Since our previous report on the Delhi High Court refusing to uphold an arbitration clause that provided for the tribunal to be comprised of one party’s employees or retired employees, there have been several cases which have provided useful guidance in relation to the appointment of arbitrators under the new provisions in the Arbitration and Conciliation (Amendment) Act 2015, which came into force on 23 October 2015 and amended the Arbitration and Conciliation Act 1996 (“Amended Act“). The Amended Act applies to arbitration agreements which pre-date the amendments.
The recent jurisprudence on appointing former employees as arbitrators has dealt with a number of issues, but four key principles emerge:
- The provisions of the Amended Act dealing with independence of arbitrators do not prohibit the appointment of former employees.
- Nonetheless, it is still important for there to be no doubts in relation to the neutrality, impartiality and independence of the arbitral tribunal. Therefore, where a party has a contractual right to compose a list or panel from which the other parties are to select an arbitrator, a ‘broad based’ approach must be adopted.
- The Courts have adopted a narrow definition of what constitutes an employee, and therefore all government employees are not automatically ineligible to be appointed as an arbitrator where one of the parties is a government body.
- If an ineligible person (e.g. an employee) was nominated as an arbitrator in the arbitration agreement but is now ineligible as a consequence of the Act, that person cannot nominate another independent arbitrator, notwithstanding what the agreement might provide.
In a remarkable judgment of 17 February 2015, rendered further to a rarely-seen application for revision of an arbitral award (which in this case lead to the retraction of the award), the Paris Court of Appeal overturned an arbitral award issued by a three-member tribunal in Paris in 2008 in favour of Bernard Tapie (Tapie), a French businessman and ex-politician, against the Consortium de Realisation (CDR), a French stated-owned company. The Court found that the award was tainted by fraud on the ground that there had been collusion between one of the arbitrators, Mr Pierre Estoup (Estoup) (a former president of the Versailles Court of Appeal), and Tapie and his counsel, Me Lantourne (Lantourne), with Estoup deliberately and systematically influencing the arbitral tribunal’s decision-making process in favour of the interests of the party that he intended to promote. Tapie and his group of companies had received € 403 million in damages under the award in question.
The dispute at the origin of the now-retracted award was highly publicised, because it involved one of France’s most famous businessmen of the 80’s, a French state-owned company, the French Government at the time of the arbitration (including the then Ministry of Finance, Ms Christine Lagarde, now Chairman of the IMF), and an arbitral tribunal composed of three renowned French legal personalities (alongside Estoup, sat Mr Jean-Denis Bredin, a well-known lawyer, and Mr Pierre Mazeaud, a law Professor and former President of the French Constitutional Council who acted as Chairman of the arbitral tribunal).
The judgment is a rare example of a successful motion for the revision of an award under French law. The French Court first classified the arbitration as domestic and then concluded that the facts disclosed in a related criminal investigation evidenced links between Estoup, Tapie and Lantourne which had been fraudulently concealed by Estoup – demonstrating a lack of independence, which had been confirmed by the arbitrator’s attitude during the arbitration proceedings. A handful of court judgments have been overturned in similar circumstances, which gives some indication as to what the legal consequences and next steps following the retraction of the arbitral award may be. However the precise legal consequences are still to be determined.