Users of commercial arbitration — particularly those that employ the top institutional rules, such as those of the ICC or ICDR-AAA — have a number of basic expectations. They want their dispute to be decided by competent, well-qualified arbitrators. They want the arbitrators to decide the case fairly, neutrally and impartially — and so they want their arbitrators to be free of conflicts of interest that may prevent them from being fair and impartial. And, ultimately, they want a final, dispositive resolution of their dispute — in the form of a final award.

The principle of finality, however, is subject to the statutory grounds set forth in Section 10 of the Federal Arbitration Act (“FAA”) for vacatur of an award. These grounds are necessarily narrow, reserved for cases where serious unfairness or irregularity manifested itself during the arbitral process. One of these grounds, as set forth in Section 10(a)(2), is “where there was evident partiality or corruption in the arbitrators.” Although corruption cases are very rare, there have been quite a number of cases addressing the “evident partiality” limb of Section 10(a)(2) — in particular, when one or more of the arbitrators were accused of having “conflicts of interest” that affected their impartiality.

Once such case was Grupo Unidos por el Canal, S.A. v. Autoridad del Canal de Panama, 78 F.4th 1252 (11th Cir. 2023), which arose when a construction consortium lost an arbitration case against the Panama Canal administrator, Autoridad del Canal de Panamá (“ACP”). Reacting against the loss, the construction companies claimed that some of the arbitrators suffered undisclosed “conflicts” that demanded vacatur. The challenge was unsuccessful at first instance and before the United States Court of Appeals for the Eleventh Circuit. But the fact of the challenge, and the judges’ holdings that arose from it, provide a useful illustration both of the type of challenges that losing parties may be tempted to explore, and the attitude (often unsympathetic) that the courts have towards such challenges.

1. The FAA’s Rules About Avoiding “Evident Partiality,” and the
   Concomitant Duty on Arbitrators to Disclose Nontrivial Business Conflicts

The FAA is said to evince a “pro-arbitration” policy, meaning that the normal duty of courts is to confirm awards (pursuant to Section 9 of the FAA) as a final judgment. Arbitral decisions cannot be appealed on the merits — and they can only be vacated according to the “narrow” grounds found in Section 10 of the FAA. One of these grounds (known colloquially as “evident partiality”) appears in Section 10(a)(2), which states that an award can be vacated “where there was evident partiality or corruption in the arbitrators, or either of them.”

There are hardly any cases dealing with proven “corruption” on the part of an arbitrator, but there are a few (albeit extraordinary) cases where an arbitrator suffered from an inherent conflict so severe as to constitute “evident partiality.”[1] There are also cases where an arbitrator’s failure to disclose a material conflict was deemed sufficient to establish “evident partiality.”[2]

Arbitral institutions naturally have a strong incentive to make sure that an award made under their auspices will not be susceptible to “evident partiality” challenges. To protect against this risk — and to preserve their integrity generally — institutions usually require arbitrators to make prescribed disclosures at the time of their appointment. For example, the American Arbitration Association requires, in cases covered by its Commercial Arbitration Rules, that arbitrators “disclose to the AAA any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality or independence, including any bias or any financial or personal interest in the result of the arbitration or any past or present relationship with the parties or their representatives.”[3] The rules make clear that this duty subsists throughout the arbitration.

By and large, these rules create confidence that commercial arbitrators will act transparently and avoid conflicts of interest. They also provide a framework for parties to make a mature and informed decision as to whether a particular circumstance, if disclosed, rises to the level of an objectionable conflict. If a party challenges an arbitrator, the institution (e.g., the ICC or the AAA) will adjudicate the challenge by referring it to one of its internal bodies. If an arbitrator survives the challenge, it will be a sign that the institution considered that the arbitrator was duly independent and impartial, as those terms are understood by the institutions. Above all, it is hoped that these procedures will provide a prophylactic against the award itself being challenged for “evident partiality” at the post-award stage. Indeed, institutions often urge arbitrators to err on the side of disclosure.

Nevertheless, occasionally a party that loses an arbitration will bring the matter to court, seeking to vacate the award for “evident partiality” by claiming that one or more of the arbitrators had a conflict. Sometimes, the party will have known of the conflict and raised it (unsuccessfully) during the arbitration. In other cases, parties discover (or claim to discover) the conflict after the award is made. In every such case, the court will need to balance the pro-arbitration policies of the FAA (which favor enforcement of final awards) against fairness concerns and the need to ensure the basic integrity of an arbitral award. The Grupo Unidos case illustrates how these concerns are applied in practice.

2. The Claims of “Evident Partiality” in the Panama Canal Cases
   1. Background: the “Panama 1” ICC Arbitration

For some years, the Panama Canal Authority (an entity owned by the Panama Government) has conducted significant upgrade work at the Panama Canal. This has led it to engage various construction companies, under contracts governed by Panamanian law, that also call for the resolution of disputes before an ICC arbitral tribunal in Miami.

By 2013, a series of disputes had arisen between ACP and the construction companies. One such dispute (known to the parties as the “Panama 1” dispute) resulted in an ICC arbitration tribunal being formed in Miami in April, 2016. The arbitral tribunal consisted of three prominent international arbitrators: Mr. Claus von Wobeser (a practitioner based in Mexico City), appointed by the construction companies, Mr. Robert Gaitskell KC (of Keating Chambers, London), appointed by ACP, and Mr. Pierre-Yves Gunter (a Swiss national), jointly appointed by the co-arbitrators as Presiding Arbitrator.

In September 2020, after various hearings, the ICC tribunal issued a preliminary award (the “Partial Award”) deciding certain disputed points against the construction companies, and in effect obligating them to repay over $200 million to the ACP.[4] At this point, the construction companies asserted that the Partial Award suffered from procedural defects, including that it had resemblances to a prior award from an earlier arbitration between the same parties (known as the “Cofferdam Arbitration”).[5] They demanded that the arbitrators disclose any links to the members of the other arbitral tribunal.

On February 17, 2021, based on the additional disclosures, the construction companies applied to the ICC to disqualify all three members of the Tribunal, claiming that the construction companies had discovered certain “conflicts”:[6]

• They complained that Presiding Arbitrator Gunter had — in an unrelated case — served as co-arbitrator alongside the lawyer who had presided over the prior “Cofferdam Arbitration.” This, they asserted, gave rise to concerns because of supposed material similarities between the Partial Award and the Cofferdam Arbitration Award.

• The construction companies also complained that Presiding Arbitrator Gunter was currently sitting with Arbitrator Gaitskell (the co-arbitrator appointed by ACP) in a parallel but unrelated arbitration. They claimed that this was a material “conflict” because the appointment in the other case had conferred a benefit on Presiding Arbitrator Gunter (it gave him more fee-paying work).

• As to Arbitrator Gaitskell, the construction companies further complained (1) that one of ACP’s counsel had served alongside him as co-arbitrator in a past unrelated arbitration; (2) that another of ACP’s counsel had appeared before him in a parallel case; and (3) that he had been unable to check whether any member of his barristers’ chambers was involved in the case (this being a feature of the English “chambers” model).[7]

• As to Arbitrator von Wobeser, the construction companies complained that he had sat as co-arbitrator with one of ACP’s counsel in a parallel but unrelated arbitration.

On December 17, 2020, the ICC Court of Arbitration rejected all of these challenges, holding that they did not raise a reasonable doubt as to the partiality of the tribunal.[8] The proceeding resumed, and the parties stipulated that there was no disagreement on quantum. On February 17, 2021, therefore, the arbitral tribunal issued a final award obligating the construction companies to pay ACP $238,460,621.80.[9]

1. 2. The Southern District of Florida Rejects the Vacatur Petition and Finds No Conflicts

Rather than pay the award, the construction companies filed a proceeding in the United States District Court for the Southern District of Florida (“S.D. Fla.”), in which they sought to vacate both the Partial and Final Awards, in part on the grounds of “evident partiality” under Section 10(a)(2) of the FAA.[10] Relying upon the same “conflicts” as they had asserted in their prior challenge, they argued that “undisclosed relationships [of the arbitrators]…. raise serious questions about the integrity of the Panama 1 arbitration.”[11]

In December 2021, Judge Richard Scola of the S.D. Fla. issued a decision rejecting the construction companies’ arguments and granting ACP’s cross-motion to confirm both awards.[12] He considered that all of “the allegations of possible bias” as to all three arbitrators were “weak.”[13] First, Judge Scola ruled that the notion that the Partial Award had been derived from the prior Cofferdam Award lacked an evidentiary basis.[14] Second, the mere fact that Mr. Gunter had been “appointed by Mr. Gaitskell and a second arbitratio[n]” was not suggestive of a conflict, but “is likely a testament to Mr. Gunter’s experience and expertise.”[15] Third, Arbitrator Gaitskell’s inability to check conflicts among other members of his London chambers was simply the way that the English bar worked.[16]

Fourth, the fact that each of Arbitrators Gaitskell and von Wobeser had (in two separate, unrelated arbitrations) sat as co-arbitrator with various members of ACP’s arbitration team was not suggestive of a conflict: “[g]iven the inherent oscillations among arbitrators and practitioners in arbitration,” it was inevitable that “arbitrators and attorneys would overlap” in different cases.[17] He also observed that at no point during the arbitration had any of the co-arbitrators served as co-counsel with any of the parties’ counsel. As such, none of the arbitrators had “shar[ed] a duty to a client.”[18]

Judge Scola further noted that the construction companies’ challenges depended on “multiple speculative assumptions, each assuming the worst in [the arbitrators’] character.”[19] This, His Honor held, was not an appropriate basis upon which to seek vacatur.[20] His Honor thus denied the vacatur motion and granted ACP’s motion to confirm both awards.[21]

1. 3. The Eleventh Circuit Upholds the Awards

On appeal, Grupo Unidos advanced essentially the same arguments it had made before the S.D. Fla. that the supposed “conflicts” of the arbitrators meant that the awards lacked integrity and needed to be vacated.

In August 2023, a three-judge panel of the Eleventh Circuit unanimously affirmed Judge Scola’s decision. Although noting that federal law “require[s] arbitrators to disclose information liberally,” including any information that may give an “‘impression of possible bias,’”[22] it commented that:

to the extent that Grupo Unidos seeks to have the entire arbitral awards vacated under this standard simply because the arbitrators worked with each other and with related parties elsewhere, Grupo Unidos finds itself on much shakier footing. To rule for Grupo Unidos, we would need to hold, in essence, that mere indications of professional familiarity are reasonably indicative of possible bias.[23]

Section 10(a)(2)’s “evident partiality” standard, it held, would only justify vacatur if “either (1) an actual conflict exists, or (2) the arbitrator knows of, but fails to disclose, information which would lead a reasonable person to believe that a potential conflict exists.”[24] It also emphasized that “[t]he alleged partiality must be ‘direct, definite and capable of demonstration rather than remote, uncertain and speculative.’”[25] As to the argued bases for vacatur:

The Presiding Arbitrator’s supposedly “lucrative” appointment in another case. During oral argument and in briefing, the construction companies ramped up their attack on Presiding Arbitrator Gunter, arguing ACP’s co-arbitrator Gaitskell “helped [him] score another lucrative position,” namely, an appointment as “tribunal president in a separate arbitration while the underlying arbitration was ongoing” — which the construction companies’ appellate counsel described colorfully as “‘[ACP’s] guy awarding the arbitral president a lucrative contract.’”[26] This fell completely flat with the court, which held that “the act of an appointment of one arbitrator by another in a separate case” had never been enough, “standing alone,” to justify vacatur.[27] Besides, the Eleventh Circuit noted, “there were many sound and impartial reasons for the parties to have chosen Gunter,” given his prominence in the world of arbitration, and so nothing negative could be inferred from the fact that Gaitskell supported his appointment.[28]

Service as co-arbitrator in a parallel case alongside one of ACP’s counsel. The Eleventh Circuit also saw no irregularity in the fact that Arbitrator von Wobeser’s “service with [ACP’s counsel] as co-arbitrators in an unrelated arbitration while the Panama 1 Arbitration was ongoing.”[29] The “problem” with this challenge, it observed, was that the construction companies had conflated this scenario with a prior case in which an arbitrator concurrently served as co-counsel with one of the parties’ counsel. Yet “the relationship between co-arbitrators is fundamentally different than the relationship between two counsel.”[30] This is because “[a]rbitrators do not represent a client.”[31]

Service as co-arbitrator in a past case alongside one of ACP’s counsel. The fact that Dr. Gaitskell had once served as an arbitrator together with one of ACP’s counsel also was unavailing. “[S]tanding alone,” the panel held, “the fact that an arbitrator . . . had previous contacts with counsel for one of the parties does not suggest evident partiality.”[32] While not excluding the possibility that “a large number of” interactions could, at some point, alter the picture,[33] it held that “familiarity due to confluent areas of expertise does not [alone] indicate bias.”[34] In this case, the panel held that the supposed conflict was “attenuated.”[35]

ACP’s counsel appearing before the arbitrator in a parallel unrelated case. Finally, the Eleventh Circuit dealt with the objection that one of ACP’s counsel had appeared before Gaitskell in another case. “We’re hard pressed,” the judges wrote, “to see how this in any way questions Gaitskell’s impartiality. Repeated appearances establish only familiarity, and familiarity ‘does not indicate bias.’”[36]

Rounding out its comments, the Eleventh Circuit remarked:

It is little wonder, and of little concern, that elite members of the small international arbitration community cross paths in their work. As one of the canal authority’s expert witnesses testified, “[w]orldwide, there are only several dozen arbitrators who would be attractive candidates” for “a proceeding such as the Panama 1 Arbitration.” We refuse to grant vacatur simply because these people worked together elsewhere. The record reveals no evidence of actual bias in the Panama 1 Arbitration. And as to possible bias, Grupo Unidos has established only that some of the arbitration’s participants were otherwise familiar with each other, and “familiarity due to confluent areas of expertise does not indicate bias.”[37]

Having disposed of the evident partiality challenges, the Eleventh Circuit further turned to the New York Convention’s grounds for non-recognition of an arbitral award. Not surprisingly, the Circuit Judges rejected the argument that the supposed arbitral “conflicts” and/or non-disclosures warranted non-recognition on the grounds of “public policy” (for purposes of New York Convention art. V(1)(d)) or meant that the award “was not in accordance with the agreement of the parties” (for purposes of New York Convention art. V(1)(d)).[38] And the panel dismissed a last-ditch argument that the tribunal had denied the construction companies an opportunity to be heard, holding that the construction companies received a “robust opportunity to present evidence and confront the other side’s evidence,” and “there is no evidence of partiality in this proceeding.”[39] The S.D. Fla. decision therefore was affirmed.[40]

3. The Future of “Evident Partiality” Challenges

The decisions of both the Eleventh Circuit and the S.D. Fla. evinced impatience with the challenges made to the arbitral panel’s conduct. Plainly, none of the judges considered the supposed “conflicts” serious enough to approach “evident partiality.” Even so, the system allowed the challenges to be ventilated at length, thus placing a “cloud” over the awards for more than 18 months.

In part, the length of time occupied by this challenge is due to the intrinsic nature of FAA motion practice and appellate practice. Indeed, vacatur motions always occupy a certain amount of time. Yet, one should not assume that a vacatur motion will invariably get as far, and take as much time, as the challenges in Grupo Unidos.

For example, in Grupo Unidos, the record showed that once the construction companies became aware of the grounds for their challenge (they learned of the supposed grounds while the arbitration was pending), they acted reasonably quickly in raising their concerns to the ICC. By contrast, if a party fails to act promptly once it knows (or ought to know) of a conflict, the courts will deem its objection waived, potentially precluding any “evident partiality” challenge.[41]

Indeed, courts are particularly skeptical of challenges where the party only “discovered” a challenge after the final award was rendered. In a 2008 opinion, the Fifth Circuit warned against a scenario in which

losing parties would have an incentive to conduct intensive, after-the-fact investigations to discover the most trivial of relationships, most of which they likely would not have objected to if disclosure had been made. Expensive satellite litigation over nondisclosure of an arbitrator’s “complete and unexpurgated business biography” will proliferate.[42]

The court also warned that, if too liberal an approach were taken to vacatur,

[this would] rob arbitration of one of its most attractive features apart from speed and finality — expertise. Arbitration would lose the benefit of specialized knowledge, because the best lawyers and professionals, who normally have the longest lists of potential connections to disclose, have no need to risk blemishes on their reputations from post-arbitration lawsuits attacking them as biased.[43]

From time to time it is suggested that “evident partiality” challenges might be decided differently if a different vacatur standard is adopted. Many courts appear to draw guidance from Justice White’s concurrence in Commonwealth Coatings, which held that while nontrivial business conflicts needed to be disclosed, arbitrators need not adhere to the same disclosure standard as judges.[44] In the same case, the plurality opinion (authored by Justice Hugo Black) stated that “we should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review.”[45] In practice, however, it is unclear if there is much (or any) difference between the two approaches, as applied. Courts tend to approach “evident partiality” issues according to the particular facts before them, and this was certainly the case in Grupo Unidos. It is far from clear that the Eleventh Circuit would have reached a different view under either the “White” or “Black” approaches in Commonwealth Coatings.

Delay aside, the financial cost of “evident partiality” challenges can be considerable. In contrast to arbitral proceedings such as the ICC case in Grupo Unidos (where fees/costs were awarded to the prevailing party),[46] U.S. vacatur proceedings are usually governed by the “American Rule,” according to which each party bears its own fees/costs. In some cases, unsuccessful “evident partiality” challenges can lead to an award of attorney’s fees, but this generally depends either on the court finding that the challenge lacked a colorable basis (thus triggering its inherent sanctioning power), or the parties’ contract having a fee-shifting provision that covers post-award proceedings.

Finally, it should be noted that, in international arbitration, the institutions (and participants) often draw guidance from “soft law” such as the International Bar Association Guidelines on Conflicts of Interest in International Arbitration — a guidebook that attempts to define both what conflicts do (and do not) affect an arbitrator’s independence and impartiality, and what relationships an arbitrator does (and does not) need to disclose to the parties at the inception of a case. Although the parties in Grupo Unidos drew the courts’ attention to these guidelines — which, if applied, probably would not have revealed a conflict — they did not play a significant role in either the Eleventh Circuit or S.D. Fla.’s reasoning.

* * *

As the Grupo Unidos case shows, the “evident partiality” standard in the FAA generally sets a high bar for overturning awards. At the same time, it permits a certain degree of post-award motion practice to occur if an aggrieved party believes that the arbitrators possessed a conflict — and even if such challenges eventually fail, they add a level of cost and delay. While courts generally disfavor challenges to arbitration awards, disappointed parties will still be motivated to bring them. The risks of such challenges can be mitigated (if not avoided) by having parties and arbitrators make full disclosures at the outset of a case — even at the risk of over-disclosure.