The LCIA updates its guidance on the use of Tribunal Secretaries

The role of tribunal secretaries in arbitration is an important subject which generates a range of different views, often expressed in strong terms.  On 26 October 2017 the LCIA published its updated Notes for Arbitrators (the Notes). The update (contained within section 8 of the Notes) seeks to provide more detail and clarity on the LCIA's approach to the role and use of tribunal secretaries. Of particular note is the LCIA's strengthening of consent requirements, requiring the parties to specifically consent to the permissible tasks, remuneration and identity of a tribunal secretary.

In introducing the changes regarding tribunal secretaries, the LCIA has emphasised the two key themes of communication and consent.

The updates can broadly be categorised as follows:

Role and Duties:

• Section 8.1 of the Notes confirms that, subject to any applicable law and the parties' consent, an arbitral tribunal may obtain assistance from a tribunal secretary. However, the Notes expressly state at paragraph 68 that "in no circumstances may an arbitral tribunal delegate its fundamental decision-making function". Paragraph 69 also stresses that a tribunal secretary's assistance does not relieve any arbitrator of their personal responsibility to perform his or her tasks.
• In paragraph 70 the onus is clearly placed upon the tribunal to ensure that a tribunal secretary does not provide any assistance before party approval has been obtained and, once appointed, that the tribunal secretary only carries out tasks which have been approved by the parties.
• The tribunal must always ensure that it informs the parties of the tasks which it proposes should be performed by the tribunal secretary. In its earlier iteration, the Notes set out a limited list of activities which the tribunal secretary might undertake. In its update, although without stipulating any particular task as appropriate for a tribunal secretary, at section 8.2 the LCIA provides a list of tasks which the tribunal "may wish to propose" as a starting point for discussion and negotiation. These include administrative tasks (such as communicating on behalf of the tribunal, organising documents, proofreading and organising procedural matters), attending hearings and meetings and some substantive tasks (such as summarising submissions and preparing first drafts), provided the tribunal always ensures compliance with paragraphs 69 and 70 of the Notes - which are summarised above.
• Any variation to the role of the tribunal secretary, such as delegating additional tasks or changing the remuneration paid, must be agreed by the parties.

Remuneration:

• If the tribunal intends for the parties to meet the cost of the tribunal secretary through the deposits they lodge with the LCIA, the tribunal must propose a fee rate to the parties, to which all must provide their express consent. In paragraph 72 the LCIA suggests that an hourly rate of £50-£150 is appropriate in the circumstances.

Appointment:

• Once the tasks and rate (if applicable) of the tribunal secretary have been agreed by the parties, the new Notes confirm that the LCIA will provide the proposed tribunal secretary with a Statement of Independence and Consent to Appointment to be completed. These will then be sent by the arbitral tribunal to the parties, giving all parties the opportunity to comment on or oppose the proposed choice on the basis of the information disclosed. Paragraph 78 also clarifies that the tribunal secretary has an ongoing disclosure obligation.

Approval:

• Section 8.3 sets out a new deemed approval process for confirming the appointment of a tribunal secretary by the parties. Previously, the parties' written approval was required in order that a tribunal secretary could be approved. The tribunal is now required to set a reasonable time limit for the approval of its proposed secretary, at the end of which the parties are deemed to have approved..
• The appointment of the tribunal secretary, together with the matters contained in paragraph 74, should then be recorded by the tribunal, preferably in a procedural order (paragraph 77).
• If any party objects to the person proposed, the tribunal must instead propose another individual (paragraph 75). There is no requirement that the objection be reasonable or based upon the information contained within the secretary's Statement of Independence or Consent to Appointment, nor that it need be supported by reasons: the parties effectively have an absolute right of veto.

Removal:

• The Notes confirm that a tribunal secretary may be removed by the tribunal at its discretion, but also that Article 10 of the LCIA Rules (relating to arbitrator challenges) applies, mutatis mutandis, to tribunal secretaries.
• Where a tribunal secretary is removed, the tribunal can replace that tribunal secretary, provided they inform the LCIA, that a new Statement of Independence and Consent to Appointment is provided to the parties, and that the parties are given an opportunity to object to the proposed new candidate.
• If the replacement tribunal secretary charges fees in respect of their work, fees should not generally be charged for work already performed by a previous tribunal secretary. It is not clear whether this refers to just duplicate work or all work.

Comment

The use of a tribunal secretary – and, in particular, the nature of the tasks delegated to such an individual – has been a matter of debate within the arbitral community for many years. High-profile cases such as the Yukos arbitration, in which Russia argued that the tribunal had improperly delegated its duties to the tribunal secretary, have drawn attention to the concern that a tribunal secretary may impermissibly act as a de facto ‘fourth arbitrator’.

Institutions and arbitrators alike have faced criticism over a perceived lack of transparency when it comes to the use of secretaries, particularly for the undisclosed use of assistance and delegation to secretaries without the parties' knowledge.  This has prompted the emergence of guidance from a number of sources. A number of arbitral institutions, including the ICC in 2012, HKIAC in 2014 and SIAC in 2015, have updated their guidance on the use of tribunal secretaries and some have instituted tribunal secretary training programmes. Industry bodies such as Young ICCA and the IBA have also issued guidance. The LCIA has now followed suit in further codifying and clarifying its approach to the appointment and use of such assistance.

The LCIA's approach is similar to that taken by many of the other institutions. The Notes make more explicit the prohibition on arbitrators delegating fundamental decision-making functions, as well as the fact that arbitrators remain responsible for, and must adequately supervise, tasks carried out by their tribunal secretaries. Ultimately, the control rests with the parties - and, should the tribunal propose the delegation of more substantive tasks and the parties reject that suggestion, to the tribunal must abide by that decision.

In many cases, the engagement of a tribunal secretary may serve the interests of the parties by ensuring that the tribunal's time is spent solely on substantive decision-making, rather than on essentially administrative or clerical matters.  The delegation of such tasks, either at a very substantially cheaper cost to the parties or more commonly at no cost to them at all, will save the parties' money.  It may also expedite the production of the tribunal's orders and awards.

With ever-increasing pressure placed upon institutions and arbitrators to drive cost and time efficiency, the LCIA's approach to the role and use of a tribunal secretary strikes a sensible balance, enabling the parties to make informed choices as to where the line is drawn between efficiency and cost-saving on the one-hand, and "over-delegation" on the other.  In all circumstances, transparency is key.

For more information, please contact Craig Tevendale, Partner, Hannah Ambrose, Professional Support Consultant, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.