Application to remove arbitrator and whether a party had taken part in the arbitral proceedings

http://www.bailii.org/ew/cases/EWHC/Comm/2015/140.html

The claimants applied to remove an arbitrator on the ground of apparent bias (pursuant to section  24 of the Arbitration Act 1996). Popplewell J found, on the facts, that there had been apparent  bias. He found that, through his work as a lawyer, the arbitrator had had a financial interest in  favouring the defendants. In reaching this conclusion, assistance was derived from the IBA  Guidelines which include the following on their Non-Waivable Red List: “the arbitrator regularly  advises the appointing party….and the arbitrator or his or her firm derives a significant financial  income therefrom”. There were also separate objections  that the arbitrator had given legal advice  on the dispute in the past and his conduct of the reference gave doubts to his impartiality. These  also gave sufficient grounds to doubt the arbitrator’s impartiality.

The defendants argued, though, that the claimants had  lost their right to object under section 73  of the Act. This provides that if a party takes part, or continues to take part, in the arbitration  without raising its objection forthwith, when it knew (or could with reasonable diligence have known) about the relevant circumstances, the right to object is lost. Popplewell J held that where  there are three sets of circumstances, which are each sufficient on their own to give rise to  doubts about the arbitrator’s impartiality, it is necessary to consider separately whether the  claimants have lost the right to rely on each such set of circumstances.

The judge also held that, where a party has not already been taking part, mere silence or  inactivity will not be sufficient to lose the right to object. Here, there had been no “taking  part” within the meaning of section 73. For example, a request to put the arbitration on hold (or  to adjourn a procedural hearing) was “entirely neutral” and mere silence in the face of revival of  the process by the other party was equally incapable of amounting to a first taking part. The judge  also noted that “Nor can the Claimants’ indication that it would be appointing its own arbitrator  amount to taking part, because it does not recognise the tribunal as yet being properly constituted  and therefore cannot amount to invoking the jurisdiction of a tribunal in its improperly or imperfectly constituted form”.