The topic of arbitrator bias has been the subject of two recent English law cases: W Limited v. M SDN BHD [2016] EWHC 422 (Comm) (which was covered in our recent blog post here) and Cofely Ltd v Bingham & Knowles Limited [2016] EWHC 240.
These cases provide useful guidance on the factors considered by the English courts when assessing whether an arbitrator is conflicted and the circumstances under which the court will agree to have the arbitrator removed.
Cofely Ltd v Bingham & Knowles Limited
Background:
The claimant, Cofely Ltd (“Cofely“), brought an application for the removal of an arbitrator under section 24 of the Arbitration Act 1996 (the “Act“) alleging apparent bias on the part of the arbitrator, (“B”), who had been appointed in respect of a dispute between Cofely and Knowles Ltd (“Knowles“) over an alleged breach of an agreement to pay Knowles a £3.5 million success fee.
Section 24(1)(a) of the Act enables a party to apply to the court to remove an arbitrator on the grounds that circumstances exist that give rise to justifiable doubts as to his impartiality.
Decision:
The court considered and affirmed the common law test for apparent bias, set out in Porter v Magill, which looks at whether “the fair minded and informed observer, having considered the facts would conclude that there was a real possibility that the tribunal was biased“.
Cofely relied on seven grounds in establishing apparent bias of the arbitrator, five of which the court considered to cumulatively raise the real possibility of apparent bias. The court therefore held that the grounds for the removal of the arbitrator were established by reference to the common law “fair observer” test. In particular, the court made the following observations on the relevant grounds:
- In a previous case, Eurocom Ltd v Siemens Plc [2014] EWHC 3710, Knowles had been found to have influenced the appointment of B as an adjudicator, which the court considered to be relevant evidence. The fact that Knowles had the ability to steer the appointment process justifiably raised concerns by Cofely as to B’s impartiality in the present case.
- B responded to what the court deemed to be justified questioning about his professional relationship with Knowles in an evasive and defensive manner, raising concerns that he may be biased.
- B called an unrequested hearing to consider Cofely’s requests for information about his relationship with Knowles during which the court agreed that B “descended into the arena on this topic in a wholly inappropriate way by seeking to press the parties into a conclusion that would justify his remaining as arbitrator”.
- Over the previous three years, B acted as arbitrator or adjudicator 25 times in cases involving Knowles as a party or the representative of a party. These appointments comprised 25% of the arbitrator’s income over that period. Further, in 18 of the 25 cases, he found in favour of Knowles or Knowles’ client.
- B’s witness statement in the court proceedings showed that he did not acknowledge the relevance of his relationship with Knowles or the need to disclose it. This indicated a lack of objectivity and hence an increased risk of unconscious bias.The case serves as useful reminders of the primacy afforded to the “fair minded and informed observer” test in cases involving allegations of arbitrator bias.
- The case, together with W Limited highlights the importance of transparency and disclosure where an arbitrator has a potential conflict of interest. In Cofely, the arbitrator’s lack of awareness regarding the relevance of his relationship with one of the parties involved in the arbitration, and his reluctance to disclose information about it, was viewed by the court as an indication of a lack of impartiality. In contrast, the arbitrator in W Limited was seen as willing to disclose conflict of interests. As a result, the court considered his lack of knowledge about an indirect relationship between his firm and one of the parties to the arbitration as genuine and lacking apparent bias.
- The final two grounds relied on by Cofely concerning (i) B’s engagement in allegedly inappropriate unilateral communication with Knowles and (ii) B’s difference in approach to the parties’ respective section 47 applications for partial awards were not found by the court to support a claim of apparent bias of B.
