The High Court recently considered an arbitrator's duty of disclosure in the case of Sundra Rajoo v Mohamed Abdul Majed.(1) The central issue in this case was whether the co-arbitrator had a duty of disclosure to the arbitral tribunal in addition to the entrenched duty of disclosure to the parties.
Rajoo (the applicant) and Majed (the respondent) in the suit were co-arbitrators in two arbitration disputes. The claimant, Virgoz, had appointed Majed as arbitrator in the proceedings. The other party chose not to submit to the arbitration proceedings. Rajoo subsequently learned that Majed had been nominated as arbitrator by the Virgoz group of companies in more than 20 arbitrations and felt that those previous appointments ought to be disclosed to the parties to the arbitration. Rajoo took the position that without such disclosure, there would be a perception of bias on Majed's part in favour of Virgoz. Majed did not make the requested disclosure when asked to do so by Rajoo. His reason was that he owed no duty of disclosure to the arbitral panel other than to the parties which had issued no challenge to his appointment.
Rajoo then filed suit to compel Majed's disclosure of his previous appointments and for consequential orders to remove Majed as arbitrator from the proceedings.
In considering the application, the court emphasised that arbitrators have a duty to disclose facts that are likely to cause bias, stating that this is well established in the international arena as well as in Malaysia. The court noted that had the parties to the arbitration made the application, it would not have hesitated to consider the same, as it would have fallen within the ambit of the Arbitration Act 2005.(2) However, the position regarding the rights of co-arbitrators to make such a disclosure request/challenge is not dealt with in the act. The court took the position that it has jurisdiction to check a breach or alleged breach when a complaint comes from any interested party, not limited to the litigants to the arbitration proceedings per se.
The court considered it the crux of the principle of natural justice for an arbitrator to be completely impartial and independent. The argument that the most important element of the requirement of impartiality and independence is disclosure was held to have merit.
The court further considered that fiduciary duties may be applicable to arbitrators as they are ultimately, in consideration of a fee, entrusted to deliver an award.
Two arguments were raised in support of Majed's counterarguments that the duty of disclosure is owed only to the parties to the dispute and cannot be extended to a co-arbitrator:
- Section 8 of the act excludes the court's jurisdiction to interfere in matters not expressly governed by the act; and
- The arbitrators were not parties to the arbitration proceedings.
The court accepted neither argument. With respect to the first argument, the court held that where the act is silent on issues outside its scope or on any matter not governed by the act, the common law powers of the court apply.
With respect to the second argument, the court found that Rajoo's contention that the arbitrators should be regarded as parties to the arbitration within the meaning of Section 2 of the act, and that a contract exists between the parties and the arbitrators, had merit.(3)
Arbitrators assume the status of quasi-judicial adjudicators with inherent duties and obligations. Therefore, the court held that Majed ought to have disclosed his past and present appointments to preserve the dignity of his office and to avoid the award being set aside pursuant to Section 37(2)(b) of the act. Rajoo had a legitimate basis to seek the court's assistance to pursue Majed, who had received remuneration for work and was potentially exposed to personal liability in contract negligence or breach of fiduciary obligations for having participated in an award which had a genuine likelihood of being set aside.
The court took a serious view of Majed's non-disclosure and ordered him to disclose past and present appointments; if he failed to do so, he would be disqualified as an arbitrator.
The decision raises interesting issues not previously considered in Malaysia as to the role of arbitrators with regard to parties to a dispute and the extent to which they have responsibility to ensure that the duties of disclosure of fellow arbitrators are observed.
For further information on this topic please contact K Shanti Mogan at Shearn Delamore & Co by telephone (+60 3 2070 0644), fax (+60 30 2078 5625) or email ([email protected]).
(1) Kuala Lumpur High Court, Suit D – 24 NCC (ARB) – 13 – 2010.
(2) See Kuala Ibai Development Sdn Bhd v Kumpulan Perunding (1988) Sdn Bhd  1 CLJ 632.
(3) Compagnie Europeene De Cereals SA v Tradax Export SA  QB (Com Ct) 301, K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd  1 Lloyd's Rep 260, 524.