Common misconceptions when selecting arbitrators

In commercial arbitration proceedings, a common and pragmatic question often raised by corporate legal officers or representative attorneys is how to best select an arbitrator. Based on the author’s experience in arbitration, there are three common misconceptions parties may have when choosing arbitrators:

1. The inability to choose a chief or sole arbitrator, leaving the decision to the head of the arbitration institution
2. The belief that the more renowned the arbitrator, the better, using fame as the sole criterion and
3. The preference for an arbitrator who is personally known to them, believing this ensures reliability.

Are these approaches effective? The author argues that these are three misconceptions in selecting an arbitrator. This article explores how to avoid these pitfalls.

Misconception No. 1

Due to a lack of understanding of arbitration procedures, some parties mistakenly believe they can choose only the co-arbitrator and not the chief arbitrator, thereby relinquishing their right to choose the chief.

In the case of a single-arbitrator tribunal, this misconception extends to a belief that it is difficult to select a sole arbitrator. This is not the case. Such misunderstandings stem from a lack of knowledge about the procedures or mechanisms for appointing sole or chief arbitrators.

In arbitration practice, a significant number of parties believe, according to the arbitration rules of the respective institutions, that in a three-person tribunal the chief arbitrator is usually selected jointly by both sides. If they cannot agree on a candidate, they often relinquish their joint selection right and delegate the appointment to the head of the arbitration institution (such as the director or chairperson).

Similarly, the appointment of a sole arbitrator is typically made either jointly by both parties or assigned by the head of the arbitration institution, with many parties also opting to forgo the opportunity to jointly select.

Although some arbitration institutions have introduced more varied provisions for the selection of arbitrators in their arbitration rules, few parties delve deeply into these rules. Most still follow the idea of: “If reaching an agreement seems unlikely, it’s more efficient to save time by foregoing the right to choose”.

Misconception No. 2

An arbitrator’s prominence can indeed lead to frequent selection, primarily because their reputation is built over time and through experience. However, when selecting an arbitrator, parties should not use reputation as the sole criterion.

Prominent arbitrators must consider their schedules, the case’s value and the relevant field, which means they may not always be available for certain cases. Because well-known arbitrators often have busy caseloads and must choose among many cases, relying solely on their reputation might result in delays or affect their focus on the case due to limited availability.

Misconception No. 3

When arbitration parties face a long list of arbitrators, choosing a suitable co-arbitrator can be challenging. Some companies prefer selecting someone they know, believing that a familiar arbitrator will be more favourable, regardless of the evidence or arguments presented. They assume a stranger will not be submissive.

However, whether chief or co-arbitrator, they must remain independent and impartial, regardless of who selects them. It is understandable to choose an arbitrator based on their professional competence, but expecting favourable treatment solely due to personal acquaintance, while disregarding their expertise and experience, is a significant misunderstanding of the arbitrator’s role.

Tips to avoid these misconceptions

Given the nature of commercial arbitration, which emphasises party autonomy, efficiency, confidentiality and expert handling, parties should fully leverage these advantages.

1. Parties involved in arbitration should actively manage the selection of arbitrators, preparing in advance to make timely decisions. It is recommended that both parties clearly outline in their contracts or arbitration agreements regarding the composition and number of members of the arbitration panel, including a list of members and the method for appointing the chief arbitrator. This ensures the chief or sole arbitrator can be selected swiftly following the signing of the contract.
2. In selecting well-known arbitrators, parties involved in arbitration should carefully consider the specifics of their case, including the professional field, complexity, and monetary value. It is essential to evaluate an arbitrator’s availability, expertise and experience comprehensively, rather than focusing solely on their reputation.
3. Arbitration should be conducted by experts, not acquaintances. Trust based solely on the notion that “it’s easier to work with someone you know” is unsustainable and contradicts the essence of arbitration. It also undermines the protection of one’s own interests.

Tian Hongtao is an associate at Zhilin Law Firm. Tian is also an arbitrator at Xiamen Arbitration Commission