Example cases of conflict
Halliburton v Chubb [2020] UKSC 48 - The Supreme Court unanimously held that the duty of disclosure is not simply good arbitral practice but is a legal duty in English law. It is a component of the arbitrator's statutory obligations of fairness and impartiality.
The arbitrator's duty of disclosure is to disclose matters which might reasonably give rise to justifiable doubts as to his or her impartiality. A failure to disclose relevant matters is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias.
The legal duty of disclosure does not, however, override the arbitrator's duty of privacy and confidentiality in English law. Where information which needs to be disclosed is subject to a duty of confidentiality, disclosure can only be made if the parties owed confidentiality obligations give their consent. Such consent may be express but may also be inferred from the arbitration agreement itself in the context of the custom and practice in the relevant field of arbitration.
In assessing whether an arbitrator has failed in a duty to make disclosure, the fair-minded and informed observer will have regard to the facts and circumstances as at and from the time the duty arose. In contrast, in assessing whether there is a real possibility that an arbitrator is biased, the fair minded and informed observer will have regard to the facts and circumstances known at the time of the hearing to remove the arbitrator.
The Supreme Court went on to dismiss the appeal against the refusal to remove an arbitrator appointed in multiple arbitrations arising from the Deep Water Horizon incident. In considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. The courts will apply that objective test, having regard to the particular characteristics of international arbitration, including the private nature of most arbitrations.
Almazeedi v Penner [2018] UKPC - 3, a former English Commercial Court judge, had been appointed as an ad hoc judge of jurisdiction A. He was also subsequently appointed as an ad hoc judge of jurisdiction B. In the event, X never sat in jurisdiction B and did not receive any remuneration for his role. In jurisdiction A, X sat on a case involving state bodies from jurisdiction B. Officers of those bodies were Ministers in jurisdiction B and who also had the power of appointment for ad hoc judges. The majority of the Privy Council held that the appointment as an ad hoc judge of jurisdiction B ought to have been disclosed and, having failed to do so, the decisions made by X could not stand.
Austrian Supreme Court (15 May 2019 Docket 18 ONc 1/19w) - The Supreme Court considered whether the fact that an arbitrator and a party counsel in one arbitration act as co-counsel in another unrelated arbitration (Point 3.3.9 of the Orange List of the IBA Guidelines on Conflicts) cast doubt on the arbitrator's independence and impartiality and thus disqualified him from acting as arbitrator in the arbitration under review. The arbitral tribunal rejected the challenge. The Supreme Court concluded that, in light of preserving arbitration as a method of dispute resolution, if an arbitrator and a counsel act as co-counsel in an unrelated case, such circumstance - in themselves - raise justifiable doubt as to the arbitrator's independence and impartiality. Thus, the court decided that the challenged arbitrator should be removed from the tribunal.
Monster Energy Company v City Beverages LLC (17-55813 9th Cir. 2019) - a JAMS arbitration could not stand when the arbitrator failed to disclose that he was a co-owner of JAMS which benefited, and he therefore benefitted, from repeat business from Monster,
W v M [2016] EWHC 422 (Comm) - The arbitrator was a partner in a law firm. He sat almost exclusively as an international arbitrator and had no involvement in the running of the law firm or the provision of legal advice to its clients. The firm regularly advised a company which had the same corporate parent as the respondent, and earned substantial remuneration from doing so. Before accepting the appointment, the arbitrator had completed the firm's conflict check systems. About a month later, it became public knowledge that the parent company had acquired the respondent.
The conflict check did not alert him to any relationship. The fair-minded observer would therefore conclude that the arbitrator was somebody who did not know the relationship between the two companies, rather than being somebody who "must have known" and whose credibility was therefore to be doubted because of his failure to make a disclosure. The court accepted that the arbitrator would have made a disclosure had he been alerted to the situation. That showed a commitment to transparency that would be relevant in the mind of the informed observer. It also showed that the arbitrator could not have been biased by the firm's work for the parent company, because if it had been in his mind, which it was not, he would have disclosed it.
Schmitz v Zilveti 20 F. 3d 1043 - The Ninth Circuit Court of Appeals vacated an award on evident partiality grounds where an arbitrator's law firm had represented the parent of the respondent in 19 cases over 35-years, albeit the arbitrator knew nothing of it.
New Regency v Nippon Herald 501 F. 3d 1101 - The arbitrator had begun a role with a company days before an award. The new employer was negotiating a contract with New Regency but there was no evidence that the arbitrator knew of the negotiations. The award was vacated.
Ometto v ASA Bioenergy 549 Fed. Appx. 41 - The arbitrator's firm had acted in certain transactions involving an affiliate of one of the parties that were not identified due to deficiencies in the conflict check system. The Court accepted that the arbitrator did not know of the conflicts and confirmed the awards. In seeking to enforce the awards in Brazil, however, the Brazilian Court refused recognition due to the undisclosed conflict, rendering the awards largely useless.
Port Autonome de Douala v Douala International Terminal [10 January 2023] - The Paris Court of Appeal annulled an award for apparent bias in light of a relationship between the tribunal president and counsel where the president had praised his advocacy and said that he would consult him before any important decision.
Deutsche Lufthansa v Bolivarian Republic of Venezuela [PCA Case No. 2022-03] - The Secretary-General of the PCA accepted a challenge under UNCITRAL Rules to a party-appointed arbitrator in an investment treaty arbitration as the arbitrator's law firm colleague acted as tribunal president in a legally and factually similar arbitration against the same respondent state.
Newcastle United Football Company Limited v The Football Association Premier League Limited [2021] EWHC 349 (Comm) - An application to remove the presiding arbitrator nominated by the party appointees was refused. Premier League informed Newcastle of a number of matters that had not been disclosed by the presiding arbitrator, including that:
- He had advised Premier League four times in the past (although all more than two years before his appointment in the arbitration). This included giving advice on potential changes to the Rules.
- In the last three years Premier League's lawyers had been involved in 12 arbitrations in which the presiding arbitrator was appointed: including three appointed by that law firm.
Moreover, the presiding arbitrator contacted Premier League's lawyers (not copying Newcastle's lawyers) asking for permission to disclose the earlier advice and asking whether Premier League were happy for him to continue. The Court concluded that none of the grounds, whether considered individually or cumulatively, would lead a fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility of bias.
Axnoller Events Ltd v Brake [2021] EWHC 949 (Ch) - The test for apparent bias was not a question of discretion. Either there was no apparent bias, in which case the judge could not recuse him or herself, or there was bias, in which case the judge must recuse him or herself. Bias meant an attitude of mind that prevented the judge from making an objective determination of the issues before the court. The fair-minded and informed observer was objective, dispassionate, and was not a party in the proceedings. They should be treated as knowing all the relevant circumstances and were neither complacent nor unduly sensitive or suspicious. The fact that, in the course of deciding successive phases of the same or related litigation between the same parties or some of them, a judge had commented adversely on the credibility of a party or a witness or found their evidence to be unreliable would not, on its own, amount to a sustainable objection. The decision was fact-sensitive.
Manchester City Football Club Ltd v Football Association Premier League Ltd [2021] EWHC 628 (Comm) - In applying the test for bias, it was necessary to bear in mind the nature and circumstances of arbitral determinations. Arbitration was a contract-based jurisdiction; the degree of the arbitrators' independence and their prior knowledge was agreed between the parties, expressly or impliedly, subject to the Act's requirements. Halliburton expressly recognised that the level of the arbitrators' remuneration could mean that they had a financial interest in obtaining further appointments, but did not indicate that it was of concern.
Dommo Energia c/ Enauta Energia S.A. and Barra Energia do Brazil Petróleo e Gás [25 February 2020] - Barra advised that a new lawyer had joined its team. One member of the tribunal subsequently made additional disclosures. Dommo requested the arbitrator provide additional information concerning his ties a law firm, which represented Barra's two majority shareholders. The arbitrator provided the requested information, indicating that while he did work for a firm historically associated with that law firm, he did not know Barra's majority shareholders, that he was not aware whether the law firm had worked for them and that in any event he had never personally worked for or on matters concerning either of these shareholders. The court considered that the link with the law firm was indirect, and that he did not work on matters or did not come in contact with the majority shareholders of Barra or its subsidiaries during his time at the Saudi firm. The challenge was rejected by the Paris Court of Appeal.