English High Court rejects application to remove the arbitrator named in the arbitration agreement on the grounds of apparent bias

The English High Court recently heard an application under s24(1)(a) of the 1996 Arbitration Act (the “Act”) to remove the arbitrator agreed in the arbitration agreement, on the grounds of apparent bias. The challenge was based on the fact that the arbitrator in question had, until recently, been an employee of one of the parties to the arbitration.

The Court was alive to the importance of honouring freedom of contract when the arbitrator had been identified and agreed in the arbitration agreement itself. On the facts of the case, there was no evidence of apparent bias and the application was accordingly refused.

Background

The disputes in question revolved around a family business in the transportation of oil and other commodities, with companies incorporated in both London (the “London Company”) and Nigeria.

In 2009, J, who was solely responsible for the Nigerian company’s trade, threatened to leave the family business. In an attempt to rescue the business and regulate the affairs of the family members, the family members and the companies controlled by them entered into an agreement expressed to be governed by English law (the “Agreement”). The Agreement contains a dispute resolution clause naming a “Mr Y as arbitrator and in the event of his unavailability Mr F”.

Mr F worked as the family accountant from about 1985 and was a full-time employee for the London company until 2002. Between 2002 and 2010, he worked part-time for the family. In 2010, Mr F returned to full-time employment for the London Company and reported directly to J only.

The family relationship became strained again and in September 2019, J commenced arbitration to resolve disputes relating to the interpretation of various provisions of the Agreement and stated in the notice of arbitration that “Mr [F] is the only other person entitled to sit as arbitrator”. Mr Y had died in 2015.

In November 2019, Mr F resigned from his employment with the London Company. He observed that the “family feud between the directors is getting nastier by the day and the employees…have been subjected to constant bullying, fabricated lies and allegations by some directors, for some time now… I, no longer wish to be dragged into this family dispute and with great regret, hereby submit my resignation with immediate effect.

Some of the family members objected to the appointment of Mr F as arbitrator, arguing that Mr F was conflicted and accordingly unable to act fairly and impartially. They pointed out that Mr F had reported only to J, and that Mr F would potentially be a witness in the dispute. They alleged that Mr F’s resignation might be a sham, or might lead to a claim for constructive dismissal against one of the parties. It was also alleged that Mr F’s refusal to provide some of the family members with information in relation to the company accounts before the commencement of the arbitration demonstrated bias. There were additionally said to have been secret conversations between Mr F and J. An application was made under s24 of the Act to remove Mr F.

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English High Court removes arbitrator on the basis that he did not possess necessary qualifications

In Tonicstar Limited v Allianz Insurance and Sirius International Insurance Corporation [2017] EWHC 2753, the English High Court considered an application under Section 24 of the Arbitration Act 1996  (the Act) for the removal of an arbitrator on the basis that he did not satisfy the contractual stipulation as to relevant experience. This judgment is of particular interest given that questions of the removal of arbitrators do not often come before the courts (because they are, in institutional arbitration, typically decided by arbitral institutions so are not usually public). The Court decided to remove the arbitrator on the basis that he had experience of insurance and reinsurance law, rather than required experience in the business of insurance and reinsurance. This decision highlights the importance of the careful drafting of arbitration clauses which specify characteristics of an arbitrator.  It also serves as a reminder of the importance of precedent in the English judicial system.

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