Briefings

Adam & Eve & Arbitration, February 2018

There are still arbitration clauses that contain arcane language requiring arbitrators to be "commercial men". In this article we examine how the English courts have interpreted this "commercial men" wording and consider whether this could ever serve to restrict the appointment of women arbitrators. We suggest that there is no objective justification for such wording, which undermines the efforts being made to improve gender diversity in arbitration. Private practice and in-house lawyers drafting bespoke arbitration clauses, as well as trade associations drafting standard form clauses, should adopt more modern language.

In recent years there has been some improvement in the number of women being selected by arbitration associations and appointed to tribunals. Now that more associations (but regrettably not all) make these figures publicly available, it is easier to track trends over time and progress is mostly¹ positive, albeit not as quick as one would like: in 2016, the London Court of International Arbitration (LCIA) reported² that 20.6% of the appointments it made were women (up from 16% in 2015); the International Chamber of Commerce (ICC) reported³ 14.8% (up from 10% in 2015); the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) reported⁴ 16% (up from 13% in 2015); and the Vienna International Arbitration Centre (VIAC) reported⁵ 17.1% (up from 14.3% in 2015).

The above figures support research⁶ published by Lucy Greenwood showing that institutional appointments of women arbitrators increased from 12% in 2015 to 17% in 2016. Similarly, in 2016 a woman was appointed as an arbitrator in Saudi Arabia for the first time, with no objection forthcoming from the Saudi administrative Court of Appeal in Dammam.

Such changes have been brought about in part by the hard work of organisations like Arbitral Women, who have fought for diversity in arbitration and in dispute resolution more broadly, for example by supporting the Equal Representation in Arbitration Pledge⁷. This is an initiative signed up to by over 2,500 signatories, including HFW and other leading international law firms and corporates from across a wide variety of sectors. The recently formed Alliance for Equality in Dispute Resolution⁸ is another positive development in this area.

Against this backdrop it is disappointing that there are still arbitration clauses that contain arcane language requiring arbitrators to be "commercial men". Such language is used predominately in trading and shipping contexts, for example in sale contracts and charterparty forms and in bespoke rather than standard form arbitration agreements. It is less common to see this language used in other commercial disputes contexts and in the standard form arbitration agreements produced by international arbitration associations.

But what exactly does it mean to be a "commercial man"?

Being a "commercial" man

Some arbitration agreements contain a term requiring that any arbitrators appointed be "commercial men", not to prevent women from being appointed (although conceivably this could be an effect of such clauses – see below) but rather, to prevent the appointment of lawyers. Such terms have their origins in the view that non-lawyers acting as arbitrators are more likely to be able to assist parties in resolving disputes quickly, efficiently and practically, as they are less likely to be concerned with the minutiae of legal arguments. Proponents of "commercial men" clauses consider trade figures to be more familiar with the practical workings of an industry and therefore better placed to help solve a dispute quickly."

It is not surprising that there has been some judicial commentary on what it means to be "commercial". In Rahcassi Shipping v. Blue Star Line⁹ the High Court came to the (not altogether unexpected) conclusion that an arbitration clause requiring appointment of arbitrators who shall be "commercial men and not lawyers" precluded the appointment of a practising junior counsel. As such, the court exercised its powers under s.24 of the Arbitration Act to remove the barrister arbitrator for lack of qualifications as specified in the arbitration agreement. The courts have reached similar conclusions when considering other specific arbitrator requirements, for example, the requirement often found in LMAA arbitration clauses that arbitrators be members of the Baltic Exchange.

An arbitrator was dismissed in November 2017 following the High Court's ruling in Tonicstar Limited v. Allianz Insurance Plc and Sirius International Insurance Corporation¹⁰, where the judge, following an unreported (but much commented on) High Court decision from 2000¹¹, found that a QC with several decades experience litigating prominent insurance/reinsurance matters did not have "ten years’ experience of insurance or reinsurance". The judge formed the view that this qualification had been decided upon by the parties specifically so as to exclude lawyers and to ensure a "trade arbitration". Interestingly, the judge was very sympathetic to the basic argument that the QC in question, Mr Schaff, had the requisite experience to sit as an arbitrator however, the judge felt unable to find "sufficiently powerful reasons" to decide that the prior High Court decision was "obviously wrong". It was considered important that the relevant trade association in this case, the Joint Excess Loss Committee, had not altered its arbitration clause wording in the wake of the 2000 case. The prior decision was deemed widely known within the insurance industry and it was notable that it had gone unchallenged for 17 years. In reality, the Joint Excess Loss Committee may never have intended that their arbitration clause would preclude the appointment of an insurance QC: their newly revised version¹², effective 1 January 2018, now provides that "arbitrators shall be persons (including those who have retired) with not less than 10 years' experience of insurance or reinsurance within the industry or as lawyers or other professionals advisers serving the industry" (our emphasis). Mr Schaff would face no challenge to his qualifications, were he to be appointed today, pursuant to the amended 2018 clauses.

The view that lawyers are necessarily less likely to resolve disputes practically and expeditiously, purely by virtue of their legal experience, now seems outdated and unwarranted. Whilst the judge in Tonicstar felt unable to construe the relevant arbitration clause in that case so as to allow for a lawyer to be appointed, other judges have been willing to consider lawyers as "commercial men" when presented with less restrictive clauses. For example, in Pando Compania Naviera v. Filmo SAS¹³, where the clause in question specified only that the arbitrators be "commercial men", efforts to have a lawyer arbitrator ousted proved unsuccessful. In the judgment delivered by Donaldson, J., he quipped that commercial men "like the elephant ... are more easily recognized than defined", but he also provided some useful guidance: the real test is whether the arbitrator has practical commercial experience. In that case, the arbitrator's experience (after retiring as a solicitor) as a full time arbitrator for 15 years, during which time he had handled a number of directorships in shipping companies, put his position as a commercial man beyond reproach¹⁴¹⁵. Had he not been a practising arbitrator for as long the decision may have been different.

Being a commercial "man"

What then of the requirement that an arbitrator be a commercial "man"? A look through the case law suggests there are no recorded cases where an arbitrator's appointment has been challenged on grounds of sex or gender¹⁶. One would hope and expect that if such a case were ever to go before the courts, then a common-sense view would prevail and "man" would be construed to mean "human being". This is certainly one of the definitions of the word offered in Black's Law Dictionary (albeit there are several cases on record where "man" has been construed in contradistinction to "woman" e.g. Chorlton v. Lings¹⁷ and Wilson v. Salford¹⁸). The authors of leading legal textbook Time Charters note: "in this day and age the better term would be “commercial person,” as there obviously would be no reasonable basis to contest the appointment of an arbitrator based on gender. ¹⁹" The same arguments could arguably be made to contest the appointment of a woman as "chairman" of a tribunal, but we are aware of no cases where this has been asserted. More gender neutral terms, such as "chairperson" or "chair" would seem preferable to eliminate any ambiguity.

But what about when an arbitration clause is tightly drafted (either on purpose or accidentally) so as to have the effect of precluding a woman arbitrator? Lawyers from this firm recently came across a curious clause requiring that "arbitrators shall be men with the experience in commercial and shipping matters who carry on business in the City of London ..." It is at least arguable that, given a literal interpretation, this clause does not allow for the appointment of a female arbitrator.

One might initially think that such a clause would be prohibited by anti-discrimination legislation. This was the argument made in Jivraj v. Hashwani²⁰, where the Supreme Court was asked to decide on the legality of a clause requiring that "all arbitrators shall be respected members of the Ismaili²¹ community and holders of high office within the community". The Court of Appeal had held that this was illegal, but the Supreme Court came to a different view. It held that arbitrators were not employees for the purposes of the relevant anti-discrimination legislation and therefore such legislation did not apply to their appointment. In its judgment, the Supreme Court also stressed that the freedom given to parties under arbitration to structure the dispute resolution process is an important factor distinguishing arbitration from court litigation, and contributing to its attractiveness to many parties. It held that, pursuant to s.1 of the Arbitration Act 1996, parties arbitrating "should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest”.

However, this doesn't necessarily mean the courts would come to the same view if presented with a clause specifying that only persons of a particular sex or gender could be appointed as an arbitrator. In Jivraj, the Supreme Court also had to consider whether the restriction in place was legitimate and justified. In the particular circumstances, they decided it was. It is very hard to envisage any scenario where restriction by sex or gender would be so justified, or deemed to be in the public interest.

So, it is unlikely that the English courts when considering the validity of an arbitral appointment would ever insist on a "commercial man" being a "man". However, there is never any excuse for (unintentionally) vague or loose drafting, and perhaps much the simplest way to avoid any ambiguity is for those penning arbitration clauses to adopt more modern drafting, and to refer to "commercial persons", or, to define the professional experiences/characteristics that they want in their arbitrators.

The more real danger with clauses that appear on first inspection to restrict appointments to men is perhaps that such clauses might frustrate enforcement in certain jurisdictions. It is one thing to have confidence in the English courts to construe the term "commercial men" broadly, but quite another to expect all jurisdictions to do the same. One can imagine that a desperate respondent might seek to frustrate the local enforcement of an award issued by a tribunal including a female arbitrator, on the ground that the tribunal was improperly constituted and therefore did not have jurisdiction to hear the dispute. Notwithstanding the fact that s.73 of the UK Arbitration Act 1996 requires any party seeking to make a challenge to the validity of a tribunal to do so without delay, or lose the right to do so, (such that an argument of this type ought not to be accessible to a respondent at the enforcement stage). It is not inconceivable that such arguments might obtain traction in certain jurisdictions (although we are not aware of any instances where enforcement of an award has been frustrated on grounds that the tribunal included and/or was chaired by a woman).

In view of all this, there really is no excuse in persisting with a requirement for arbitrators to be "commercial men". More modern language needs to be used by private practice and in-house lawyers drafting bespoke arbitration clauses and also by trade associations drafting standard form clauses widely incorporated into arbitration agreements and commercial contracts. The use of explicitly or implicitly discriminatory language of any sort, even where this is inadvertent, undermines efforts elsewhere to bring about change. With International Women's Day²² on 8 March fast approaching, now is a good time for all lawyers to consider how they can help safeguard the hard-won gender equality achievements of recent years. One simple thing all lawyers can do is to avoid sloppy and anachronistic drafting.

For further information, please contact the authors of this briefing:

Footnotes

1. An outlier to the general trend is the figure reported for 2016 by the International Centre for Dispute Resolution (ICDR), which, at 16%, is unchanged from the 2015 figure. For more information, visit: https://globalarbitrationnews.com/gender-diversity-in-international-arbitration-some-statistics/#_ftnref4
2. For more information, visit: ‘LCIA Facts and Figures 2016: A Robust Caseload’, available at: http://www.lcia.org/LCIA/reports.aspx
3. The ICC reported that “women arbitrators represented 14.8% of all arbitrators appointed by ICC Arbitration parties, co-arbitrators or directly by the Court in 2016”. For more information, visit: https://iccwbo.org/media-wall/news-speeches/icc-court-sees-marked-progress-gender-diversity/
4. In its 'Statistics 2016', the SCC reported that 16% of total arbitral appointments in 2016 were women and that when the SCC made the appointment, women made up more than 20% of the appointments. For more information, visit: http://www.sccinstitute.com/statistics/
5. For more information, see the VIAC 2016 Statistics, available here: http://www.viac.eu/en/service/statistics/89-service/statistiken/327-viac-statistics-2016
6. Lucy Greenwood is a director of Arbitral Women, an international and non-governmental organisation bringing together women practitioners active in international dispute resolution. For more information, visit: https://www.arbitralwomen.org/
7. For more information, visit: http://www.arbitrationpledge.com/
8. The Alliance for Equality in Dispute Resolution is a not for profit organisation formed to advocate for increased diversity in the international dispute resolution community. They strive for equality of opportunity regardless of sex, location, nationality, ethnicity or age. For more information, visit: https://www.allianceequality.com/
9. Rahcassi Shipping Co SA v. Blue Star Line (The Bede) [1969] 1 Q.B. 173
10. Tonicstar Ltd v. Allianz Insurance Plc (formerly Cornhill Insurance Plc) [2017] EWHC 2753 (Comm);
11. Co X v. Co Y 2000 (unreported). In this case, an important factor in the judge's findings was that the relevant arbitration clause provided trade industry figures with the powers to make the appointment of an arbitrator in circumstances of party default.
12. The Joint Excess Loss Committee's 2018 updated Excess Loss Clauses (JELC) CL432.
13. Pando Compania Naviera v. Filmo SAS [1975] Q.B. 742
14. In Vincor Shipping v. Transatlantic Schiffahrtskontor Gmbh HCCL 99/1986, the High Court in Hong Kong came to the same view when asked to consider whether a retired solicitor could be a "commercial man"; it found that the solicitor's prior experience as a full-time employee of a correspondent of a mutual insurance association was sufficient practical commercial experience in the shipping industry.
15. In the US, whilst in Aramco Servs. Co. v. EAC Bulk Transp. Inc., 1993 AMC 1885, 1886 (Fla. 1993) it was held that “[a] ‘commercial man’ could be anyone employed in or familiar with, the commercial shipping industry", the judgments in WK Webster & Co v. American President Lines Ltd 1994 US App LEXIS 20244 and US Ship Management Inc v. Maersk Line Ltd 2002 US App LEXIS 24053 are more in line with the English position, the view being that a practising lawyer can only be a "commercial man" where they have practical experience of the commercial workings of the maritime industry, for example as derived from working in that industry as a non-lawyer, it being necessary to look at the sum of the individual's experiences, rather than viewing his/her official current job title as definitive of his/her experience.
16. Any party seeking to make any challenge to the validity of a tribunal must do so without delay and without taking part, or continuing to take part, in the proceedings, or otherwise risks being barred from making such a challenge, pursuant to s.73 Arbitration Act 1996.
17. Chorlton v. Lings (1868-69) L.R. 4 C.P. 374
18. Wilson v. The Town Clerk of Salford (1868-69) L.R. 4 C.P. 398
19. 29A.62, Time Charters, 7th Ed., 2014.
20. Jivraj v. Hashwani [2011] UKSC 40
21. The Ismaili are Muslims belonging to the Shia branch of Islam.
22. To celebrate International Women's Day, HFW will be running a series of events across our international network in recognition of the importance of gender equality and the need tor everyone to work together to solve inequality. This year's International Women's Day theme is Press for Progress and the campaign calls on everyone to motivate and unite friends, colleagues and whole communities to think, act and be gender inclusive. HFW wholeheartedly supports that cause. For more information on the campaign, for more information, visit: https://www.internationalwomensday.com/Theme