Challenges to an Arbitrator

The Uniform Code grants a party the right to challenge an arbitrator peremptorily or for cause. Parties do not have to give reasons for their peremptory challenge. Generally, parties will rely on information contained in the profiles and disclosures made by arbitrators when challenging for cause. Pursuant to the Code, an arbitrator is required to disclose any direct or indirect financial or personal interest in the outcome of the arbitration as well as any existing or past financial, business, professional, family, or social relationships that are likely to affect impartiality. Persons requested to serve as arbitrators should disclose any such relationships that they have with any party or its counsel, or with any individual whom they have been told or have reason to believe will be a witness. They should also disclose any such relationship involving members of their families or their current or former employers, partners, or business associates. Arbitrators should make reasonable efforts to identify relationships required to be disclosed. Parties are requested to advise the Director if they are aware of any similar relationships involving a party or counsel or a potential witness.

 

A challenge for cause to a particular arbitrator will be granted where it is reasonable to infer an absence of impartiality, the presence of bias, or the existence of some interest on the part of the arbitrator in the outcome of the arbitration as it affects one of the parties. The interest or bias must be direct, definite, and capable of reasonable demonstration, rather than remote or speculative.

The following, though not exhaustive, are examples of circumstances where a challenge for cause would be granted. Arbitrators should consult the procedures of the SRO in which they are serving for specific guidance on disclosures and challenges.

Opinion and Bias

1. Arbitrator has a firm opinion or belief as to the subject of an action for which she/he is an arbitrator.
2. Arbitrator has a personal bias toward a party.
   
   

Business or Personal Relationships

1. Arbitrator is or was related by blood or marriage to any party, its attorneys, or witnesses.
2. Arbitrator is or was guardian or ward, conservator or conservatee, employer or employee, principal or agent, or debtor or creditor of either a party or an officer of a corporation which is a party. Arbitrator is the parent, spouse, or child of one who is related as above described.
3. Arbitrator is or was a member of any party's family, a business partner, vendor, customer, or client of any party, a surety or guarantor of the obligations of any party, is currently a creditor or shareholder of any corporate party, or has any business relationship with any party.
   
   

Previous or Current Involvement

1. Arbitrator is adverse to a party, its attorneys, or witnesses, or has complained against or been accused by any of them in another action, instituted or resolved during the past five (5) years.
2. Arbitrator or any member, shareholder, or associate of, or of counsel to his or her law firm has been in the relation of attorney and client with, or adverse to, any party within three (3) years of the filing of the arbitration claim.
3. The arbitrator is currently a party to or the subject of a complaint, arbitration, or litigation involving a securities investment.
   
   

Financial Interest

Arbitrator knows that she/he has, individually or as a fiduciary, or her/his spouse or minor child residing in her/his household has a financial interest in the subject matter in controversy or in a party to the arbitration proceeding, or any other interest that could be substantially affected by the outcome of the arbitration proceedings.

 

Should information regarding an arbitrator be disclosed during the course of a hearing that was not disclosed previously, a party may challenge the arbitrator for cause. The arbitrator should then consider withdrawing in accordance with Canon II of the Code of Ethics. Arbitrators should not feel offended if they are challenged on a particular case since challenges are generally not based on the ability or competence of an arbitrator.