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2016 (Kyo) 43

2017.12.12
2016 (Kyo) 43
Minshu Vol. 71, No. 10
Decision on whether or not an arbitrator’s abstract statement to the parties that there is a possibility of occurrence of events that “would likely to give rise to doubts as to his/her impartiality or independence” as referred to in Article 18, paragraph (4) of the Arbitration Act causes such events to constitute facts “which have already been disclosed” as referred to in the same paragraph
Case of appeal with permission against the appeals court’s ruling to revoke the decision to dismiss a petition for revocation of an arbitral award
Decision of the Third Petty bench, quashed and remanded
Osaka High Court, Decision of June 28, 2016
1. An arbitrator’s abstract statement to the parties that there is a possibility of occurrence of events that “would likely to give rise to doubts as to his/her impartiality or independence” as referred to in Article 18, paragraph (4) of the Arbitration Act does not cause such events to constitute facts “which have already been disclosed” as referred to in the same paragraph.

2. In order for an arbitrator’s failure to disclose to the parties a fact that “would likely to give rise to doubts as to his/her impartiality or independence” as referred to in Article 18, paragraph (4) of the Arbitration Act to constitute a breach of the arbitrator’s obligation of disclosure imposed by the same paragraph, it is required that by the time of completion of the arbitration procedure: (i) the arbitrator had known the fact; or (ii) the fact should have ordinarily been found out by the arbitrator’s investigation conducted to a reasonable extent.
(For 1 and 2) Article 18, paragraph (1), item (ii) and paragraph (4) of the Arbitration Act



Arbitration Act

Article 18 (1) If the following grounds are found with respect to an arbitrator, the parties may challenge such arbitrator:

(ii) there are reasonable grounds to doubt the impartiality or independence of the arbitrator.

(4) During the course of the arbitration procedure, an arbitrator shall, without delay, disclose to the parties all the facts that would likely to give rise to doubts as to his/her impartiality or independence (excluding those which have already been disclosed).
The decision of prior instance shall be quashed.

This case shall be remanded to the Osaka High Court.
Reasons for the appeal filed by the counsels for the appeal, TERAZAWA Yukihiro, SATO Kyoko and KUNIMINE Kosuke



1. In this case, an arbitral tribunal consisting of a panel of three arbitrators rendered an arbitral award (hereinafter referred to as the “Arbitral Award”) on Arbitration Case No. Osaka 11-02 of the Japan Commercial Arbitration Association (hereinafter referred to as the “JCAA”) between the appellants and the appellees (hereinafter referred to as the “Arbitration Case”), against which the appellees filed a petition for revocation on such grounds as that the ground specified in Article 44, paragraph (1), item (vi) of the Arbitration Act (hereinafter referred to as the “Act”) existed.

2. According to records, the background of this case is as described below:

(1) In October 2002, appellee PREM Warehouse LLC, a U.S. corporation, entered into a sale and purchase agreement for air-conditioning equipment with SANYO Electric Air Conditioning Co., Ltd. and Sanyo Airconditioners Manufacturing Singapore Pte Ltd, a Singaporean corporation (hereinafter referred to as “SACMS”) (hereinafter referred to as the “SPA”).

The SPA contains an agreement that any dispute arising between the parties shall be referred to three arbitrators and be submitted to their award with Osaka being designated as the place of arbitration, in accordance with the Commercial Arbitration Rules established by the JCAA.

(2) In April 2004, appellant SANYO Electric Co., Ltd. succeeded to the rights and obligations of SANYO Electric Air Conditioning under the SPA. In January 2009, appellant SANYO Asia Pte Ltd, a Singaporean corporation, succeeded to the rights and obligations of SACMS under the SPA.

(3) In April 2011, appellant SANYO Electric became a wholly-owned subsidiary of Panasonic Corporation.

(4) In June 2011, the appellants filed an application with the JCAA for commencement of an arbitration procedure against the appellees for the Arbitration Case, seeking an arbitral award that would, among others, declare that the appellants had committed no breach of their contractual obligations under the SPA or other arrangements.

(5) By September 20, 2011, person A and two others were appointed as arbitrators for the Arbitration Case. A is an attorney-at-law affiliated with the Singapore office of King & Spalding LLP (hereinafter referred to as “K&S”).

On the same date, A prepared and submitted to the JCAA a written statement (hereinafter referred to as the “Statement”) containing the following statement: “Attorneys at K&S may in the future give advice to, or represent, clients in cases which are not related to the Arbitration Case but in which the clients’ interests conflict with those of any of the parties to the Arbitration Case and/or any of its/their affiliated companies. Attorneys at K&S may also in the future give advice to, or represent, any of the parties to the Arbitration Case and/or any of its/their affiliated companies in cases not related to the Arbitration Case.”

(6) Person B, who is an attorney-at-law, was not affiliated with K&S at the time of appointment of A as an arbitrator for the Arbitration Case, but has been affiliated with the San Francisco office of K&S since February 20, 2013 at the latest.

(7) The arbitral tribunal consisting of a panel of A and two other arbitrators rendered the Arbitral Award on August 11, 2014.

A failed to disclose to the appellants and the appellees as the parties to the Arbitration Case, by the time the Arbitral Award was rendered, the fact that B, who was affiliated with K&S, acted as a counsel for Panasonic Corporation of North America (hereinafter referred to as “Panasonic North America”), a U.S. corporation which is a wholly-owned subsidiary of Panasonic as with appellant SANYO Electric, in a suit against Panasonic North America pending in the United States District Court for the Northern District of California (hereinafter referred to as the “Fact”).

3. The court of prior instance revoked the Arbitral Award, stating that the Fact constituted a fact that “would likely to give rise to doubts as to his/her impartiality or independence” as referred to in Article 18, paragraph (4) of the Arbitration Act (hereinafter referred to as a “Fact Mentioned in Article 18, Paragraph (4) of the Act”) and ruling as follows in summary:

(1) The purpose of imposing on an arbitrator the obligation to disclose to the parties, without delay during the course of the arbitration procedure, all the Facts Mentioned in Article 18, Paragraph (4) of the Act excluding those which have already been disclosed, is to provide the parties with information which allows the parties to decide whether or not to challenge the arbitrator. Therefore, the facts so required to be disclosed must be specifically identifiable. In the Statement, A only abstractly represented that conflict-of-interest relationships may potentially arise in the future, which does not constitute a disclosure of the Fact.

(2) An arbitrator is not excused from the obligation to disclose a Fact Mentioned in Article 18, Paragraph (4) of the Act to the parties merely because he/she did not know such fact. Instead, an arbitrator should have an obligation to investigate facts that he/she can find out without trouble to disclose such facts. As for the Fact, A should have been able to find it out without particular trouble by following the procedure for checking the presence of conflict-of-interest relationships at K&S, the law firm with which A was affiliated. Although it is not known whether or not such an investigation was conducted in this case, even assuming that the Fact was not disclosed due to A’s failure to conduct such an investigation, A should be deemed to have breached his/her obligation to disclose the Fact. Considering that the obligation of disclosure imposed by Article 18, paragraph (4) of the Act is essential to ensure the impartiality of the arbitration procedure and the arbitrator, a breach of such obligation constitutes a ground specified in Article 44, paragraph (1), item (vi) of the Act.

4. However, while the court of prior instance’s ruling described in 3 (1) above is acceptable, its ruling described in 3 (2) above is not acceptable, for the following reasons:

(1) During the course of the arbitration procedure, an arbitrator is obligated to disclose to the parties, without delay, all the Facts Mentioned in Article 18, Paragraph (4) of the Act (Article 18, paragraph (4) of the Act). The purpose of this obligation is understood as to secure the effectiveness of the system for challenging an arbitrator by allowing the parties to appropriately file a petition for a challenge by causing the arbitrator to disclose facts more broadly than facts constituting “grounds to doubt the impartiality or independence of the arbitrator,” which are grounds for a challenge (paragraph (1), item (ii) of the same article). If any of the Facts Mentioned in Article 18, Paragraph (4) of the Act are deemed to be facts “which have already been disclosed,” the arbitrator has no obligation to disclose such facts again (the text in the parentheses of paragraph (4) of the same article). However, if an arbitrator’s mere abstract statement to the parties that there is a possibility of occurrence of events that will constitute Facts Mentioned in Article 18, Paragraph (4) of the Act causes such events to constitute facts “which have already been disclosed” as referred to above, the parties would be made unable to appropriately file a petition for a challenge based on specific facts, which may result in disregard of the purpose of the said paragraph which intends to secure the effectiveness of the system for challenging an arbitrator. This would be inappropriate.

Therefore, it is appropriate to understand that an arbitrator’s abstract statement to the parties that there is a possibility of occurrence of events that will constitute Facts Mentioned in Article 18, Paragraph (4) of the Act does not cause such events to constitute facts “which have already been disclosed” as referred to in the same paragraph.

Let us apply the above arguments to this case. A merely abstractly stated in the Statement that conflict-of-interest relationships may potentially arise between A and other attorneys-at-law affiliated with K&S. This statement should not be regarded as causing the potential relationships to constitute facts “which have already been disclosed.” The court of prior instance’s ruling described in 3 (1) above is acceptable as consistent with the above. The reasons for appeal on this point are unacceptable.

(2) Now, as described above, an arbitrator has an obligation to disclose to the parties all the Facts Mentioned in Article 18, Paragraph (4) of the Act, and it is obvious that an arbitrator is obligated to disclose Facts Mentioned in Article 18, Paragraph (4) of the Act if he/she is aware of them. Considering, in addition to the intention of Article 18, paragraph (4) of the Act as described above, the fact that the same paragraph does not limit the facts required to be disclosed to those that are known to the arbitrator, the arbitrator should be obligated to disclose to the parties facts that should ordinarily be found out by his/her investigation as to the presence of Facts Mentioned in Article 18, Paragraph (4) of the Act conducted to a reasonable extent.

In addition, in light of the fact that the same paragraph does not limit the timing at which an arbitrator is obligated to disclose Facts Mentioned in Article 18, Paragraph (4) of the Act other than by merely stating “During the course of the arbitration procedure,” and that the same paragraph only excludes facts “which have already been disclosed” from those required to be disclosed, an arbitrator should have the obligation of disclosure until completion of the arbitration procedure, whether or not any disclosure is requested by any of the parties.

Therefore, in order for the arbitrator’s failure to disclose to the parties a Fact Mentioned in Article 18, Paragraph (4) of the Act to constitute a breach of the arbitrator’s obligation of disclosure imposed by the same paragraph, it is required that by the time of completion of the arbitration procedure: (i) the arbitrator had known the fact; or (ii) the fact should have ordinarily been found out by the arbitrator’s investigation conducted to a reasonable extent.

However, it is not clear from the documents submitted up to the decision of prior instance whether or not A had known the Fact by the time the Arbitral Award was rendered. It is not clear either whether or not the Fact was known at K&S or what system was in place at K&S to check the presence of conflict-of-interest relationships between attorneys-at-law affiliated with it. It is thus not clear either whether or not the Fact should have ordinarily been found out by A’s investigation conducted to a reasonable extent by the time the Arbitral Award was rendered. The court of prior instance’s ruling described in 3 (2) above that A breached his/her obligation to disclose the Fact, which ruling was made without confirming the points described above, contains illegality that obviously affects its judgment. The reasons for appeal are well-grounded to the extent that they are consistent with the above arguments.

5. For the above reasons, the decision of prior instance should inevitably be quashed without considering the rest of the reasons for appeal. The Court thus remands this case to the court of prior instance to have it further and fully hear the case.

Accordingly, the Court unanimously decides as set forth in the main text.
Justice TOKURA Saburo

Justice OKABE Kiyoko

Justice KIUCHI Michiyoshi

Justice YAMASAKI Toshimitsu

Justice HAYASHI Keiichi
(This translation is provisional and subject to revision.)