Originally from The College of Commercial Arbitrators Guide to Best Practices in Commercial Arbitration, Fifth Edition

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NON-NEUTRAL ARBITRATORS

Party-appointed arbitrators who are not neutral—that is, who are not both independent and impartial—are permitted in some arbitration agreements. Non-neutral arbitrators are appointed as panel members, for example, in reinsurance arbitration, labor union arbitration, sports arbitration and certain securities arbitrations. Arbitrators should be familiar with the appointment process and other considerations concerning non-neutral conduct and disclosures because non-neutral arbitrators continue to be appointed in domestic arbitration. This chapter addresses best practices involving the special challenges that non-neutral arbitrators can pose. Additional chapters of the Guide—for example, chapters 2, 4, and 14, respectively pertaining to arbitrator appointment and disclosures, arbitrators’ fees and expenses, and intra-tribunal relations—should be considered by the reader. The general provisions in other chapters apply to non-neutral arbitrators except as  specifically noted in this chapter.

I.            ARBITRATOR SELECTION GENERALLY

A.           Parties’ Arbitration Agreement

Because the use of non-neutral arbitrators continues as a permitted practice in domestic arbitration, albeit rarely used except in a few industries and legal areas, a well-drafted arbitration clause will state clearly whether or not the party-appointed arbitrators on a tripartite panel will be neutral. Clarity is particularly important because courts are obligated to enforce the selection process agreed upon by the parties, see, e.g., 9 U.S.C. § 5; UAA § 3; RUAA § 11(A); Cal. Civ. Proc. Code § 1281.6, and because an arbitration administrator or appointing authority can exceed its powers if the selection process is not in compliance with the parties’ agreement, see Brook v. Peak Int’l, Ltd., 294 F.3d 668, 673-74 (5th Cir. 2002) (“The AAA’s departure from the selection procedure . . . was utterly unwarranted.”); Americo Life v. Myer, 440 S.W.2d 18, 22-25 (Tex. 2014)(affirming vacatur of arbitration award on grounds that the AAA improperly disqualified Americo Life’s first party-appointed arbitrator based on a finding of partiality, despite fact that the parties’ arbitration agreement only required a “knowledgeable, independent businessperson or professional” and AAA rules in effect when the agreement was entered assumed party-appointed arbitrators were not neutral; specific provisions in agreement overrode general terms of incorporated rules in any event; panel formed in violation of party agreement exceeded its powers when it resolved dispute).