Many distribution agreements contain an arbitration clause. In Norway, the usual form of arbitration is “ad hoc” arbitration. Arbitration clauses are generally short – referencing only the Arbitration Law (LOV-2004-05-14-25).
Lawyers are frequently appointed as arbitrators. And in small countries (or in large law firms…) the lawyer or his/her firm may have various connections to the parties involved.
In a recent ruling, the Norwegian Supreme Court discussed where the line is drawn for disqualification when lawyers act as arbitrators (HR-2025-921-A). As the Norwegian Arbitration Act is based on the UNCITRAL Model Law, the clarifications should also be of interest in an international perspective.
The case concerned the validity of an arbitral award made by a panel of judges that included a lawyer from a firm that had a limited client relationship with one of the parties.
Under the Arbitration Act is that arbitrators are disqualified if there are circumstances that create “justified doubt” about the arbitrator’s impartiality and independence. (Section 14(2) of the Arbitration Act). The disqualification review is broadly speaking like that which apply to judges in “ordinary courts” (section 108 of the Court Act). However – choosing your own panel is different. But should this lead to a less strict application of the impartiality requirement? On this the parties disagreed.
In its ruling The Supreme Court held that if an arbitration system is to be trusted it must apply the disqualification rules with the same degree and precision as the ordinary courts, albeit deviations may occur due to the special features of arbitration or the goal of international legal unity.
Accordingly, Court held that If the law firm has a “not insignificant assignment for a party while the arbitration is ongoing”, the arbitrator is disqualified – even if the arbitrator himself has no relation to the case or the client relationship.
The decisive factor is how the situation appears to “the outside world”. A form of identification between lawyer and firm must be assumed – for both practical and principled reasons. Law firms appear as collective entities, and it will be impossible for anyone outside the firm to know who is working on what. In smaller firms, there is also a real risk of informal exchange of information.
Admittedly, the Supreme Court allowed for the possibility that modest client relationships or special organizational conditions may lead to a different result. This depends on a specific assessment, where both the scope of the assignment and business significance for the company will be relevant. Conversely, a personal connection to the assignment – professional or organizational – will weigh heavily and can easily lead to disqualification.
The reasoning of the Supreme Court also included consideration in relation to Article 6 of the European Convention on Huma Rights. (“The right to a fair trial)”. In line with the ECtHR’s practice, Article 6 will fully apply in arbitration proceedings, unless the parties have unequivocally waived this protection.
In this instant case the Supreme Court found that the arbitrator should not be disqualified. This despite that the lawyer had not informed the district court (which –appointed the lawyer as arbitrator) of the firm’s client relationship. (Which should have been easy for the lawyer to check prior to accepting the assignment.)
Nevertheless, the Supreme Court did not find that there was justified doubt about his impartiality or independence. The work in question was a limited assistant related to an administrative decision, generating “a relatively” insignificant fee.
The work was carried out by another department in the firm – without any professional or organizational connection to the arbitrator. The assignment did not involve any strategic or other advice that could create ties to the client’s interests.
Carl Arthur Christiansen, IDI country expert for agency and distribution in Norway
