Conflict Of Interest – Apparent Bias Of Arbitrators

As Lyndon Smith explains, there have been two noteworthy judgments by the Commercial Court this year on the subject of apparent bias of arbitrators. These decisions potentially have a wider application because, whilst they give guidance as to how the English courts will treat conflicts of interest of an arbitrator, the principles discussed, as a third case in the TCC has already demonstrated, apply equally to the appointment of adjudicators.

Both cases considered the apparent bias of a sole arbitrator based on an alleged conflict of interest.

In Cofely Ltd v Bingham & Knowles Ltd,1 the claimant's application was for the removal of the arbitrator during the course of the arbitration under section 24 (power of the court to remove an arbitrator) of the Arbitration Act 1996.

W Ltd v M SDN BHD2 followed soon afterwards in which the claimant challenged two awards by alleging serious irregularity under section 68(2) (challenging the award: serious irregularity) of the Arbitration Act 1996. In this case, the claimant also relied on the new IBA Guidelines to support its position.

In September 2016, the Cofely case was referred to in an adjudication enforcement case, Beumer Group UK Ltd v Vinci Construction UK Ltd.3

Despite all the discussion and developments surrounding these cases, both cases ultimately reconfirmed the well established common law position as to the basic test for establishing bias as set out in Porter v Magill.4 That is, whether:

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

Cofely Ltd v Bingham & Knowles Ltd

Background

Cofely Ltd (a major construction company) applied to have the arbitrator removed under section 24 of the Arbitration Act 1996 alleging apparent bias. The dispute related to the alleged breach of an agreement by Cofely to pay a success fee to Knowles (claims consultants) of £3.5m.

Knowles had been appointed by Cofely to advise upon and then progress its claims for an extension of time and associated additional costs relating to Cofely's contract with Stratford City Developments Ltd and the Olympic Delivery Authority to design, build, maintain and operate district energy services to the Olympic Park and Westfield Shopping Centre in Stratford, London.

Section 24(1)(a) of the Arbitration 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.

Cofely's concerns surrounded Knowles' request for the appointment of this particular Arbitrator. On his acceptance of nomination form, he had failed to disclose any prior involvement with Knowles and subsequent to the commencement of the arbitration and following the first award, the judgment of Eurocom Ltd v Siemens Plc5 was handed down in the Technology & Construction Court.

The Eurocom case concerned a summary judgment application made by Eurocom against Siemens in respect of an adjudication decision made by this arbitrator. The application failed on the grounds that Siemens had real prospects of successfully defending the claim on the basis that the adjudicator had no jurisdiction because of a fraudulent misrepresentation allegedly made by one of Knowles' employees when applying for the appointment of the adjudicator on Eurocom's behalf. It turned out that the adjudicator appointed (who was also the arbitrator in the Cofely...