Apparent bias

Apparent Bias: How to avoid the appearance of bias

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It is common for parties to a construction contract to provide for a named arbitrator or adjudicator in every contract they enter into.  However, in certain circumstances, regularly appointing the same arbitrator or adjudicator may lead to a conflict of interest on the part of the arbitrator or adjudicator, which, if not disclosed or addressed, can lead to the appearance of bias. 

The issue of apparent bias of arbitrators was dealt with recently in Cofely Limited v Anthony Bingham [2016].  The Commercial Court made a finding of apparent bias in relation to an arbitrator who had obtained 18% of his appointments as an adjudicator or arbitrator, and 25% of his income over the past 3 years from cases where Knowles Ltd was either a party, or was advising one of the parties. 

What happened?

Cofely was the responding party in an arbitration commenced by Knowles Limited.  Knowles Ltd applied to the Chartered Institute of Arbitrators for the appointment of an arbitrator.  They requested Mr Bingham.  The CIArb Code for Professional and Ethical Conduct of Members provides that an arbitrator must disclose “all interests, relationships and matters likely to affect the member’s independence or impartiality”, and the CIArb acceptance of nomination form requires disclosure of any involvement, however remote, with either party over the last five years.  Mr Bingham did not disclose any involvement with Knowles Ltd. Cofely did not object to Mr Bingham’s appointment. 

Following the judgement in Eurocom v Siemens [2014], in which Ramsey J declined to grant summary judgment of an adjudicator’s decision on the grounds that Siemens had made a sufficiently strong case that the adjudicator had not been validly appointed because Knowles Ltd had made fraudulent misrepresentations to the adjudicating nominating body, RICS, Cofely became concerned about Mr Bingham’s relationship with Knowles Ltd.  Cofely requested information as to what proportion of his income and appointments as an adjudicator or arbitrator came from cases where Knowles Ltd was either a party or a party advisor.  Mr Bingham called a procedural meeting at which he denied any conflict of interest, and declared that the tribunal had been properly constituted.  (A declaration on this basis had not been sought by either party.)

It was revealed by Mr Bingham in correspondence that 18% of his appointments and 25% of his income over the last three years had come from cases where Knowles Ltd was either a party or was advising one of the parties.  Following this, Cofely requested that Mr Bingham recuse himself, but he refused. 

The judge in the Commercial Court held that all of the above facts cumulatively were such that a fair minded observer would have concerns as to Mr Bingham’s impartiality.  This justified Mr Bingham’s removal as an arbitrator under section 24(1)(a) of the Arbitration Act 1996.  The judge declined to make any finding of actual bias. The judge held that if Mr Bingham did not resign, the court would make an order that he be removed. However, this was not necessary, as Mr Bingham resigned as arbitrator following the judgment. 

Comment

The case gives rise to a number of concerns for those involved in construction disputes. 

Firstly, for those involved in drafting contracts, is the approach of naming one arbitrator or adjudicator now a risky one?  Or should one rely on an appointing body instead, who may appoint the same arbitrator or adjudicator in related disputes?

If one is advising a party to an arbitration or adjudication, to what extent is one permitted to influence the appointing body’s appointment by arguing that this case can only be decided by an arbitrator or adjudicator who possesses a certain rare skillset?  If acting for the responding party, it would certainly appear to be a wise course of action to request a copy of the appointment form.

For those acting as arbitrator or adjudicator, to what extent is it necessary to disclose every dinner you have attended with the parties or their advisors, or every case worked on? What about the position where you went to the same school, or work out of the same barristers’ chambers as one of the parties or its advisors?

For appointing bodies, it is acceptable to appoint the same decision maker in a related dispute (as was until recently the policy of RICS)?  Is it acceptable to rely on the same small pool of adjudicators?  These are questions that will need to be addressed by appointing bodies in future.  Indeed, RICS is in the process of holding a public consultation on the question.

Conclusion

If in doubt as to whether an adjudicator or arbitrator has a conflict of interest, a clear set of guidelines is provided by the IBA Guidelines on Conflicts of Interest in International Arbitration.  These require an arbitrator to disclose whether within the last three years he or she has been involved in a case with either party or its advisors on two or more occasions, or whether he or she is involved in an ongoing case with either party or its advisors.  The Guidelines are not themselves without issues (see the recent case of W Ltd v M SDN BVD [2016]) but they are a good starting point. 

No doubt there will now be a flurry of challenges to adjudicators’ and arbitrators’ partiality, following which common sense will ultimately prevail. In the meantime, parties, adjudicators and arbitrators must bend over backwards to appear transparent. 

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