On Feb. 22, in the High Court of Justice of England and Wales case H1 v. W, Judge Neil Calver[1] handed down judgment, published in anonymized form, in an application for the removal of a sole arbitrator for apparent bias under Section 24 of the Arbitration Act 1996.
Judge Calver removed a sole arbitrator on the grounds of apparent bias, holding that the arbitrator's decision to accept an expert witness's evidence, without his appearance at a hearing and for cross-examination, paired with his remarks concerning his familiarity with that expert witness, gave rise to justifiable doubts as to his impartiality.
To protect the interest in anonymity of the disputing parties to the arbitration, Judge Calver decided to anonymize the judgment. The judgment is notable as a successful Section 24 apparent bias application, the decision to anonymize the judgment, and because of its particular facts.
There are a number of lessons that can be drawn from this case.
First, when negotiating an arbitration clause, parties should pay close attention to the procedure for the appointment of arbitrators. In this case, for example, three years and 10 months elapsed between the insured's first nomination of a sole arbitrator and the parties' eventual agreement of the terms of appointment of the sole arbitrator "W."
The appointment of arbitrators is a critical part of arbitral procedure and a common issue giving rise to unnecessary increases in the length and cost of arbitral proceedings, one which many commonly used procedural rules include provisions to control.[2]
Second, where a sole arbitrator is to be appointed, in considering candidates, parties or any third party tasked with nominating a sole arbitrator would be well-advised to strike a balance between industry experience and experience sitting as an arbitrator.
Once again, foresight is preferable to hindsight, and parties should pay attention to any qualifications they wish for an arbitrator to have at the point of negotiating their arbitration agreement, ensuring that this is set out with sufficient clarity and with safeguards against impasses.
Third, the drafters of the Arbitration Act 1996 went to great lengths to ensure that the act was drafted so as to be accessible and user-friendly to the nonlawyer arbitrator.
The general duty of the arbitral tribunal is set out in Section 33(1) of the Arbitration Act 1996 in a few short lines.[3] Where, as here, the intervention of the court is required,[4] the English Commercial Court will exercise its supportive powers to ensure that justice is done quickly, so as to allow arbitral proceedings to resume with minimal disruption and delay, including by respecting the parties' interest in resolving their dispute privately at arbitration.
Background
The underlying arbitration was between an insurer and a film company and a film production guarantor. A dispute arose after the insurer rejected a claim under its film production insurance policy, declining to provide an indemnity in connection with an accident that had occurred on set during the filming of a television series in Sweden in 2018. During filming, a lit prop Molotov cocktail that was supposed to be thrown by the lead actor exploded in his hand, causing serious injury after it had been swapped out for the originally scripted bottle of water.
The insurance policy was governed by English law, and contained an arbitration agreement submitting disputes to arbitration in London by a sole arbitrator identified as "an experienced practitioner in film or television programme production, as appropriate. If agreement cannot be reached on a suitable arbitrator, one will be chosen by the chairperson or president of the film or television production industry body as appropriate."[5]
After the parties failed to agree on an arbitrator, the British Film Institute nominated W as the sole arbitrator.
At a case management hearing, W made comments concerning his knowledge of the insured's factual and expert witnesses, which the insurer claimed gave rise to "an apprehension that he held pre-determined favourable views of those witnesses and pre-determined negative views of the insurer's witnesses."[6]
The insurer sought an order for W's removal pursuant to Section 24(1)(a) of the Arbitration Act 1996. The order asked that W be entitled to payment of his fees up until the conclusion of the case management hearing in question on Nov. 23, 2023, pursuant to Section 24(4) of the Arbitration Act 1996, and that the insured pay its costs of the application.
The insurer's application notice set out 10 grounds of apparent bias,[7] but by the time of the single-day hearing, the insurer's two remaining central objections were that (1) the arbitrator had improperly criticized the witness "JH" for switching sides, and that (2) the arbitrator had made remarks at a case management hearing about how he would treat the evidence of the expert witnesses generally, and of one expert witness in particular.[8]
Apparent Bias
The legal test for apparent bias was most recently authoritatively stated by the U.K. Supreme Court on Nov. 27, 2020, in Halliburton Co. v. Chubb Bermuda Insurance Ltd.,[9] and asks whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.[10]
Judge Calver applied this test, noting its objective character[11] and that removal of an arbitrator following a finding of apparent bias is not discretionary, but follows the finding of fact, and that in cases where the facts are inconclusive, the judge is bound to resolve any doubt in favor of removing the arbitrator.[12]
Judge Calver further noted that a fair-minded and informed observer should take into account the fact that arbitrators drawn from a small industry are more likely to know their peers. This is not problematic in itself since the desirability of a nonlawyer arbitrator may lie in the fact of their yearslong industry experience,[13] which brings with it an increased likelihood that the arbitrator has had dealings with one or more dramatis personae.[14]
A nonlawyer arbitrator will also not case-manage the arbitral procedure and matters of evidence with the same level of sophistication as might be expected of an experienced lawyer.[15]
When it comes to the arbitrator's weighing of evidence in a Section 24 apparent bias application, Judge Calver stated — citing the Court of Appeal of England and Wales' decision in Locabail (UK) Ltd. v. Bayfield Properties Ltd. on Nov. 17, 1999[16] — what matters is that the arbitrator not appear to prejudge any matter or base a finding on anything other than the evidence presented to them.[17]
Judge Calver was prepared to chalk up to the sole arbitrator's experience or inexperience his "unfortunate and misguided" criticism of a fact witness for the insurer — who had originally been tasked by the insured to investigate the accident — for switching sides.
The judge found, however, that the sole arbitrator's remarks about there being no need to hear the expert witnesses gave the "firm impression of [W] having already allowed extraneous, illegitimate factors to influence his assessment of evidence which he has not yet heard and, moreover, of not even realising that that is an unfair approach to adopt."[18]
Citing the High Court's previous decision in David Jackson v. Thompsons Solicitors on Feb. 6, 2015,[19] Judge Calver concluded that the sole arbitrator's remarks suggested "a mind that is closed to the consideration and weighing of relevant factors."[20] This was sufficient to give rise to justifiable doubts as to his impartiality for Section 24(1)(a) purposes, and to justify the sole arbitrator's removal.
Anonymization
Judge Calver accepted that the principles regarding anonymization are the same as those for publication.
Drawing on authorities, he also acknowledged that the court's weighing up of the imperative of open justice against the parties' expectation of privacy in arbitral proceedings was a fact-sensitive exercise and involved consideration of matters, such as what details about the arbitration are disclosed in the judgment, whether the fact of the arbitration has been made public by the parties, and whether anonymization would make the judgment more difficult to follow.
In relation to anonymization of the arbitrator's name in the judgment, the biggest single factor for Judge Calver seems to have been that, given how small the Scandinavian film industry is, revealing the arbitrator's name was liable to compromise the anonymity of the disputing parties. However, the judge also noted that his decision to preserve the anonymity of the arbitrator in the judgment was "exceptional".[21]
Comment
Arbitrators do not need to be lawyers, although they though often are. Nonlawyer arbitrators, which are most common in construction, shipping and commodities disputes, can, as noted by Judge Calver, be valuable in providing the first-hand knowledge of a complex industry sector that some lawyer arbitrators may lack.
As H1 v. W shows, parties wishing to appoint nonlawyer arbitrators with little or no prior experience of conducting arbitrations would be well-advised to draft arbitration agreements that call for a three-arbitrator tribunal that includes some arbitrators experienced in the conduct of arbitrations, if not also of legal practice.[22]
It should be noted that, once a dispute has arisen, it is still possible to vary the arbitration agreement to stipulate that a legally trained arbitrator be appointed or a three-person arbitral tribunal be constituted. However, this will require the agreement of all the parties, which is often difficult to achieve once a dispute has already arisen.
In fact, in H1 v. W, the legal representatives of the insurer had proposed that the parties depart from the terms of the arbitration clause and agree to appoint a legally trained arbitrator with knowledge of the industry. This was refused, in reliance on the arbitration clause.[23]
The arbitrator's duties are set out in Section 33 of the Arbitration Act 1996. The grounds for the removal of an arbitrator in Section 24 largely overlap with those duties and their nonfulfillment.[24]
The Departmental Advisory Committee on Arbitration's 1996 report, which preceded the 1996 act, points out that the arbitrator's duties set out in Section 33 are designed to define the arbitrator's role accessibly to conform with "what most would regard as self-evident rules of justice [which are] generally accepted in our democratic society, and are not merely theoretical considerations that concern lawyers."[25]
In other words, Section 33 and, by extension, Section 24, are designed to encourage and support the nonlawyer and lawyer arbitrator equally in the enterprise of doing full justice to the parties with greater procedural flexibility than is available in litigation. Bias and apparent bias both pose threats to that enterprise, hence the court's powers in Section 24 to intervene to remove an arbitrator where necessary.
The insurer does not appear to have attempted to pursue an order for the sole arbitrator W to pay costs in these proceedings,[26] which is nonetheless available in principle pursuant to Section 24 of the Arbitration Act, since the arbitrator is, as a matter of procedure, always a party to Section 24 applications for removal.[27]
The Arbitration Bill — or HL Bill 59, as amended in the Special Public Bill Committee and published on March 27 — includes a new Subsection 24(5A), which would expressly address the recovery of the cost of legal proceedings and limit recovery to cases where an "act or omission of the arbitrator in connection with the proceedings is shown to have been in bad faith."
In this case, the Section 24 application was heard on Feb. 8, 2024, just over two months after it was issued on Dec. 4, 2023, and judgment was handed down two weeks later, demonstrating the English court's policy of speedy finality in arbitration.
The case is also a reminder of the importance of prompt action. The procedural hearing in the arbitration, which was central to the judgment, took place just a few days before the merits hearing, but, in the intervening days, the application was made to court to have the arbitrator removed.
Finally, central to the Section 24 application in this case were comments made by the arbitrator at a case management hearing. These were recorded in contemporaneous notes prepared by the parties' legal representatives, the accuracy of which neither party disputed. Those notes assisted the court in making its findings. For anyone tasked with taking such a contemporaneous note, this case should act as proof, were it needed, of the great value of that exercise.
Paul-Raphael Shehadeh is an associate at Duane Morris LLP.
Notes
[1] H1 & Anor v W & Ors [2024] EWHC 382 (Comm); Like many judges of the Senior Courts of England and Wales and UK Supreme Court, before his appointment to the High Court, Calver J himself acted as a commercial arbitrator in various international arbitrations so has first-hand experience of the role and its demands.
[2] For example, under Article 5.6 of the LCIA Arbitration Rules, the LCIA Court is to appoint the Arbitral Tribunal (i) promptly following receipt by the Registrar of the Response, else (ii) promptly after 28 days from the Commencement Date. Similarly, Articles 11 and 12 of the ICC Rules include short time limits for the parties to nominate prospective arbitrators and the decisions of the ICC Court as to appointment of an arbitrator are final.
[3] "(1) The tribunal shall– (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined." Arbitration Act 1996, s. 33(1).
[4] Pursuant to section 24(2) of the Arbitration Act 1996, if an arbitral or other institution or person is vested by the parties with power to remove an arbitrator, the parties must go through that process first: the court will only step in to exercise its power of removal if satisfied that the applicant has first exhausted any and all other avenues available to it.
[5] As quoted at [7] in the anonymised judgment of Calver J in H1 & Anor v W & Ors [2024] EWHC 382 (Comm).
[6] At [4].
[7] Reproduced at [3].
[8] At [71].
[9] Halliburton Co v Chubb Bermuda Insurance Ltd [2021] AC 1083.
[10] The test for apparent bias is the same as for judges, as noted in Halliburton, and the leading cases followed by the Supreme Court in Halliburton (chiefly Porter v Magill [2001] UKHL 67, and Helow v Advocate General for Scotland [2008] UKHL 62 on judicial impartiality/ bias) are equally in point in relation to arbitrators, making allowances for the differences between the judicial and arbitral process. When considering apparent bias in relation to an arbitrator, the fair-minded and informed observer should take account of the following: (i) arbitration is generally private and confidential, with more limited discovery so there is a premium on frank disclosure; (ii) an arbitrator's findings on issues of fact are not amenable to judicial review, and judicial review of issues of law are limited; (iii) an arbitrator is remunerated by the parties so may have an interest in not alienating the disputing parties which is not a concern in relation to a state-funded judge; (iv) arbitrators need not be experienced in the conduct of arbitrations; (v) the professional reputation and experience of an arbitrator is a relevant consideration in the assessment of apparent bias; and (vi) parties may deploy apparent bias challenges tactically.
[11] At [5].
[12] At [62] (citing Lord Justice Mummery in AWG Group Ltd v Morrison [2006] EWCA Civ 6 at [6] as to the lack of discretion in the question of whether to remove an arbitrator following a finding of apparent bias; citing the single, unanimous judgment of the then Lord Chief Justice, Master off The Rolls and Vice−Chancellor Bingham, Woolf and Scott LJJ in Locabail (UK) Ltd v Bayfield Properties Ltd & Anor [1999] EWCA Civ 3004, at [25] (as to resolving uncertainty in favour of recusal).
[13] Citing Sir Ross Cranston in Africa Sourcing Cameroun Ltd v LMBS Societe Par Actions [2023] EWHC 150 (Comm), at [89].
[14] per Moore-Bick J in Rustal v Gill & Duffus [2000] 1 Lloyd's Rep. 14 at [18].
[15] per Colman J in Norbrook Laboratories Ltd v Tank [2006] EWHC 1055 (Comm), at [153].
[16] Locabail (UK) Ltd v Bayfield Properties Ltd & Anor [1999] EWCA Civ 3004.
[17] Locabail (UK) Ltd v Bayfield Properties Ltd & Anor [1999] EWCA Civ 3004, at [2]. There are starker examples of arbitrators allowing extraneous matters to allow extraneous and/or illegitimate factors to colour their weighing of evidence as in Re the Owners of the Steamship 'Catalina' and the Owners of the Steamship 'Norma'[1938] 61 Lloyd's Reps 362–363, where the arbitrator opined: "They are not Italians. The Italians are all liars in these cases and will say anything to suit their book. The same thing applies to the Portuguese. But the other side here are Norwegians, and in my experience the Norwegians generally are truthful people. In this case I accept the evidence of the master of the [Norwegian ship] Norma."
[18] At [79].
[19] Jackson v Thompson [2015] EWHC 218.
[20] Jackson v Thompson [2015] EWHC 218 at [15].
[21] At [93].
[22] At [79], Calver J considered the fact that the arbitrator – though experienced in his field of industry – was not experienced as an arbitrator and was sitting as a sole arbitrator, so could not benefit from the "tempering influence" of two co-arbitrators.
[23] At [17] – [18].
[24] The Arbitration Bill (HL Bill 59 as amended in Special Public Bill Committee and published on 27 March 2024) would insert a new section 23A which sets out the scope of the arbitrator's ongoing duty of disclosure to the intermediary seeking that individual's appointment as arbitrator, or upon appointment as arbitrator, to the parties directly, of circumstances of which the arbitrator is aware (or ought reasonably to be aware) that might reasonably give rise to justifiable doubts as to the individual's impartiality in relation to the proceedings. This is to be contrasted with the approach adopted in the non-binding IBA Guidelines on Conflicts of Interest in International Arbitration (February 2024), where there is an interplay between General Standard 3 (on arbitrator's disclosure of facts or circumstances that may give rise to doubts as to an arbitrator's impartiality or independence), and General Standard 7 (the parties' duty to make reasonable enquiries to uncover such matters), such that parties adopting the IBA Guideline must actively police the arbitrator's impartiality. Such a positive duty is absent from the English Arbitration Act 1996, which places the onus on the arbitrator with regard to impartiality.
[25] Paragraph 152, DAC Report.
[26] At [6]: "The insurer seeks an order: […] (3) that that the second and third defendants pay its costs."
[27] Case law with regard to the liability for costs of an arbitrator removed pursuant to section 24 shows a cautious approach which balances the characteristic English approach to the apportionment of the costs of legal proceedings (i.e. 'costs follow the event') against the important doctrine of arbitrator immunity (set out in section 29(1) of the Act, "An arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith."):
In Cofely Ltd v Bingham [2016] EWHC 540 (Comm) (17 February 2016), the court ordered the removal of an arbitrator for apparent bias on the basis of his recent repeat appointments by the same party. In his decision on costs in that case, Mr Justice Hamblen ordered the arbitrator to bear some of the costs of the section 24 proceedings, but without a finding of bad faith on the arbitrator's part. Mr Justice Hamblen, then a High Court judge, was subsequently appointed to the Court of Appeal. As a Lord Justice of the Appeal, together with Sir Geoffrey Vos and Lord Justice Simon, Hamblen LJ gave judgment in Halliburton Company v Chubb Bermuda Insurance Ltd & Ors [2018] EWCA Civ 817 (19 April 2018), which was upheld by the Supreme Court.
In the UK Supreme Court decision in Halliburton Co v Chubb Bermuda Insurance Ltd [2021] AC 1083 (27 November 2020), Lord Hodge noted the possibility of an arbitrator being ordered to bear some or all of the costs of legal proceedings as a sanction for the non-disclosure of a matter occasioning section 24 proceedings for their removal, even where, on later examination, the court does not find that there is apparent bias (at paragraph [111]).
Reprinted with permission of Law360.
