English court rejects arbitrator bias challenge on account of tactical delay

In its judgment, the court reiterated that deliberate or tactical delays in raising issues which may lead to the setting aside of any award will likely result in a party later losing its right to challenge, even if the conduct complained of was “egregious”.

Radisson Hotels APS Danmark (Radisson) had raised a challenge against a London-seated ICC arbitration award connected with one of its hotels in Turkey managed by a Turkish Hayat entity. Radisson claimed serious irregularity on the grounds of arbitrator bias and non-disclosure of communications between a tribunal member appointed by Hayat and an individual acting on behalf of Hayat.

Hayat began the underlying arbitration proceedings against Radisson for breaches of a hotel management agreement in 2018. In March 2021, the tribunal issued a partial award on liability, finding Radisson in breach. Before the partial award was issued, Hayat’s former in-house counsel Dr Durman – who had previously acted in the arbitration for Hayat – offered to assist Radisson in the arbitration. Durman alleged to Radisson that Hayat’s appointed arbitrator, referred to in the judgment as CD, corresponded with representatives of Hayat on an unofficial, ‘ex parte’, basis. Durman was later appointed by Radisson as its legal adviser for all matters relating to Turkey, including the Hayat arbitration, in December 2021.

Once appointed, Durman put Radisson in contact with Hayat’s former quantum expert, a Mr. Önkal, who was subsequently retained by Raddison to assist in the quantum phase of the arbitration. In January 2022, Önkal provided Radisson with a USB stick containing details of his previous work in the arbitration for Hayat. The device contained a Word document setting out email exchanges between members of the tribunal concerning the tribunal’s evaluation of the parties’ cases. Radisson continued to participate in the arbitration after discovering the emails, submitting its rejoinder on quantum the following day. It did not challenge the partial award until two weeks later, after receiving ‘native’ copies of the emails.

In its challenge, Radisson alleged that CD had engaged in serious misconduct by forwarding two chains of internal tribunal emails – one of which contained a fellow arbitrator’s impressions of the parties’ cases – to Önkal in March 2019. CD was then copied in on an email from Önkal in April 2019 to a board member of Hayat’s holding company stating that CD had returned from London “fully filled” and that the board member and Önkal had “a lot to talk about” as a result. Finally, in May 2019, CD sent Önkal an email to Hayat’s expert attaching correspondence between Radisson and the tribunal. The April and May emails were discovered after issue of the application to challenge the award.

The judge, dismissing Radisson’s challenge, found that, as a result of its delay, Radisson had waived its right to challenge the partial award under section 73 of the 1996 Arbitration Act. This provides that, broadly, a party who fails to make an arbitration challenge promptly waives the right to do so. The judge found that Radisson had received credible evidence from Durman of the communications between CD and Hayat in September 2021. It should have progressed towards raising its challenge with the tribunal at this point, but had instead waited four months to do so.

The judge found that Radisson’s lawyers had considered Durman to be a credible source when he made the allegations of arbitrator misconduct in September 2021. She criticised Radisson’s failure to take a witness statement from him at this point, in circumstances where they later obtained two fee proposals for investigations to determine the relationship and communication between CD and Hayat. Radisson therefore failed to demonstrate it had used reasonable diligence to discover the grounds of challenge which it now relied on at an earlier stage.

Arbitration expert Madelaine Power of Pinsent Masons stressed the importance of this case for all users of arbitration. “This judgment is one that all users and practitioners in the international arbitration sphere should read,” she said.

“In addition to reiterating the court’s disapproval of tactical of banking of grounds of challenge until a later date, the court gave important guidance to practitioners when faced with suspicions which may lead to a challenge - including taking full notes of meetings and telephone calls in all settings, proofing witnesses and preserving of all related correspondence including WhatsApp messages,” she said.

“If parties become aware of circumstances that may lead to a challenge, these should be raised with the tribunal as soon as they become apparent to avoid losing the opportunity to do so once the award has been rendered,” she said.

Mitchell Abbott of Pinsent Masons added that the case was also a reminder of the importance of coming to such challenges with ‘clean hands’.

“The impulse to think tactically is understandable in such circumstances but this case is a clear demonstration why it must be resisted in arbitration challenges – any resulting delay may render the challenge inadmissible,” he said.