—(4) A and Others v B and Another

Hearing date: 15 July 2011

Introduction and factual background

The claimants' application is made under section 24(1)(a) of the Arbitration Act 1996 to remove a sole arbitrator and to challenge a partial award for serious irregularity under section 68(1) of the Act. As is usual in such cases, the claimants have joined as a defendant not only the other party to the arbitration but the arbitrator, but he has taken no part in the proceedings, indicating that he will abide by the decision of the court.

The background to the matter is as follows. The underlying dispute between the claimants and the first defendant arose under a share sale and purchase agreement ("SPA") dated 26 July 2006, the details of which do not matter. On 31 March 2009, the first defendant commenced arbitration, pursuant to the Rules of the London Court of International Arbitration ("LCIA"), alleging breaches of the SPA. After some debate between the claimants' solicitors (then SJ Berwin, now White & Case after the relevant team of solicitors moved firms) and the first defendant's solicitors, Dewey & LeBoeuf, as to an appropriate QC to act as sole arbitrator, SJ Berwin suggested the second defendant (to whom I will refer as "X") as someone with appropriate financial law experience. This was agreed by Dewey & LeBoeuf.

On 8 May 2009, X signed a Statement of Independence, as required by the Rules of the LCIA, confirming that he was:

"impartial and independent of each of the parties, and I intend to remain so, and there are no circumstances known to me likely to give rise to any justified doubts as to my impartiality or independence."

His appointment as sole arbitrator was notified to the parties by the LCIA on 12 May 2009. At the time of his appointment, X had in the past received instructions as counsel from both firms of solicitors, once from SJ Berwin in 2005 and twice from Dewey & LeBoeuf (in 1999 and in 2004). This is entirely as one would expect of experienced and competent counsel specialising in the field of financial law in which the dispute arose for which he was appointed arbitrator. In particular, in 2004 he had been instructed by Dewey & LeBoeuf to act for clients of the firm who were involved in a dispute which led to litigation in the Commercial Court in which the clients were defendants (I will refer to this as "the Y litigation"). Neither the clients nor the dispute had any connection with either of the parties to the present arbitration.

The details of his involvement in that litigation are set out by X in a letter of 15 February 2011 to Mr Gerald Aksen who was appointed by the LCIA Court of Arbitration to decide the challenge to X as sole arbitrator made by the present claimants in circumstances which I will come to. I can summarise his involvement in the litigation by reference to that letter.

X was first instructed in September 2004 when he advised in consultation and in writing. Nothing further occurred until November 2006 when the claimants commenced proceedings against Dewey & LeBoeuf's clients in the Commercial Court. X was involved in advising the clients, assisting with junior counsel in the production of pleadings and preparation of the case for the trial, which was due to commence on 3 March 2008. A few days before that, the parties reached a settlement and the proceedings were stayed in the usual way on the basis of a Tomlin order. At the time of his appointment by the LCIA in the present case, the stay remained in place and it can be inferred that X had no reason to suppose the litigation would be revived. It was merely a common enough example in the field of commercial law of a case where a QC appointed as arbitrator has, in the past, acted as counsel instructed by one or other of the firms of solicitors involved in the arbitration.

Pleadings were exchanged in the arbitration during the course of 2009 and 2010 and various procedural hearings took place in person and on the telephone as a consequence of which X issued five procedural orders in all, the last two following procedural hearings on 26 November 2009 and 6 May 2010. In November 2009, the hearing of the arbitration was fixed for September 2010.

It was in fact some time in late 2009 (but evidently before the first of those procedural hearings) that the settlement in the Y litigation broke down, since in his letter of 15 February 2011, X says that in late November 2009, he was instructed by Dewey & LeBoeuf to advise the clients, which he did in December 2009. It appears from his letter that it simply did not occur to X at that stage that he was acting again on an active basis as counsel instructed by a firm of solicitors who were one of the firms involved in an arbitration where he was arbitrator. This is unfortunate, since I have little doubt that if he had mentioned the revival of the Y litigation at the procedural hearing on 26 November 2009, both parties would have said they had absolutely no objection to his continuing as arbitrator and the current application would never have been made. However, it is clear that his failure to mention his involvement at that stage was inadvertent.

In the Y litigation, the stay pursuant to the Tomlin order was lifted and in February 2010 there was a short case management hearing which X attended. Although he does not say so in terms in his letter, I infer that it was at that hearing that the case was re-fixed for trial on 29 November 2010 and that, at that stage or soon thereafter, X was retained to act as leading counsel for the defendants at that trial. However, between that case management hearing and commencement of trial preparation in mid-November 2010, his involvement in the case was limited to briefly liaising with opposing counsel in March 2010, advising twice on the telephone in March and August 2010 and having a discussion with junior counsel in October 2010.

In the meantime, in the arbitration, White & Case took over from SJ Berwin acting for the claimants in August 2010 and the matter proceeded to an oral hearing in London between 6 and 16 September 2010, at which both parties were represented by solicitors and counsel. X obviously reserved his award and, following the hearing, there were written submissions on costs. He says in the letter of 15 February 2011 that he worked on the award in late September, in October and early November 2010. At the end of November 2010, at the behest of one of the parties, the LCIA enquired when the award could be expected and on 30 November 2010, the LCIA was told that the award was expected to be completed by mid to end December 2010.

His other professional commitments had meant that X had not started trial preparation for the Y litigation until mid November 2010. The trial commenced before the Commercial Court on 29 November 2010 and took place on 29 and 30 November and 1 and 8 December 2010.

Following the first three days of the trial, X wrote to the parties on 6 December 2010 in the following terms:

"Before completing and issuing the award in this arbitration, I think I should mention to the parties that currently I am acting in a matter wholly unconnected with this arbitration in which Dewey & LeBoeuf act as my instructing solicitors on behalf of the client.

The case is an action in the Commercial Court in London arising from a dispute which began in 2004. Proceedings began in 2006, settled just before trial in 2008, but then the settlement failed and the case revived at the end of 2009 and was subsequently relisted. The opening and evidence was heard last week and closing submissions are due to take place on Wednesday 8 December.

The trial has made me conscious of the fact that Dewey & LeBoeuf (not Mr Greenwood) are the same solicitors as appear for the claimant in this arbitration: hence this letter.

I have of course acted for clients on the instructions of SJ Berwin (though not, as I remember, White & Case); and I am aware that the fact that SJ Berwin and Dewey & LeBoeuf are, or have been, my instructing solicitors in unconnected matters are not things that strictly require disclosure, as they are not things that have any bearing on my independence or impartiality.

Nonetheless, I would prefer the parties to know the position."

As appears from the penultimate paragraph of that letter (and as he confirms in his letter of 15 February 2011) it was his involvement in the trial which reminded X of the fact that the same firm of solicitors was instructing him as was acting for one of the parties in an arbitration in which he was arbitrator and about to issue his award. It seems that until then, he had overlooked this point.

As he said in his letter of 6 December 2010, although he was instructed in the Y litigation by Dewey & LeBoeuf, it was not by the same partner who was conducting the arbitration, Mr Nicholas Greenwood, but by another partner in the firm. Indeed, as appears from Mr Greenwood's witness statement in opposition to the present application dated 9 March 2011, the only overlap in terms of legal teams is that, at various stages four trainee solicitors and one newly qualified solicitor at Dewey & LeBoeuf were involved in the preparation of both cases. However, Mr Greenwood's evidence is that none of them had any direct contact with X either in the arbitration or in the Commercial Court litigation. In his letter of 15...