AT & T Corporation v Saudi Cable Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Longmore J. |
| Judgment Date | 13 October 1999 |
| Date | 13 October 1999 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court)
Longmore J.
Sydney Kentridge QC and Toby Landau (instructed by Clifford Chance) for the applicants.
Gordon Pollock QC and D Scorey (instructed by Freshfields) for the respondent.
The following cases were referred to in the judgment:
Bremer Handelsgesellschaft mbH v Ets Soules et CieUNK[1985] 2 Ll Rep 199 (CA)
Clenae v Australia & New Zealand Banking[1999] VSCA 35
Hagop Ardahalian v Unifert International SA (The Elissar)UNK[1984] 2 Ll Rep 84
Laker Airways Inc v FLS Aerospace Ltd[1999] CLC 1124
Najjar v Haines(1991) 25 NSWLR 224
R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet (No. 2)WLR[1999] 2 WLR 272
R v GoughELR[1993] AC 646
R v Inner West London Coroner, ex parte DallaglioUNK[1994] 4 All ER 139
R v Sussex Justices, ex parte McCarthyELR[1924] 1 KB 256
Arbitration Chairman of tribunal was non-executive director of party's competitor Whether arbitrator should be removed and awards set aside for bias.
This was an application for an arbitrator's appointment and decisions to be set aside for bias.
The applicant, AT & T, submitted a bid for a substantial telecommunications project in Saudi Arabia. A Canadian company, Nortel, also made a bid. One of the requirements of the bid was that cable for the project should be acquired from Saudi Cable Co (SCC). AT & T and SCC concluded a pre-bid agreement providing for ICC arbitration. AT & T was awarded the project contract but failed to agree terms with SCC and commenced arbitration proceedings. AT & T and SCC each appointed an arbitrator and agreed to the appointment of F, a Canadian lawyer, as chairman of the tribunal. Unknown to AT & T, F was a non-executive director of Nortel and held 474 common shares. F signed a statement of independence and was confirmed as chairman by the ICC. The tribunal made three awards deciding that the obligation to negotiate was binding on the parties, that AT & T had not been negotiating in good faith and assessing damages payable by AT & T to SCC. Meanwhile AT & T discovered that F was a non-executive director of Nortel and filed a challenge to him with the ICC which was rejected. AT & T applied to the court for F to be removed as arbitrator and for the awards to be set aside.
Held dismissing AT & T's application:
1. Article 2.13 of the ICC rules provided that the ICC's decision on the challenge of an arbitrator was final. That provision could not exclude an inquiry into whether F was biased according to common law rules but it did preclude an inquiry into whether there was any breach by F of any obligation to disclose facts which might call his independence into question under the ICC rules.
2. If there was a failure to disclose in breach of ICC rules that would not necessarily lead to F's removal and the setting aside of the awards. It was not the case that any breach of the obligation to disclose however venial must lead to an award being set aside. The question would be whether the awards were affected by the rules of assumed bias as applied to arbitrators.
3. F was not to be automatically disqualified as a judge in his own cause by reason of his non-executive directorship of Nortel. Automatic disqualification required a direct pecuniary interest or close connection with a party in the suit. In this case there was only a possible but intangible benefit to a rival company.
4. The test for bias was the same for arbitrators as for judges and was whether there was a real danger of bias, including unconscious bias. On that test the court was satisfied that there was no real danger of unconscious bias in the sense of F being predisposed or prejudiced against AT & T's case for reasons unconnected with the merits. F was a non-executive director of Nortel and not concerned in day to day commercial decisions. F's holding of shares in Nortel was so small as to be of no consequence. The allegation of bias rested on those two matters and there was no other evidence of bias. (R v GoughELR[1993] AC 646 and R v Inner West London Coroner, ex parte DallaglioUNK[1994] 4 All ER 139applied.)
Longmore J: The question in this case is whether it is right to order removal of an arbitrator and to set aside awards to which he has been a party on the grounds of bias when one of the parties to the dispute was at relevant times unaware that the arbitrator was a non-executive director of a competitor company which was not merely a commercial rival of that party in the field of telecommunications but was also a disappointed bidder for the very contract that formed the background to the dispute submitted to arbitration.
The application is made by AT & T Corp, the US telecommunication giant. The competitor company is Northern Telecom Ltd (Nortel), a substantial Canadian company. Both companies were among seven international telecommunications companies who in 1992 were invited by the Saudi Arabian Ministry of Post Telephone and Telegraph (MOPTT) to submit bids for the Saudi Kingdom's sixth telecommunications expansion project (TEP-6). The project was valued at about US$4.6 billion. One of the requirements of the bid was that cable required for TEP-6 should be acquired from Saudi Cable Co (SCC), who are the respondent in the arbitration proceedings and the respondent to the application now before me.
In 1993 SCC approached each of the bidders with a view to reaching agreement for the supply of cable for TEP-6 in the event that the bidder was ultimately successful in obtaining the TEP-6 contract. On 10 August 1993 AT & T and SCC concluded a pre-bid agreement (PBA) and it is pursuant to that PBA that the arbitration has taken place. Paragraph 6 of the agreement provided that upon award of any cable-related contract to AT & T, the parties would meet promptly and negotiate in good faith mutually satisfactory agreements. The arbitrators have decided that the PBA is governed by the law of New York, largely because New York law recognises that as a binding contractual obligation whereas other candidates (such as English law) do not. The PBA also contained an arbitration clause submitting disputes to the International Chamber of Commerce, the place of arbitration being London. English law is thus the proper law of the arbitration agreement which I shall call the curial law.
In May 1994 it became clear that AT & T rather than any of the other six bidders was going to be awarded the contract and the TEP-6 contract was concluded between AT & T and MOPTT on 13 August 1994. There was considerable criticism of the process by which AT & T got the contract both in the industry and in the press. Nortel were particularly aggrieved because they had terminated arrangements of their own with Bell Canada in return for what they hoped would be US Government support in securing overseas contracts. They alleged that, instead of giving such support, President Clinton had personally lobbied the King in favour of AT & T.
Once the contract was secured, AT & T and SCC began negotiating pursuant to the PBA. Those negotiations came to nothing and AT & T terminated the PBA on 10 December 1994; on 3 February 1995 it filed a request for arbitration with the ICCclaiming a declaration that the PBA had been correctly terminated. SCC filed its answer claiming that the contract had not been validly terminated and asking for an order that AT & T comply with the agreement and negotiate in good faith.
ICC rules permit each party to a dispute to nominate its own arbitrator subject to confirmation by the ICC; AT & T nominated Maitre Michael Schneider, a German lawyer practising in Geneva and SCC nominated Mr Robert Von Mehren, a partner in a New York law firm. They were, in due course, confirmed. As is customary, the parties and their arbitrators had discussions to see if they could agree on a chairman of the tribunal. If the parties are able to reach agreement, ICC will usually be content to confirm such person as chairman; in the absence of agreement ICC will make the appointment. A number of names were canvassed and rejected. One name that commanded some assent was that of Mr L Yves Fortier QC who practised in Montreal. Inter-party negotiations about the appointment of the chairman took place, at any rate mainly, between Mr John Beechey of Clifford Chance in London, solicitors acting on behalf of AT & T, and Mr Rayner Hamilton of White & Case in New York, attorneys acting on behalf of SCC. On 17 March, Mr Beechey faxed Mr Fortier's office in Montreal asking him if he would be available to act as chairman of an arbitration tribunal, telling him a little about the dispute and requesting him to forward a curriculum vitae (CV). On 20 March 1995 Mr Beechey while having various meetings in Paris received a telephone call from Mr Fortier who happened to be in Oxford. A certain...
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