Laker Airways Inc. v FLS Aerospace Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Rix J. |
| Judgment Date | 20 April 1999 |
| Date | 20 April 1999 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Rix J.
Michael Sullivan (instructed by Watson Farley & Williams) for the first respondent.
George Leggatt QC for the General Council of the Bar of England & Wales.
The following cases were referred to in the judgment:
Bolkiah (Prince Jefri) v KPMG (a firm) [1999] CLC 175; [1999] 2 AC 222.
Kuwait Foreign Trading Contract & Investment Co v Icori Estero SpA (unreported, 29 June 1991, Court of Appeal, Paris).
Nye Saunders & Partners v BristowUNK (1987) 37 BLR 92.
Pilkington plc v PPG Industries Inc (unreported, 1 November 1989).
R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No. 2)WLR [1999] 2 WLR 272.
R v Chief Constable of the North Wales Police, ex parte ABELR [1999] QB 396.
R v Essex Justices, ex parte PerkinsELR [1927] 2 KB 475.
R v GoughELR [1993] AC 646.
Arbitration — Whether barrister appointed as arbitrator should be removed because barrister from same chambers instructed in same matter by another party — Whether circumstances gave rise to justifiable doubts as to arbitrator's impartiality — Arbitration Act 1996, s. 24(1)(a).
This was an application by a party to an arbitration for the court to remove a barrister as an arbitrator on the ground that there were justifiable doubts as to his impartiality under s. 24(1)(a) of the Arbitration Act 1996 because he practised from the same chambers as another barrister instructed in the arbitration.
FLS performed maintenance services on Laker aircraft. Disputes arose and part of FLS's claim was referred to arbitration. FLS appointed a barrister, “B”, as its arbitrator. At that time another barrister, “S”, who had recently joined the same set of chambers as B, had already been instructed in the dispute on behalf of FLS. Laker asked FLS to make a new appointment but FLS refused. Laker asked B to resign on the basis that the presence of S and B in the same set of chambers might colour B's view of the arguments and that “Chinese walls” within chambers might be insufficient to prevent the passing of information or the holding of informal discussions within chambers of which Laker would be ignorant. B declined to resign on the request of one party only. Laker applied to the court for B's removal under s. 24(1)(a) of the Arbitration Act 1996 on the basis that circumstances existed which gave rise to justifiable doubts as to B's impartiality.
Held, dismissing the application:
Laker failed to appear and that was tantamount to withdrawal of the application which should therefore be dismissed with costs. Considering the issue of principle, the test under s. 24 was objective: the court had to find that circumstances existed which justified doubts as to impartiality. An unjustifiable doubt was not sufficient, but it was not necessary to prove actual bias. The test was the same as the common law test for bias. In cases where barristers had appeared as counsel before arbitrators and judges from the same chambers, English and foreign courts had ruled that there was no appearance of bias. There was in fact no conflict of interest between counsel from the same chambers appearing on opposite sides of a dispute because barristers were not partners or fellow employees. For the same reason Laker had not shown that there was a real risk of breach of confidentiality. Nor had Laker shown that B's judgment would be coloured by familiarity. Chambers were made up of individual barristers with separate reputations who shared neither career nor remuneration. Accordingly the grounds on which the application was based were not made out. (R v GoughELR[1993] AC 646 applied; Pilkington plc v PPG Industries Inc (unreported, 1 November 1989), Nye Saunders & Partners v BristowUNK(1987) 37 BLR 92 and Kuwait Foreign Trading Contract & Investment Co v Icori Estero SpA (unreported, 29 June 1991, Court of Appeal, Paris) considered.)
Rix J: The question in this application brought under the Arbitration Act 1996 is whether a barrister who has been appointed an arbitrator by one party to the arbitration should be removed by the court on the ground that another barrister from the same chambers has been instructed in the arbitration by the appointing party. Put in the terms of s. 24(1)(a) of the Act, the question is whether:
“circumstances exist that give rise to justifiable doubts as to his impartiality.”
The application to remove the arbitrator has been brought by Laker Airways Inc (“Laker”), which is respondent in the arbitration. The claimant in the arbitration, first respondent here, is FLS Aerospace Ltd (“FLS”). There are also concurrent proceedings in court. Both arbitration and action arise out of the performance by FLS of maintenance services on Laker aircraft. Part of FLS's claim has gone to arbitration because of an IATA arbitration clause incorporated into one schedule of the contract between FLS and Laker. There are counterclaims by Laker. The details of their disputes are not material for present purposes. The IATA clause provides that the arbitral tribunal should settle its own procedure “and if necessary decide the law to be applied”.
FLS appointed Mr Stanley Burnton QC as their arbitrator on 23 September 1998. At that time Mr Michael Sullivan, who had recently joined 1 Essex Court, the set of chambers where Mr Burnton also practises, had already been instructed in the dispute on behalf of FLS. As a new member of those chambers, following a transfer from other chambers, Mr Sullivan had not then met, and did not know, Mr Burnton. The first query relating to Mr Burnton's appointment arose in a letter dated 30 November 1998 from Laker's US attorneys, Bode & Beckman LLP. Mr Robert Beckman was there responding to a query raised by FLS's solicitors as to the suggested nomination of a third arbitrator who had apparently worked at some time in the same US federal agency as Laker's chief executive. Mr Beckman's response was to ask whether it was true that Mr Sullivan and Mr Burnton practised in the same chambers. When it was confirmed that that was so, Mr Beckman requested FLS to make a new appointment, referring in his fax to “Mr Burnton's law office”. FLS's solicitors explained that barristers are self employed, but share office space and clerks: they pointed out that Mr Burnton's independence could not be questioned, and suggested that Mr Beckman's request was part of a campaign to delay the arbitration.
Unfortunately, the progress of the arbitration has not run smoothly, and there have been disagreements about whether its seat should be in the US or the UK and as to which curial law should apply. Indeed, the arbitral tribunal has not yet been constituted. Laker's arbitrator, who was appointed in November 1998 following a deadline imposed by IATA, resigned around 20 January 1999 after it was alleged that he and Mr Beckman had been in private correspondence with one another. No third arbitrator has yet been chosen.
In the meantime, Laker's then London solicitors, Lee & Pembertons, wrote on 22 December 1998 to Mr Burnton, asking him to resign. Their letter said that FLS had a justifiable concern that the presence of Mr Sullivan and Mr Burnton in the same set of chambers might colour Mr Burnton's view of the arguments, and further that “Chinese walls” within chambers might be insufficient to prevent the passing of information or the holding of informal discussions within chambers of which Laker would be ignorant. They added:
“You will appreciate that our client perceives matters from an American point of view and it is important that that should be taken into account.”
Mr Burnton replied on 4 January 1999. In a careful but firm letter, he offered to resign if requested to do so by both parties, but declined to do so on the request of one party only. He said:
“to resign on the basis of one party's wholly unfounded suggestions of bias or impropriety would give that party a veto over the other's appointment, as well as give credence to unfounded suggestions of impropriety”.
Laker made its application on 20 January 1999. Mr Burnton as well as FLS was made respondent. The grounds stated are that:
“circumstances exist that give rise to justifiable doubts as to Mr Burnton's impartiality, the circumstances being that he practises at the Bar from the same set of Chambers as the advocate instructed in the arbitration and in parallel litigation on behalf of FLS…Full particulars of these circumstances and the doubts which arise therefrom appear from the Affidavit of Thomas Bolkenhol…”
Mr Bolkenhol is the president of Laker. His affidavit states that Laker “strongly doubts Mr Burnton's impartiality”. He argues that Laker is a US company, and that in the US it would be impermissible and unthinkable for two lawyers “from the same firm” to assume roles in the same matter where an actual or potential conflict of interest arises. Mr Burnton's position as a member of the arbitral tribunal could not be regarded as just, and the decision of such a tribunal would not be respected in the US as rendered by a just and impartial tribunal. His understanding was that in practice there is little difference between a set of chambers and a US law office in that barristers share administration, a common library, a common store room, promote the employment of their fellows, socialise, and hold themselves out as a group sharing special expertise. There was a conflict of interest between Mr Burnton and Mr Sullivan in their respective duties in the arbitration. There was no organisational structure in chambers designed to prevent the intentional or accidental transmission of information between them, including confidential information. Finally, Mr Bolkenhol said that Mr Burnton and Mr Sullivan are well known to each other and that Mr Burnton's approach to the dispute may be coloured...
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