This blog post was first published on the Practical Law arbitration blog.
Tribunals have a fundamental duty to act fairly and impartially under section 33(1)(a) of the English Arbitration Act (“AA 1996“). Where a party feels an arbitrator is failing in their duty, pursuant to section 24(1)(a) of the AA 1996:
“A party to arbitral proceedings may… apply to the court to remove an arbitrator on any of the following grounds – that circumstances exist that give rise to justifiable doubts as to his impartiality…”
English law stipulates a clear, consistent and rigorous approach to determining whether there are justifiable doubts as to an arbitrator’s impartiality, namely the common law test of apparent bias (Locabail v Bayfield). This test examines whether the fair-minded and informed observer, looking at all the facts, would consider there to be bias (Porter v Magill).
Despite this, parties may still come away from arbitral proceedings with concerns that an arbitrator is not impartial, even if such concerns are not sufficient for the court to remove the arbitrator. This problem has led to a renewed debate regarding whether we should consider alterations to the system of unilateral appointments as a solution.
Jan Paulsson and Sundaresh Menon SC, among others, have questioned the status quo. They do not suggest the abolition of party nomination but that improvements are needed, such as creating a disciplinary body for arbitrators or improving the rules on pre-appointment interviews.
Two recent English court cases have illustrated that actions creating an impression of bias may not be sufficient to meet the English law test for apparent bias.
What the English courts say
In H v L and others, H and R had been co-defendants in American proceedings. H settled the claim and sought to claim on its insurance policy with L. L argued the settlement was unreasonable and it (reasonably) had not consented to it. As the co-arbitrators could not agree on a third arbitrator, the selection was referred to the High Court under the arbitration agreement. Following a contested hearing, Flaux J selected M.
M disclosed his role in previous arbitrations involving L. H raised no objection to M’s impartiality at that stage. However, following M’s appointment, H learnt of several facts which led to it making an application to court to have M removed as an arbitrator. H argued M’s conduct gave rise to the appearance of bias due to:
- M’s acceptance of appointments in arbitrations relating to claims brought against R arising from the same underlying American proceedings.
- M’s failure to disclose those appointments to H.
- M’s response to the challenge to his impartiality.
M acknowledged that “it would have been prudent for [him] to have informed [H]…”as it was important both parties “should share confidence that the dispute would be fairly determined on the evidence and the law without bias”.
Popplewell J dismissed H’s claims, finding that the fair-minded and informed observer would not have found any grounds to remove M. However, M’s acknowledgment suggests his actions gave H reasonable concerns as to his impartiality even if they were not sufficient to meet the English law test for apparent bias.
In Symbion Power LLC v Venco Imtiaz Construction Co, the court considered a challenge under section 68 of the AA 1996. However, serious concerns were also raised by the judge (apparently on her own initiative) regarding the conduct of Symbion’s party-nominated arbitrator.
Symbion’s arbitrator had sent an email to Symbion’s counsel headed “HIGHLY CONFIDENTIAL: NOT TO BE USED IN THE ARBITRATION”. It was not copied to the other party or arbitrators. The email expressed negative views about the tribunal chairman.
Jefford J stated that such unilateral contact had been wholly inappropriate because:
“the ability of each party to appoint an arbitrator is intended to… give the parties confidence in the balance and fairness of the tribunal. The party-appointed arbitrators patently do not represent the party that appointed them and they are under a duty, as individual arbitrators and as a tribunal, to act fairly and impartially.”
Although such a unilateral communication “may give rise to concerns that the arbitrator is not acting fairly or impartially”, it did not lead (perhaps surprisingly) to there being justifiable doubts as to the arbitrator’s impartiality, as, consistent with the English law test, this would turn on the facts of the case as a whole.
Fear of the unknown
Although the English law test was correctly applied, one can see how the parties in the above cases could nonetheless have come away with reasonable concerns as to the arbitrators’ impartiality. Such concerns may create doubt for parties as to the fairness of arbitration proceedings. It does not necessarily matter whether a party has evidence to support its doubt; the impression that some of the tribunal may be influenced against them is enough to give rise to such doubts.
These doubts often arise in part from the misconception that a party-nominated arbitrator is there to represent the relevant party. While this is clearly incorrect, it highlights the question of whether arbitration needs to take steps to address the risk that issues of apparent bias may give rise to doubts about the integrity of the arbitral process.
What can be done?
Some of Paulsson and Menon’s proposals merit serious consideration. Universal adoption of the London Court of International Arbitration (“LCIA“) default appointment rule, limiting the length of pre-nomination interviews and ensuring transcripts of such interviews are made available to the other side may increase parties’ confidence in the impartiality and fairness of arbitrators.
A disciplinary body for arbitrators would inspire greater confidence in arbitration. The proposed disciplinary system would start with an institutional investigation followed by a Charter Institute of Arbitrators (“CIArb“) investigation. CIArb could then punish any guilty arbitrator, publishing, and notifying other institutions of its findings.
However, rigorous scrutiny is required. Any proposals must strengthen arbitration and so care must be taken that they are properly implemented and cannot be used by parties as a tactical tool to delay proceedings or influence arbitrators’ decision-making.