It was widely predicted that the decision of the English Court of Appeal in Halliburton v Chubb last year would act as a spur to, rather than a break on, challenges to arbitrators on grounds of impartiality. The recent decision of the Commercial Court in Soletanche Bachy France S.A.S. v Aqaba Container Terminal (PVT) Co provides a number of insights into how the English courts will approach such applications, both in arbitrations generally and in ICC arbitrations in particular.
The arbitration
The arbitration out of which the proceedings arose concerned a contract by which the claimant building contractor agreed to carry out substantial construction works to extend a container port in Jordan on behalf of the respondent over a period of several years. In due course, the respondent decided to terminate the claimant’s employment under the construction contract because the claimant was in substantial delay. The respondent subsequently engaged an alternative contractor, BAM International (BAM) to complete the works.
The claimant commenced an ICC arbitration alleging that the termination had been unlawful. The respondent counterclaimed for the additional cost of completing the works as a result of having to engage BAM as a replacement contractor.
Disclosure of a conflict
On the first day of the oral hearing, an issue arose out of a series of documents which appeared to show that an employee of the respondent had received a series of corrupt payments from BAM. As soon as this issue arose in argument, one of the arbitrators (Arbitrator X) disclosed that he was currently retained by BAM in relation to a dispute on an entirely separate construction project in a different part of the world. The claimant confirmed that, notwithstanding that disclosure, it had no objection to him continuing in his role.
By the second day of the hearing, the claimant had accepted that the documents purporting to evidence corrupt payments were themselves forgeries. As a result, there was no longer any issue of potential corruption involving BAM.
The challenge to the award
The tribunal issued an award in which it decided that the termination of the contract had been lawful and that the claimant was liable to the respondent for approximately US $40 million. Shortly after the award had been issued, the claimant wrote to Arbitrator X asking him to provide details of his connection with BAM arising out of his instruction by them. He obliged.
The claimant then commenced proceedings in the English Commercial Court seeking to set aside the award on the basis that Arbitrator X’s failure fully to disclose his relationship with BAM was a serious irregularity pursuant to section 68 of the English Arbitration Act 1996. The claimant also made several other challenges to the award which were resolved by the application of familiar principles. However, the rejection of the impartiality challenge gave rise to three points of real interest.
No duty to disclose
First and foremost, it is notable that the court was emphatic in its conclusion that there had been no obligation on Arbitrator X to disclose his connection with BAM. The decision in Halliburton broke new ground by deciding that, as a matter of English law, there could be a duty on an arbitrator to disclose the existence of a conflict of interest even where an objective observer would not, in the end, conclude that there was an appearance of impartiality. The significance of the decision of Soletanche Bachy France S.A.S. v Aqaba Container Terminal (PVT) Co is the clear indication it gives that the courts are not going to apply an unrealistic or unduly rigorous standard when assessing alleged failures to disclose.
The essentials of the conflict
The second point of significance arising out of Soletanche Bachy France S.A.S. v Aqaba Container Terminal (PVT) Co is the court’s discussion of the circumstances in which there might be a duty on an arbitrator to give further disclosure. At the heart of the claimant’s case was an argument that Arbitrator X should have, but failed to, disclose to the parties, subsequent to his initial disclosure, as and when his involvement in BAM’s dispute became more extensive. Again, the court had “no difficulty whatever” in concluding that, simply because the dispute had become more active and the arbitrator’s involvement more substantial, there was a need for him to provide further details to the parties. Once he had disclosed “the essentials” of the potential conflict, there was no obligation to provide further disclosure unless something significant changed.
The ICC case information sheet
The third point of significance is the approach taken to the presence of BAM in the ICC case information sheet, which was provided by the ICC secretariat to the members of the tribunal at the outset of the arbitration to assist with the identification of potential conflicts. The claimant argued that the fact that BAM had been listed by the ICC was significant.
The court had no difficulty in concluding that there was no need for Arbitrator X to disclose his retention by BAM “simply because” it had been included in the list. As the judge put it, this list had been created “simply by ploughing through the papers and finding the names of companies or individuals” who had been referred to. Whether or not there was a need to disclose a connection with a particular entity depended on an objective assessment of its significance, not on whether or not it had been included in a list of entities that were potentially relevant.
Conclusion
Arbitrators’ conflicts are a topical issue in the English Court. Soletanche Bachy France S.A.S. v Aqaba Container Terminal (PVT) Co provides useful guidance on the specific points identified above, as well as a more general sense of reassurance that challenges to arbitrators or awards on the grounds of impartiality will continue to be treated with a large serving of scepticism and a healthy dollop of common sense. However, and for now, the message for practitioners continues to be to “watch this space”. The UK Supreme Court has recently given permission to appeal in Halliburton, so the law on this topic may well be re-written (again) in the not too distant future.
