Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HONOURABLE MR JUSTICE FLAUX
Between :
(1) - (4) A and OTHERS | Claimants |
- and - | |
(1) B (2) X | Defendant |
Iain Milligan QC and Nicholas Sloboda (instructed by White & Case LLP) for the Claimants
Paul Stanley QC (instructed by Dewey & LeBoeuf LLP) for the First Defendant
The Second Defendant did not attend and was not represented
Hearing date: 15 July 2011
Judgment
The Honourable Mr Justice Flaux:
Introduction and factual background
The claimants’ application is made under section 24(1)(a) of the Arbitration Act 1996 to remove a sole arbitrator and to challenge a partial award for serious irregularity under section 68(1) of the Act. As is usual in such cases, the claimants have joined as a defendant not only the other party to the arbitration but the arbitrator, but he has taken no part in the proceedings, indicating that he will abide by the decision of the court.
The background to the matter is as follows. The underlying dispute between the claimants and the first defendant arose under a share sale and purchase agreement (“SPA”) dated 26 July 2006, the details of which do not matter. On 31 March 2009, the first defendant commenced arbitration, pursuant to the Rules of the London Court of International Arbitration (“LCIA”), alleging breaches of the SPA. After some debate between the claimants’ solicitors (then SJ Berwin, now White & Case after the relevant team of solicitors moved firms) and the first defendant’s solicitors, Dewey & LeBoeuf, as to an appropriate QC to act as sole arbitrator, SJ Berwin suggested the second defendant (to whom I will refer as “X”) as someone with appropriate financial law experience. This was agreed by Dewey & LeBoeuf.
On 8 May 2009, X signed a Statement of Independence, as required by the Rules of the LCIA, confirming that he was:
“impartial and independent of each of the parties, and I intend to remain so, and there are no circumstances known to me likely to give rise to any justified doubts as to my impartiality or independence.”
His appointment as sole arbitrator was notified to the parties by the LCIA on 12 May 2009. At the time of his appointment, X had in the past received instructions as counsel from both firms of solicitors, once from SJ Berwin in 2005 and twice from Dewey & LeBoeuf (in 1999 and in 2004). This is entirely as one would expect of experienced and competent counsel specialising in the field of financial law in which the dispute arose for which he was appointed arbitrator. In particular, in 2004 he had been instructed by Dewey & LeBoeuf to act for clients of the firm who were involved in a dispute which led to litigation in the Commercial Court in which the clients were defendants (I will refer to this as “the Y litigation”). Neither the clients nor the dispute had any connection with either of the parties to the present arbitration.
The details of his involvement in that litigation are set out by X in a letter of 15 February 2011 to Mr Gerald Aksen who was appointed by the LCIA Court of Arbitration to decide the challenge to X as sole arbitrator made by the present claimants in circumstances which I will come to. I can summarise his involvement in the litigation by reference to that letter.
X was first instructed in September 2004 when he advised in consultation and in writing. Nothing further occurred until November 2006 when the claimants commenced proceedings against Dewey & LeBoeuf’s clients in the Commercial Court. X was involved in advising the clients, assisting with junior counsel in the production of pleadings and preparation of the case for the trial, which was due to commence on 3 March 2008. A few days before that, the parties reached a settlement and the proceedings were stayed in the usual way on the basis of a Tomlin order. At the time of his appointment by the LCIA in the present case, the stay remained in place and it can be inferred that X had no reason to suppose the litigation would be revived. It was merely a common enough example in the field of commercial law of a case where a QC appointed as arbitrator has, in the past, acted as counsel instructed by one or other of the firms of solicitors involved in the arbitration.
Pleadings were exchanged in the arbitration during the course of 2009 and 2010 and various procedural hearings took place in person and on the telephone as a consequence of which X issued five procedural orders in all, the last two following procedural hearings on 26 November 2009 and 6 May 2010. In November 2009, the hearing of the arbitration was fixed for September 2010.
It was in fact some time in late 2009 (but evidently before the first of those procedural hearings) that the settlement in the Y litigation broke down, since in his letter of 15 February 2011, X says that in late November 2009, he was instructed by Dewey & LeBoeuf to advise the clients, which he did in December 2009. It appears from his letter that it simply did not occur to X at that stage that he was acting again on an active basis as counsel instructed by a firm of solicitors who were one of the firms involved in an arbitration where he was arbitrator. This is unfortunate, since I have little doubt that if he had mentioned the revival of the Y litigation at the procedural hearing on 26 November 2009, both parties would have said they had absolutely no objection to his continuing as arbitrator and the current application would never have been made. However, it is clear that his failure to mention his involvement at that stage was inadvertent.
In the Y litigation, the stay pursuant to the Tomlin order was lifted and in February 2010 there was a short case management hearing which X attended. Although he does not say so in terms in his letter, I infer that it was at that hearing that the case was re-fixed for trial on 29 November 2010 and that, at that stage or soon thereafter, X was retained to act as leading counsel for the defendants at that trial. However, between that case management hearing and commencement of trial preparation in mid-November 2010, his involvement in the case was limited to briefly liaising with opposing counsel in March 2010, advising twice on the telephone in March and August 2010 and having a discussion with junior counsel in October 2010.
In the meantime, in the arbitration, White & Case took over from SJ Berwin acting for the claimants in August 2010 and the matter proceeded to an oral hearing in London between 6 and 16 September 2010, at which both parties were represented by solicitors and counsel. X obviously reserved his award and, following the hearing, there were written submissions on costs. He says in the letter of 15 February 2011 that he worked on the award in late September, in October and early November 2010. At the end of November 2010, at the behest of one of the parties, the LCIA enquired when the award could be expected and on 30 November 2010, the LCIA was told that the award was expected to be completed by mid to end December 2010.
His other professional commitments had meant that X had not started trial preparation for the Y litigation until mid November 2010. The trial commenced before the Commercial Court on 29 November 2010 and took place on 29 and 30 November and 1 and 8 December 2010.
Following the first three days of the trial, X wrote to the parties on 6 December 2010 in the following terms:
“Before completing and issuing the award in this arbitration, I think I should mention to the parties that currently I am acting in a matter wholly unconnected with this arbitration in which Dewey & LeBoeuf act as my instructing solicitors on behalf of the client.
The case is an action in the Commercial Court in London arising from a dispute which began in 2004. Proceedings began in 2006, settled just before trial in 2008, but then the settlement failed and the case revived at the end of 2009 and was subsequently relisted. The opening and evidence was heard last week and closing submissions are due to take place on Wednesday 8 December.
The trial has made me conscious of the fact that Dewey & LeBoeuf (not Mr Greenwood) are the same solicitors as appear for the claimant in this arbitration: hence this letter.
I have of course acted for clients on the instructions of SJ Berwin (though not, as I remember, White & Case); and I am aware that the fact that SJ Berwin and Dewey & LeBoeuf are, or have been, my instructing solicitors in unconnected matters are not things that strictly require disclosure, as they are not things that have any bearing on my independence or impartiality.
Nonetheless, I would prefer the parties to know the position.”
As appears from the penultimate paragraph of that letter (and as he confirms in his letter of 15 February 2011) it was his involvement in the trial which reminded X of the fact that the same firm of solicitors was instructing him as was acting for one of the parties in an arbitration in which he was arbitrator and about to issue his award. It seems that until then, he had overlooked this point.
As he said in his letter of 6 December 2010, although he was instructed in the Y litigation by Dewey & LeBoeuf, it was not by the same partner who was conducting the arbitration, Mr Nicholas Greenwood, but by another partner in the firm. Indeed, as appears from Mr Greenwood’s witness statement in opposition to the present application dated 9 March 2011, the only overlap in terms of legal teams is that, at various stages four trainee solicitors and one newly qualified solicitor at Dewey & LeBoeuf were involved in the preparation of both cases. However, Mr Greenwood’s evidence is that none of them had any direct contact with X either in the arbitration or in the Commercial Court litigation. In his letter of 15 February 2011, X confirms, at paragraph 15:
“To the best of my knowledge and belief, I had no conversation about the arbitration with anyone at Dewey & LeBoeuf who carried out work on the [Y] dispute”.
The letter of 6 December 2010 did not immediately provoke any sort of adverse response from White & Case. X says that he completed the partial award on various days between 2 and 16 December 2010 and signed it on 17 December 2010. In the award, although some issues were decided in favour of the present claimants, one crucial issue was decided in favour of the present defendants, who were accordingly the successful party.
On 20 December 2010, the award was forwarded to the parties by the LCIA and the following day, the present claimants applied to the LCIA Court of Arbitration to remove X as arbitrator pursuant to paragraph 10.3 and 10.4 of the Arbitration Rules of the LCIA, which provide:
“10.3
An arbitrator may also be challenged by any party if circumstances exist that give rise to justifiable doubts as to his impartiality or independence. A party may challenge an arbitrator it has nominated, or in whose appointment it has participated, only for reasons of which it becomes aware after the appointment has been made.10.4
A party who intends to challenge an arbitrator shall, within 15 days of the formation of the Arbitral Tribunal or (if later) after becoming aware of any circumstances referred to in Article 10.1, 10.2 or 10.3, send a written statement of the reasons for its challenge to the LCIA Court, the Arbitral Tribunal and all other parties. Unless the challenged arbitrator withdraws or all other parties agree to the challenge within 15 days of receipt of the written statement, the LCIA Court shall decide on the challenge.”
After the claimants launched that challenge under the LCIA Rules, they invited X to resign as arbitrator, which he declined to do in a letter of 31 December 2010. The President of the LCIA Court of Arbitration, Professor William W Park then appointed one of the members of the Court, Mr Gerald Aksen, a US attorney to determine the claimants’ challenge to the arbitrator. He received written submissions from the parties as well as X’s letter of 15 February 2011 and then issued his written Decision on Challenge to Sole Arbitrator dated 11 March 2011 in which he denied the challenge.
It is not necessary to refer to that Decision in detail as it is not in any sense binding on me, given that I have to decide the present application de novo. However, it is interesting to note that Mr Aksen, in ruling that there were no circumstances that gave rise to justifiable doubts as to X’s impartiality and independence, focused on the fact that a barrister in England does not “represent” the solicitors who instruct him, but the lay client. He also emphasised that X has no financial interest in Dewey & LeBoeuf and no duty to clients of that firm unless instructed to represent one of those clients.
Whilst that procedure of challenge under the LCIA Rules was pending, an extension of time had been granted for the filing of the present application, which was filed on 27 January 2011.
The relevant statutory provisions
The following provisions of the Arbitration Act 1996 are relevant to the current application:
“24Power of court to remove arbitrator
(1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds—
(a) that circumstances exist that give rise to justifiable doubts as to his impartiality;
33General duty of the tribunal
(1) The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent;
68Challenging the award: serious irregularity
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);”
The applicable legal principles
The applicable legal principles are not seriously in dispute. Under section 24(1)(a) of the Act, an arbitrator is to be removed if there are “justifiable doubts as to his impartiality”. Section 33 requires an arbitrator to act “impartially” and failure to comply with that duty constitutes a “serious irregularity” under section 68. The LCIA Arbitration Rules are to similar effect, requiring that arbitrators: “be and remain at all times impartial and independent of the parties” and that there may be a challenge (as occurred here) “if circumstances exist that give rise to justifiable doubts as to his impartiality or independence”.
The Court of Appeal in Locabail (UK) v Bayfield Properties [2000] QB 451 held that the common law test for apparent bias is reflected in section 24 of the Arbitration Act. As to the common law test, that is as formulated by Lord Goff of Chieveley in R v Gough [1993] AC 646 at 670, but with the minor adjustment of that test suggested by Lord Hope of Craighead in Porter v Magill [2002] 2 AC 357 at [103]:
“I respectfully suggest that your Lordships should now approve the modest adjustment of the test in R v Gough set out in that paragraph. It expresses in clear and simple language a test which is in harmony with the objective test which the Strasbourg court applies when it is considering whether the circumstances give rise to a reasonable apprehension of bias. It removes any possible conflict with the test which is now applied in most Commonwealth countries and in Scotland. I would however delete from it the reference to "a real danger". Those words no longer serve a useful purpose here, and they are not used in the jurisprudence of the Strasbourg court. The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”
In my judgment, three aspects of this test need to be emphasised for the purposes of the present application. First, the test is an objective one and not dependent upon the characteristics of the parties, for example their nationality, so that it is nothing to the point that the claimant companies are registered in foreign jurisdictions or that the individuals who control or manage them are foreign nationals who might, for example, regard as odd the way in which a member of the English Bar can be instructed in one case by a firm of solicitors whilst acting as arbitrator in another case where the same firm of solicitors was acting for one of the parties. The issue is whether the impartial objective observer, irrespective of nationality, would conclude from those facts that there was a real possibility that the arbitrator was biased.
That it is not necessary or appropriate to draw a distinction between cases where there is a foreign party and cases where there is not, was decided by Morison J in ASM Shipping Ltd of India v TTMI Ltd of England [2005] EWHC 2238 (Comm); [2006] 2 All ER (Comm) 122 at [39 (2)]:
It is no longer necessary, in my judgment, to draw a distinction between cases where there is a foreign party and those where there is not. The objective observer is there to ensure an even handed approach to apparent bias, whatever the nationality of the parties. The only possible justification for treating foreign parties differently could be on the basis that they may not understand as well as an indigenous party the way the legal professions in England are organised or their conventions and rules of conduct: the sorts of points, if I might say so, made by Mr Beloff QC in his submissions to the Board of the International Council of Arbitration for Sport. The interpolation of the observer does, I think, make it unnecessary in future to have to give special regard to foreigners. "In determination of their rights and liabilities, civil or criminal, everyone is entitled to a fair hearing by an impartial tribunal. That right ... is properly described as fundamental." [paragraph 2 of Locabail]. The entitlement to that right is universal [see for example Article 12(2) of the Uncitral Model Law] and not parochial and it is not to be determined by awareness or otherwise of local rules and customs.
The second aspect of the common law test which is of particular relevance to the present case is that the test assumes that the impartial observer is “fair-minded” and “informed”, in other words, in possession of all the facts which bear on the question whether there was a real possibility that the arbitrator was biased. As Lord Phillips of Worth Matravers MR put it in Re Medicaments and Related Classes of Goods (No. 2) [2001] 1 WLR 700 at 726-7:
“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility....that the tribunal was biased.”
What is meant by “fair-minded” and “informed” in this context was explained by Lord Hope of Craighead in Helow v Secretary of State for the Home Department [2008] UKHL 62; [2008] 1 WLR 2416 at [1] to [3] of his speech:
“1 The fair-minded and informed observer is a relative newcomer among the select group of personalities who inhabit our legal village and are available to be called upon when a problem arises that needs to be solved objectively. Like the reasonable man whose attributes have been explored so often in the context of the law of negligence, the fair-minded observer is a creature of fiction. Gender-neutral (as this is a case where the complainer and the person complained about are both women, I shall avoid using the word "he"), she has attributes which many of us might struggle to attain to.
2 The observer who is fair-minded is the sort of person who always reserves judgment on every point until she has seen and fully understood both sides of the argument. She is not unduly sensitive or suspicious, as Kirby J observed in Johnson v Johnson(2000) 201 CLR 488, 509, para 53. Her approach must not be confused with that of the person who has brought the complaint. The "real possibility" test ensures that there is this measure of detachment. The assumptions that the complainer makes are not to be attributed to the observer unless they can be justified objectively. But she is not complacent either. She knows that fairness requires that a judge must be, and must be seen to be, unbiased. She knows that judges, like anybody else, have their weaknesses. She will not shrink from the conclusion, if it can be justified objectively, that things that they have said or done or associations that they have formed may make it difficult for them to judge the case before them impartially.
3 Then there is the attribute that the observer is "informed". It makes the point that, before she takes a balanced approach to any information she is given, she will take the trouble to inform herself on all matters that are relevant. She is the sort of person who takes the trouble to read the text of an article as well as the headlines. She is able to put whatever she has read or seen into its overall social, political or geographical context. She is fair-minded, so she will appreciate that the context forms an important part of the material which she must consider before passing judgment.”
The importance of the Court looking at all the facts was also emphasised by Richards LJ in National Assembly for Wales v Condron [2006] EWCA Civ 1573; [2007] P & CR 38 at [50]:
“The court must look at all the circumstances as they appear from the material before it, not just at the facts known to the objectors or available to the hypothetical observer at the time of the decision.”
The third aspect of the common law test which is of particular relevance to the present case is that, although the fair-minded and informed observer is not to be regarded as a lawyer, he or she is expected to be aware of the way in which the legal profession in this country operates in practice. This emerges from the decision of the Court of Appeal in Taylor v Lawrence [2002] EWCA Civ 90; [2003] QB 528. That was a case in which a County Court judge had appearing before him solicitors who were in the process of writing his will. He disclosed this and no objection was taken. Judgment was given against the defendants, who appealed on the grounds of apparent bias. The appeal was dismissed but it subsequently emerged that the solicitors had decided not to charge the judge (which he had not previously disclosed) and the defendants sought to re-open the appeal. As a consequence the Court of Appeal sat as a five man Court (Lord Woolf CJ, Lord Phillips of Worth Matravers MR, Ward, Brooke and Chadwick LJJ). The Court gave permission to re-open the appeal, but then dismissed the appeal.
At [61] to [65] of the judgment of the Court, Lord Woolf said:
61 The fact that the observer has to be “fair minded and informed” is important. The informed observer can be expected to be aware of the legal traditions and culture of this jurisdiction. Those legal traditions and that culture have played an important role in ensuring the high standards of integrity on the part of both the judiciary and the profession which happily still exist in this jurisdiction. Our experience over centuries is that this integrity is enhanced, not damaged, by the close relations that exist between the judiciary and the legal profession. Unlike some jurisdictions the judiciary here does not isolate itself from contact with the profession. Many examples of the traditionally close relationship can be given: the practice of judges and advocates lunching and dining together at the Inns of Court; the Master of the Rolls’ involvement in the activities of the Law Society; the fact that it is commonplace, particularly in specialist areas of litigation and on the circuits, for the practitioners to practise together in a small number of chambers and in a small number of firms of solicitors, and for members of the judiciary to be recruited from those chambers and firms.
62 It is also accepted that barristers from the same chambers may appear before judges who were former members of their chambers or on opposite sides in the same case. This close relationship has not prejudiced but enhanced the administration of justice. The advantages in terms of improved professional standards which can flow from these practices have been recognised and admired in other jurisdictions. Again by way of example, in the United States they have in recent years established the rapidly expanding American Inns of Court modelled on their English counterparts with the objective of improving professional standards.
63 The informed observer will therefore be aware that in the ordinary way contacts between the judiciary and the profession should not be regarded as giving rise to a possibility of bias. On the contrary, they promote an atmosphere which is totally inimical to the existence of bias. What is true of social relationships is equally true of normal professional relationships between a judge and the lawyers he may instruct in a private capacity.
64 A further general comment which we would make, is that judges should be circumspect about declaring the existence of a relationship where there is no real possibility of it being regarded by a fair minded and informed observer as raising a possibility of bias. If such a relationship is disclosed, it unnecessarily raises an implication that it could affect the judgment and approach of the judge. If this is not the position no purpose is served by mentioning the relationship. On the other hand, if the situation is one where a fair minded and informed person might regard the judge as biased, it is important that disclosure should be made. If the position is borderline, disclosure should be made because then the judge can consider, having heard the submissions of the parties, whether or not he should withdraw. In other situations disclosure can unnecessarily undermine the litigant’s confidence in the judge.
65 If disclosure is made, then full disclosure must be made. This case demonstrates the danger of making partial disclosure. If there has been partial disclosure and the litigant learns that this is the position, this is naturally likely to excite suspicions in the mind of the litigant concerned even though those concerns are unjustified.
Basis of the claimants’ application
Mr Iain Milligan QC for the claimants has two distinct limbs to the current application. First he submits that this is a case in which the fair-minded and informed observer would conclude that there was a real possibility of what he described as “unconscious bias”. Second, he has what he submits is a free-standing point that, even if the fair-minded and informed observer would not conclude that there was a real possibility of unconscious bias, the failure by X to disclose his involvement in the Y litigation for over a year was in itself a serious irregularity within the meaning of section 68 of the Arbitration Act which justifies setting the award aside. I propose to deal with the rival submissions of the parties on each of these limbs of the application and my conclusion on each separately and in turn.
Alleged “unconscious bias”
Claimants’ submissions
Mr Milligan QC submits that where, as in the present case, whilst hearing the arbitration and considering his award, the arbitrator is actively involved as counsel in another piece of litigation for one of the firms of solicitors who are acting in the arbitration, the fair-minded and informed observer would consider that there was a real possibility of unconscious bias. He does not suggest that X had any actual predisposition to decide the arbitration in favour of Dewey & LeBoeuf’s clients; hence his submission that this was a case of unconscious bias.
By this he meant, not that there was any actual conflict of duty, since, importantly, he accepts that there is no conflict of duty or interest in this case, but that the arbitrator may have been unconsciously biased in favour of the party instructing the particular firm by whom he was instructed in the case in court. This unconscious bias or predisposition was said by Mr Milligan to have a number of potential aspects which would concern the independent observer. First, irrespective of the fact that the teams of solicitors were not the same in the two cases, the arbitrator may have had an unconscious predisposition towards their clients because of the possibility of disappointment of the firm and the question of the arbitrator’s reputation as an individual lawyer, combined with wishing to foster the relationship with the firm, not only in respect of the current instructions, but for the purposes of future instructions.
Second, there was a real possibility of unconscious bias where the arbitrator had an ongoing relationship with the particular firm of solicitors, so that his decisions in the case, for example on matters such as disclosure, might be unconsciously influenced by the confidence he had in the firm.
Third, the arbitrator might find himself defending the conduct of the firm of solicitors in the case in which he was acting for them in court and then find himself sitting in judgment on the conduct of the solicitors in the arbitration.
Fourth, where he is actively involved as counsel instructed by the particular firm, the arbitrator is effectively in contact with the solicitors for one of the parties in the arbitration in a manner which is not visible to the other party to the arbitration. There is a real possibility that, albeit inadvertently, something is said to the arbitrator or by the arbitrator which then feeds through to the arbitration and has an influence on the outcome. Mr Milligan gave as an example an arbitrator saying something inadvertently at the solicitors’ offices, when there for a consultation on the court case, which revealed his thinking in the arbitration, which then got fed back to the other partner dealing with the arbitration.
Fifth, where the arbitrator is actively instructed as counsel by one of the firms involved in the arbitration, there is a financial relationship between the arbitrator and that firm which is one that depends on negotiation (in other words with the barrister’s clerk) and there is an unconscious temptation for the solicitor to be softer in negotiation, which would lead to unconscious bias on the part of the arbitrator, given the larger fee.
In support of his case of unconscious bias, Mr Milligan also relies upon the IBA Guidelines on Conflicts of Interest in International Arbitration, not because he suggests they are mandatorily applicable, but because their spirit shows what the international arbitration community considers does give rise or may give rise to a real risk of bias. The Guidelines contain a number of lists of situations where there is or may be a conflict of interest, specifically, a “Non-Waivable Red List”, a “Waivable Red List” and an “Orange List”, categories which are essentially self-explanatory.
Mr Milligan’s primary position is that the present case would fall within one of the situations identified on the Waivable Red List, namely 2.3.2. So far as relevant, 2.3 provides:
“2.3 Arbitrator’s relationship with the parties or counsel
2.3.1 The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
2.3.2 The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.”
However, Mr Milligan submits that, even if the present situation does not fall expressly within the Waivable Red List, the court should apply the approach of the IBA Guidelines by analogy on the basis that their spirit covers what should happen in all cases of potential conflict, irrespective of whether the facts of the particular case fall within the list. This was an approach which recommended itself to Morison J in the ASM case, where the situation in the case did not fall within any of the lists. Nonetheless, the learned judge considered that he should have regard to the Guidelines. At paragraph 39(4) of the judgment, he said this:
“The IBA guidelines do not purport to be comprehensive and as the Working Party added "nor could they be". The Guidelines are to be "applied with robust common sense and without pedantic and unduly formulaic interpretation." I am not impressed by the points Mr Croall made on these lists. They come close to the point in issue. The question at issue is not whether what happened fell within the red list or not. Barristers in practice who take up part-time judicial appointments are not, as Mr Croall submitted, mentioned in the lists at all. But that says nothing about the true answer to the questions in this case.”
Mr Milligan relies upon the General Standards Regarding Impartiality, Independence and Disclosure within the IBA Guidelines and specifically General Standard (4) (c) which provides:
“A person should not serve as an arbitrator when a conflict of interest, such as those exemplified in the Waivable Red List, exists. Nevertheless, such a person may accept appointment as arbitrator or continue to act as arbitrator, if the following conditions are met:
(i) All parties, all arbitrators and the arbitration institution or other appointing authority (if any) must have full knowledge of the conflict of interest; and
(ii) All parties must expressly agree that such person may serve as arbitrator despite the conflict of interest.” (emphasis added)
Relying upon the spirit of the Guidelines which that provision demonstrates, Mr Milligan submits that the fact that X had been reinstructed in the Y litigation should have been disclosed to the parties, when that reinstruction took place in November 2009. The fact that it was not, and was not disclosed until 6 December 2010, immediately before the award was published, does give rise justifiable doubts as to the arbitrator’s impartiality and the fair-minded and informed observer would conclude that there was a real possibility of unconscious bias.
Mr Milligan also relied on the standard form of acceptance for those accepting appointment as an ICC arbitrator, not because this was an ICC arbitration but because their approach represents what he described as the international view of such things, emphasising the importance of detailed disclosure of anything which might call in question the arbitrator’s independence. Under the heading “Independence” that provides:
“INDEPENDENCE (Tick one box and provide detailed information, if necessary.)
In deciding which box to tick, you should take into account, having regard to Article 7 (2) of the Rules, whether there exists any past or present relationship, direct or indirect, between you and any of the parties, their related entities or their lawyers or other representatives, whether financial, professional or of any other kind. Any doubt must be resolved in favour of disclosure. Any disclosure should be complete and specific, identifying inter alia relevant dates (both start and end dates), financial arrangements, details of companies and individuals, and all other relevant information.
Nothing to declare: I am independent and intend to remain so. To the best of my knowledge, and having made due enquiry, there are no facts or circumstances, past or present, that I should disclose because they might be of such a nature as to call into question my independence in the eyes of any of the parties.
Acceptance with disclosure: I am independent and intend to remain so. However, mindful of my obligation to disclose any facts or circumstances which might be of such a nature as to call into question my independence in the eyes of any of the parties, I draw attention to the matters on the attached sheet.”
Defendants’ submissions
Mr Paul Stanley QC for the defendants emphasised the point I referred to in my analysis of the applicable legal principles, namely that the relevant inquiry is into all the factual circumstances as they appeared to the court at the hearing, not for example as they might have appeared in November 2009 had X disclosed his re-instruction at that stage. In other words, the court must take into account the known facts which demonstrate that some of the aspects of unconscious bias identified by Mr Milligan as examples are simply not applicable. There is thus no evidence that X inadvertently let slip some comment about the arbitration or that he had to defend the conduct Dewey & LeBoeuf in the court case or criticise them in the arbitration.
Mr Stanley pointed out that the first two aspects Mr Milligan identified (not disappointing solicitors or repose of trust in solicitors the arbitrator knows) did not depend upon parallel or simultaneous instruction in a court case or arbitration as counsel. They would apply with equal force where the QC arbitrator had received instructions from one or other of the firms involved in the arbitration in the past. Mr Stanley submitted that, save in the extreme case where the arbitrator received a very substantial proportion of his instructions as counsel from one particular firm, not only should he not have to disclose past or simultaneous instructions, but the fair-minded and informed observer, knowing how the legal profession in this country works, would not consider there was a real possibility of apparent or unconscious bias.
So far as the fifth aspect, the financial relationship, is concerned, Mr Stanley accepts that, if an arbitrator actually allowed the fee he had received in another case as counsel to influence his judgment as arbitrator, that would be a very serious matter which would amount to actual bias. However, nothing of the kind is alleged here. Rather, this is all said to be unconscious or sub-conscious, on the part both of the partner in the firm of solicitors negotiating the fee and the barrister (and his or her clerk), which as Mr Stanley puts it creates a “psychologically impossible situation”, since if the matter remains sub-conscious on all sides, it cannot conceivably have any influence on the arbitrator’s judgment or thinking in the arbitration.
On the basis of the known facts as they appear in the material before the court, Mr Stanley submitted that the fair-minded and informed observer would not conclude that there was a real possibility of apparent or unconscious bias. He submitted that the IBA Guidelines did not alter that conclusion. He drew attention to the fact that the Guidelines are not intended to override any applicable national law. This is clear from paragraph 6 of the Introduction which provides:
“These Guidelines are not legal provisions and do not override any applicable national law or arbitral rules chosen by the parties. However, the Working Group hopes that these Guidelines will find general acceptance within the international arbitration community (as was the case with the IBA Rules on the Taking of Evidence in International Commercial Arbitration) and that they thus will help parties, practitioners, arbitrators, institutions and the courts in their decision-making process on these very important questions of impartiality, independence, disclosure, objections and challenges made in that connection. The Working Group trusts that the Guidelines will be applied with robust common sense and without pedantic and unduly formalistic interpretation.”
As Mr Stanley pointed out, the test in General Standard (2) as to what is described in the Guidelines as a conflict of interest (although of course as Mr Milligan accepted this is not a case of conflict of interest) does appear to be very close to both the test in the Arbitration Act and the common law test for bias:
“(2) Conflicts of Interest
(a) An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator if he or she has any doubts as to his or her ability to be impartial or independent.
(b) The same principle applies if facts or circumstances exist, or have arisen since the appointment, that, from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrator’s impartiality or independence, unless the parties have accepted the arbitrator in accordance with the requirements set out in General Standard (4).”
He also referred to General Standard (6) headed “Relationships” sub-paragraphs (a) and (b) of which provide:
“(a) When considering the relevance of facts or circumstances to determine whether a potential conflict of interest exists or whether disclosure should be made, the activities of an arbitrator’s law firm, if any, should be reasonably considered in each individual case. Therefore, the fact that the activities of the arbitrator’s firm involve one of the parties shall not automatically constitute a source of such conflict or a reason for disclosure.
(b) Similarly, if one of the parties is a legal entity which is a member of a group with which the arbitrator’s firm has an involvement, such facts or circumstances should be reasonably considered in each individual case. Therefore, this fact alone shall not automatically constitute a source of a conflict of interest or a reason for disclosure.”
As Mr Stanley points out, this emphasises consideration of each case on its own facts and eschews what might be described as a US approach to conflicts of interest within a single firm. It expressly provides that the fact that the arbitrator’s own firm (obviously on the assumption that the arbitrator is a partner or other member of a law firm) is involved with one of the parties to the arbitration neither automatically requires disclosure nor amounts to a conflict of interest. It all depends upon the circumstances of the particular case.
So far as the claimants’ reliance on 2.3.2 of the Waivable Red List in the IBA Guidelines is concerned, Mr Stanley submitted that reliance was misplaced essentially for three reasons. First because a barrister in the position of X was not “representing” his instructing solicitors, Dewey & LeBoeuf. Together, they were professional colleagues representing their clients, the defendants in the Y litigation. So far as counsel is concerned, the instructions are those of the lay client, albeit they come through the firm of solicitors, the professional client.
Second, when 2.3.2 is read, as it should be, with the preceding provision 2.3.1, it constitutes a modest extension of that provision. 2.3.1 deals with the situation where the arbitrator is acting as counsel for one of the parties to the arbitration in an unrelated matter, and 2.3.2 deals with the situation where the arbitrator is acting as counsel for one of the firms of lawyers acting in the arbitration, an obvious example of which in an English law context would be if the arbitrator was acting as counsel for one of the firms of solicitors which was the defendant in a professional negligence action.
Third, the defendants’ narrow construction of 2.3.2 is supported by other provisions of the various lists, specifically various provisions of the Orange List (which is defined as a non-exhaustive enumeration of the situations in which depending on the circumstances of the case, may give rise in the eyes of the parties to justifiable doubts as to the arbitrator’s impartiality or independence). By definition, those situations are less serious than those covered by either of the Red Lists. The Waivable Red List consists of serious situations which should only be considered waivable if and when the parties, with full knowledge of the relevant conflict of interest, consent to the arbitrator continuing to act.
Mr Stanley refers in particular to 3.1.2 and 3.4.1 of the Orange List which provide:
“3.1. Previous services for one of the parties or other involvement in the case
3.1.2 The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter.
3.4. Relationship between arbitrator and party and others involved in the arbitration
3.4.1 The arbitrator’s law firm is currently acting adverse to one of the parties or an affiliate of one of the parties.”
Mr Stanley submits that on the claimants’ wide construction of 2.3.2, the odd situation would arise where currently being instructed in an unrelated matter by one of the firms of solicitors acting in the arbitration was a Red List matter whereas the arbitrator having acted as counsel against one of the parties to the arbitration in the past (or someone else in the arbitrator’s firm currently acting against one of the parties to the arbitration) which, on any view, is equally serious, is regarded as only an Orange List matter. Accordingly, Mr Stanley submits that the IBA Guidelines do not assist the claimants in establishing apparent or unconscious bias.
Mr Stanley submits that the ICC form is of no assistance. The first part of it tells you what to think about in terms of disclosure, but what it does not say is you must disclose every past and present relationship, direct or indirect, between you and any of the parties or their related entities or their lawyers or representatives.
In so far as the claimants rely upon the failure of X to disclose his involvement in the Y litigation for a year from November 2009 until December 2010 as itself evidence supporting a case of apparent or unconscious bias, Mr Stanley submits that, at least in a case of inadvertent, as opposed to deliberate, non-disclosure (and it is common ground that, on any view, the present case is one of inadvertent delay in disclosure on X’s part), failure to disclose is not itself evidence of apparent or unconscious bias.
Mr Stanley submits that it is made clear that apparent bias and any obligation to disclose are quite distinct and separate, in a passage from the speech of Lord Mance in Helow . At paragraph 58 Lord Mance said:
“The other consideration is that Lady Cosgrove did not volunteer a reference to her membership of the Association. Had she disclosed this, the very fact of disclosure could have been seen by a fair-minded observer as a "badge of impartiality", as showing that "she ha[d] nothing to hide and [was] fully conscious of the factors which might be apprehended to influence … her judgment": Davidson v Scottish Ministers (No 2) 2005 1 SC (HL) 7, paras 19 and 54, per Lord Bingham of Cornhill and Lord Hope of Craighead. Again, however, this can only be one factor, and a marginal one at best. Thus, to take two opposite extremes, disclosure could not avoid an objection to a judge who in the light of the matter disclosed clearly ought not to hear the case; and non-disclosure could not be relevant, if a fair-minded and informed observer would not have thought that there was anything even to consider disclosing. In the present case, I do not consider Lady Cosgrove's failure to disclose her membership of the Association to be a factor which would carry any great weight in the balancing of factors which a fair-minded and informed observer must be assumed to undertake. A fair-minded and informed observer would I think be much more likely to conclude that it never crossed her mind that her membership involved anything which it was relevant for her to disclose.”
Decision
Attractively and beguilingly though Mr Milligan’s submissions on “unconscious bias” were put, I cannot accept them. On closer analysis, I consider that the fair-minded and informed observer would conclude that there was no real possibility of apparent or unconscious bias on the facts of this case as they are now known to the court on the material before me.
Taking Mr Milligan’s five aspects of unconscious bias in turn, so far as the first is concerned, which is not disappointing Dewey & LeBoeuf by whom he was instructed in the Y litigation by deciding the arbitration against their clients, I agree with Mr Stanley that, in a sense, this point goes too far. Taken to its logical conclusion, it would apply to any barrister arbitrator who regularly received instructions from one or other (or indeed both) of the firms of solicitors acting in the arbitration. The arbitrator might unconsciously not want to disappoint that firm, whether he was currently instructed by them in simultaneous proceedings or had simply been instructed by them in the past. The existence of simultaneous proceedings would be irrelevant to the issue whether there was the alleged but unconscious predisposition.
I do not consider that the fair-minded and informed observer, who is presumed to know how the legal profession in this country works, would consider that, merely because the arbitrator acted as counsel for one of the firms of solicitors acting in the arbitration, whether in the past or simultaneously with the arbitration, there was a real possibility of apparent bias. Since the alleged predisposition to favour that firm is necessarily unconscious, any possibility that the arbitrator’s judgment was, to use Mr Stanley’s word “skewed”, would be entirely theoretical. If the alleged predisposition is “unconscious”, it is difficult to see how the arbitrator can have had the relevant predisposition or, at least, it seems to me that the independent observer would not consider on the present facts that any such predisposition was made out.
Of course, if the arbitrator has an actual predisposition towards the particular firm of solicitors because he is actually considering his relationship with the firm and wishing to foster that relationship, that would amount to actual bias, but there is no suggestion of any such actual predisposition here, nor could such a serious allegation be advanced in the absence of any evidence.
What might be described as a difficult halfway house between such an actual predisposition and Mr Milligan’s allegation of unconscious predisposition may be the case to which I adverted several times during the hearing, of the barrister arbitrator who receives a very substantial proportion of his instructions as counsel, say 60%, from one of the firms acting in the arbitration. It may well be, not just that that is a matter which would have to be disclosed by the arbitrator at the outset, but that (at least where there was no waiver by the parties) there might be a real possibility of apparent bias.
However, that is emphatically not the present case, since the Y case was only the second set of instructions X had received from Dewey & LeBoeuf. It should also be noted that, even in that extreme case of a barrister arbitrator who receives a very substantial proportion of his instructions as counsel from one of the firms acting in the arbitration, neither any obligation to disclose nor any apparent bias are dependent upon his acting as counsel instructed by that firm in a case being conducted concurrently with the arbitration.
Mr Milligan’s second aspect of unconscious bias was to do with the possibility that because he was acting as counsel for the particular firm of solicitors, the arbitrator might have particular confidence in the firm in relation to matters arising in the case. Again it seems to me this point goes too far. Quite apart from the fact that it would apply wherever the arbitrator had been instructed as counsel by that firm with sufficient regularity for him to build up an impression of the firm and its practices (in other words, the fact that he might be acting for that firm as counsel concurrently with the arbitration is irrelevant to whether this particular aspect of alleged unconscious bias arises), the reality is that the point, if it were a good one, would apply equally to judges.
It is a fact that judges of the Commercial Court (whether through having been instructed by particular firms of solicitors whilst at the Bar or through experience of case management and trial of cases as judges) build up a picture of the strengths and weaknesses of particular firms of solicitors or indeed of individual solicitors, just as they do of individual members of the Bar. Accordingly they will have more confidence in some firms or individual solicitors (or members of the Bar) than in others. No-one could sensibly suggest that a judge should have to recuse him or herself in such situations. Were that so, there would be no judges sitting.
Furthermore, as Mr Stanley pointed out, on the facts of the present case, the arbitrator did not have to consider whether his experience of acting on instructions from Dewey & LeBoeuf was such as entitled him to repose particular trust in them. The only situation where trust of a solicitors’ firm might have mattered was one where in fact the arbitrator trusted White & Case in relation to a contested disclosure application and did not order disclosure against their client. I do not consider that this particular aspect is one which the fair-minded and informed observer would consider could conceivably give rise to any real possibility of unconscious or apparent bias.
On the basis of the material before the court, Mr Milligan’s third and fourth aspects of unconscious bias (the arbitrator having to rule on the conduct of the firm and the arbitrator inadvertently disclosing something connected with the arbitration) simply do not arise. Whilst viewed at the time when he was re-instructed in November 2009 (and on the claimants’ case should have disclosed such re-instruction) these matters might have been ones of potential concern, it is clear on the authorities to which I have referred that the question of apparent bias is to be judged at the time of the application before the court on the basis of the material now available.
What is now clear is that in the Y litigation, there is no evidence of X having had to defend the conduct of Dewey & LeBoeuf and there was no criticism of Dewey & LeBoeuf in the arbitration on which he had to rule as arbitrator. Equally, given the evidence that to the limited extent that junior staff were common to both cases, they had no direct contact with X and his own statement that he did not discuss the arbitration with anyone at Dewey & LeBoeuf who was involved in the Y litigation, the suggestion of some inadvertent slipping out of his assessment of the dispute in the arbitration is not even pure speculation, but complete invention. No fair-minded and informed observer could conceivably consider that these aspects which never in fact arose had any relevance to the issue of apparent or unconscious bias.
In relation to the fifth aspect, the existence of the financial relationship, to the ignorant and prejudiced observer, the fact that X received a fee as counsel from Dewey & LeBoeuf might appear significant. However, once it is accepted (as the claimants have to accept) that there is no question of the existence of the arbitration having consciously influenced the partner negotiating X’s brief fee for the trial (and there is no evidence that that partner, who was not Mr Greenwood, even knew about the arbitration) or that the fee agreed consciously influenced X in his conduct of or decision in the arbitration, this is a complete non point. If the alleged influence was unconscious, so that X was unaware of the point, the financial aspect cannot have influenced him. As Mr Stanley submitted, the point is a fanciful one and the fair-minded and informed observer could not conceivably think that it gave rise to a real possibility of apparent bias.
In all the circumstances and on the basis of the material before the court, I do not consider that the claimants’ case of unconscious bias is made out. That conclusion is not altered by the fact that X did not disclose his involvement in the Y litigation until late in the day. Whilst, as I have said, it is unfortunate that he did not disclose that involvement the moment he was re-instructed in November 2009, it is clear that his failure to do so was not deliberate, but inadvertent.
In those circumstances, I do not consider that the failure by X to disclose until December 2010 his involvement as counsel in the Y litigation can give rise to a real possibility of apparent or (as Mr Milligan would have it) unconscious bias where there would otherwise be none. As the passage from the judgment of the Court of Appeal in Taylor v Lawrence quoted above demonstrates, the test as to when it is appropriate to disclose potential conflicts or other matters of embarrassment is lower than the test of apparent bias. In other words, it may be appropriate in a borderline case to disclose at an early stage, because, if there is an objection, then even if there is no apparent bias, the judge or arbitrator may still want to consider whether to withdraw.
Furthermore, the passage from the speech of Lord Mance in Helow which I quoted above makes it quite clear not only that disclosure and apparent bias are quite separate questions but that merely because there has been a failure to disclose, that could not amount to a real possibility of apparent bias, if the fair minded and informed observer would not have thought there was anything that needed to be disclosed. In the present case it seems to me that once it was explained to the fair minded and informed observer that the delay in disclosure until December 2010 was inadvertent on the part of X, that observer would not consider that the delay could have any bearing on whether there was apparent or unconscious bias.
Furthermore, in my judgment that conclusion is not altered in any way by the IBA Guidelines, which do not assist the claimants for a number of reasons. First, as paragraph 6 of the Introduction to the Guidelines makes clear, the Guidelines are not intended to override the national law. It necessarily follows that if, applying the common law test, there is no apparent or unconscious bias, the Guidelines cannot alter that conclusion.
Second, on the true construction of 2.3.2 in the Waivable Red List, that provision is not dealing with the current situation. X was not representing Dewey & LeBoeuf, rather he and they together were representing the lay clients. In my judgment, in the light of the other provisions of the Guidelines to which Mr Stanley drew my attention, the narrow approach to 2.3.2 which he advocated is to be preferred. It is dealing with the situation where the law firm involved in the arbitration is the actual client of the arbitrator in another case in which he is acting as counsel. It is worth remembering that since these are IBA Guidelines, they are probably not focusing on the peculiarities of the split profession in this jurisdiction, but so far as the application of this provision within this jurisdiction is concerned, it seems to me that it is dealing with a case where, for example, the arbitrator as counsel is acting for the solicitors who are defendants in a professional negligence action.
Third, nor in my judgment can it be said that the present situation is within the spirit of the IBA Guidelines, if not the letter, as Morison J decided was the case in the ASM case. That was a very different case from the present one. There the arbitrator had acted as counsel instructed by a particular firm of solicitors in an earlier case in which serious allegations were being made against M and M was a witness in the case in which he was arbitrator, being cross-examined and accused of similar dishonesty by counsel instructed by the same firm of solicitors. The objection to the arbitrator continuing to sit was not that he had been instructed in the previous case by one of the firms involved in the arbitration. Rather it was his prior and recent involvement as counsel in litigation in which serious allegations had been made against M who was now a key witness in the arbitration: see [12] of Morison J’s judgment.
Morison J considered that although the situation he was considering did not fall within the Red or Orange Lists in the IBA Guidelines, those lists “come close to the point in issue” ([39(4)] of the judgment). He does not identify which of the situations in the Lists was close to the one he was considering, but it may very well be that he had in mind 3.1.2 in the Orange List: “The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter”. M was not a party but he was a key witness being accused of similar dishonesty as previously, so that one quite see how the learned judge could have considered that the situation was within the spirit of that provision.
The present case is completely different. Given the terms of General Standard (6) quoted at paragraph 46 above and given that what might be described as the obverse situation to the present (where the arbitrator has acted as counsel against one of the parties) is dealt with by 3.1.2 in the Orange List, if it were the intention of the Guidelines to cover the present situation, it would surely have been covered expressly by the Orange List. Any suggestion that it is within the spirit of 2.3.2 in the Waivable Red List necessarily involves saying that it is more serious than the Orange List, which is illogical.
I do not consider that the claimants’ case on this issue is assisted in any way by the ICC Statement of Independence essentially for the reasons given by Mr Stanley. Nothing in the Form has any bearing on whether, applying the common law test which is also the test under section 24 of the Arbitration Act, there was apparent bias in this case.
Non-disclosure
Claimants’ submissions
Mr Milligan QC’s second argument in support of the claimants’ application is that, even if the fair-minded and informed observer would not conclude that there was a real possibility of unconscious bias, the failure by X to disclose his involvement in the Y litigation for over a year was in itself a serious irregularity within the meaning of section 68 of the Arbitration Act which justifies setting the award aside.
Mr Milligan relies in this context upon the wording of the disclosure obligation in Article 5.3 of the LCIA Arbitration Rules which provides:
“[the arbitrator] shall sign a declaration to the effect that there are no circumstances known to him likely to give rise to any justified doubts as to his impartiality or independence, other than any circumstances disclosed by him in the declaration.”
He submits that this obligation, to disclose “circumstances …likely to give rise to any justified doubts” is wider than the provision in Article 10.3 dealing with a challenge to the arbitrator (on the grounds of actual or apparent bias) which permits a challenge “if circumstances exist that give rise to justifiable doubts”. Thus, as in the case of the ICC Statement of Independence, the obligation to disclose arises in what might be described as a borderline case, even where there is no apparent bias.
Mr Milligan then submits that the five points or aspects he relied upon in support of his case of unconscious bias, even if they do not establish such unconscious bias, are on any view circumstances likely to give rise to justified doubts as to the arbitrator’s impartiality or independence. He goes on to submit that if the real possibility of unconscious or apparent bias constitutes a “serious irregularity which has caused substantial injustice” to the claimant within the meaning of section 68(2) of the Arbitration Act, as Morison J held in ASM at [39(3)] of the judgment in that case, followed by Colman J in Norbrook Laboratories v Tank at [145], then so must the likelihood of unconscious or apparent bias, coupled with non-disclosure such as occurred here for at least a year.
A further reason why the claimants have suffered substantial prejudice within the meaning of the section by virtue of the non-disclosure is said by Mr Milligan to be that X’s failure to disclose his involvement in the Y litigation has deprived the claimants of the opportunity to challenge X at an earlier stage when it would have been more likely that he would stand down as arbitrator.
Defendants’ submissions
Mr Stanley submits that the distinction Mr Milligan draws between Article 5.3 and Article 10.3 of the LCIA Rules is not an attractive one, as the words “likely to” in Article 5.3 are no different on analysis from the common law test for apparent bias: “real possibility”. In other words, he submits that the provision is only requiring disclosure of circumstances which would actually themselves be disqualifying. The fact that arbitrators may out of caution give wider disclosure does not mean that they are under an obligation to do so or that the failure to do so is a procedural irregularity. If that submission is accepted, then he says this second point does not arise at all: once the court has decided the first point against the claimant, that is an end of the application.
Even if he is wrong about that, he submits that, if Mr Milligan cannot establish unconscious bias, then he cannot show that any failure on X’s part to make timely disclosure of his involvement in the Y litigation caused substantial injustice to the claimants. This is because, if there was no unconscious bias, earlier disclosure would have made no difference. In particular, the arbitrator would not have resigned at an earlier stage. Given the firm view he expressed in his letter of 6 December 2010 that his involvement in the Y litigation had no bearing on his independence or impartiality, there is no basis for assuming he would have taken a different view earlier.
Furthermore, given that on this hypothesis, X was an impartial arbitrator even if he would have resigned if he had made disclosure earlier, all that the claimants have lost is the opportunity to have a different impartial arbitrator, but that can hardly be regarded as a substantial injustice.
Decision
This alternative case is an ingenious attempt by Mr Milligan to keep alive the claimants’ application to set aside the award, even if the court concludes that the common law test for apparent bias is not satisfied. Despite the ingenuity, I am quite satisfied that, if, as I have held, the case of apparent or unconscious bias is not made out, there are no grounds for setting aside the award.
It seems to me that there is considerable force in Mr Stanley’s submission about Article 5.3 of the LCIA Rules and that the distinction which Mr Milligan seeks to draw is a semantic one. In other words, I consider that, in so far as Article 5.3 is imposing an obligation on the arbitrator to disclose circumstances likely to give rise to any justified doubts as to his impartiality or independence, that is only an obligation to disclose matters which amount to apparent bias i.e. where there is a “real possibility”. Whilst arbitrators may indeed make wider disclosure out of caution, they are under no obligation to do so, let alone under an obligation breach of which could entitle the aggrieved party to say there was a serious irregularity, for the purposes of section 68 of the Arbitration Act, notwithstanding that there was not in fact any arguable case of apparent bias.
Even if that analysis is wrong and the arbitrator was under an obligation to make disclosure at an earlier stage, it seems to me impossible to say, for a number of reasons, that the fact that disclosure was late was a serious irregularity which caused substantial injustice to the claimants within the meaning of section 68 of the Act. First and as an important starting point, the authorities on section 68 make it clear that to succeed in setting aside an award under the section “a high threshold must be satisfied” (per Lord Steyn in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221 at [28]). As is said in one of the cases: “[it] is designed as a longstop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration in one of the respects listed in section 68, that justice calls out for it to be corrected” (per Cresswell J in Petroships Pte Ltd v Petec Trading & Investment [2001] 2 Lloyd’s Rep 348 at 351).
Thus it is one thing to conclude as Morison J did in ASM, that the fact that the tribunal was not impartial of itself satisfies the requirements of section 68, but quite another to conclude where, by definition, the court has decided that the tribunal was impartial (because the case of unconscious bias has been rejected) that a failure to disclose in a timely fashion an involvement in an earlier case which did not amount to unconscious bias, was a serious irregularity which has caused the claimant substantial injustice. In my judgment, the claimants’ attempt to equate the two situations is completely misplaced. The claimants’ case of non-disclosure (which is in fact a case of late disclosure) of something which does not amount to apparent bias seems to me a very long way indeed from satisfying the high threshold of serious irregularity under section 68 of the Act.
Even if the claimants could show that X’s late disclosure of his involvement in the Y litigation was a serious irregularity, in my judgment they could not begin to show that it had caused or will cause them substantial injustice. Given X’s firm view that there was nothing in his involvement in the Y litigation which had any bearing on his independence or impartiality, there is no reason to suppose that he would have taken a different view at an earlier stage and withdrawn from the arbitration. At best the claimants can say he might have done which is nowhere near good enough to establish that they have been caused substantial injustice.
Furthermore, even if the claimants could establish that X would have resigned if he had disclosed at an earlier stage his involvement in the Y litigation, they still cannot show any substantial injustice through still having him as arbitrator when this alternative case is predicated upon there being no case of unconscious bias established. At best they have lost the opportunity to have another impartial arbitrator instead, which by no stretch of the imagination is a substantial injustice.
Conclusion
For all the above reasons, I have concluded that both limbs of the claimants’ case must fail and the application to remove the arbitrator and set aside the award must be dismissed.