W Ltd v M Sdn Bhd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Knowles CBE,Mr Justice Knowles |
| Judgment Date | 02 March 2016 |
| Neutral Citation | [2016] EWHC 422 (Comm) |
| Docket Number | Case No: CL-2015-000344 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 02 March 2016 |
[2016] EWHC 422 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Knowles CBE
Case No: CL-2015-000344
In the matter of the Arbitration Act 1996
And in the matter of an arbitration
Huw Davies QC and Siddharth Dhar (instructed by Clyde & Co LLP) for the Claimant
Luke Parsons QC and Caroline Pounds (instructed by Fenwick Elliot LLP) for the Defendant
Hearing date: 16 December 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The Claimant is a corporation incorporated in the British Virgin Islands. The Defendant is a corporation incorporated in Malaysia. The parties contracted in relation to a project in Iraq. A dispute arose, and an LCIA arbitration was commenced by the Defendant in April 2012. Mr David Haigh QC, a Canadian lawyer, was appointed sole arbitrator.
Mr Haigh QC has made two awards in the arbitration; one dated 16 October 2014 and one dated 26 March 2015. The Claimant challenges the awards under section 68 of the Arbitration Act 1996 ("the 1996 Act").
That section provides that a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) "apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award". By section 68(2) "serious irregularity" means an irregularity, of one or more of nine specified kinds (three are referenced by the Claimant in this case), "which the court considers has caused or will cause substantial injustice to the applicant".
It is common ground that the present case is not a case of actual bias, or of actual absence of independence or impartiality. The challenge in the present case alleges apparent bias based on alleged conflict of interest.
The case has wider importance because the Claimant highlights and relies on "[t]he fact that the conflict of interest in this case fell squarely within paragraph 1.4 of the Non-Waivable Red List within the 2014 IBA Guidelines", i.e. the 2014 edition of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration. That paragraph in the 2014 IBA Guidelines now reads:
"The arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom."
The arbitrator
There is no doubt that the present case falls within the description given in Paragraph 1.4 of the 2014 IBA Guidelines. The arbitrator's firm (but not the arbitrator) does regularly advise an affiliate of the Defendant (but not the Defendant) and the arbitrator's firm (but not the arbitrator) derives substantial financial income from advising the affiliate.
There is also no doubt that the present case would not have fallen within Paragraph 1.4 of the "Non-Waivable Red List" before that List was amended in 2014. One of the amendments made in 2014 was to add the words "or his or her firm" before the words "regularly advises".
Mr Haigh QC is with Burnet Duckworth & Palmer LLP ("the Law Firm"). He has been admitted to the Alberta Bar for 50 years and was appointed Queen's Counsel in 1984. He is a Fellow and Chartered Arbitrator of the Chartered Institute of Arbitration, and a Founding Member of the Western Canada Commercial Arbitration Society.
Mr Haigh QC's curriculum vitae, published on the website of the Law Firm, suggests a wider brief, but he has informed the Court that "[o]ver the past half dozen years or so, I have sat almost exclusively as an international arbitrator".
The Law Firm is fairly described by the Claimant as of medium size. Mr Haigh QC is a partner in the Law Firm. He has provided further detail to the Court, including the following:
"I no longer participate in partnership matters and only rarely attended partnership meetings in the period between 5–10 years ago. More recently, I have not attended such meetings. The current version of [the Law Firm's] partnership agreement, approved by a full vote of the partners, expressly "grandfathers" me so that I am exempt from compulsory retirement. I am the only member of [the Law Firm] to which this exemption applies. … I would describe myself as essentially a sole practitioner carrying on my international practice with support systems in the way of secretarial and administrative assistance provided by [the Law Firm]. I am treated for the purposes of compensation as a separate department within the firm and, other than [one other] I am the only member of the … Alternative Dispute Resolution department"
At the time of Mr Haigh QC's appointment as arbitrator in the present matter, a company ("Q") was a client of the Law Firm. A senior partner (" SP") in the Law Firm was a member of Q's board and a shareholder in Q. The managing partner ("MP") of the Law Firm was Q's company secretary.
The Defendant was a subsidiary of another company, P. After an announcement in June 2012, in December 2012 P acquired Q. On the acquisition SP resigned his directorship in Q and sold his shareholding. MP resigned his office as Q's company secretary.
However following the acquisition, and thus since Q became (like the Defendant) a subsidiary of P, the Law Firm continued to provide legal services to Q. P itself takes its advice from a different law firm. The legal services provided to Q have been substantial and it is to be inferred that the Law Firm has earned substantial remuneration from Q for the work.
Mr Haigh QC made a statement of independence dated 18 May 2012 on consenting to his appointment as arbitrator. As it happened this was a month or so before the announcement of the acquisition of Q by P.
On accepting the appointment as arbitrator, Mr Haigh QC made some, in the event immaterial, disclosures to the parties revealed by his firm's conflict check systems. He made a later, in the event immaterial, disclosure in September. Those conflict check systems did not however alert him to the fact that the firm had Q as a client.
There was substantial publicity in due course when P acquired Q, but the Law Firm's conflict check systems did not draw Q or its new relationship with P to his attention (apparently because of the way in which the acquisition was named within the firm). He confirms that he was not otherwise alert to Q's new relationship with P, and his firm's continuing work for Q, in order to consider and make a disclosure to the parties then. He regrets that this is what happened, as he would have wished to make a disclosure had he known.
Apparent bias?
It is common ground between the parties that the test at common law for apparent bias is whether "a fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased": Porter v Magill [2002] AC 357 at [103] per Lord Hope.
In Yiacoub v The Queen [2014] UKPC 22; [2014] 1 WLR 2996 at [12] Lord Hughes (with Lords Neuberger, Mance, Clarke and Toulson) added:
"That and similar formulations use the word "biased", which in other contexts has far more pejorative connotations, to mean an absence of demonstrated independence or impartiality."
In Helow v Secretary of State for the Home Department and another [2008] UKHL 62; [2008] 1 WLR 2416 at [39] Lord Mance continued:
"The question is one of law, to be answered in the light of the relevant facts, which may include a statement from the [here, arbitrator] as to what he or she knew at the time, although the court is not necessarily bound to accept any such statement at face value, there can be no question of cross-examining the [arbitrator] on it, and no attention will be paid to any statement by the [arbitrator] as to the impact of any knowledge on his or her mind: Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, para 19 per Lord Bingham of Cornhill CJ, Lord Woolf MR and Sir Richard Scott V-C. The fair-minded and informed observer is "neither complacent nor unduly sensitive or suspicious", to adopt Kirby J's neat phrase in Johnson v Johnson (2000) 201 CLR 488, para 53, which was approved by my noble and learned friends, Lord Hope of Craighead and Baroness Hale of Richmond, in Gillies v Secretary of State for Work and Pensions [2006] 1 WLR 781, paras 17 and 39."
What do the present facts amount to? An arbitrator is a partner in a law firm. The firm earns substantial remuneration from providing legal services to a client company that has the same corporate parent as a company that is a party in the arbitration. The firm does not advise the parent, or the party. There is no suggestion the arbitrator does any of the work for the client company.
Further, the arbitrator, although a partner, operates effectively as a sole practitioner using the firm for secretarial and administrative assistance for his work as an arbitrator. The arbitrator makes other disclosures where, after checking, he has knowledge of his firm's involvement with the parties, and would have made a disclosure here if he had been alerted to the situation.
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