In 2020, two London-seated ICC arbitration proceedings were commenced involving various entities (the Lenders) and a Nigerian company (Aiteo) (referred to as the 'onshore arbitration' and the 'offshore arbitration').  The Lenders in each proceeding sought to nominate the former judge, Dame Elizabeth Gloster (the Arbitrator), to the three member tribunals. They also sought to consolidate the two arbitrations.

Aitoe objected to the appointment of the Arbitrator in both proceedings.  The matter was referred to the ICC Court who decided that the Arbitrator could be appointed in one arbitration only (the offshore arbitration), but not the other.  The tribunal in the offshore arbitration subsequently ordered consolidation of the proceedings (contrary to Aiteo's objections).

In the period 2022-23, four arbitral awards were issued, each of which was in favour of the Lenders.  Aiteo unsuccessfully challenged two of the awards before the English court on jurisdictional grounds.  

In late 2023, Aiteo challenged the Arbitrator before the ICC Court, leading to her removal from the tribunal that was hearing the consolidated proceedings.  The challenge was based on doubts as to the Arbitrator's independence and impartiality, which Aiteo said arose from her professional relationship with the international law firm, Freshfields (counsel for the Lenders).

Aiteo subsequently applied to set aside the four awards based on the existence of a 'serious irregularity' (s.68 of the Arbitration Act 1996 (the Act)).  Aiteo sought to argue that: (i) there was apparent bias by the Arbitrator that amounted to a 'serious irregularity'; (ii) the serious irregularity caused Aiteo 'substantial injustice'; and (iii) it was entitled to raise its challenge out of time.  The challenge was resisted by the Lenders.

When the Arbitrator was nominated in 2020, she disclosed her appointment in two unrelated arbitrations in the past two years by clients represented by Freshfields.  She later disclosed, in April 2022, that she had been appointed by the ICC as the presiding arbitrator in a case in which Freshfields was acting. 

However, the Arbitrator did not disclose that: 

• in mid-2020, she had given advice to a client of Freshfields in an unrelated matter – although she had disclosed the matter to the Lenders/Freshfields, her clerk inadvertently failed to include the instruction in her disclosure statement; 
• in June 2021, Freshfields replaced counsel representing a party that had appointed her in an unrelated arbitration; and
• in February/March 2022, she was instructed by Freshfields to give an expert declaration for the purposes of foreign law proceedings in an unrelated matter.

The Arbitrator gave a further disclosure in November 2023: that she had recently been instructed by Freshfields to provide advice in connection with foreign proceedings.  This led Aiteo to ask various questions of the Arbitrator, whose responses (in December 2023) brought to light the failures to disclose the three instructions referred to above.

To establish a 'serious irregularity' under s.68, Aiteo needed to demonstrate the existence of 'apparent bias' by the Arbitrator.  The test for apparent bias, as confirmed in Halliburton v Chubb, is whether the fair-minded and informed observer would consider there to be a real possibility that an arbitrator was biased.  The Supreme Court stated that where there are circumstances that might reasonably give rise to a conclusion that there was a real possibility of bias, the arbitrator is under a legal duty to disclose those circumstances.

The Court in this case commented that the observer was not concerned with whether the Arbitrator was biased in favour of Freshfields' client, but whether, viewed objectively and "in the round", there could reasonably be a perception of bias or the perception/reality of unconscious bias.  The Court noted that its concern is not only that justice is done but that justice is manifestly and undoubtedly seen to be done.

Disclosure issues

The Court began by considering the disclosure issues.  Following Halliburton v Chubb, it did so by looking carefully at the relevant circumstances, together with the applicable arbitral rules, guidelines and practices.  It noted the need to look at the overall picture rather than placing the different engagements into individual silos.  

Jacobs J considered that the Arbitrator had properly made two disclosures at the outset of the proceedings.  It also found that the Arbitrator was not obliged to disclose the June 2021 instruction and the April 2022 appointment, as those cases did not involve a nomination by Freshfields.  

However, there were three separate failures to make timely disclosure, which related to the Arbitrator's instructions in an advisory / expert capacity (which the Court said was akin to a co-counsel relationship between an arbitrator and the instructing law firm).  The Arbitrator should have disclosed, first, the mid-2020 and, second, the February/March 2022 instructions at the appropriate times.  It did not matter that the failures to disclose were inadvertent.  Third, the Arbitrator should also have "immediately" disclosed the October 2023 instruction rather than delaying giving disclosure by a few weeks.

The effect of the ICC Court's decision

As noted above, the ICC Court had already upheld Aiteo's challenge against the Arbitrator, which had been based on doubts over the impartiality of the Arbitrator.  However, Jacobs J concluded that the Court was not bound by the decision of the ICC Court (as it was not res judicata).  The Lenders were therefore entitled to re-argue the issue of apparent bias before the English court.  

Nevertheless, the Court held that the informed observer could be coloured by the (unreasoned) decision of the ICC Court, as it would know that the ICC Court has considerable experience of determining challenges and that challenges rarely succeed.  That said, ultimately the observer would need to make up its own mind.

Applying the informed observer test

The Court considered the cumulative picture of appointments / engagements that were both disclosed and not disclosed.  This consisted of three arbitral appointments (including the offshore arbitration), three advisors/expert engagements, and one unsuccessful nomination (in the onshore arbitration).  It found that the observer would consider this to be a significant number of instructions in a short time. 

The Court accepted that had timely disclosure occurred, the observer may have considered that the Arbitrator was "on the right side of the line".  However, the observer would regard the failings of disclosure to be highly relevant to the question of a real possibility of bias, and as adding to the cumulative picture of a significant number of arbitral appointments.

In reaching its decision, the Court balanced various aggravating factors with factors that went the other way.  On the one hand, one of the disclosures had been made to Freshfields but (inadvertently) not to Aiteo / the ICC, and the Arbitrator had taken an inconsistent approach, disclosing some relationships but not others.  On the other hand, the Arbitrator had a distinguished judicial career, the Arbitrator responded promptly and fully to the questions raised of her in December 2023, and the Arbitrator's co-arbitrators did not consider that the Arbitrator had demonstrated bias.

The judge nevertheless determined that the informed observer would consider that there was a real possibility of unconscious bias in this case.  The observer would feel comfortable in reaching that conclusion in circumstances where the ICC Court had removed the Arbitrator.

Having met the test of 'serious irregularity', Aiteo was then required to consider the existence of 'substantial injustice' (pursuant to s.68). The Court followed a previous decision in finding that a finding of apparent bias will "normally" infer the existence of substantial injustice.  This is because a party has a fundamental right to have its case decided by an unbiased tribunal and the outcome of an arbitration might have been different if the case had been argued before an impartial tribunal.  However, the Court said that there might be a particular reason why substantial injustice does not arise.

On the facts in this case, the Court determined that the inference of substantial injustice could be rebutted for three of the awards, but not for one of them.  The three awards involved circumstances that meant that Aiteo's substantive arguments would no longer be reasonably arguable.  For one, the court had looked at the issues afresh in a s.67 challenge and, for another, there was the unusual situation where each member of the tribunal had been required to independently reach a decision.  In contrast, another of the awards did give rise to substantial injustice as it had involved reasonably arguable points on both sides and Aiteo was entitled to have its arguments considered by an impartial tribunal.

The Court did however warn against an English court being drawn into trying to work out how the non-biased members of a tribunal would otherwise have decided the case.  It said that the court should not, or should be very reluctant to, consider the extent to which the impugned arbitrator influenced the decision making of the other arbitrators.

The Court was invited to consider two further arguments.

First, the Lenders argued that Aiteo had lost the right to challenge the awards because Aiteo had taken part in the arbitration without raising an objection (under s.73 of the Act).  The Court rejected this argument, finding that the disclosures in late 2023 were the "tipping point" and it was only at that point that the true picture emerged.

Second, the Lenders argued that Aiteo's application was outside the 28-day time limit to challenge an award (under s.70(3) of the Act).  But the Court considered that it was appropriate to grant an extension, primarily because it considered that the need to resolve the impact of apparent bias was more important than the disruption to the arbitration timetable that may arise.  The disclosures, which were "transformational", only arose on 9 December 2023, and Aiteo was justified in waiting to file its application on 30 January 2024 as it was entitled to wait for the outcome of the ICC Court challenge (on 18 January 2024).

This judgment, the latest to deal with the difficult topic of arbitrator bias, demonstrates the great care that is required when an arbitrator comes to disclose relevant professional relationships at the outset of an arbitration and throughout the proceedings.  The sense from the judgment is that, but for the non-disclosures, there may not have been a finding of apparent bias, particularly if Aiteo had been given the opportunity to object to the later engagements before they took place.  Law firms must also take care to manage the different types of relationship they hold with individual arbitrators, and not to focus solely on the number of arbitration nominations they have made or attempted to make.

The issues in this case give rise to a host of difficult questions for which there are no easy answers.  Can a busy arbitrator be influenced by a relationship with a law firm when he or she is being appointed by many different law firms and by different teams within those law firms?  How much weight ought to be placed on the impeccable reputation and standing of a challenged arbitrator?  Should the court closely examine whether a biased arbitrator has in fact impacted the decision-making of the other two arbitrators?  How can arbitrators keep better track of their professional relationships, and how can institutions and law firms better probe issues of impartiality?  Is more guidance or procedure required to provide parties with confidence that they can safely nominate an arbitrator without subsequent challenge?

The judgment demonstrates the high standards that arbitrators will be held to by the English courts when it comes to the matter of impartiality. This comes at a time when the Arbitration Bill, which is passing through Parliament, will amend the Act to insert a statutory duty of disclosure based on circumstances that an arbitrator is or should be aware of that may cause doubts over his or her impartiality. In this case, a combination of the number of instructions (three arbitral appointments and three advisory / expert engagements in five years) and the problematic approach of the Arbitrator to disclosure was decisive.  The Court was not convinced that a finding of apparent bias could be avoided by various factors going the other way, including that all of the necessary disclosures were eventually made, the Arbitrator had achieved great distinction as a judge, the non-disclosures were inadvertent, the Arbitrator was not financially dependent on Freshfields, and the co-arbitrators expressed the view that the Arbitrator had not displayed any bias.  

The judgment is also helpful in its guidance on the impact of apparent bias on the s.68 test for 'substantial injustice'.  Where the informed observer would consider there to be a real possibility that an arbitrator was biased, the outcome will usually be both that the impugned arbitrator is removed and that any awards that have been issued will be required to be reconsidered.  The Court in this case emphasised that the general position is that the existence of apparent bias will lead to a finding of substantial injustice and it was willing to overlook the fact that the challenge was out of time to ensure that justice could be seen to be done.

For users of arbitration – particularly arbitrators and law firms with busy arbitral practices – the judgment contains a sobering warning of the impact of failings in arbitrator disclosure.  The message to arbitrators (and their nominators) is clear: be sure to carefully monitor your professional relationships and avoid inadvertent omissions in disclosure.

Citation: Aiteo Eastern E&P Company Limited v Shell Western Supply and Trading Limited & Ors [2024] EWHC 1993 (Comm)