The challenge of challenging arbitrators: recent cases

Challenges to arbitrators receive a large amount of attention. However, and as illustrated by recent cases, such challenges rarely succeed. Here we look at those cases by reference to two of the grounds commonly raised in these challenges: the lack of independence or impartiality of arbitrators and the misuse of tribunal secretaries.  

Impartiality and independence

As is the case for all types of dispute resolution, impartial and independent decision-makers and due process are of paramount importance to reach a fair result. Article 12 of the UNCITRAL Model Law, which is widely replicated in institutional arbitration rules and reflected in national arbitration legislation, requires arbitrators to be impartial and independent. Such impartiality and independence must be present both at the time of appointment and throughout the life of the arbitration. If circumstances exist which give rise to "justifiable doubts" as to their impartiality or independence, parties may challenge the arbitrator(s).¹  

The IBA Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines) contain helpful guidance on best practice and what may amount to "justifiable doubts". They do not have the force of law (and are not used as the applicable test by the English Courts) but are widely used by arbitrators and institutions alike and are often cited in challenges. The test is applied objectively (a "reasonable third party test") and there is no need for actual bias; apparent bias is sufficient. The IBA Guidelines use a Red, Orange and Green list approach to help determine whether the particular facts give or might give rise to doubts as to an arbitrator's impartiality or independence.

The English Court of Appeal recently had to consider the position of an arbitrator who received appointments in a series of arbitrations arising out of the Deepwater Horizon incident. The issue arose after the arbitrator (known as "M") had been appointed as chair by the English courts in an arbitration between Halliburton, a multinational oil field services company, and its insurers, Chubb. Chubb then appointed M in a second Deepwater Horizon related arbitration against Transocean, a drilling contractor. In turn, Transocean then also appointed M in a third Deepwater Horizon related arbitration against another insurer. Halliburton complained about non-disclosure by M of these subsequent appointments and sought to challenge M's impartiality. 

According to the Court of Appeal, the key question for disclosure is whether the other appointments might have provided the fair-minded and informed observer with a basis for a reasonable apprehension of lack of impartiality. Although the Court of Appeal answered this question in the affirmative and found that M should have disclosed the fact of the other appointments at the time he was appointed, on the facts of this case, that did not lead to a finding that M was biased. The Court of Appeal noted in particular that the non-disclosure was "accidental rather than deliberate" and non-disclosure does not in itself justify an inference of apparent bias. The Court of Appeal also found that the limited degree of overlap meant that this was not a case where overlapping issues should give rise to any significant concerns and therefore did not remove M as arbitrator.²   

In the English Commercial Court judgment of P v Q discussed below, a challenge to the chairman of a tribunal was successful and the LCIA Court revoked his appointment. This was on the basis of comments that the chairman had made at an international conference which gave rise to justifiable doubts as to his independence or impartiality. 

Arbitrator challenges also arise in the context of investor-state arbitration. In BSG Resources v Guinea,³ the Claimant applied to have the entire tribunal disqualified for lack of impartiality. Article 57 of the ICSID Convention allows a party to propose the disqualification of any member of a tribunal on account of any fact indicating a manifest lack of impartiality. The Claimant submitted that a procedural order deciding that pursuing various issues of document production at that stage of the proceedings would "make no meaningful contribution to the resolution of the dispute" meant that the tribunal had prejudged the issue and therefore lacked impartiality. The Chairman of the ICSID Administrative Council disagreed and the challenge was rejected. In the Chairman's view, a third party undertaking a reasonable evaluation of the tribunal's decision and surrounding facts would see no evidence of either prejudgment of the disputed issues or any violation of due process and therefore no manifest lack of impartiality. 

Improper delegation or the "Fourth Arbitrator"

Tribunal or "administrative" secretaries are often appointed to assist tribunals in large arbitrations. Their duties range from purely administrative (such as communicating the tribunal's messages to the parties) to preparing draft procedural orders, researching questions of law, and drafting parts of the award.⁴ They are subject to the usual conflict checks and best practice dictates that their appointment be approved by the parties, though this is not always the case. 

In P v Q,⁵ the English Commercial Court had to consider whether a tribunal constituted under the LCIA arbitration rules had improperly delegated its duties to the tribunal secretary. The application was made pursuant to section 24(1)(d) of the Arbitration Act 1996, which gives the court the power to remove an arbitrator where such arbitrator has refused or failed to properly conduct the proceedings. 

In this case, the Chairman of a three member tribunal mistakenly sent an email intended for the tribunal secretary to the Claimant. In the email, the Chairman forwarded an email from the Claimant and asked the tribunal secretary: "Your reaction to this latest from the [Claimant]?". The Claimant then brought a challenge seeking to have all three members of the tribunal removed on the basis, among others, of improper delegation to the secretary. The LCIA Court heard the challenge and analysed the time spent by the secretary, chairman and the co-arbitrators on three procedural decisions issued by the tribunal. The LCIA Court took the view that there had not been improper delegation. It therefore rejected the challenge on this basis and the claimant appealed. 

The Commercial Court reached the same conclusion and dismissed the appeal. More importantly, it also noted that the courts should be slow to deviate from the determination of the challenge by the LCIA Court, which was the parties' chosen forum for resolution of the question in issue. 

Following the judgment, the LCIA implemented changes to its Notes for Arbitrators in relation to tribunal secretaries. A tribunal wishing to appoint a secretary is now required to outline the tasks that the secretary will carry out and the parties must expressly consent to the tasks proposed. 

P v Q is not the first case where a tribunal has been challenged for using tribunal secretaries. In the high profile appeal of the Yukos awards,⁶ the fact that the tribunal assistant had drafted the award was an argument put forward by Russia for annulment before The Hague District Court. The point was not decided upon by the District Court as it annulled the award for lack of jurisdiction (currently under appeal). 

According to the guidance published by various institutions on best practice for arbitrators and tribunal secretaries, challenges on the basis of improper delegation may be successful if it can be established that the arbitrators delegated their decision-making to a third party. For example, the ICC Note on the appointment, duties and remuneration of administrative secretaries specifically states:

"Under no circumstances may the Arbitral Tribunal delegate decision-making functions to an Administrative Secretary. Nor should the Arbitral Tribunal rely on the Administrative Secretary to perform any essential duties of an arbitrator."

An example where a challenge of an award was successful on that basis was the case of Sacheri v Robotto by the Italian Supreme Court.⁷ The challenge raised was that the arbitrators, who were construction specialists, had engaged a lawyer to draft the award for them. The Italian Supreme Court annulled the award on the basis that the arbitrators could not critically examine it once it had been drafted and had effectively delegated the decision-making. 

Conclusion

Earlier this year, the LCIA made available online digests of the 32 LCIA arbitration challenge decisions made between 2010 and 2017. This is against a backdrop of over 1,600 cases registered with the LCIA during the period covered by the decisions. Of those 32, only six were upheld and a further one partially upheld. 

Similarly, the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) last year published a note on SCC Board decisions on challenges to arbitrators taken in 2013 to 2015. In the period January 2013 to December 2015, 567 arbitral proceedings were initiated at the SCC. The SCC Board received 28 challenges, with many resulting in the relevant arbitrator stepping down voluntarily. Decisions were issued on 14 challenges and only four were sustained. The Red, Orange and Green lists of the IBA Guidelines are widely referred to in the LCIA Court and SCC Board's decisions. 

A party that believes that an arbitrator is pre-disposed in a certain way may try to have that arbitrator removed and a new arbitrator appointed. Similarly, it may try to attack an award on the basis of improper delegation. However, where such challenges fail before the relevant institution, the English courts will not readily interfere with the institution's judgement, as per the strong message delivered by the Commercial Court in P v Q. 

While there is more transparency in recent years surrounding challenges to arbitrators, which attract attention, they are still relatively rare. As the figures above demonstrate, they even more rarely succeed and the English Courts in particular take a very robust approach. 

1. A formulation in both the Model Law and the Arbitration Act 1996, though the latter only requires impartiality and is silent on independence.
2. Halliburton Company v Chubb Bermuda Insurance Ltd & Ors [2018] EWCA Civ 817 (19 April 2018).
3. BSG Resources Limited, BSG Resources (Guinea) Limited and BSG Resources (Guinea) SARL v Republic of Guinea (ICSID Case No. ARB/14/22), Decision of 28 December 2016.
4. See Article 3 of Young ICCA Guide on Tribunal Secretaries.
5. P v Q, R, S and U [2017] EWHC 194 (Comm).
6. Hulley Enterprises Limited (Cyprus) v The Russian Federation (PCA Case No. AA 226); Yukos Universal Limited (Isle of Man) v The Russian Federation (PCA Case No. AA 227); Veteran Petroleum Limited (Cyprus) v The Russian Federation (PCA Case No. AA 228) awards of 18 July 2014.
7. Sacheri v Robotto, Corte di Cassazione, 2765, 7 June 1989.