Removal of an arbitrator for apparent bias

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Facts

Cofely had a major claim under its contract with the Olympic Development Authority at the Olympic Park.  Cofely hired Knowles Limited as its claims representatives; Cofely and Knowles entered into a Success Fee Agreement but during a subsequent adjudication against the ODA, conducted by Knowles, Cofely became unhappy with Knowles’ advice and approach.  It therefore cut out Knowles and did a direct deal with the ODA involving a substantial payment to Cofely.

Knowles then submitted a claim under the Success Fee Agreement for £3.5m as a success fee.  There was an arbitration clause in the Success Fee Agreement and Mr Anthony Bingham was appointed as arbitrator by the Chartered Institute of Arbitrators.  Mr Bingham made an interim award of £1m but then the Eurocom v Siemens Decision was reported in which the TCC had declined to enforce an adjudication Decision issued by Mr Bingham in circumstances in which the TCC identified a possibility of fraudulent misrepresentation by Knowles.  Cofely therefore wrote to Knowles and to Mr Bingham asking questions about the nature and extent of the relationship between Knowles and Mr Bingham, asking how many times he had been involved as an adjudicator or arbitrator in disputes involving Knowles and how many times he had found in favour of Knowles’ clients.  Mr Bingham took a very aggressive line with Cofely but eventually stated that over 3 years his dispute resolution income had been £1,146,000 and about 25% of that had come from Knowles’ appointments.  He was asked to withdraw from the arbitration but refused.  Cofely applied to the High Court on the grounds of partiality.

Held:

  1. There was apparent bias on Mr Bingham’s part pursuant to Section 24.1a of the 1996 Arbitration Act. The Judge applied the common law test from Davidson v Scottish Ministers (2004) What disqualifies the Judge is the presence of some factor which could prevent the bringing of an objective judgement to bear, which could distort the Judge’s judgement”.
  1. The fact that an arbitrator is regularly appointed or nominated by the same party/legal representative may be relevant to the issue of apparent bias particularly if it raises questions of financial dependence.
  1. The Court accordingly found that grounds existed justifying the removal of Mr Bingham as arbitrator and if he did not resign then an Order for his removal would be made.

Comment

  1. The interim award of £1m was not challenged by either party and was not affected by this ruling.
  2. The Court stressed the importance of a nominee arbitrator giving proper disclosure of anything which might affect his partiality, to enable both parties to take their own decision as to whether they wish to proceed.

It was the appearance of bias rather than any actual bias which was at issue.

For more information, contact Robert Langley on 0191 211 7957 or at [email protected].