Amy C Kläsener - The Guide to M_A Arbitration

@privlawlib

The Taking of Evidence

covered, in most circumstances and in the absence of the parties’ agreement to the contrary, by the discretionary power to conduct the proceedings and to determine issues of evidence taking.The IBA Rules suggest in Article 6(1) that the tribunal should first consult with the parties before it appoints its ‘own’ expert.

In practice, tribunals will usually strive to obtain the parties’ agreement (not necessarily a formal procedural agreement, but at least a common understanding) as to whether to have a tribunal-appointed expert or experts instructed by the parties. If the parties cannot agree, most arbitration laws and arbitration rules grant the tribunal the power to determine this. Despite this procedural discretion, the tribunal must consider whether its decision to have a tribunal-appointed expert or not to hear an expert at all could violate one party’s right to properly present its case.Another question as to the appointment of experts is not just whether to have party-appointed experts or a tribunal-appointed expert, but often whether to have both.The IBA Rules are a helpful source for the procedure on appointing experts and presenting written and oral expert evidence.

In M&A disputes, different kinds of experts may be retained. One aspect relates to the question as to how to qualify and assess an expert determination that was obtained prior to the initiation of the arbitration as a pre-arbitral step (see Chapter 3 on conflicts between expert determination and arbitration clauses). In most M&A disputes, the claimant claims compensation for certain damages or a price adjustment for which quantum experts will be needed (see Chapter 6 on the role of the quantum expert in M&A disputes). Apart from these kinds of experts, one might also need the assistance of experts on accounting or certain legal fields such as corporate, capital markets, competition, etc., in particular where foreign law is concerned.

55

© 2020 Law Business Research Ltd

@privlawlib

5

Special Issues in Connection with Warranty and Indemnity Insurance

Amy C Kläsener and Thomas H Webster1

Introduction

Insurance offerings have dramatically transformed M&A transactional practice. Whether obtained by the buyer or seller, insurance offers the possibility of externalising the risks associated with certain representations and warranties. Where difficult issues or the risk-aversion of either party may have blocked a transaction in the past, insurance now greases the wheels.

There have been only a handful of reported M&A disputes involving insurers, but it is already clear that warranty and indemnity (W&I) insurance2 will also affect M&A arbitration practice.This form of insurance has become widespread, and the number of claims raised underW&I policies is significant.3 The overwhelming majority of these insurance claims are satisfied under the policies or settled, but some are disputed. Little data is published regarding the number of claims under W&I policies that result in arbitration or litigation.Anecdotally, the authors have heard that the number of disputed claims, while still small, is rising.

Whatever the figures, this number and the impact of W&I insurance on arbitration practice will increase in the coming years. The impact will be felt in both the transaction phase and any dispute phase. In the transaction phase, the insurers’ and underwriters’ counsel now double-checks the due diligence performed by the buyer and influences the deal terms.4

1Amy C Kläsener is a partner at Dentons and Thomas H Webster is an independent arbitrator at the Law Offices of Thomas Webster.

2Or in US parlance ‘representation and warranty insurance’ or ‘RWI’.

3Estimates range from ca. 18-26 per cent (D. Froneberg, D. Dreier,AIG Studie 2019: Steigende Azahl der Meldungen und höhere Schäden; in, M&A Insurance, Grundlagen – Praxis – Trends (June 2019), p. 36) to 55 per cent (SRS Acquiom, Claims Insights Report (Dec. 2018), p. 16).

4See, SRS Acquiom, 2019 Buy-side Representations and Warranties Insurance (RWI) Deal Terms Study (October 2019).

56

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

In the dispute phase, the buyer will generally raise claims in respect of insured representations and warranties directly against the insurer5 under the W&I policy (instead of against the seller under the sale and purchase agreement (SPA)). In the following, we refer to this as an ‘M&A insurance arbitration’.Where there are multiple insurers, the buyer may need to raise claims against each, either individually or in a consolidated proceeding. Finally, although there have not yet been any reported cases, it is possible that a buyer may attempt to consolidate insured claims against the insurer under the W&I policy and uninsured claims against the seller under the SPA into a single proceeding.

This chapter seeks to identify some of the possible effects of this development in M&A arbitration and tentative solutions, including points for consideration for arbitration clauses.

We also consider the extent to which these issues are new or whether there are analogies that may be helpful, for instance claims involving indemnification or subrogation. In such cases, the seller often has the right to participate in or assume the right from the buyer to defend against the third-party claim. One of the differences in the case of M&A insurance arbitration is that the insurer does not merely have a duty to step into the shoes of the seller; the SPA and W&I insurance policy generally require that the buyer seek recourse solely against the insurer under the claim procedure in the policy (bypassing the seller altogether). Exceptions apply, for instance, if the claim is uninsured. An M&A insurance arbitration is similar to indemnification or subrogation disputes in that the party ultimately paying has the right to conduct the defence. However, in the typical indemnification or subrogation situation the party ultimately paying is the party responsible for the claim and most knowledgeable regarding the facts and circumstances. In the W&I insurance situation, this is seldom true: the seller invariably has better knowledge of the claims than the insurer.

Additional issues may arise in connection with an M&A insurance arbitration – these include coverage issues under the applicable substantive insurance law and procedural issues where a number of insurers are involved.

Primer on structuring W&I insurance policies

In larger transactions, one typically encounters multiple insurers and policies. There is a limit to the amount of coverage that any individual insurer will underwrite, for example, €100 million. If additional coverage is sought, the insurance is typically structured in layers, with each layer being insured separately by one or more insurers.Together, these policies build what is referred to as the insurance tower.

The insured typically agrees to a deductible.Above the deductible, there is the primary layer, with a first, second or additional excess layers above that. Imagine a medieval tower with a spiral staircase and guards at each landing. If each landing represents the attachment point of the coverage layer above it, the guard at each landing represents the threshold issue to be proved before the insured may proceed: even if the claim is covered by the policy, coverage of a layer is triggered only if the insured proves that the quantum exceeds the attachment point.

5Except as otherwise indicated, the discussion below focuses on the situation where the buyer is the insured and the seller is the party giving the warranty and indemnity.Although W&I insurance is also offered to sellers, the overwhelming majority of policies are issued to buyers in M&A transactions.

57

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

Insurers in the top excess layer will likely take the position that they should remain undisturbed until all skirmishes involving the lower layers have been resolved, with only the largest and most successful claims able to fight their way to the top of the tower.This can be likened to successive dispute resolution proceedings. However, the insured may prefer for all insurers to come down from their tower and face off on level ground in a single battle (consolidated proceedings) with not only the insured but also the buyer, who in our example is asserting the claims.

Each layer may be insured by a single entity, a group of insurers, or by a combination of such policies. In case of a group, the insured may enter into bilateral policies with each insurer or with a number of insurers. The insurers in a specific layer may be jointly and severally liable in case of a group or syndicate approach or not, in case of individual policies.

Each layer is priced differently based on the risk profile. Premiums for the primary layer (which is more likely to be called on) may be twice as high as those in the higher layers. Within a layer, insurers may act as a syndicate, each insuring part of the same layer of risk jointly and severally.The applicable substantive insurance law will define the types of insurance contracts and the liability of the insurers.

The insurance coverage is typically arranged by a broker on the insured’s side, who negotiates with arrangers on the side of the insurers. If issues of contractual intent arise, for instance whether or not the parties contemplated consolidated arbitration proceedings, many of the parties may not have considered the point at all.

An insurance tower of, say, €300 million might involve anywhere from three to 30 or more insurers, depending on the structure. Although an insured might prefer a simpler structure with fewer contractual partners with a view to future claim handling, the involvement of multiple insurers may ultimately reduce risk for the buyer. Moreover, the party seeking W&I insurance in the final days of a transaction will likely have little leverage to influence the structuring of the tower and may well have to focus on more direct issues relating to the transaction itself.

Negotiation and due diligence

The risk covered by W&I insurance will generally relate to the classic representations and warranties in an SPA.Those representations and warranties are of course usually subject to detailed negotiation and to extensive due diligence. Adopting W&I insurance introduces one or more third parties into that process.

Insurance companies generally engage experienced M&A lawyers to review the due diligence conducted by the buyer (underwriters’ counsel). However, insurers are generally granted access only in the final stages of a transaction and typically have only days, or at most one to two weeks, to complete their due diligence, evaluate the risks, and decide which warranties and indemnities to insure.

58

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

The questions to resolve will include whether the interests of the transaction parties and the insurer are aligned; whether the availability of insurance reduces the buyer’s incentive to conduct a thorough due diligence procedure,6 and whether insurers improve the fact-finding process because they are a second set of eyes and more professional and objective than the transaction parties.

How the involvement of W&I insurers will influence the transaction process is a matter for debate. Insurers have less of a stake in the transaction being completed and are focused solely on risk. If the seller is the insured, the insurers will generally wish to be certain that all relevant disclosure is documented and appropriately reflected in the SPA and disclosure schedules.With respect to representations qualified by the seller’s knowledge, however, sellers may have less of an incentive to acquire knowledge of relevant facts at the target. Buyers may be less objective than insurers, focused as they are on factors such as opportunities or synergies with their existing businesses.

Whether the W&I insurance is procured by the seller or the buyer, there are issues as to confidentiality7 and expertise8 that must be dealt with.

Do insured sellers grant more generous representations and warranties than they would if they bore the full risk?9 Where the seller procures the insurance, the seller can presumably be relied on to seek to limit its liabilities and therefore its premiums. However, where the risks are insured, the seller may have less of an incentive.Where the buyer is the insured, its insurance will depend on the scope of the warranties and indemnities that it obtains, and it will be in its interest to seek to maximise recoveries. In so-called ‘synthetic’ policies, the seller provides no representations or warranties in the SPA at all, with the insurer covering warranties specified in the policy.

What is clear is that insurers already play an active role in the drafting of the insured’s representations and warranties.W&I insurers bring extensive transaction and claims experience and an interest in clearly defining the insured risks to the drafting process. Clarity in drafting likely assists parties to understand their obligations and decision-makers to resolve disputes under the insurance policy and SPA.

Purchase price adjustments

In many SPAs there is provision for a post-closing or completion purchase price adjustment with, in some instances, an expert accounting determination of the amount of the adjustment to be made (see Chapters 6 and 7).The SPA may address the risk of changes in

6J. Risse & H. Haller,‘Post M&A Arbitration:Warranty & Indemnity Insurance Changes the Scene,’ Baker McKenzie Newsletter, 12 January 2017, available at https://globalarbitrationnews.com/post-ma- arbitration-warranty-indemnity-insurance-changes-the-scene/.

7For example, in buyer-side policies, insurers typically require access to due diligence reports prepared by the buyer’s counsel or other advisors, which may be confidential and privileged.

8For example, although an insurer will in fact rely on an auditor’s report, the auditor’s reports will generally exclude reliance by third parties.Whether insurers will request reliance letters, and whether auditors will grant them, are questions that remain open at present.

9J. Risse & H. Haller,‘Post M&A Arbitration:Warranty & Indemnity Insurance Changes the Scene,’ Baker McKenzie Newsletter, 12 January 2017, available at https://globalarbitrationnews.com/post-ma- arbitration-warranty-indemnity-insurance-changes-the-scene/.

59

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

the financial status of the target between signing and closing by means of warranties (e.g., as to the net working capital) or may provide for a purchase price adjustment mechanism to reflect these changes.

This can create an issue as to the coverage under the W&I policy, which may cover the warranty but not the price adjustment itself. Many insurers exclude coverage of purchase price adjustments. However, if the price adjustment relates to an issue that is also covered by a representation or warranty, the buyer could theoretically proceed either through the price adjustment clause in an expert determination or a claim under the W&I policy. Perhaps to counteract this risk, in insured transactions, purchase price adjustments are usually by a separate escrow in insured transactions.10

In addition, there is sometimes a dispute as to whether the expert accounting determination is properly viewed as final or final subject to manifest error and the effect of that determination on any subsequent arbitration (see Chapter 3).Where the arbitration is between the buyer and the insurer, the argument that the expert determination is not binding may be stronger (assuming that there is no agreement to the contrary in the policy).

All of this is a matter for drafting of the SPA and the W&I policy. However, where the boundary between issues subject to expert accounting adjudication and arbitration remains unclear, or expert determinations are called into question, the procedure may be further complicated by the involvement of an W&I insurer.

W&I insurance’s impact on arbitration

In a dispute, one initial issue will be whether the insurer is a party to the arbitration between buyer and seller, or whether the buyer may or must proceed first against the insurer under the SPA and the policy.

We understand that a current trend is to require the buyer to seek recourse against the insurer rather than the seller. This arrangement enables the seller to avoid in most cases the time and cost of dispute resolution proceedings. Additionally, we understand that the insurer frequently forfeits all subrogation rights against the seller except in cases of fraud.

Where the buyer is required to claim first under the policy and the only subrogation rights retained by the insurer are in case of fraud, formal dispute resolution proceedings are limited to three cases: (1) between the buyer and insured where the buyer contests denial of a claim under the policy; (2) between the insurer and seller for subrogation of claims arising from the seller’s fraud; or (3) between the buyer and the seller in relation to any uninsured claims.

Where the buyer is not required to proceed first against the insurer, a key issue is whether the insurer will participate directly in the arbitration. Some arbitration rules, such as the LCIA Rules, provide for the possibility of additional parties, subject to certain limits. However, where the parties wish to provide for the possibility of the insurers participating in the arbitration itself, it is highly advisable to include consolidation provisions in the arbitration clauses of both the SPA and the W&I policy.The issue is crucial as the wording

10See, SRS Acquiom, 2019 Buy-side Representations and Warranties Insurance (RWI) Deal Terms Study, p. 19 (October 2019).

60

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

of the W&I clauses can generally be expected to track liability under the SPA.Therefore, as illustrated in Ageas v. Kwik-Fit & Anor, liability under the SPA may well determine liability under the W&I insurance (subject to any deductible).11

As regards M&A insurance arbitrations between insurers and the insureds (usually the buyers and usually in respect of denied claims), there is an issue as to who the parties – or active parties – to the arbitration will be. For example, if there are multiple insurers contributing to various layers of an insurance tower, as discussed above, there will likely be as many separate policies and corresponding arbitration agreements.12

Decisions regarding a common arbitration may be quite difficult if left to the dispute stage given that the insurers may have differing interests depending on their different attachment points and different approaches to procedural issues. Given the time and cost associated with disputes regarding jurisdiction over additional parties or contracts, parties are well advised to consider and provide for an agreed approach at the contracting stage (see ‘Joinder or consolidation’, below).

All of this may create issues regarding the parties to, and scope of, any M&A insurance arbitration, as is illustrated in the complex situation dealt with in British-American Insurance v. Matelec Sal & Anor, which concerned two arbitrations relating to one insurance policy.13 Another option for parties to consider is a mechanism to permit decision-making with respect to the arbitral process at the time of the dispute, which could be modelled on the role of the agent of a financing syndicate in a loan facility.The agent is usually empowered to take minor decisions itself and more material decisions with the consent of the financing parties holding a majority interest in the facility. In many cases with syndicated loans, the financing parties share pro rata in all recovery. Therefore the syndicate lenders’ interests are aligned. However, where the interests of insurers in an insurance tower are not aligned (e.g., where a claim affects only insurers in the lower layers), this model could be unfair. Allowing decisions by a majority of insurers or weighted decision-making might be an option, assuming of course that the insurers have a say in joint decision-making.However,this approach runs contrary to insurers’traditional desire to retain as much control as possible over the legal situation. There are also the classic issues of what the insured may do without the consent of the insurers. In one of the few reported cases in this area, the insured settled without the insurers’ consent.The insured’s claim was dismissed in court proceedings as not falling within the excess coverage but also because the insured did not seek the insurers’ consent as it was

required to do under the W&I insurance policy.14

11Ageas (UK) Limited v. Kwik-Fit (GB) Limited and AIG Europe Limited [2014] EWHC 2178 (QB). In that case, the claim under the insurance policy was essentially a pass-through of the warranty claim under the SPA subject to deduction of the minimum.

12Insurers generally enter into separate policies with the insured, although in some cases groups of insurers may enter into a single policy (e.g., as open co-insurers) with the insured that provides for several (not joint) liability (see, e.g.,Article 77 of Germany’s federal Insurance Contract Law).

13British-American Insurance (Kenya) Ltd. v. Matelec Sal and Thika Power Ltd. [2013] EWHC 3278 (Comm).The parties in that case appear to have incurred substantial costs to determine whether arbitration provisions were applicable before even beginning to deal with the underlying issues.

14See Epstein and Keyes,‘Court Denies Coverage under Reps and Warranties Policy’, NewYork Law Journal Vol. 258 No. 101, Nov. 27, 2017. Ratajczak et al v. Beazley Solutions Ltd. 2016 WL 8117956 (ED Wisconsin 2016), and 870 F. 3d 650 (7th Cir 2017).

61

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

How does the involvement of a W&I insurer impact the truth-seeking function of the arbitration process? M&A arbitration between seller and buyer may already involve one step of removal from the most knowledgeable persons, who oftentimes are (or were) at the target.Where an insurer with little or no previous involvement with the target or the transaction steps into the shoes of the buyer, the insurer is now two steps removed from personal knowledge of the facts and circumstances of the case. In particular, when prosecuting claims of fraud by the seller, the insurer may be at an informational disadvantage.15

The effects of this on arbitral procedure are not yet known.We may begin to see more requests for judicial assistance in the taking of evidence from tribunals. In any case, where the seller or the buyer is no longer involved, both parties and tribunals will need to expend additional time in finding the facts.

This impact on truth finding may be greater in relation to W&I insurance than insurance of other externalised risks. In the case of liability insurance, for instance, the focus is usually on either certain external factors or the insured’s own behaviour. In the case of W&I insurance, whether a representation was correct as given or whether a warranty is observed is largely within the control of the seller or target.There may be more room for insurance fraud in the M&A context than with typical liability insurance.

Where issues regarding the interpretation of the insurance policies or their arbitration clauses arise in an arbitration, it is possible that none of the parties to the arbitration is able to provide evidence of intent or of the matrix of fact relating to the underlying transaction.This is because the policies are frequently arranged by the lead insurer and negotiated with the buyer’s broker.These negotiations may take place simultaneously with the various layers of insurers or sequentially, and these negotiations are typically done in the final days of a transaction.

Joinder or consolidation

When disputes arise that involve a number of insurers, the parties and arbitrators may be faced with thorny issues involving joinder and consolidation. Insurance policies in a tower are typically based on a form (usually the form of the buyer’s insurance broker). However, even if the policies contain identical arbitration clauses, consolidation of proceedings will not be possible under the rules of most arbitral institutions without agreement of all of the parties.16

If the buyer has procured insurance from more than a single insurer, any dispute may involve a multiparty and multi-contract situation. From the buyer’s perspective, it may make sense to resolve all coverage issues in a single proceeding. However, implementing this in arbitration requires careful drafting ex ante, and the insurers may have less interest in common proceedings.

15Insurers typically gain access to all information and documentation in possession of the buyer/insured, but claims of fraud often rely on evidence that is with the seller. In such cases, insurers would be well advised to ensure that the dispute resolution provision under the SPA provides for access for the insurers to relevant documents, which is something that may not be available in case of litigation in many civil law countries.

16For an exception see Article 22.1(viii) of the LCIA Rules.The corresponding provision of the 1998 LCIA Rules was discussed in C v. D1, D2 and D3 [2015] EWHC 2126 (Comm), upholding the joinder of a party to the arbitration. (One of the authors was presiding arbitrator.)

62

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

From the perspective of the insured, consolidation can be a key tool in reducing the length and cost of proceedings. If the tower consists of a primary and two excess layers, an insured could face three consecutive proceedings, in part covering similar or identical issues of coverage and quantum.

From the insurers’ perspective, consolidation may not be the preferred option. Insurers compete fiercely with each other. Each insurer may have a different approach to settlement. They will likely want to be represented by separate legal counsel, and they may not be able to agree on an arbitrator.

Insurers in the higher layers may resist consolidation on the basis that they have the right to wait until the insured has exhausted its remedies against insurers in the lower layers.This argument can be based on economics, as each layer of insurance is priced in light of all of the relevant risks, including the risk that the insurer will need to defend a claim in arbitration.

From a substantive perspective, the policies may contain different wording and trigger different coverage issues. When interpreting the policy wording to ascertain the parties’ intentions, recourse may have to be had to the insurance broker and arrangers who negotiated the policies on behalf of the insured and the insurers, who may not be parties to the arbitration.

Most importantly, as mentioned above, the interests of insurers in different layers will rarely be aligned. Insurers in the lower tiers may focus on coverage issues, whereas in the higher tiers they may focus more on quantum issues (whether the attachment point triggering their policy has been reached or whether the claim exhausts the layer).The insurers may have little incentive to work together.

From the arbitrators’ perspective, consolidated proceedings may be more difficult to handle because of the number of parties, counsels, briefs and differing perspectives.

Comparison with dispute resolution in the excess liability market

Although W&I insurance is relatively new on the market, other insurance products may be structured similarly and may provide a useful point of comparison. In terms of dispute resolution procedures, the interests of the insured and the insurers may be comparable with those of the insured and the insurers in relation to W&I insurance. Liability insurance tends to be structured similarly, in a tower with excess layers.

The Bermuda Form policies generally foresee London or Bermuda seated institutional arbitration.17 The forms have not yet adopted language foreseeing consolidated proceedings, and consolidation in either London or Bermuda is a matter of consent. For the reasons discussed above, insurers in a tower may have reasons to object to consolidation.18

17See Harris, Scorey and Geddes, The Bermuda Form: Interpretation and Dispute Resolution of Excess Liability Insurance, Oxford University Press.

18For a discussion, see Matin,‘The Bermuda Form Arbitration Process:A Glimpse Through the Insurers’ Spectacles’ (Norton Rose Fulbright), p. 8, available at https://www.nortonrosefulbright.com/-/media/files/ nrf/nrfweb/imported/20171107--the-bermuda-form-arbitration-process-a-glimpse-through-the-insurers- spectacles.pdf?la=en&revision=30e91ed8-cfc1-40e1-9696-66af3cf0bf26.

63

© 2020 Law Business Research Ltd

@privlawlib

Special Issues in Connection with Warranty and Indemnity Insurance

Alternatives to consolidated arbitral proceedings

There are a number of alternative ways to structure arbitral proceedings short of full consolidation.

These include appointing the same tribunal for all consecutive proceedings.19 This has the advantage of being easier to negotiate than full consolidation after the fact and may go a long way towards ensuring that the holdings in the various proceedings are consistent with each other.

As a variation, the parties could also appoint separate tribunals at the same time, with the higher layers agreeing to stay proceedings until the tribunal has issued an award under the primary policy.

Another option would be for the insurers in the higher layers to participate in the primary policy proceeding as observers or interveners.This could be done whether or not the higher layers agree to be bound by the awards. However, the primary policy insurer may not see any advantage in adding potentially controversial voices to its proceeding, in particular as primary insurers cannot know how and to what extent the interventions of the other insurers may complicate or delay the proceedings, potentially adding significant cost to the arbitration. Such an arrangement would at any rate need to include an agreement as to the division of costs among the insurers.

Parties and tribunals may consider procedural protections to ensure that the parties in consolidated proceedings are treated fairly. In particular on the insurers’ side, interests may not be aligned, and care must be taken to ensure that the interests of the insurers are not undermined by contradictory pleading. One way of addressing both the economics and fairness issues is to allow separate briefs to be submitted sequentially, as is frequently provided for in multiparty arbitration.This allows an insurer in a higher layer to wait and see whether the insurers in the lower layers have covered the relevant points and restrict its briefing to isolated points of difference and points specific to the higher layers. Staggering filings may satisfy the expectation of insurers in the higher layers that they will bear a smaller proportion of the cost and burden of proceedings.

Issues involving appointment of the arbitral tribunal

The appointment of arbitrators with the appropriate expertise may pose particular challenges in the case of arbitrations underW&I insurance policies.These disputes likely require expertise in insurance law and issues typical in M&A arbitrations, such as transaction experience and financial acuity. Parties will have to consider in any particular case which of these areas of expertise is more important.As the relative importance of these two areas of expertise cannot be foreseen when the policies are entered into, parties should be wary of defining too precisely the qualifications of arbitrators in the arbitration agreement.

The appointment process becomes much more difficult in the case of large towers made up of a number of individual insurers or syndicates, in particular where arbitrators are from firms with insurance practices. Conflicts of interest may be so difficult to handle

19In two related LCIA arbitrations there was provision for a sole arbitrator in one arbitration and a three-person tribunal in the other.The LCIA appointed one of the authors as sole arbitrator and presiding arbitrator.A challenge based on the parallel appointments was dismissed by the LCIA Court.

64

© 2020 Law Business Research Ltd