A Discussion of the Yukos Case

Can the unsuccessful party challenge an arbitral award on the basis that an arbitral secretary was substantially involved? The Russian Federation argues “Yes” and applied in November 2014 to the District Court of The Hague to set aside the so-called Yukos awards. [1]

The arbitral secretary in the Yukos case had devoted between 40 % and 70 % more time to the arbitrations than did any of the arbitrators. On that basis, Russia argues that “the arbitrators did not personally fulfil their mandate” (para. 468 of the petition). In support of its argument, Russia refers to the Young ICCA Guide on Arbitral Secretaries.[2] Published in 2014, the Guide purports to reflect Best Practices on the Appointment and Use of Arbitral Secretaries. They consist of four articles addressing some general principles (Art. 1), the appointment of Arbitral Secretaries (Art. 2), their role during the arbitration (Art. 3) and the aspect of costs (Art. 4).

This post will first present how much involvement of an arbitral secretary is admissible under the Young ICCA Guide (1). Secondly, this article analyses the Russian arguments for challenging the Yukos award (2).

1. The Young ICCA’s liberal stance on the tasks of an arbitral secretary

Everyone would probably agree to the basic notion stated in Article 1(4) of the Young ICCA Guide:

“It shall be the responsibility of each arbitrator not to delegate any part of his or her personal mandate to any other person, including an arbitral secretary.”

The arbitral secretary must not become the Fourth Arbitrator. As noted in the commentary on Article 1(4) of the Young ICCA Guide:

“Any arbitrator who appoints an arbitral secretary must, therefore, do so appropriately and with great care not to delegate any part of his or her decision-making in a way that would dilute the arbitrator’s mandate.”

From this follows the decisive question: What tasks can an arbitrator delegate to an arbitral secretary without diluting the arbitrator’s mandate? Probably no arbitration agreement deals with this question. In rare cases, the arbitral tribunal might have discussed the issue with the parties and specified the limits of delegation. In all other cases, the tribunal (and the courts, and the parties) might consider the Young ICCA Guide and its liberal stance. Pursuant to Article 3 of the Young ICCA Guide, an arbitral secretary does not need to restrict his / her assistance to undertaking administrative matters. Rather, an arbitral secretary may also

  •  research questions of law;
  • research discrete questions relating to factual evidence and witness testimony;
  • review the parties’ submissions and evidence;
  • attend the tribunal’s deliberations;
  • draft appropriate parts of the award.

The reason for Young ICCA’s liberal stance on the arbitral secretary’s tasks is clear: If one were to restrict the tasks of the arbitral secretary to purely administrative issues, one could simply refrain from appointing one in the first place. On the other hand, it might be remarkable that the Young ICCA Guide allows an arbitral secretary to draft parts of the award. In a survey conducted by Young ICCA, 67 % of the respondents rejected the idea that the arbitral secretary should prepare the first draft of an arbitral award.

 

2. The Challenge of the Yukos Award

As stated in the introduction, Russia has requested the District Court of The Hague to set aside the Yukos awards – amongst others – because the arbitral tribunal did not fulfil its personal mandate. According to Russia, arbitral secretaries may only carry out administrative activities. Russia refers to the 1996 UNCITRAL Notes on Organizing Arbitral Proceedings as well as the ICC Note Concerning the Appointment of Administrative Secretaries and the Young ICCA Guide (cf. para. 479 et seq. of the petition). As “evidence” that the arbitral secretary carried out not only administrative but also substantive tasks, Russia refers to the time sheet of the arbitral tribunal and the arbitral secretary. The arbitral secretary, Mr. Valasek, devoted more time to the arbitration than did any of the arbitrators. The following is an overview of the time spent during the merits phase of the arbitration:

Arbitral Secretary

What is more, the arbitral secretary did not have to occupy himself with administrative matters because these were performed by the administrative secretaries of the Permanent Court of Arbitration which was administering the proceedings. Russia concludes that the arbitral secretary inadmissibly participated in the substantive work of the tribunal.

Russia’s arguments are certainly valid. The time spent by the arbitral secretary shows that he had a very important role in the arbitration.

One could, however, also argue that Russia was well aware of the arbitral secretary’s substantive activities. First, the tribunal’s Chairman informed Russia that the he intended to appoint an arbitral secretary even though the tribunal already had the administrative support of the PCA. Russia did not object. Secondly, Russia was informed that the arbitral secretary spent 381 hours on the jurisdictional phase of the arbitration (while the Chairman of the Tribunal spent 490 hours). Even though the secretary spent considerably less time than the Chairman of the Tribunal on the jurisdictional phase, one could nevertheless argue that the numbers nevertheless show that the arbitral secretary was not simply carrying out administrative tasks but was substantially involved in the arbitration. Russia did, however, not object. Thirdly, if one were to consider the tasks compiled by Young ICCA as the international consensus, as Russia suggested, it is not surprising that the arbitral secretary spent more than 2,600 hours on the merits phase of the Yukos arbitration. If an arbitral secretary researches questions of law, reviews the parties’ submissions and evidence, attends the deliberations and drafts parts of the award, it is understandable that he / she devotes at least the same amount of time to the arbitration as the arbitrators.

 

3. The Practical Consequences

If the tribunal intends to designate an arbitral secretary, the tribunal might want to point out from the very beginning what tasks it wants to delegate. This minimizes the risk that the award is later challenged on the basis of the substantial involvement of the arbitral secretary.

If the tribunal has not made the extent of the involvement specific and if a party makes an application for setting aside the award, it all burns down to two questions: (i) Is an arbitral secretary allowed to carry out substantive activities as listed in the Young ICCA Guide? The decision of the District Court of The Hague might give some guidance in that respect. If the District Court of The Hague holds that it is generally accepted that an arbitral secretary can draft parts of the award and perform other substantive tasks, a party that does not agree with such far-reaching authorities might have to object immediately upon the appointment of the arbitral secretary. (ii) And, did the parties have a chance to realize early in the arbitration that the secretary was substantially involved? If the parties failed to object to the involvement, they might have waived their right to set aside the award on such ground.

 

[1]              Cf. Russia’s Petition

[2]             Young ICCA Guide