Commercial Court rejects assertion of arbitrator bias

In the recent decision in H v L, M, N and P [2017] EWHC 137 (Comm) in the Commercial Court, Mr Justice Popplewell addressed an attempt by the Claimant, H, to remove M, the third arbitrator in a arbitration between H and L, on the basis that the conduct of M gave rise to an appearance of bias. Mr Justice Popplewell rejected H’s claim – none of the grounds advanced by H, either individually or cumulatively, established any circumstances which gave rise to any justifiable doubts as to the impartiality of M.

Following an incident, H (together with two others, R and Q) had been found liable for claims brought in the United States. H had, however, negotiated a settlement of the claims after the liability hearing but before judgment. H’s liability insurer, L, declined H’s claim arising from the settlement on the basis that H’s settlement of the claim was not a reasonable settlement and that L had, reasonably, not consented to the settlement.

H commenced arbitration and appointed N as arbitrator. L appointed P as arbitrator. There was no agreement on the identity of the third arbitrator and, following a contested hearing in the High Court, M was appointed as third arbitrator by the Court.

Subsequently, H sought the removal of M as arbitrator on the basis of M’s acceptance of two later appointments as arbitrator in two arbitrations in relation to the same incident (one involving R and L and the other involving R and another insurer).

H asserted that M would receive a secret benefit from L in the first arbitration, in the form of remuneration, having been appointed by L. H further asserted that M would learn information in the two arbitrations relevant to the H v L arbitration, which would give L an unfair advantage.

The Judge had little hesitation in concluding that neither point would cause a fair-minded or informed observer to have any doubts about the impartiality of M. If they caused H to do so, it was as a result of its fundamental misunderstanding of the nature of international arbitration in London governed by the Arbitration Act 1996. Generally, the fact that an arbitrator may be involved in an arbitration between Party A and Party B, whose subject matter is identical to that in an arbitration between Party B and Party C, does not preclude the arbitrator from sitting on both tribunals.

In the circumstances, H’s second ground in support of its application, that M should have disclosed the two later appointments, failed too. There was no obligation to disclose circumstances which the informed observer would not regard as raising a real possibility of impartiality.

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