Guidant LLC v Swiss Re International SE & Anor

On these two applications being heard together, the claimant, Guidant, is asking the court to appoint a third arbitrator in each of two arbitrations.

The background in brief summary is that Guidant has incurred substantial liabilities in litigation in the United States involving claims for personal injury arising from the use of allegedly defective cardiac rhythm management devices, which Guidant manufactured. Guidant has claimed indemnities against such liabilities under insurance policies which it purchased for the 2004 policy year. For present purposes, three policies of insurance are relevant. The first was a policy placed with Markel (Bermuda). The second policy was placed originally with Zurich but has subsequently been transferred, as part of a larger transfer of business, from Zurich to the UK branch of Swiss Re International SE, which is the defendant to these two arbitration claims. The third relevant policy was placed directly with Swiss Re. It has been made clear by Mr. Lockey QC, who appears for the defendant on each of the two applications, that the UK branch of Swiss Re is part of the same legal entity.

All three insurance policies were written on the Bermuda form and are in identical terms, save for the limits of cover. Each policy contains an arbitration clause, which provides for the arbitration of disputes in London by a tribunal of three arbitrators. Each party has the right to appoint an arbitrator and the third arbitrator is to be appointed by the two party appointed arbitrators. The clause further provides that:

“In the event of a failure of the first two arbitrators to agree on a third arbitrator, either of the parties may apply to a Judge of the High Court for the appointment of a third arbitrator.”

Guidant has referred its claims to arbitration and has appointed the same arbitrator in each of the three arbitrations. The insurers have appointed different arbitrators in each of the three arbitrations. In the arbitration against Markel, the two party appointed arbitrators have appointed as the third arbitrator - who by convention is also the chair of the tribunal - Mr. Michael Collins QC. In the other two arbitrations against Swiss Re, however, no agreement has been reached on the appointment of the third arbitrator.

The arbitrator appointed by Guidant has sought to insist that Mr. Collins should also be appointed as the third arbitrator in those two arbitrations. The arbitrators appointed by Swiss Re have refused to agree to the appointment of Mr. Collins and have instead, in each case, put forward a list of three names and invited the arbitrator appointed by Guidant to choose one of those names, which he has declined to do. There is no overlap between the two lists of names which the arbitrators appointed by Swiss Re have put forward.

An impasse has therefore been reached and Guidant has applied to the court seeking an order under s.18(3)(d) of the Arbitration Act 1996 to appoint Mr. Collins as the third arbitrator in the two arbitrations against Swiss Re. Swiss Re, for its part, opposes the appointment of Mr. Collins and asks the court to appoint a different arbitrator in each of the arbitrations in which Swiss Re is the respondent.

Although Swiss Re has suggested in its evidence that the facts and issues are unlikely to be the same in all three arbitrations, and although it is right to say that Swiss Re has sought to rescind one but not (so far) the other of the two contracts of insurance to which it is a party, applying a measure of reality there is bound to be a substantial overlap between the issues in all three arbitrations. It seems to me that that will inevitably be so in circumstances where the policies are in identical terms and cover the same risks (except as to the level of cover) and when, as the evidence adduced by Guidant indicates, all three policies were written upon the basis of the same application for insurance made by Guidant. In those circumstances, Guidant argues that it is highly desirable that there should be a common chair of the three arbitral tribunals. That is said to be desirable for three principal reasons. First, they say that it will reduce the risk of inconsistent decisions in the different arbitrations – consistency itself being an important aspect of justice. Second, it is said that having a common chair will reduce costs and delay by having a smaller total number of arbitrators and fewer calendars to co-ordinate. Third, it is argued that it will at least hold out the possibility (although Guidant accepts that this could only be done by agreement) of co-ordinating the procedure, or at least parts of the procedure, in the three arbitrations.

I would agree with Guidant that those are all objectively desirable goals and, if this were litigation, the court would almost certainly order the three claims to be managed and tried together in the interests of efficiency and to avoid the risk of inconsistent results. This is not litigation, however, and in arbitration proceedings considerations of party choice, privacy and confidentiality are relevant and important. As Mr. Lockey QC for the defendant, Swiss Re, has emphasised, under the 1996 Act the court has no power to order consolidation or co-ordination of arbitration proceedings nor does an arbitral tribunal have such power except with the consent of the parties (see s.35 of the Act). Swiss Re and Markel have each made it clear that they do not consent to consolidation of the three arbitrations nor to concurrent hearings, and that is their right.

In circumstances where the arbitrations will therefore be taking place separately, it seems to me that Swiss Re has a legitimate basis for objecting to the appointment as the third member of the tribunals in its arbitrations of the same person who is the third arbitrator and chair of the tribunal in the Markel arbitration. If the same person were to be appointed, there would be a legitimate concern that that person would be influenced in deciding the Swiss Re arbitrations by arguments and evidence in the Markel arbitration. Indeed, the likelihood that that would occur is implicit in the very argument which Guidant makes that appointment of the same person would minimise the risk of inconsistent decisions. Swiss Re is not a party to the Markel arbitration and will have no opportunity to be heard in that arbitration or to influence its outcome. Indeed, without a waiver of confidentiality, they will not be privy to the evidence adduced or the submissions made in the Markel arbitration. If the Markel arbitration were to be heard first, the members of the tribunal in that arbitration would form views, without any input or opportunity for input from Swiss Re, from which they may afterwards be slow to resile.

I accept the submission made by Mr. Tse on behalf of Guidant that the appointment of a common arbitrator does not justify an inference of apparent bias. The fact that the same person has been appointed by Guidant as its arbitrator in the Markel arbitration is not, therefore, a ground on which an application could be made to seek to disqualify him from acting in the Swiss Re arbitrations. Guidant is entitled to choose the same individual as their arbitrator in all three arbitrations, as they have. But conversely Swiss Re, for their part, are in my view reasonably entitled to object to having forced upon them an arbitrator who has already been appointed in the Markel arbitration and about whose involvement in that arbitration they are entitled to feel the concern which I have indicated.

I therefore decline to appoint Mr. Collins as the third arbitrator and chair in these two arbitrations. It will be clear and obvious from what I have said that that decision has nothing to do with the qualifications of Mr. Collins, who is of course a very well qualified and highly experienced international arbitrator.

I also do not consider there to be any inconsistency between this decision and the decision of the Court of Appeal in the case of Abu Dhabi Gas v. Eastern Bechtel Corporation [1982] 2 Lloyds Rep 425, on which counsel for Guidant has relied. In that case there were arbitrations under a contract and a sub-contract for construction work. The question was whether the same arbitrator should be appointed for both arbitrations. At first instance, Mr. Justice Bingham held that separate arbitrators should be appointed. His reasoning was summarised as follows by Lord Denning in his judgment given on the appeal:

“The sub-contractors, for instance, might say that the arbitrator’s decision in the first arbitration might affect his decision in the second arbitration. If he had already formed his view in the first arbitration, they would be prejudiced. It would be most unfair to them because he would be inclined to hold the same view in the second arbitration.”

That is, essentially, the same concern which I consider that Swiss Re might reasonably feel in the present case if the same third arbitrator were appointed for all three arbitrations.

Lord Denning went on to refer to the danger in having separate arbitrations with separate arbitrators, namely the risk of inconsistent decisions. He considered that the same arbitrator should be appointed for both disputes in that case and that it was possible to reconcile the desire to avoid inconsistent findings with the consideration that it was, in his words (at p.426-7), “equally desirable that it should be done so that neither party should feel that any issue has been decided against them beforehand, or without their having an opportunity of being heard in the case.” I confess that it is not entirely clear to me how the solution which Lord Denning envisaged was expected to work, but he appears to have contemplated a common pre-trial hearing in both arbitrations in which decisions would be made about which issues should be decided separately and at what stage issues should be decided. He also appears to have envisaged the possibility that the arbitrator at a certain stage of the proceedings might be replaced in one of the two arbitrations by somebody else, if that was necessary to avoid any perception of unfairness.

Whatever was possible under the earlier Arbitration Acts, it is plain that the solution envisaged by Lord Denning is not available under the 1996 Act. In particular, it is not possible to have a single common pre-trial conference (as he called it) in all the arbitrations of the kind which he envisaged nor to have a single hearing of common issues without the consent of the parties if he also envisaged that. Nor is it practical or sensible to contemplate replacing the third arbitrator in one or more of the arbitrations during the course of the proceedings. In any case, there is an important difference between the Abu Dhabi Gas case and the present case in that what the contractor was seeking in the Abu Dhabi Gas case was an order from the court to have the same arbitrator appointed in both arbitrations whoever that person might be. There was no question in that case, such as arises here, of an attempt by one party to impose on the other not only the concept of a common arbitrator, but the identity of the particular arbitrator whom they wish the court to appoint. I am therefore satisfied that there is no reason arising from the Abu Dhabi Gas case (or any other authority) which would require me to depart from the conclusion that I have reached on principle that I should not accede to the application to appoint in the Swiss Re arbitrations the same chair who has already been appointed in the Markel arbitration.

Swiss Re seek, however, to press the point further and ask the court to appoint a different chair for each of the two arbitrations in which they are involved. To support that position, Mr. Lockey emphasised that a party is entitled to insist on information disclosed in one arbitration being used only for the purpose of that arbitration and that such information should not be used in another arbitration, even where that second arbitration is one between the very same parties, as is the situation here. He also emphasised again that there is no power which the court has or which the tribunal has to consolidate the two arbitrations or manage them together.

I accept both of those points. But, nevertheless, the fact is that, for these two arbitrations where the parties are identical, the same considerations of privacy and confidentiality do not arise as are raised in the case of the Markel arbitration which involves a third party. Not only will the parties in these two arbitrations be the same but, quite naturally, they are being represented by the same solicitors and counsel. The parties and their legal representatives in one arbitration will, therefore, all know what has happened in the other, and it does not seem to me to be objectionable in any way that the same should be true of any of the arbitrators. Indeed, it seems to me positively desirable that the arbitrators should - to the extent that there is no other legitimate objection to it - be the same, so as to avoid inconsistency of decisions insofar as it may help to achieve that. In my view, there is no legitimate objection which Swiss Re has raised or can raise to having the same individual appointed as the third arbitrator in each of the two arbitrations between themselves and Guidant. I consider that that is indeed the preferable course.

As to who that arbitrator should be, I mentioned earlier that a total of six names have been proposed by the two arbitrators appointed by Swiss Re. Each of those six individuals has impeccable and indeed outstanding qualifications. Guidant has not indicated a preference for any one of them and it therefore falls to the court to select one. The person whom I propose to nominate is Sir Richard Aikens for the reason that he has only recently retired from the bench. In the absence of any other information, it therefore seems likely that he may have better availability and less likelihood of any conflict than other individuals who have been acting as arbitrators for longer. I will, however, give liberty to apply in the event that any difficulty arises in relation to the appointment of Sir Richard Aikens.