ICC Commission Report Construction Industry Arbitrations Part 2
Out-Law Analysis | 14 Sep 2017 | 12:09 pm | 5 min. read
Many adjudicators are also practitioners at the construction bar and deal with many members of the construction industry during their practice. It is therefore not surprising for adjudicators to have had dealings with the parties who come before them, in what can create fertile conditions for allegations of bias.
The law is cautious about even suggestions of bias in a decision-maker, and for good reason – it can reduce confidence in the system of justice. Against this stands the need to ensure that the justice system is not hindered by worthless allegations of bias. This need is especially pronounced in the context of a dispute resolution process that is designed to be fast, like Security of Payment Act (SOPA) adjudication. Allegations of apparent bias in this context call for careful examination, and this case gives some guidance on what that should involve.
Singapore engineering company UES had applied to set aside an adjudication that it claimed had been determined on the basis of bias on the adjudicator’s part, pointing out that the adjudicator had had prior dealings with a corporate representative of engineering contractor KH Foges, a Mr Foo.
UES said that the adjudicator had previously acted as counsel for a company called RPPL of which Foo was the managing director, and for RPPL’s related company EPPL. The adjudicator had also been a nonexecutive director of another company, RH, while Foo was its chief executive and executive chairman.
The adjudicator did not disclose this relationship with Foo, RPPL and RPPL’s related companies, and was not forthcoming in addressing UES's queries about these associations, the company said.
The court, however, rejected the allegation of apparent bias. Applying the doctrine of apparent bias to adjudicators is based on SOPA, which requires adjudicators to act 'impartially' and to 'comply with the principles of natural justice'. The court said that the statutory impartiality requirement embodies the natural justice principle of 'the rule against bias', of which the doctrine of apparent bias is an offshoot.
Bias due to association
The test for apparent bias is well-established in Singapore law, but its application in the context of a tribunal’s association with a party had not previously been considered. It is settled law that apparent bias is established 'if there are circumstances which would give rise to a reasonable suspicion or apprehension in a fair-minded reasonable person with knowledge of the relevant facts that the tribunal was biased'.
In applying this test to an allegation of bias by association, the judge held that a rational connection between the tribunal’s association and the prospect of bias must be shown. This means that the party alleging bias must show that there is reason to hold that the tribunal’s association might influence its decision. Relevant factors to consider in this include: the duration, intensity and nature of the tribunal’s association, and the time elapsed since the last renewal of such association.
On the adjudicator’s association with Foo as counsel for RRPL, the judge said that a fair-minded reasonable observer would not place much weight on it because would be aware of the 'reality' that SOPA adjudicators are likely to have had dealings with disputing parties or their representatives. The adjudicator’s association with RRPL was also relatively long ago, the last association having ended more than three years before his appointment as adjudicator.
The association also could not be considered 'strong or close' in intensity, as the adjudicator had only acted for RRPL twice in over 12 years. During this period four other lawyers were had acted for companies in the RRPL group across 13 different matters.
The adjudicator’s association as counsel for EPPL was even weaker, as a decade had passed since he last acted for the company and Foo had never been involved in these matters or with EPPL generally.
The judge also examined the nature, duration and intensity of the adjudicator’s association with Foo via his non-executive directorship of RH and concluded that little weight should be accorded to it.
Adjudicator’s disclosure of associations
In alleging apparent bias, UES also complained about the adjudicator’s failure to disclose his associations with Foo and the related companies. The judge said held that a tribunal’s failure to disclose can, in principle, lead to a reasonable suspicion of bias if it is sufficiently material or significant. When a tribunal makes only a partial disclosure of its association, the court will examine whether this gives an impression of the tribunal intentionally concealing, or presenting a picture different from, the actual association.
This can arise if, for instance, the tribunal reveals that it has links with a party, and discloses a trivial connection, but omits to mention a substantial tie such as a prolonged personal friendship.
The judgment gave two guiding principles on disclosing associations. First, an adjudicator should disclose all facts which might create a case of apparent bias, erring on the side of disclosure in borderline cases. Second, as a matter of good practice if disclosure should be made, it should be made in full.
In this case the judge found that the adjudicator fell short of best practice in failing to disclose his associations with Foo and the related companies. However, given the limited and sporadic nature of the associations in the first place, a fair-minded observer would not have attributed the non-disclosure to bias. UES’ allegation of apparent bias therefore failed on this ground.
Response to queries
The court also rejected UES’ allegation of bias based on the adjudicator’s responses to queries about his associations. The judge accepted that a response to inquiries about associations can lend weight to a reasonable suspicion of bias but said the detail, speed and tone of the response should be considered. The adjudicator’s responses to UES did not suggest a reasonable suspicion of bias as they were meticulous and thorough, speedy and objective, he said.
The court also said that an allegation of apparent bias must be raised at the earliest opportunity. A party cannot wait and then bring the allegation up for the first time when seeking to set aside what turns out to be an unfavourable adjudication determination. This would undercut the statutory objective of SOPA in ensuring timely settlement of payment disputes in the construction industry, it said.
In practice, therefore, if an adjudicator suggests that he has had previous dealings with a party, the other party must inquire into this immediately or without undue delay. Failure to do so can amount to a waiver of an apparent bias challenge, especially if a party is legally represented.
This case gives welcome practical guidance on allegations of apparent bias against adjudicators. It demonstrates that these allegations cannot be made lightly, and will be subject to close scrutiny by the courts. Even if apparent bias is established, the court may set aside the adjudication determination, although the judge said that only material breaches of natural justice justify setting aside an adjudication determination.
Raman Kaur is an international arbitration expert at Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com. A version of this article first appeared in the Society of Construction Law (Singapore) newsletter.
ICC Commission Report Construction Industry Arbitrations Part 2