Are arbitrators immune from liability?
International Arbitration (4th edition)
Arbitrators shall be liable for costs and damages arising out of the non-performance of their arbitral duties (Art. 745 CP). They shall also be liable if they do not render the award within the time limit established (Art. 756 CP). In this case, they will lose the right to collect their fees.
Contractual liability of the arbitrators for the non-performance of their obligations may be imposed by the contract the arbitrators shall enter into with the parties (Arts. 1662, 1723, 1724 and 1728 NCCC).
However, no liability is imposed on arbitrators for errors in judicando, other than in circumstances that would give rise to criminal liability.
Arbitrators are subject to civil liability if they culpably do not fulfil, or do not timely fulfil, the obligations of their mandate. However, based on jurisprudence, the setting aside of the award is a prerequisite for any liability of the arbitrators.
In principle arbitrators shall be immune from liability when adjudicating a dispute. However, Chapter 8 of ICCA (introduced with the amendments of 2017) provides for administrative liability for arbitrators. An arbitrator who has rendered an award on a dispute in which one of the parties is a consumer within the meaning of § 13, item 1 of the additional provisions of the Law on Protection of Consumers shall be liable to a fine of BGN 500 up to BGN 2500 BGN. In case of repeated violation, the fine shall be three times the amount. In addition, an arbitrator that fails to comply with the mandatory instructions of the Inspectorate of the Minister of justice shall be liable to pay a fine in the amount of BGN 2 500.
The FAA is silent on the question of liability of arbitrators. However, some U.S. courts have held that arbitrators are immune from liability for “all acts within the scope of the arbitral process.” Sacks v. Dietrich, 663 F.3d 1065, 1069 (9th Cir. 2011); see also, e.g., Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155, 1160 (10th Cir. 2007); Honn v. Nat’l Ass’n of Sec. Dealers, Inc., 182 F.3d 1014, 1017 (8th Cir. 1999). Nevertheless, arbitrators can be held liable in rare cases, such as for acting in “bad faith, with malicious purpose, or in willful and wanton disregard of human rights, safety, or property.” Postma v. First Fed. Sav. & Loan of Sioux City, 74 F.3d 160, 163 (8th Cir. 1996).
The Supreme Court of Canada has established the following preconditions, the existence of which establish immunity from suit for arbitrators:
1. There must be an existing dispute which the parties have submitted to the arbitrator;
2. The arbitrator must be acting in a judicial or quasi-judicial manner; that is, he or she receives evidence and hears argument in coming to his or her decision; and
3. The arbitrator must be fulfilling his or her function as an independent party, in compliance with the mandatory provisions of the applicable legislation.
Generally, arbitrators are immune from liability for negligence. They must nevertheless act honestly and fairly between the parties. If an arbitrator is found to be guilty of misconduct, including acting in bad faith or fraud, they could be sued for recovery of fees.
Arbitrator immunity is not included in any laws or rules of Cyprus.
Basic civil liability may apply to the arbitrators if they are in violation of their duties and this leads to damages. Case law holds that arbitrators are especially liable where the arbitration award gets repealed by the court. Their liability is of a contractual nature.
UAE- Federal Jurisdiction
An English translation of the recent amendment to Article 257 of the UAE's Federal Law No. 3 of 1987 by Federal Decree Law No. 7 of 2016 (the “Penal Code”) provides that:
‘Temporary imprisonment shall be inflicted on whoever issues a decision or expresses an opinion or submits a report or presents a case or proves an incident, in favour of a person or against him, contrary to the duty of fairness and unbiasedness, in his capacity as an arbitrator, expert, translator or investigator who is appointed by a judicial or an administrative authority or elected by the parties.’
The introduction of the above caused significant concern amongst the arbitration community, with both experts and arbitrators rejecting potential appointments.
The concern within the arbitration market has however subsided, assisted by the fact that no arrests nor convictions of either arbitrators or experts have occurred since the promulgation of the above amendment.
The DIAC Rules (Article 40) provides for immunity for any act or omission in connection with the arbitration, by an arbitrator. The terms of reference, should be produced, normally limit an Arbitral Tribunal’s liability to acts of bad faith.
The ADCCAC Rules do not expressly provide for the grounds on which arbitrators, will or will not be held liable for their actions and/or omissions.
UAE - Common Law Jurisdictions
DIFC Arbitration Law (Article 22) provides that an arbitrator will only be liable for his / her acts or omissions where such have caused ‘damage by conscious and deliberate wrongdoing’.
The above does ‘not affect any liability incurred by an arbitrator by reason of his resigning’
The ADGM Regulations (Regulation 23) also provides that an arbitrator shall be not be liable unless the ‘act or omission in connection with an arbitration’ is shown to have ‘caused damage by conscious and deliberate wrongdoing’.
Under the 1996 Act, an arbitrator is not liable for any act or omission in the discharge or purported discharge of his functions as arbitrator unless the arbitrator is shown to have acted in bad faith (s.29(1)). Another exception relates to any liability incurred by the arbitrator by reason of their resignation (s.29(3)).
Yes, s 25 of the IAA provides that ‘[a]n arbitrator shall not be liable for —
- negligence in respect of anything done or omitted to be done in the capacity of arbitrator; and
- any mistake in law, fact or procedure made in the course of arbitral proceedings or in the making of an arbitral award.’
The Arbitration Act (the “Act”) is silent on whether arbitrators are immune from liability. The KCAB International Arbitration Rules (the “Rules”) provide that arbitrators appointed under the Rules “shall not be liable for any act or omission in connection with an arbitration conducted under the Rules, unless such act or omission is shown to constitute willful misconduct or recklessness” (Article 56 of the Rules).
No. Arbitrators can be held liable depending on whether the breach of duties is related to the actual decision of the dispute or to other duties.
Pursuant to the applicable case law it is recognized that the parties of the arbitration proceedings implicitly agree to treat the arbitrator's liability equivalent to the liability of the state court judges laid down in section 839 (2) Civil Code. Thus, arbitrators cannot be held responsible for the incorrectness of the judgment unless the breach of duty represents a criminal offence.
The arbitrator cannot invoke this privilege if the breach relates to other contractual duties, e.g. if the arbitrator terminates his contract without justified reasons at an inappropriate stage of arbitration. In this case the arbitrator must compensate the parties for their damages on the basis of general contractual liability principles.
In case of a truncated tribunal, a substitute arbitrator can be appointed by the party, whose arbitrator is absent. In case of a truncated tribunal, the tribunal cannot continue with the proceedings.
Yes, to some extent. Under the Arbitration Law, arbitrators cannot face legal liability for any actions they take during the arbitration proceeding or in performing their duties as arbitrators, provided their actions were taken in good faith. In theory, the tribunal or arbitrators can be held liable cost and losses arising from delays caused by them in rendering an award without a valid justification.
There is no provision under Liechtenstein law on arbitration that would provide for arbitrator immunity.
Section 47 of the Arbitration Act states that the arbitrator shall not be liable for any act or omission in respect to anything done or omitted in the discharge of his functions as an arbitrator unless the act or omission is shown to have been in bad faith.
In strict sense, yes. Arbitrators are not liable by the consequences that may arise from the awards issued by them, since there are not existing legal provisions that foresee this circumstance, and because arbitrators are not considered as court officers or public officers who indeed are subject to liability for their actions.
Notwithstanding the above, arbitrators can be responsible for damages caused by the grant of precautionary measures issued by them, this according to article 1480 of the Commerce Code.
Arbitrators are not accorded any statutory immunity under the ACA. There is no provision governing liability for negligence of the arbitrator and in such a circumstance an action is likely to be maintainable. The Lagos Law grants arbitrators statutory immunity unless they act in bad faith. Generally, public policy favours immunity for arbitrators from liability for their judicial acts. The recourse that parties have against arbitrators that do not perform their tasks with all due diligence is to terminate the mandate of such arbitrators. The proposed amendments to the ACA include a provision according immunity on arbitrators.
No, arbitrators must perform their tasks pursuant to their appointment agreements. The agreements are subject to general contract law principles and thus arbitrators may in principle be held liable for breach of contract. However, the threshold to impose liability is likely intent or gross negligence.
There is no law expressly exempting arbitrators from any liability arising from the arbitration proceedings. However, it appears that arbitrators may be held to answer for any violation of a confidentiality or protective order issued by a court. (Rule 10, Special ADR Rules)
There are no explicit provisions in the Arbitration Law attributing liability to arbitrators. However, arbitrators could be held liable for violations of other laws, e.g., anti-bribery law. Moreover, if it is shown that the arbitrator was acting out of self-interest, the arbitral award could be nullified and the arbitrator held liable for actual, direct damages his/her actions have caused.
Under French law, arbitrators cannot be held liable for what they have decided, even if they make a legal or factual error (Bompard v. Consorts C. and others, Paris Court of Appeal, 22 May 1991). However, in the exercise of their function, arbitrators are liable if they breach obligations arising from their relationship with the parties such as rendering an award once the deadline for doing so has passed (Louis Juliet and Benoît Juliet v. Paul Castagnet, Pierre Couilleaux and Adolphe Biotteau, French Court of Cassation, First Civil Chamber, 6 December 2005, No. 03-13.116). Arbitrators must also provide each party a reasonable opportunity to present its factual and legal arguments, and a reasonable opportunity to respond to the arguments made by the other parties before the arbitral tribunal decides on any issue in the case. In the Blow Pack Case (21 May 2019, No. 17/12238), the Paris Court of Appeal upheld the judgment of the Tribunal de Grande Instance, holding that a breach of due process by the arbitral tribunal (which, in that case, led to the partial annulment of the underlying arbitral award), relates to the tribunal’s jurisdictional power, and does not trigger the arbitrator’s personal (civil) liability.
Under French criminal law, arbitrators may also be found liable for corruption (French Penal Code, Articles 434-9 and 435-7).
Despite the absence of any legal text providing for the arbitrator’s immunity, such immunity is presumed and applied by analogy from the legislative immunity accorded to the judge/court. However, the immunity does not apply in cases of fraud, deceit or gross fault (gross negligence), in which cases the arbitrator’s civil liability can be exceptionally invoked before the courts. (Fathi Waly, Arbitration in local and international commercial disputes, Munsha’at Al Ma’aref, 2014 ed., p. 369-371)
Furthermore, in case of institutional arbitration, the CRCICA arbitration rules provide for the exclusion of liability of the arbitrators, the Centre, its employees and any members of the Board or Advisory Committee thereof, save for intentional wrongdoing.
No, they are not immune from liability. According with Art. 18 of the LAM, once an arbitrator has accepted its designation, it has the obligation to comply with its obligations, being liable to the parties in cases of non-performance of their obligations for the damages and losses that their action or omission has caused, unless it is a justified impediment.
For international arbitration, the ICA Act is silent on the matter, which may be nonetheless addressed by the applicable arbitration rules.
For domestic arbitration, since in Chile arbitrators are deemed to exercise a jurisdictional function, most of the liabilities potentially applicable to judges apply, mutatis mutanda, to arbitrators. Therefore, they may be held either criminal and/or civil and/or disciplinary liable based on grounds very similar to those existing for judges. However, in practice, cases from which criminal and/or civil liability may arise are extremely unusual. Disciplinary liability is barely seen.
The legal relationship between the arbitrator and the parties (receptum arbitri) is to be qualified according to the law at the seat of arbitral tribunal (lex arbitri). According to Swiss case law and the legal doctrine, the arbitrator is obliged to personally fulfill all his/her duties with all due care. Throughout the proceedings, arbitrators are committed to independence and impartiality.
The liability of arbitrators is considered to be limited to the event of unlawful intent or gross negligence. However, in case of breach of duties by the arbitrator, parties are likely to in the first instance challenge the arbitration award and only subsequently attempt to hold the arbitrator liable for damages. In addition, an arbitrator may be liable if he/her accepts an appointment without disclosing a reason for refusal that finally leads to refusal or revocation of the arbitration award in appeal proceedings.
In Swiss Rules arbitration, art. 45 Swiss Rules declares the exclusion of liability of, inter alia, the arbitrators for any act or omission in connection with arbitration conducted under the Swiss Rules, except if such act or omission is shown to constitute intentional wrongdoing or gross negligence.
Arbitrators are not immune from liability. Nevertheless, pursuant to article 881 GrCCP the arbitrators may be held liable only for gross negligence or intentional breach of their duties. Same rule applies to judges regarding the violation of their duties. In case the conduct of the arbitrator constitutes a criminal act, such as bribery for example, apart from the fact that he may be subject to prosecution, the aggrieved party may bring a tort claim against him under article 914 of the Greek Civil Code. Specific procedural requirements apply. Claims against arbitrators shall take the form of a special remedy provided for under article 73 para. 5 of the Introductory Law to the GrCCP, the so-called action for judicial misconduct. This remedy must be filed within 6 months from the time the arbitrator’s wrongful act or omission takes place (see however the analysis below). In case the claim against the arbitrator is premised upon an erroneous award, it is argued in legal literature, that, by analogy to what is applicable to State Court judges, the aggrieved party must first exhaust all available remedies against the award. In case the aggrieved party succeeds in his request for setting aside the award, an action for judicial misconduct is precluded for lack of damage. On the contrary, in case the request is dismissed, the aggrieved party must file side action within six months.
Yes, arbitrators are immune from liability. However, if a designated arbitrator fails to perform his duties without any just reason, s/he should compensate the loss of the parties for such failure.