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overview of arbitor's criminal liability

Published on : 23 Jan 2018


Are arbitrators above the law? Have you thought about arbitrators and the importance of their role in international arbitration tribunals? Well, arbitrators are the most crucial element of the modern alternative dispute resolution system. Their position is similar to that of judges who have been given unlimited powers and are immune from liabilities in the courtroom. Arbitrators awards are binding on parties, and they are final, subject to some limited grounds. They have an obligation to consider all the factual and legal aspects of a matter and to decide accordingly. However, one school of thought holds that arbitrators have unlimited powers in a tribunal and that they have been provided with unlimited powers to act both within and outside their jurisdictions without any restriction. For this reason, a modern law has introduced regulations and liabilities for arbitrators in some countries to restrict their powers and to sentence them if they are found guilty of a breach. Accordingly, UAE Decree Law Number 7 of 2016 (the New Law) introduced the laws relating to this matter in 2016. In this article, we will discuss the criminal liability of arbitrators under the New Law and its impact on arbitration in the UAE.

Salient Features of the New Law

The New Law concerns arbitrators in the UAE as it is a new law introduced in any significant arbitration jurisdiction. Many jurisdictions provide immunity for the arbitrators to have a proper arbitration tribunal. They are immune from the civil liability arising from their role as an arbitrator. This freedom has extensive support in almost all international jurisdictions’. In a recent Australian supreme court case, the court held that arbitrators are only liable to the parties if a court overturns the award and if a party establishes that an arbitrator was grossly negligent. Similarly, countries such as UK and Canada also provide full immunity for arbitrators from civil liability unless proved that they are guilty of fraud or bad faith in a tribunal.

There are three basic types of duties imposed by an arbitrator. These are the duties imposed by the parties, the responsibilities imposed by law, and ethical obligation. These include but are not limited to:

  1. settling the dispute and giving an award that is not subject to challenge at the enforcement level,
  2. to act independently and impartially during the tribunal, to follow the deadline and avoid delays,
  3. to operate in good faith and maintain confidentiality, and to provide the opportunity for each party to represent their case.
  4. Failing to do any of the above duties or the duties imposed by the law will result in a challenge of the award, in civil liability or even in criminal liability for arbitrators in many jurisdictions.

Article 257 of the New Law states that “Whoever issues a decision, makes an opinion, files a report, presents a case or asserts a fact in favor of or against someone, contrary to the required duties of impartiality and honesty, in their capacity as arbitrators, experts, interpreters (translators) or fact-finder appointed by the administrative or judicial authority or nominated by the parties shall be punished by temporary imprisonment. The above said categories should be prohibited from taking up any new assignments and shall be subject to the provisions of Article (255) hereof.”

Before this amendment, article 257 imposed criminal liability only on experts appointed by the courts. Regarding this change, the criminal liability is extended to experts as well as to the arbitrators selected by an arbitration institution. Those appointed under the ad hoc system by the parties or by the judicial authority will be criminally liable if they breach the provisions of the article mentioned above. 

The broad language and the risk of being imposed of criminal liability raised much attention in the UAE. The concern emerges from the fact that, unlike the court systems, the decision in arbitration procedures cannot be appealed. Limited grounds to appeal an award exist at the enforcement level. These do not include the wrongful application of laws, and only cover major issues such as matters relating to bribery. Therefore, these specific amended laws intend to improve the strength of arbitration procedures by imposing criminal liability not only on arbitrators but also on experts and translators who issue opinions contrary to the duties of impartiality and naturality. Scholars and the parties to the arbitration appreciate the new regulations of imposing some limitations on arbitrators.

On the other hand, arbitrators argue that the consequences of these amendments may extend the timeline of the arbitration procedure as well as damage the reputation of the arbitrators overall. Article 257 does not require evidence of the positive intention of wrongdoing by the arbitrator. The breach of the duties of fairness and impartiality is not defined and constitutes a broad meaning in the UAE law which leaves a big question mark for arbitrators.  It is a question raised by the legal community on this particular aspect by comparing article 22 of DIFC’s arbitration law, which states that:

“No arbitrator, employee or agent of an arbitrator, arbitral institution, an officer of an arbitral institution or appointing authority shall be liable to any person for any act or omission in connection with an arbitration unless they are shown to have caused damage by conscious and deliberate wrongdoing."  

Further, when comparing the broad language of Article 257 with other jurisdictions where the criminal liability of arbitrators applies, those laws are more specific and easy to apply in practice. Criminal liability of arbitrators emanates from the exercise of their quasi-judicial functions. Under Spanish regime, the crimes get defined as specific crimes, and the definitions are more precise, such as the definitions of bribery in articles 385 and 388 of the Criminal Code and illegal negotiations in Articles 297-298 of the Criminal Code. Misconduct is considered a criminal liability in Argentina and the law is specific on the matter. (art. 269 Criminal Procedure Code). China also imposes criminal liability on arbitrators in certain circumstances.    

Accordingly, there are no guidelines provided regarding what will surface as evidence of a contravention of duty. Hence, the arbitrators as practitioners of the law understand the chance of defending themselves in such situations is very narrow. Nevertheless, in general, practice, proving an arbitrator acted dishonestly and in a partial manner is a difficult task. Despite the easiest or difficulty in proof, the losing party of arbitration will try to use article 257 when they are dissatisfied with the outcome of the arbitration award. With the limited number of grounds to challenge in enforcement level, the parties will use this article most of the time, and it will delay the process and damage the arbitrator’s reputation undoubtedly.

Effect of the New Law 

The damage towards the arbitrators’ reputation cannot be revised as the consequences of criminal liability under the UAE laws are serious. It will lead to an investigation and the person charged must handover their passport, sometimes authorities may decide to restrict to travel outside the UAE, and the changes of imprisonment are very high. As a consequence, arbitrators don’t risk undertaking tribunals as sole arbitrators due to the fear of later consequences. Therefore, the parties in some tribunals are forced to appoint three arbitrators regardless of the number of arbitrators agreed on in the contract’s arbitration clause. This process has an impact on the underlying concept of arbitration namely party autonomy where parties have all the freedom to choose the procedure of the arbitration.    

Another effect is the due diligence, with respective arbitrators and experts looking closely at the background of the parties, their counsel and their conduct in the past. On the other hand, arbitrators look carefully on their fellow tribunal members and their past behavior.

Now the tribunals require parties to provide in a statement that they are treated fairly in the tribunal regardless of whether this is true. So, the arbitrators can use this later to defend themselves. The arbitrators are also liable to pay compensation to the parties under S. 207(2) if they resign from an ongoing tribunal without giving a proper reason. Considering all these reasons, some scholars argue that this is a form of attack on arbitrators.

Moreover, there are there are reduced sentences in certain circumstances as well. Article 255, referred to in Article 257 is set out below:

 “Shall be exempted from penalty:

  1. The witness who, if he tells the truth, shall be subject to a severe prejudice in his freedom, honor or shall expose to such severe prejudice his spouse, even if divorced, one of his ascendants, descendants, brothers, sisters or in-laws of the same degrees.
  2. The witness who reveals before the court his name, surname, and nickname and who had not to be heard as a witness or if he has to be told that he has the right, if he wishes, to abstain from testifying.
  3. In the two above instances, if such perjury exposes another person to legal prosecution or to a judgment, the author shall be sentenced to detention for a minimum term of six months”.

Arbitrators must act justly, with responsibility, and comply with their professional standards, and not be subject to bias when they conduct the trial. They are the driving seats of arbitration, and therefore their behavior impacts on the tribunal and a small increase in the power of arbitrators or a slight restriction in their powers will bring a significant impact on the overall matter. It is clear that imposing criminal liability on arbitrators not only impacts the arbitrators, it also impacts the entire arbitration procedure. Although the legislative writers provided some clarifications and justifications, there is not much change concerning the matter.

Also, Article 257 leads to a position where the UAE is no longer considered as a suitable place as the number of arbitrators signing in the UAE tribunals is reduced. There are some reported incidents where international arbitrators were found reluctant to undertake arbitration cases in the UAE, and the consequences of this are a delay in arbitration and more frustration for the parties. Without a viable and effective arbitration system, companies and practitioners will not choose the UAE as their seat of arbitration. It is understandable that all the leading institutions around the world shape and improve their regulations for a better arbitration experience to the parties. For example, the introduction of Expedited arbitration procedure in the ICC, LCIA and other institutions allowing modern means of communication in a tribunal, and approving a default “documents only” tribunal under the HIAC arbitration institution. In that way, the UAE must also take measures and changes to attract international arbitration. However, it can be pointed out that the drafting of article 257 with full intention missed the later consequences and the severe effect it may have on the reputation of UAE arbitration.

Considering all the later consequences, UAE practitioners and arbitrators association with the support of International Arbitration institutions made a plea to the UAE cabinet of ministry to reconsider the serious criminal liability imposed on arbitrators. However, some scholars argue that the intention of legislative drafting is unlikely to be changed as the UAE has a history of imposing strict regulations in many fields. Nevertheless, the UAE courts may choose to apply a narrow definition of article 257 considering all the facts and ongoing circumstances. On the whole, the new legislation has proved to be a significant blow to the UAE’s reputation as a major international arbitration Centre in the Middle East.    

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