In a recent case the English High Court refused to apply the IBA Guidelines on Conflicts of Interest 2014 (IBA Guidelines) when it considered a challenge to an arbitrator. Instead, in applying the English common law test for apparent bias, it concluded that there was no apparent bias despite the circumstances falling within the non-waivable red list under the IBA Guidelines. The case demonstrates that although the English court will have regard to the IBA Guidelines, they do not have the force of law and the court will not apply them mechanically.
In the case of W Limited v M SDN BHD  EWHC 422 (Comm), the Claimant challenged two arbitral awards under section 68 of the Arbitration Act 1996 on the basis that there had been a “serious irregularity” leading to a “substantial injustice”. The serious irregularity related to allegations of apparent bias of the arbitrator based on an alleged conflict of interest.
The arbitrator was a partner in a law firm. Despite his status as a partner, the arbitrator stated that he was operating almost as a sole practitioner, remunerated by the firm but effectively only using the firm for administrative and secretarial support services. However, the arbitrator’s firm provided legal services to a company, with the same corporate parent as one of the parties in the arbitration. Conflict checks conducted by the arbitrator did not reveal the potential conflict and the arbitrator stated he was therefore not aware of it. He further noted that he would have made a disclosure, if alerted to the need to so do.
Paragraph 1.4 of the IBA Guidelines lists on its Non-Waivable Red List a situation where “The arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom“. Whilst the judge decided it was clear that the present situation fell within paragraph 1.4, he was not clear on the reason why facts “classically appropriate for a case-specific judgment” should warrant inclusion on the Non-Waivable Red List. The judge also critiqued the uncertainty arising from the 2014 IBA Guidelines’ introductory language which caveats the Non-Waivable Red List with “depending on the facts of a given case“, yet states that inclusion on the Non-Waivable Red List means that “justifiable doubts necessarily exist as to the arbitrator’s impartiality or independence“.
Applying the English common law test, the judge concluded that a fair minded and informed observer would not conclude that there was a real possibility of the tribunal being biased, lacking independence or impartiality. As such, despite the matter falling within the Non-Waivable Red List, it was not a sufficient basis to set aside the awards.