Q: Do BANI rules allow for the challenge of an arbitrator’s appointment?
A: In short, yes. Pursuant to Article 11, 2018 BANI’s Rules and Procedures (BANI Rules), the parties to an arbitration may challenge an arbitrator on the grounds that there exists a situation that give rise to any justified doubts as to the arbitrator’s impartiality and/or independence of the arbitrator. In general, Law No. 30 of 1999 of Arbitration and Alternative Dispute Resolution (Indonesian Arbitration Law) which sets out the following requirements for arbitrators: (i) is not considered as a first or second degree relatives with one of the parties involved in the dispute; (ii) has no financial or other interests in the arbitration award.
In addition to the requirements set out in the Arbitration Law, and common in international arbitration practice, the IBA Guidelines on Conflicts of Interest in International Arbitration (“IBA Conflicts Guidelines”) are also often used as a supplemental guide to determine the impartiality or independence of arbitrators in circumstances that give rise to any justified doubts concerning an arbitrator’s impartiality or independence. The IBA Conflicts Guidelines provide a non-exhaustive list of facts and situations that are generally considered likely to give rise to situations of conflict. The IBA Conflict Guidelines break down these situations into the following categories:1
1. Red List, provides a non- exhaustive list of situations which give rise to an objective conflict of interest. The Red List is classified into Non-Waivable Red List and Waivable Red Lists.
a. The Non-Waivable Red List are a list of situations that can violates the principle nemo iudex in causa sua, such that disclosure alone cannot resolve the conflict. In case of a situation provided in the Non-Waivable Red List, the arbitrator must resign from the case, e.g. the situation where the arbitrator is a manager, director or member of the supervisory board or has a similar controlling influence in one of the parties;
b. Waivable Red List are a list of situations which require not only the disclosure of the arbitrator of the situation, but also a specific waiver from the prejudiced party, e.g. the arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
2. Orange List are a list of situations that may give rise to justifiable doubts as to arbitrator’s impartiality or independence. However, disclosure of such situations should not automatically disqualify the arbitrator, e.g. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties
3. Green List, provides a list of situations which do not required disclosure by the arbitrator because such situations are considered as not situations resulting in any actual apparent conflict of interest from the relevant point of view, e.g. The arbitrator and counsel for one of the parties or another arbitrator have previously served together as arbitrators or as co-counsel.
We note that the IBA Guidelines are not binding in regards to any arbitration institution and only serve as a useful guideline in issues of conflict of interest and challenges to the appointment of an arbitrator. The procedure for challenging an arbi- trator under BANI Rules are as follows:
a. If the arbitral tribunal has not yet
been formed, a party may submit a challenge of a prospective arbitrator whose impartiality and independence is being doubted. If the challenged prospective arbitrator does have a conflict of interest with the case or the party in dispute, he must resign;2
b. If the arbitral tribunal has been formed, the challenging party shall notify BANI inwriting within 14 (fourteen) days after they have been advised the identity of such arbitrator or 14 (fourteen) days after the challenging party receives the information about the circumstances that give rise to the arbitrator’s impartiality or independence, by attaching the documents establishing the basis for such challenge;3
c. BANI will establish a special team to review the challenge document. There are 2 possible result of
the challenge. If the challenged arbitrator agrees to resign, or another party agrees with the challenge, a replacement arbitrator shall be appointed in the same manner as the appointment of the recused arbitrator;4
If the other party or the challenged arbitrator does not agree to the challenge and the Chairman of BANI also considers that the challenge is groundless, then the challenged arbitrator shall continue their duties as an arbitrator.5
Challenge shall only be done if there are circumstances that clearly indicate that the arbitrator has a conflict of interest. This is due to the fact that in the case that BANI considers the challenge to be groundless, the challenged arbitrator shall continue their duty, which in turn may bring the party in a disadvantageous position. WNA/HES
2. Article 12 paragraph 2 BANI Rules;
3. Article 12 paragraph 1 BANI Rules;
4. Article 12 paragraph 2 BANI Rules;
5. Article 12 paragraph 3 BANI Rules.