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Arbitrator's work with lawyers on separate case will not make him biased, rules High Court

Out-Law News | 28 Sep 2011 | 11:06 am | 2 min. read

An arbitrator is not likely to be biased by the mere fact that he is working for one of the parties on an unrelated case, a judge has said.

The losing party in a case involving a share sale and purchase agreement had argued that the barrister acting as the arbitrator in the case may have had an "unconscious bias" in favour of the other party, whose lawyers the barrister had been working with in a matter unrelated to the arbitration.

However Mr Justice Flaux said in a High Court ruling that the fact that the arbitrator had not mentioned his involvement in the other case until shortly before deciding on and issuing his award was not a sufficient reason to remove the arbitrator and set the award aside.

The separate case had been 'stayed' by the courts before the arbitration began, and only became active again once the arbitration was already running.

Arbitration is a system of formal dispute resolution by one or more impartial people for a final and binding decision. The arbitral tribunal can be made up of legal or industry experts of the parties' own choosing, using procedures which they can influence.

The arbitrator will preside over the proceedings and ultimately produce an award which is binding on both parties. Barristers are frequently chosen in cases where specialist knowledge in a particular area of law is necessary.

Under the rules of the London Court of International Arbitration (LCIA), an arbitrator may be challenged "if circumstances exist that give rise to justifiable doubts as to his impartiality or independence". However Mr Justice Flaux said that these rules could not override the national law.

The arbitrator had signed a statement under the LCIA rules confirming that he was "impartial and independent" of each of the parties and intended to remain so. The fact that he had received instructions in the past from both parties' lawyers was irrelevant and "entirely as one would expect" given the field in which they worked, Mr Justice Flaux said.

The losing party made its challenge because an old case was resurrected and the arbitrator was working on it with a lawyer from the winning party's law firm.

The main law governing arbitrations in the UK is the Arbitration Act. The Act allows a court to remove an arbitrator if "circumstances exist that give rise to justifiable doubts as to his impartiality", or if there is "serious irregularity affecting the tribunal, the proceedings or the award".

The judge said that if the losing party really wanted to argue that the arbitrator would not want to disappoint his clients in the unrelated case, then the "logical conclusion" would be to apply this to any barrister who had acted as an arbitrator while "simultaneous proceedings" existed. He likened this to the position of judges, who frequently hear cases involving the same lawyers and legal firms.

"The fair-minded and informed observer, knowing how the legal profession in this country works, would not consider there was a real possibility of apparent or unconscious bias," the judge said.

He added that although there was an "inadvertent" delay of thirteen months between the other  court case becoming active again and the arbitrator disclosing his involvement, it was unlikely that the delay would prove sufficient grounds to remove the arbitrator.

"The claimants' case of non-disclosure (which is in fact a case of late disclosure) of something which does not amount to apparent bias seems to me a very long way indeed from satisfying the high threshold of serious irregularity under... the Act," he said.