MEMORANDUM FOR RESPONDENT - Pace University

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QUEEN’S UNIVERSITY FACULTY OF LAW [Cook/Garcia 145; Lew et al. 236; McIlwrath/Savage 257; Moses 125] and improves the efficiency and legitimacy of the arbitral process as a whole [Paulsson 13]. 8. The Parties, and not the Council, are in the best position to determine the suitability of potential arbitrators [Born 1366, 1382]. Parties to an arbitration have a unique understanding of the particularities of their dispute and the qualities their arbitrators should possess. For this reason, administering institutions rarely deny appointments [Born 1407]. Here, the Parties were unequivocal in their endorsement of Mr. Y [Ltrs. of 26 and 27 July 2010]; thus, the Council should defer to their agreement. Party autonomy is the basis of international commercial arbitration [Ashford 81; Redfern/Hunter 315; Böckstiegel 25] and an administering institution should only overrule the parties’ choice in exceptional circumstances. These circumstances do not exist here. 9. The Council should only exercise its discretion when the appointed arbitrator is so unsuitable that his or her presence on the tribunal poses a significant danger of rendering an award unenforceable or bringing the arbitral proceedings into disrepute. An institution’s role in confirming arbitrators is to ensure a minimum standard of independence and impartiality [Lew et al. 237; Gaillard/Savage 552], to preserve the reputation of the arbitral institution [Bühring-Uhle et al. 2006 35] and to ensure efficient administration of the proceedings [Gaillard/Savage 483; Zuberbühler et al. 48]. Given the primacy of party autonomy in arbitration, an institution should not step beyond that role. The integrity of the arbitral process is undermined not only by the appointment of unsuitable arbitrators, but also where the administering institution improperly overrules the parties’ agreement. Here, the Council should defer to the Parties’ acceptance of a presiding arbitrator unless an arbitrator is patently unsuitable. Indeed, there is no evidence that Mr. Y’s relationship with Claimant was so improper that the Parties could not waive it. 3. The Council should have regard for the Parties’ expectations and should have applied the IBA Guidelines to confirm Mr. Y. 10. The Council should have applied the IBA Guidelines to confirm Mr. Y. The Council referred to the IBA Guidelines in the letter informing Mr. Y of his appointment [Ltr. 15 July 2010]. This reference shows the Council intended to rely on, or at least consider, the IBA Guidelines when determining if Mr. Y would be confirmed. Furthermore, this reference created a reasonable expectation by the Parties that the IBA Guidelines would be applied. Institutions should respect not just the letter of the applicable rules, but also the reasonable expectations of the parties [Leaua in Klausegger et al. 110]. The IBA Guidelines have been widely accepted as the standard for determining independence and impartiality in international arbitration [Blackaby et al. 270; McIlwrath/Savage 246; Rozas in Fernández-Ballesteros/Arias 417]. Accordingly, the Council, although not formally bound by the IBA Guidelines, should have applied them to confirm Mr. Y. 4
QUEEN’S UNIVERSITY FACULTY OF LAW 11. The relationship disclosed by Mr. Y falls under the “waivable red list” as set out in the IBA Guidelines [IBA Guidelines Pt. 2 (2.3.3)]. Mr. Y indicated that a partner from his firm is advising Claimant in this dispute [Ltr. 19 July 2010]. Relationships listed on the waivable red list can be waived if parties are aware of the improper relationship and expressly agree to waive the resulting conflict of interest [IBA Guidelines Gen. Stn. 2; Moses 133]. In this case, both Parties expressly waived any objection to Mr. Y’s disclosure and reaffirmed their confidence in his independence and impartiality [Ltrs. of 26 and 27 July 2010]. Applying the IBA Guidelines, the Council should have confirmed Mr. Y. 4. The Council’s decision to deny Mr. Y’s confirmation was premature. 12. Under the Milan Rules, the Parties have ten days to object to the independence or impartiality of an arbitrator [art. 18(3) 2010 Milan Rules]. In its letter of 26 July 2010, the Secretariat informed the Parties that they had ten days to raise any objections to Mr. Y’s appointment. However, only four days later, the Council denied Mr. Y’s confirmation [Ltr. 2 August 2010]. This departure from the Milan Rules may not have resulted in substantial prejudice to the Parties, but it does indicate the Council’s disregard for the Parties’ Agreement and its own Rules. B. The Council did not comply with the Parties’ Agreement in appointing Mr. Z as presiding arbitrator. 13. Even if the Tribunal finds that the Council acted according to the Parties’ Agreement by denying confirmation of Mr. Y, the Council did not comply with the Parties’ Agreement in appointing Mr. Z. According to the Parties’ Agreement, if an arbitrator is not confirmed, a new arbitrator must be appointed by the original appointing authority [art. 20(3) 2010 Milan Rules; art. 15 Model Law]. The party-appointed arbitrators were the original appointing authority [Cl. Ex. 4]. The Council acknowledged this when it initially requested that the party-appointed arbitrators make another appointment after Mr. Y was not confirmed [Ltr. 2 August 2010]. Only if “a replacement arbitrator must also be substituted”, is the Council then authorized to make the appointment itself [art. 20(3) 2010 Milan Rules]. Here, the Council’s authority to substitute a replacement arbitrator was not engaged [1] and the Council should have invited the party-appointed arbitrators to make another appointment [2]. 1. The Council did not have authority to substitute a replacement arbitrator because there was no replacement arbitrator. 14. Art. 20(3) Milan Rules is limited to situations where a replacement arbitrator must also be substituted. The Council does not have the authority to appoint an arbitrator except as a substitute for a “new” arbitrator. Here, when the party-appointed arbitrators were informed that the Council had denied Mr. Y’s confirmation they did not appoint a new arbitrator. Instead, they 5
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MEMORANDUM FOR RESPONDENT - Pace University

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