws a clear distinction between compulsory, in the sense of being required by law, and voluntary arbitration. In the former case an arbitration board must offer the guarantees set out in Article 6(1). At the same time, it should be remembered that the right of access to state courts secured by the said article is not absolute, but may be subject to limitations. These are permitted by implication, since the right of access by its very nature calls for regulation by the contracting states. In this respect, they enjoy a certain margin of appreciation, although the final decision as to the observance of the Convention’s requirements rests with the court itself. It must be satisfied that the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with Article 6(1) if it does not pursue a legitimate aim and if there is no reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
Therefore, compulsory arbitration may be required by national laws provided that it pursues a legitimate aim and there is reasonable proportionality between the aim and the means employed. Anyway, local legislation on compulsory arbitration cannot impair the essence of the right of access to the courts, otherwise it is not in line with Article 6(1) of the Convention. However, the situation is much more complicated when parties have voluntarily entered into an arbitration agreement.
In the landmark Tabbane v. Switzerland case, the ECtHR found that no real issue arises under Article 6 in the case of voluntary arbitration to which consent has been freely given. The parties to a dispute are free to take certain disagreements arising under a contract to a body other than an ordinary court of law. By signing an arbitration clause, the parties voluntarily waive certain rights secured by the Convention. Such a waiver is not incompatible with the Convention provided it is established in a free, lawful and unequivocal manner.
That last three requirements have been consistently determined by the Court as mandatory. As early as in 1962, in X. v. the Federal Republic of Germany, the European Commission of Human Rights underlined that if a party signed the arbitration clause under constraint, it is regarded to be contrary to the Convention. This condition is closely related to the condition of unequivocality. In much more recent case, Suda v. Czech Republic, the applicant argued that he was forced to submit his claims to an arbitral tribunal which he had not consented to, due to the arbitration agreement concluded between the company, of which the minority shareholder was the applicant, and the main shareholder of the same company. Having found a violation of Article 6(1), the Court indicated that the requirements of absence of constraint and unequivocality were not satisfied.
The condition of lawfulness has not been elaborated in the case law of the ECtHR. However, it can be ascertained that this condition relates to the requirements imposed by national laws on arbitration agreements, including the subject matter of disputes which can be submitted to arbitration.
In the recent and very prominent Mutu and Pechstein v. Switzerland case, the Court concluded that the arbitration proceedings had to afford the safeguards provided for under Article 6(1) of the Convention, since one of the applicants had not freely and unequivocally accepted the arbitration clause. Consequently, if the three requirements of voluntary arbitration are not met, such an arbitration will be viewed as compulsory with respect to all the guarantees set out in Article 6(1).
Waivable Rights under Article 6(1) of the Convention
Having mentioned in Tabbane v. Switzerland “certain rights” which the parties of the voluntary arbitration can waive, the Court did not clearly indicate these rights. They, nonetheless, can be deduced from its case law.
First of all, by signing the arbitration agreement, the parties waive the right to bring their dispute before an ordinary court. In Lithgow and Others v. the United Kingdom, the former Commission held that the right of access to the courts secured by Article 6 para. 1 is not absolute but may be subject to limitations.
In addition, they can waive the right to a public hearing. As noted in Suovaniemi and Others v. Finland, this right can be validly waived even in court proceedings. So, it is not surprising that the same can be done in arbitration, the essence of which is confidentiality.
Finally, since the contracting states have not been responsible under the Convention for the length of the arbitration proceedings, its parties waive the right to a trial within a reasonable period of time. Nonetheless, this right cannot be waived in relation to the control by state courts over arbitration proceedings.
Most Fundamental Rights Cannot Be Waived
The rights under Article 6(1) which are the most fundamental in their nature cannot be waived. One of these rights is the right to a fair trial. As repeatedly stressed by the Court, this right must be interpreted in the light of the Preamble to the Convention, which declares, among other things, the rule of law to be part of the common heritage of the Contracting States. A fair trial is an essential element of the rule of law. The right to a fair hearing is even considered part of procedural public policy.
The second non-waivable right under Article 6(1) of the Convention is the right to an independent and impartial tribunal. Although the Court has not directly determined the nature of this right, its case law indicates that the parties cannot waive it when concluding an arbitration agreement.
It should also be borne in mind that the right to an independent and impartial tribunal is not absolutely unwaivable. It only cannot be waived in advance. The waiver can be done after the violation of the right occurs. For example, in Suovaniemi and Others v. Finland the Court held that the applicants had lost their right to invoke the arbitrator’s lack of impartiality as a ground for having the arbitral award quashed, since they had approved him as an arbitrator despite their being aware of the grounds for challenging him and thus irreversibly waived their right to an impartial judge within the meaning of Article 6.
Justice Must Be Seen to Be Done
This right was the subject of the very recent judgement of 20 May 2021 in BEG S.P.A. v. Italy. In this case, the applicant, an Italian company, alleged that the lack of independence and impartiality of one of the arbitrators constituted a violation of the applicant’s right to an impartial and independent arbitration under Article 6(1) of the Convention.
In the judgment, the Court recalled well-established case law on application of Article 6(1) of the Convention to arbitration proceedings. Thus, it was reiterated that in order to ascertain whether a tribunal can be considered “independent” for the purposes of Article 6(1), regard must be had, inter alia, to the manner of appointment of its members and their term of office, the existence of safeguards against outside pressures and the question as to whether it presents an appearance of independence. A tribunal or a tribunal member must be independent vis-à-vis the executive, Parliament, as well as the parties involved. In order to determine whether a tribunal can be considered to be independent as required by Article 6, appearances may also be of importance.
The ECtHR also stated that impartiality normally denotes the absence of prejudice or bias. According to the Court’s settled case law, for the purposes of Article 6(1) the existence of impartiality must be determined according to subjective and objective tests. The former is based on ascertaining the personal convictions and conduct of a particular judge, by establishing whether he showed any personal prejudice or partiality in a given case. The latter is based on determining whether the court offered, in particular through its composition, guarantees sufficient to exclude any legitimate doubt about its impartiality.
Having applied the said principles to the case, the Court noted that the arbitrator whose impartiality was questioned had not expressly indicated the absence of reasons that might have had an impact on his/her impartiality and independence, but simply accepted the appointment. The ECtHR agreed in this regard with the applicant’s argument that, in the absence of an explicit negative disclosure, one could legitimately presume that such relationships and/or economic interests did not exist.
As to the subjective test of impartiality, no evidence of the arbitrator’s personal prejudice or bias was found.
With regard to the objective test, the Court recalled the adage “justice must not only be done, it must also be seen to be done”. Taking into consideration the arbitrator’s senior role in the parent company of the applicant’s opponent in the arbitration as well as his legal representation of this company in domestic courts as counsel, the ECtHR expressed a rather interesting view, namely that the arbitrator’s impartiality was capable of being, or at least appearing, to be open to doubt and that the applicant’s fears in this respect can be considered reasonable and objectively justified. Therefore, the Court found a violation of Article 6(1) of the Convention.
Strasbourg Court’s Case Law Sets Standards of Arbitral Proceedings
To sum up, since the second half of the 1980s, the fundamental rights defined in the European Convention of Human Rights have been increasingly influencing arbitration. As the Strasbourg Court has consistently made clear, all the safeguards provided for under Article 6(1) of the Convention must be guaranteed during arbitral proceedings, which is compulsory according to national legislation. If one freely agreed to refer one’s dispute to the consideration of an arbitral tribunal, at least the right to a fair hearing and the right to an independent and impartial tribunal need to be ensured in the course of the arbitration proceedings. The evolving case law of the European Court of Human Rights shows that even a reasonable doubt about the independency or impartiality of an arbitrator can be considered a violation of Article 6(1) of the Convention.