by Andrew Flake
In discussing our litigated disputes, we will often borrow phrasing from the world of poker. And it is true that the game, with its mix of tactics in play and chance in the draw, invites some comparison: an opponent is bluffing, someone is playing cards close to the vest, someone else is lowering or raising the stakes.
In games of stud poker, someone might have an ace “in the hole,” meaning a card held face down and not revealed until after the betting. Since a high card can dramatically change the game’s outcome, concealing it until the end of the game is one strategy, and it may be a winning one.
But not when it comes to award-confirmation challenges: As the Eleventh Circuit reminds us in a recent decision affirming an arbitration award and rejecting a challenge that a player kept “in the hole” for too long, in arbitration, the “ace” needs to be played openly and early.
The case was a Peruvian mining dispute between two Peruvian companies, SSK and Tecnicas. SSK had provided electromechanical work on an oil refinery project for Tecnicas, as general contractor, and their agreement provided for arbitration seated in Miami, Florida. While the case was ongoing, one of the lawyers assisting Tecnicas left his firm to take a position with the law firm representing SSK.
It was an understandable cause of concern, but we do not know to what extent the new law firm had screening procedures in place, or the details of the potential harm, because, for whatever reason, Tecnicas did not raise the issue with the arbitrator the time. The result was waiver, as Judge Pryor succinctly states here:
Because Técnicas Reunidas de Talara S.A.C., the losing party in the arbitration, had knowledge of the attorney side-switching but did not object until Técnicas received an adverse award more than a year later, Técnicas waived its right to complain.
Certainly, when the issue is an ethical challenge, the situation and the outcome may not be clear-cut, and whether to raise a challenge requires deliberation and judgment. If the potential harm substantial enough, though, the issue needs to be raised promptly.
There is sometimes a view on counsel’s part that only a court can address professionalism or conflict issues. In fact, the arbitration tribunal is able and empowered to address disqualification issues, including to disqualify counsel if necessary. The ICC arbitration rules (Art. 28) allow the arbitrator to order interim or conservatory measures she deems appropriate, as do ICDR (Rule 27, for orders deemed necessary) and other rule sets.
So Tecnicas had an option, at the time, to raise and address the conflict issue. On appeal, Tecnicas framed its challenge as one of public-policy, which it contended could only be raised at the confirmation stage. Public policy challenges are of course limited — the Court described them as “exceedingly narrow and rarely successful” — but the Eleventh Circuit also disagreed that they are exempt from the requirement that they be raised promptly.
It would be different, said the Court, if there were crucial facts only learned later, as in one of its earlier decisions, University Commons-Urbana, Ltd. v. Universal Constructors Inc., 304 F.3d 1331 (11th Cir. 2002). There, an arbitrator had disclosed some, but not all, of the relevant facts that would let a reasonable party understand a potential conflict existed (surprisingly, the arbitrator was currently also serving as co-counsel, with one of the lawyers before him in the arbitration, in a state court proceeding).
The key point here is that, whether based on rules of professionalism or public-policy or on some other ground, challenges need to be raised promptly, and as soon as counsel has reasonable grounds for concern. That affords the arbitrator a chance to address them as necessary. Evaluate the facts, decide whether a challenge is appropriate, and if it is, raise it timely. If uncertainty remains, seek guidance: If there are facts about an attorney’s conflict relationship, or the arbitrator’s, they can be drawn out and evaluated during the proceeding. If it pertains to the status of the arbitrator herself, counsel also has the option of discussing the issue with the case manager or via the appropriate process at the administering organization.
Whatever their nature, when concerns arise, not just about merits disposition, but about the fairness of the process itself, they warrant immediate consideration. Grounds for challenge are not hole cards.[The opinions discussed are Tecnicas Reunidas de Talara S.A.C. v. SSK Ingenieria y Construccion S.A.C., Case No. 21-13776 (11th Cir., filed July 22, 2022) and University Commons-Urbana, Ltd. v. Universal Constructors Inc., 304 F.3d 1331 (11th Cir. 2002).]