The prospect of litigating in the local courts of one’s counterparty can induce fear. Those courts may be perceived as inefficient or costly; their substantive and procedural laws may be unfamiliar or unpredictable in application; or their judiciary might not be (at least from one party’s point of view) competent. Worst of all is the possibility of home-court bias against the foreign party: “there is little use in going to law with the devil while the court is held in hell”.1
This probably explains, in part at least, why international arbitration remains the more popular solution to the risk of adjudicatory bias.2 The avoidance of such bias as a key factor for many when choosing to arbitrate reinforces the critical importance of impartiality and independence of arbitrators. Thus a respectable arbitration law will provide for a party to challenge the appointment of an arbitrator whose conduct or background gives rise to justifiable doubt as to his independence or partiality. In England, the prevailing standard for establishing apparent bias is set out in Porter v Magill,3 namely whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.4
A v B is the latest decision from the English High Court which has applied the Porter v Magill test in the context of alleged bias of an arbitrator.5 In that case, X was appointed as sole arbitrator to preside over a dispute between parties A and B. X had a history of being instructed by the solicitors for A. Indeed, the solicitors were retained to act as counsel in an unrelated litigation for a period of time which overlapped with that while X served as sole arbitrator in the arbitration between A and B. Importantly, this was not disclosed until X had prepared for and proceeded with 3 days of trial in the unrelated litigation. B argued that there was a real possibility of X being affected by unconscious bias by virtue of his professional ties to SA. This unconscious bias was said to be made out by the cumulative presence of several factors which include the following: X’s relationship with the solicitors would mean that X would place greater confidence in them; the situation fell within the socalled red list of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines); and finally, X was under a duty to make a timely disclosure of his retention by the solicitors but failed to do so. Although the court ultimately rejected the allegation of bias, the decision appears to be right at the borderline. In rejecting it, the judge made several important observations worthy of comment.
First, the court cautioned that whether a potential situation of conflict falls within the red or orange lists identified by the IBA Guidelines is not determinative of the issue. Each case will turn on its own facts. Indeed, the court found that the situation at hand did not even fall within the red list of the IBA Guidelines, and so B’s reliance on them was misconceived.
Second, any complaint of bias must take into account the traditions and practices of the legal profession. The mere fact that X maintained a working relationship with the solicitors and may therefore place greater confidence in them is not indicative of bias; it was a reality of legal practice that judges and adjudicators possess “a picture of the strengths and weaknesses” of particular law firms or individual solicitors, as informed by their experiences. This holding is a timely reminder to complainants that any allegation of bias cannot ride on expectations that judges and arbitrators are neutral in an absolute sense, or that the inevitable predispositions they carry would necessarily lead to unfairness. With this in mind, the court cited the following observations of Lord Woolf in Taylor v Lawrence:6
“Our experience over centuries is that this integrity is enhanced, not damaged, by the close relations that exist between the judiciary and the legal profession. Unlike some jurisdictions, the judiciary here does not isolate itself from contact with the profession… It is also accepted that barristers from the same chambers may appear before judges who were former members of their chambers or on opposite sides in the same case. This close relationship has not prejudiced but enhanced the administration of justice. The advantages in terms of improved professional standards which can flow from these practices have been recognised and admired in other jurisdictions…. The informed observer will therefore be aware that in the ordinary way contacts between the judiciary and the profession should not be regarded as giving rise to a possibility of bias. On the contrary, they promote an atmosphere which is totally inimical to the existence of bias.” (emphasis added)
It follows that a high threshold of personal connections between the arbitrator and counsel needs to be demonstrated in order to found an allegation of bias. It is to be noted, and perhaps emphasised, that Lord Woolf in the passage quoted above was speaking of a legal tradition that is peculiarly English. His Lordship accepted that it was not universal. His comments may have limited application in other legal traditions.
Thirdly, the court declared that an arbitrator is only under an obligation to disclose circumstance that to him or her may establish apparent bias. This may seem surprising in the context of the facts of the case. If an arbitrator is truly blinded by unconscious bias, as was alleged in A v B, it could hardly be expected of him to be cognizant of circumstances which would establish a bias he cannot perceive. While such a disclosure regime would practically lead to minimal disclosure, the position may be motivated by concerns that both excessive and partial disclosure of circumstances could be abused by uncooperative parties to mount tactical challenges against an arbitrator.7
A leading English commentary on international arbitration noted in 2001:8
“The continuing deterioration in the spirit of arbitration entails that objections are now being made on the grounds of supposed interest or bias which would never have been put forward in the past. These are, we hope and believe, largely rejected, and they serve the purpose only of wasting time and money.”
This apprehension has since been echoed by other commentators and practitioners.9 But with corporate relationships becoming increasingly intertwined in today’s globalized economy, and the operations of international law firms having grown significantly, it is not surprising that a greater number of conflict-of-interest issues continue to emerge. In the next issue of the Chronicle, we will consider certain developments in the more international world of investment treaty arbitration.