Originially from: World Arbitration and Mediation Review (WAMR)

Establishing Neutrality in Arbitrations
Involving Closely-Knit Industries
by Stephanie Smith
Introduction
Consider a situation in which your twenty closest friends are the
only people from whom you can choose to form a panel, testify as experts
in, and oppose you in an arbitration involving billions of dollars. Each of
these friends has expertise in the area of the arbitration, but also have
known each other for years, have had arguments, have dated each other,
and have disagreed with each other on a regular basis. There are no other
people who are remotely qualified. The possible personal and financial
conflicts are overwhelming, especially if you are required to find impartial
arbitrators and experts to resolve the billion-dollar dispute. Thus begins
the problem with arbitration in close-knit industries.

In recent years, the increases in litigation costs have led to a steady
increase in alternative dispute resolution, particularly in commercial and
contractual relationships. The continuing increase in the use of arbitration
in commercial disputes has led to numerous questions and concerns
dealing with close-knit industries and disclosure by experts and arbitrators.
In close-knit industries, the experts and arbitrators often have both
business and personal relationships with each other and with the parties.
These entanglements create a problem of disclosure and impartiality that is
amplified by the lack of a standardized system of disclosure. While
arbitrators have a duty to disclose before appointment to an arbitration
panel, experts have not been held to this standard. Experts and arbitrators
both have these relationships that raise certain concerns, of which the
attorneys and clients must be aware to create a relatively fair arbitration
proceeding. The necessity of impartiality by arbitrators, especially in
close-knit industries, has been well-established as being vital to continuing
a tradition of fair arbitration, maintaining confidence in the arbitral
mechanism, and sustaining the goals of arbitration, such as "avoid[ing] the
complex, time-consuming and costly alternative of litigation."
Unfortunately, the practical considerations in close-knit industries have
not been truly addressed by current law or by current case law, which
focuses only on the evident partiality of arbitrators and ignores the effects
of partiality on the part of experts. To establish an arbitration system in
close-knit industries that complies with the desired attributes of a fair
arbitration, the duty to disclose by arbitrators must be expanded and a duty
to disclose by experts must be established.