The recent case of H v L & Others [2017] EWHC (Comm) 137 confirms that the appointment of an arbitrator in related references (and his/her failure to disclose those appointments) will not of itself create an appearance of bias so as to justify his/her removal under s.24(1)(a) Arbitration Act 1996 (the “Act”). The judgment summarises the test for apparent bias in an English seated arbitration and emphasises the integrity and impartiality of arbitrators as a central tenet of the same.  Separately, Popplewell J has also confirmed that orders granted pursuant to powers under the Act cannot be varied under CPR 3.1(7).

Background

The case concerned a challenge under s.24(1)(a) of the Act in a London seated arbitration between H (a corporation) and L (a Bermudan insurance company). S.24(1)(a) permits the court to remove an arbitrator where circumstances exist that give rise to justifiable doubts as to his/her impartiality. L challenged the appointment of the chairman (“M”) on the basis that his appointment as arbitrator in related proceedings gave rise to an appearance of bias. 

The arbitration arose out of claims against H and two others, including R. H had negotiated a settlement of the claims against it.  L refused to pay H’s insurance claim.  H consequently commenced arbitration proceedings in London against L.  The party-nominated arbitrators were unable to agree on a chairman and M was therefore appointed by the court under s.18 of the Act.

Grounds for challenge

H discovered that after M’s appointment he had also accepted a further two appointments as arbitrator involving claims by R (one of which was against L itself) which arose out of the same incident (the “R Arbitrations”). These appointments had not been disclosed to H. H brought a challenge under s.24(1)(a) of the Act, its principal argument in that regard being that M’s acceptance of appointment as arbitrator in the R arbitrations gave rise to an appearance of bias because:

 - M would receive a “secret benefit” from L in relation to these appointments (i.e. his remuneration in the form of arbitrator’s fees) and therefore be pre-disposed to determine the issues in favour of L; and

 - M would be privy to information in the R Arbitrations that was relevant to issues in the present reference and such information would not be disclosed to H.

Relevant principles under the act

H’s challenge under s.24(1)(a) was therefore based not on actual bias but on an allegation that M’s appointment in the R Arbitrations gave rise to apparent bias. For these purposes the court applied the principle of impartiality under s.33 of the Act which provides that the tribunal shall act “fairly and impartially between the parties…”

The judge then went on to set out, in 7 propositions, the relevant principles applying to an allegation of apparent bias under s.33. Amongst these he identified that the overarching test is the objective common law test set out in Porter v Magill [2002] AC 357:

whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased

Decision

Popplewell J dismissed the application under s.24(1)(a) of the Act. 

On the facts, the fair minded and informed observer would not consider that there was any apparent bias arising from M’s appointment in the R Arbitrations:

- There was no secret benefit.  The suggestion that the question of payment of fees would pre-dispose an arbitrator to decide the case in favour of the appointing party is inconsistent with the duty enshrined in s.33 of the Act.  Such a conclusion would also mean that no arbitrator could ever accept an appointment without being capable of removal for apparent bias.

- The same underlying facts often give rise to more than one claim and potentially more than one arbitration.  Arbitrators are able (and required under s.33) to disregard material encountered in related proceedings that has not been introduced in the present case. 

- It is desirable for an arbitrator with the relevant expertise to sit in related arbitrations arising out of the same factual circumstances.  Such an approach supports the principle of party autonomy in choice of appropriate arbitrator and promotes efficiency of proceedings (since the arbitrator is already familiar with the relevant facts).

Popplewell J also rejected further arguments relied upon by H to assert that an apparent bias existed in relation to M’s appointment in the R Arbitrations; the first was that M had failed to disclose the appointments, and the second were complaints concerning M’s conduct in responding to the complaint.

In an additional argument, H also asserted that, for other reasons, the court should invoke CPR 3.1(7) (court’s case management power to vary or revoke an order) to reverse its earlier order appointing M as arbitrator under s.18 of the Act. This was also rejected on the basis that the rule did not provide any basis for amending an order made under the statutory powers of the Act; the provisions of the Act (including those to effect or sanction removal) thus governed such matters.

Comment

The case summarises the authorities and principles applicable to challenges under s.24(1)(a) of the Act brought on the basis of an apparent bias.  It also addresses the wider policy ramifications for the efficacy of the arbitration process and the independence ascribed to arbitrators if the courts are too quick to accede to removal applications.  Separately, the case also confirms that the power to revise orders under CPR 3.1(7) does not apply to orders made under the statutory powers of the Act.

Charlotte Luker-Coombs

Managing Associate
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