In a recent case before the Nicosia District Court the applicants applied to set aside July 27 2011 and March 20 2012 arbitral awards issued against them.1 The main reason for appealing the arbitral awards was that the arbitrator had misconducted himself in the proceedings.
The legal framework regarding arbitrator misconduct is contained in the following acts:
- Under Article 36(2) of the Courts of Justice Law 14/60 (as amended), a court can dismiss the arbitrator and annul a decision made during an improperly conducted process if the conduct of the arbitrator or umpire is not proper or if he or she wrongly administers the procedure.
- Under Article 20(4) of the Arbitration Law a court can remove an arbitrator if he or she demonstrates misconduct or improperly handles a case. Further, the court may annul the arbitration award when an arbitrator or umpire misconducts himself or herself or poorly handles a case, or when arbitration is conducted irregularly or an arbitral award is issued irregularly.
The applicants argued that the arbitrator had misconducted himself. The arbitrator had initially agreed to provide the applicants with additional time to examine technical difficulties that had emerged with their defence, but proceeded to make an arbitral award against the applicants in the interim period. The applicants believed that the case would be reheard at a later stage and that the proceedings were still ongoing.
The court analysed the Supreme Court judgment in Neophytos Solomou v Laiki Cyprialife Ltd and highlighted that instances in which arbitrator misconduct were established had been gradually limited through case law. The court referenced Russell on Arbitration (16th Edition, p302), which states the following in connection with the conduct of the arbitration process:
"The main pillars on which an arbitral award can be successfully set aside, is where the arbitrator through his own actions conducts an arbitration ex parte without substantial reason, or where parties who are entitled to be present are excluded, or the false rejection or acceptance of a testimony and the improper passing of duties."
The court subsequently referenced Halsbury's Laws of England (4th Ed, Volume 2, Paragraph 622), which sets out further examples of arbitrator misconduct, including "if the arbitrator or umpire has failed to act fairly towards both parties, as, for example, by hearing one party but refusing to hear the other, or by deciding in default of defence without clear warning".
The court accepted the applicant's submissions and concluded that the arbitrator had misconducted himself by giving no notice of the fact that he would reach a decision and by creating a legitimate expectation that their request for a new hearing date had been accepted. The arbitrator, as an officer of the court, had failed to adhere to the substantive principles of judicial proceedings and therefore the arbitral awards were set aside.
While instances of arbitrator misconduct are limited, the obvious disregard of procedure which restricts the fair treatment of parties will always be upheld by the courts. Practitioners should therefore endeavour to assist arbitrators to ensure that due procedure is followed.