There have been a number of important developments in relation to the law relating to the duty of arbitrators (a) to give disclosure, and (b) to avoid conflicts of interest arising from appointments in related arbitrations.

This client alert is similarly concerned with duties in international arbitration, albeit with the duties on expert witnesses to avoid conflicts of interest, particularly in related arbitral proceedings and/or arbitrations involving common issues.

Summary

In Secretariat Consulting Pte Ltd v A Company, the Court of Appeal unanimously upheld the decision of the Technology and Construction Court in A v B [2020] EWHC 809, granting an injunction to restrain the UK branch of the claimant group from acting as an expert witness for a third party against an existing client of its Singapore branch in related arbitrations. The Court of Appeal held that the duty to avoid conflicts of interest owed to the client was owed by the entire group even though the client had retained experts from only the Singapore branch of the group.

Core to the court’s holding were the following facts: (a) the group operated and marketed its services as a single global firm, (b) the terms of the Singapore branch’s retainer with the client contained a duty to not disclose confidential information, and (c) the retainer with the third party related to the same underlying project.

The court considered the question of whether experts owe fiduciary duties of loyalty to their clients but found it unnecessary on the facts to determine that question. This is the first time the English courts have considered whether an expert’s duties in potentially conflicting concurrent retainers can bind all entities within a firm providing expert services.

What happened between the parties?

The developer (Company) of a large petrochemical plant (Project) appointed a consultant to provide engineering, procurement and construction management services (EPCM Consultant). The appointment was worth US$2 billion. The Company also let two works contracts valued at US$117 million to a sub-contractor (Sub-Contractor).

In the course of the Project, the EPCM Consultant failed to release certain designs on schedule, causing the Sub-Contractor to face additional costs. The Sub-Contractor commenced arbitration against the Company to recover these additional costs (Arbitration 1).

In March 2019, the Company’s solicitors signed a confidentiality agreement with Singapore based Secretariat Consulting Pte Ltd (SPG), for arbitration support and expert services in Arbitration 1. SPG is an entity within the Secretariat group, an international firm offering litigation support services. SCP also confirmed to the Company’s solicitors that "there are no conflicts", i.e., the lead expert could act as an independent expert witness for the Company in Arbitration 1.

In August 2019, the EPCM Consultant commenced a separate arbitration against the Company for non-payment of fees (Arbitration 2). The Company counterclaimed for delays and disruption, including any liability the Company may have to the Sub-Contractor.

In October 2019, SCP notified the Company that London based Secretariat International UK (SUK) had been contacted by the EPCM Consultant to act as quantum and delay experts in Arbitration 2. SUK, like SPG, is an entity within the Secretariat group. SCP asked for the Company’s consent noting that the expert retained in Arbitration 2 was (a) instructed in a separate arbitration, (b) an expert in a different discipline (quantum as opposed to delay), and (c) an employee of a different company within the Secretariat group. SCP also offered to set up electronic and physical separation between the teams. The Company replied stating that it believed there was a conflict of interest should the expert from SUK act for the EPCM Consultant in Arbitration 2.

On 5 March 2020, the Company’s solicitors wrote to the lead expert from SCP, proposing to increase the scope of his instructions to include expert witness services in Arbitration 2. On 10 March, SCP notified the Company that SUK had already been engaged by the EPCM Consultant in Arbitration 2, prompting the Company’s solicitors to reiterate their position that there was a conflict which could give rise to a risk that SUK might use the Company’s confidential information. On 19 March, a third company within the Secretariat group replied to the Company to assert that there was no conflict and no risk of confidential information being disclosed.

On 20 March 2020, the Company issued an urgent ex parte application for an interim injunction against SCP, SUK and the third Secretariat entity. The claim focused on two separate grounds, namely a breach of fiduciary duty and a breach of confidence. The judge granted interim relief on 23 March 2020 finding that:

(a) SCP owed a fiduciary duty of loyalty to the Company as it was engaged to provide extensive advice and support throughout Arbitration 1, implying a relationship of trust and confidence;

(b) where a fiduciary duty exists, it may be extended to the entire Secretariat group; and

(c) as all branches of the Secretariat group, including SUK and SCP, shared a common financial interest and were managed and marketed as a single global firm, the fiduciary duty could be extended to the Secretariat group.

What did the Court of Appeal decide?

The court unanimously upheld the judge’s decision to grant the injunction though not on the grounds that SCP owed a fiduciary duty of loyalty to the Company. Instead, the court upheld the injunction on the grounds that the duty to avoid conflicts of interests in SCP’s retainer with the Company was owed by the entire Secretariat group.

There were four issues before the court. The issues and the court’s ruling on each are as follows:

(1) Did SCP owe a fiduciary of loyalty in law?

The court decided it was unnecessary to determine the question. However, the court noted the general reluctance in English law to recognise fiduciary relationships outside of established categories in the absence of clear contractual intent.

In this case, the Company and SCP had entered into a contract containing an express clause dealing with conflicts of interest which the court deemed sufficient for the purposes of deciding this appeal.

The court did note that should there be a fiduciary duty, that duty would not undermine or negate an expert’s overriding duty to the tribunal which was noted in Wheeldon Brothers v Millennium Insurance [2017] EWHC 218 (TCC).

(2) Did SCP owe a duty to avoid conflicts of interest under its contract with the Company?

The terms of SCP’s retainer in Arbitration 1 confirmed that there was no existing conflict of interest and, crucially, that SCP would ensure it remained conflict free until the end of its engagement.

The court held this undertaking as evidence that SCP owed the Company a contractual duty to avoid conflicts of interest for the duration of its engagement.

(3) Did the entire Secretariat group owe the Company a duty to avoid conflicts of interest?

The court held that the entire Secretariat group owed the duty because:

(a) SCP’s conflict checks had included all Secretariat group entities.

(b) ‘Secretariat International’ appeared on all emails from all SCP personnel irrespective of which branch the person belonged to.

(c) The Secretariat group marketed itself as one global firm operating via regional offices.

(d) When the lead expert for Arbitration 1 joined SCP, the press release put out by the Secretariat group stated that the expert would “lead Secretariat’s charge into Asia whilst also contributing to the firm’s ongoing success in the Middle East”.

(e) Both experts were part of the Secretariat group’s ‘International Team’.

(f) Finally, the experts used the expression ‘our firm’ in correspondence and in particular when notifying the Company that SUK had received an enquiry in relation to Arbitration 2.

(4) Was there an actual conflict of interest?

The court held there was an actual conflict of interest as both retainers related to the same underlying matter. The Secretariat parties had sought to draw a general distinction between experts based on the roles they are engaged to carry out. ‘Testifying experts’, it was argued, are experts who simply give testimony while ‘roving experts’ are those with a wider advisory role.

The Secretariat parties asserted that the expert in Arbitration 2 was a ‘roving expert’ and the one in Arbitration 1 was a testifying expert, and as such there was no conflict of interest between them due to the different scopes of their engagement. The court held that assuming the distinction existed (which it did not confirm), both experts were roving experts and “the risk of a conflict of interest was thereby exacerbated”.

The court found there was an actual conflict of interest at hand for four reasons, namely:

(a) SUK was retained in Arbitration 2 and would be advising against the interests of the Company.

(b) The EPCM Consultant was the Company’s representative or agent on the Project and the same party could not act for an employer and the representative or agent simultaneously.

(c) The experts from SCP and SUK would be advising on disputes relating to the self-same Project.

(d) Both arbitrations centred on the same issues, i.e., the delays and disruptions.

Why is this judgment important for you?

Conflicts of interest in arbitration usually relate to choice of arbitrator. Some of the factors which raise the risk of conflicts with respect to arbitrators are equally relevant to specialist legal support services such as expert services. In any arbitration, only a few experts are likely to have the appropriate combination of expertise and experience in the subject matter. Unique to experts is the industry structure, where expert services are often provided by global corporate groups (accounting experts for example). Therefore, there is a real risk that the firm one retains can engaged by another party to a related dispute.

As there is, for the time being, no duty preventing a firm of experts from taking potentially conflicting retainers, the onus is on disputing parties to mitigate the risk in contract. Parties to disputes may wish to:

(a) consider retaining experts and other legal support service providers on terms that include a broad duty to avoid conflicts of interest as opposed to a narrow one limited to the branch/office with which they are directly contracting; and

(b) consider the nature of the service provider they retain. We note that the Secretariat parties were branches of a single corporate group; it remains to be seen whether a similar finding would have been made if the group was structured such that there was no common financial interest between different offices (for example, a Swiss verein structure).