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Ethics in international arbitration: They’re not just for lawyers

by Matthew Rushton on 25 Sep 2013

ethics in international arbitration

Ethical issues in international arbitration are a hot topic. The approaching 10th anniversary of the 2004 IBA Guidelines on Conflicts of Interest in International Arbitration has already generated discussion concerning potential revisions to the source of the now-familiar “Red,” “Orange” and “Green” lists of conflict situations that may confront arbitrators.

In addition, one of the most vigorously debated issues at present is what law should govern the conduct of counsel in international arbitration. The practical situation that invariably provides the focus for that question is the extent to which counsel may prepare witnesses for giving testimony in international arbitration proceedings. This is a problem because extensive “woodshedding” is prohibited in some jurisdictions, yet permitted (if not de rigueur) in others. For example, under their respective codes of conduct, English barristers and solicitors are strictly limited in their ability to prepare witnesses before a hearing, while lawyers in the United States are not so limited and, indeed, generally assume that failure to thoroughly prepare their witnesses is flirting with malpractice. So which rule controls when an American lawyer is representing a client in an arbitration hearing being conducted in London? There is no clear answer at present, although the draft IBA Guidelines on Party Representation in International Arbitration promises to provide some guidance.

The attention to ethical issues confronted by counsel and arbitrators is altogether understandable. But what about the ethical obligations of the witnesses themselves, particularly expert witnesses? The current focus upon conflicting ethical norms applicable to counsel has obscured somewhat another dimension to the witness-prep debate: the ethical norms that apply to expert witnesses. Construction cases are notoriously expert-driven, often requiring expert testimony of various professionals, including engineers and accountants.

At one level, the ethical rules applicable to engineers and accountants are no different from those that apply to lawyers (or, indeed, to civilized people generally): tell the truth, keep client secrets secret, etc.1 And yet there are also litigation-specific ethical rules with which engineers and accountants must comply. In the U.S., the National Society of Professional Engineers, for example, has promulgated a Code of Ethics for Engineers (“Code of Ethics”), under which its members have various duties when serving as expert witnesses:

  • Engineers shall be objective and truthful in professional reports, statements or testimony. They shall include all relevant and pertinent information in such reports, statements or testimony, which should bear the date indicating when it was current.2
  • Engineers shall not, without the consent of all interested parties, participate in or represent an adversary interest in connection with a specific project or proceeding in which the engineer has gained particular specialised knowledge on behalf of a former client or employer.3
  • Engineers shall not attempt to injure, maliciously or falsely, directly or indirectly, the professional reputation, prospects, practice or employment of other engineers.4

It takes little imagination to conceive of situations in which an engineer’s expert testimony might be something less than “objective” or fail to include “all relevant and pertinent information.” Although perhaps less common, it is likewise easy to foresee circumstances in which an engineer is proffered as an expert witness precisely because he or she has “gained particular specialised knowledge on behalf of a former client or employer,” without the engineer having first obtained “the consent of all interested parties.” This may be especially problematic when the dispute involves highly specialised knowledge possessed by relatively few individuals in the world. Finally, human nature being what it is, it is not unheard of for experts to take great exception to criticism of their opinions and conclusions by opposing experts, thereby creating a risk that each may be tempted to “injure, maliciously or falsely, directly or indirectly, the professional reputation” of the other.

Like the National Society of Professional Engineers, the American Institute of Certified Public Accountants (“AICPA”) has promulgated a Code of Professional Conduct containing numerous ethical standards. Indeed, the AICPA has published a number of guides for its members who serve as testifying experts, including Consulting Services Special Report 03-1, “Litigation Services and Applicable Professional Standards,” and Practice Aid 10-1, “Serving as an Expert Witness or Consultant.” The Practice Aid provides CPAs guidance to the relevant provisions of the Code of Conduct and cautions thus:

  • The roles of expert witness and consultant practitioner differ from the role of the attorneys in the litigation process. Because litigation is an adversarial proceeding, each party presents his or her case to a trier of fact. Attorneys must advocate for their clients. The practitioner, on the other hand, must serve his or her client (the attorney) with integrity and objectivity, as required by the [Code of Conduct]. Accordingly, forensic accountants should have objective neutrality with regard to their professional opinions and not advocate for the position of the attorneys or the attorneys’ clients.5

In addition, CPAs are subject to Rule 101: “Independence. A member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by council.”6 Under Interpretation 101-3 (“Nonattest Services”), the independence of CPAs serving as expert witnesses is deemed impaired:

Expert witness services create the appearance that a member is advocating or promoting a client’s position. Accordingly, if a member conditionally or unconditionally agrees to provide expert witness testimony for a client, independence would be considered to be impaired.7

The practical effect of Interpretation 101-3 is that a CPA cannot act both as a client’s auditor (an “attest” service requiring independence) and expert witness (which impairs independence). Such a situation might easily arise where an owner’s CPA, in the course of auditing a contractor’s pay applications, uncovers evidence of fraud by the contractor. Interpretation 101-3 would appear to prohibit the CPA from continuing to provide auditing services to that client if the CPA also agrees to provide expert testimony regarding the alleged fraud.

Not only are the ethical obligations of engineers and accountants somewhat different from those applicable to counsel and arbitrators, the breach—real or imagined—of those obligations creates a different dynamic in international arbitration proceedings than such a breach by counsel or an arbitrator. In the case of a potential conflict of interest between counsel and arbitrator, the arbitrator may be obliged to decline appointment or even withdraw from serving.8 Conflicted counsel may be required to withdraw from the representation.9 In either event, the objective is the same: removal of the conflict so that the integrity of the proceedings—and enforceability of the resulting award—are protected. But the discovery of an ethical breach by an expert witness goes not to the integrity of the process so much as the credibility of the witness, which can devastate a party’s case. Indeed, it is no exaggeration to say that, where expert witnesses are concerned, Credibility is King. One time-honored way of attacking an expert’s credibility is to identify inconsistencies between his or her current testimony and previous positions the expert has taken in litigation or published writings. An allegation that an expert witness has violated some ethical obligation adds fuel to the fire. The witness is not merely bought and paid for—which is routinely assumed to be the case—but actually a bad person. Indeed, far from seeking to cure the ethical breach, opposing counsel may seek to exploit it by keeping the witness on the stand as long as possible in order to make the expert himself or herself, rather than his or her opinions, the focus of the tribunal’s attention. One can easily imagine cross-examination going into witness prep, not to show that counsel has done something improper, but to show that the witness has acted unethically according to the witness’s own ethical rules.

Nor are arbitral tribunals lacking in authority to discount expert testimony they find incredible. For example, the IBA Rules on the Taking of Evidence in International Arbitration give tribunals great discretion to “determine the admissibility, relevance, materiality and weight of evidence,”10 including the evidence of expert witnesses. Significantly, the IBA Rules also require party-appointed experts to submit reports including, inter alia, “a statement of his or her independence from the Parties, their legal advisors and the Arbitral Tribunal” and “an affirmation of his or her genuine belief in the opinions expressed in the Expert Report.”11 To be sure, the IBA Rules’ requirements that an expert be independent and have a genuine belief in his or her opinions are not expressed in precisely the same terms as the above-quoted provisions of the Code of Ethics for Engineers or the AICPA’s Code of Professional Conduct. Nonetheless, those requirements are at least consistent with the ethical obligations of engineers and accountants, and a violation of those obligations could easily call into question the veracity of the expert’s statement of independence and/or affirmation of genuine belief in his or her opinion. In such a case, the tribunal would have ample authority under the IBA Rules to discount the expert’s opinions.

The ethical obligations of arbitrators and counsel have attracted a great deal of attention in the international arbitration community, and rightly so. But construction disputes frequently involve the services of other professionals as expert witnesses who often have ethical obligations of their own. All participants in international construction arbitrations—arbitrators, counsel and expert witnesses—should be mindful of those obligations to help ensure the credibility of international arbitration as a dispute resolution process. And if concern for the credibility of the process were not reason enough for counsel to be interested in these issues, avoiding the catastrophe of having a key expert’s credibility destroyed because of the witness’s ethical lapse provides additional incentive.

See, e.g., National Society of Professional Engineers, Code of Ethics for Engineers, Professional Obligations, ¶3(a) (“Engineers shall avoid the use of statements containing a material misrepresentation of fact or omitting a material fact.”) and ¶4 (“Engineers shall not disclose, without consent, confidential information concerning the business affairs or technical processes of any present or former client or employer, or public body on which they serve.”); American Institute of Certified Public Accountants, Code of Professional Conduct, Rule 102 (“Integrity and objectivity. In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest and shall not knowingly misrepresent facts or subordinate his or her judgment to others.”) and Rule 301 (“Confidential client information. A member in public practice shall not disclose any confidential client information without the specific consent of the client.”).

Code of Ethics, Rules of Practice, ¶ 3(a).

Code of Ethics, Professional Obligations, ¶ 4(b).

Code of Ethics, Professional Obligations, ¶ 7.

Practice Aid 10-1, ¶ 27.

Code of Conduct, Rule 101.

Code of Conduct, Interpretation 101-3 (footnotes omitted).

IBA Guidelines on Conflicts of Interest in International Arbitration, General Standard 2(a) (“An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator if he or she has any doubts as to his or her ability to be impartial or independent.”).

Hrvatska Elektroprivreda, d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24 (6 May 2008).

IBA Rules, Art. 9(1).

IBA Rules, Art. 5(2)(c), (g).

By Troy L. Harris, FCIArb

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Topics: International Arbitration

Matthew Rushton

Written by Matthew Rushton