The Possibility Of Costs Awards Against Arbitrators: A Claimant's Application To Recover Costs Following An Arbitrator's Withdrawal

• Published date: 22 July 2020
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Fenwick Elliott LLP
• Author: Mr Lyndon Smith

The recent case of C Ltd v D and X [2020] EWHC 1283 (Comm) (21 May 2020) considered whether the Claimant ("C") was entitled to recover costs following an arbitrator's withdrawal from a London Court of International Arbitration ("LCIA").

C argued that in reaching a decision on its application for interim relief, the arbitrator and second defendant ("X") failed to treat C fairly and impartially. C highlighted X's lack of experience in sitting as an arbitrator; something which C believed was not clear from X's curriculum vitae ("CV").

C applied to have X removed under section 24 of the Arbitration Act 1996 (Power of a Court to remove an Arbitrator). C also made a complaint to the Solicitor's Regulatory Authority ("SRA"). This ultimately led to X resigning on the basis that X's position had become untenable.

Following on from this, C was of the view that it should not be liable for the costs of the application and therefore made an application to the Court for X and the First Defendant ("D") to pay the costs of C's section 24 application. (note: X was the Second Defendant).

Background

C and D are both companies which carry out activities with philanthropic aims. C designs software and has created a mobile software application and database for use by refugees to help them identify and locate support services. D is a non-profit organisation which seeks to find and protect lost, abducted and displaced children.

C and D entered into a licence agreement on 29 August 2017 whereby C licensed a platform to D for it to be adjusted so as to make it more user-friendly to children. D secured a large grant (around '1.3m) to pursue the configuration. However, shortly after the release of the modified application, D sought to terminate the licence agreement for reasons that C maintained were unjustified. Following failed attempts to mediate, C commenced an arbitration in which it sought (i) the balance of the fee under the licence agreement ('51,061.81), (ii) damages (in the region of '115,000) and (iii) a declaration that the intellectual property of the modified application belonged to C.

C applied to the LCIA to appoint an arbitrator on an expedited basis. The LCIA appointed X on 29 November 2018 and X's CV was provided to the parties with the Notice of Appointment.

X had 35 years of experience as counsel, solicitor and mediator in commercial disputes, including LCIA proceedings. It was common ground that the LCIA was aware that X had not been appointed as an arbitrator in an LCIA arbitration prior to this appointment and it was X's position that the appointment had been accepted because of X's considerable expertise as a mediator and familiarity with the specialist subject matter of the claim.

X's CV set-out, what were termed: "Examples of cases X has been involved with either as counsel or Arbitrator include..."

Neither party to the arbitration challenged X's appointment at the time, nor were they involved in X's selection or appointment.

C made an application for interim measures and a hearing took place on 8 March 2019 but the application was dismissed by X.

C had concerns about X's treatment of its submissions and filed a challenge ("the first challenge") with the LCIA Court, complaining that X had failed to treat the parties fairly and impartially and that this might have arisen due to X's lack of experience as an arbitrator.

X responded refuting the claims and refused to resign. X refuted the allegations of bias...