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Arbitrator shouldn’t have unilateral contact with one of the parties

It’s been a busy time in the Cope household recently, what with the arrival of my baby daughter. However, I’ve now managed to catch up on a few of the TCC’s recent judgments. One of those was Jefford J’s judgment in Symbion v Venco. Although ostensibly about an application under section 68 of the Arbitration Act 1996 to set aside or vary an arbitration award because the tribunal failed to deal with all the issues that were put to it, the bit that really caught my eye starts at paragraph 76.

Symbion Power LLC v Venco Imtiaz Construction Company

In August 2008, Symbion engaged Venco as the sub-contractor for certain civil and structural works on a power station in Kabul, Afghanistan. The parties’ sub-contract was based on the FIDIC Red Book and any arbitration would be under the ICC rules and would have its seat in England.

As is often the case on construction projects, disputes arose that led to the main contract (between JV and Venco) being terminated. Termination of the sub-contract followed. This led to Venco starting an arbitration against Symbion in 2013, claiming some US$4 million for work done prior to termination of the sub-contract.

In an award published in July 2016, Venco was largely successful in its claim. However, Symbion was disgruntled with the outcome, and applied to the court under section 68, arguing that of the seven defences it raised, the tribunal failed to deal with two defences at all, and failed to address the essential parts of the remaining two. One of those was concerned with an estoppel argument.

Now, before moving on, I should just comment that Symbion’s section 68 claim sounds a bit like the Scottish adjudication concept whereby an adjudicator fails to “exhaust his jurisdiction“. Co-incidentally, Matt will be blogging about that concept since it came up before Lady Woolff earlier this month in NKT Cables A/S v SP Power Systems Ltd (see, I have been paying attention!).

Back to Symbion v Venco

Jefford J dismissed Symbion’s application and gave detailed reasons. She also took the opportunity to make a number of observations about something that Symbion’s appointed arbitrator had done during the arbitration (my paragraph 76 point).

Symbion and Venco’s arbitration was conducted by a three-person tribunal, with each party appointing one arbitrator, and then the party-appointed arbitrators appointing the chairman. The tribunal was constituted in 2013.

In mid-2014, Symbion’s party-appointed arbitrator, “Arbitrator A”, wrote to Symbion’s counsel. The email was headed “HIGHLY CONFIDENTIAL: NOT TO BE USED IN THE ARBITRATION” and was not copied to the other party or arbitrators. It:

“… went on to say that both party-appointed arbitrators were upset by the conduct of the chairman; it expressed highly negative views about him; and Arbitrator A said that he was meeting the chairman and would encourage him to resign.”

In fact, in 2015, Venco’s party-appointed arbitrator resigned and was later replaced. The chairman did not resign.

Symbion disclosed the email in the court proceedings to support its submission that it was inappropriate to remit the award to the tribunal, and instead it should be set aside or varied. When he found out, Arbitrator A complained about the email being disclosed to Symbion’s solicitors and that “his confidence had not been kept”.

In her judgment, Jefford J expressed her astonishment that such an email was sent in the first place. She noted that it would be appropriate for there to be some contact “to which the other party will not be privy”, but that contact was limited to ascertaining whether the arbitrator was suitable and available. It may extend to the selection of the chairman for the same reasons but, once the tribunal was appointed, it was wholly inappropriate for one arbitrator to contact the party that appointed him without notice to the other members of the tribunal and the other party.

I liked the reasoning she gave for her astonishment:

“… the ability of each party to appoint an arbitrator is intended to bring balance to the tribunal and give the parties confidence in the balance and fairness of the tribunal. The party-appointed arbitrators patently do not represent the party that appointed them and they are under a duty, as individual arbitrators and as a tribunal, to act fairly and impartially.”

With regard to communications, she continued:

” Any communication by one arbitrator with one party which concerns the arbitration may give rise to concerns that that arbitrator is not acting fairly or impartially for the simple reason that it creates the impression of a close relationship between the arbitrator and the party and raises the spectre of other such communications.”

And with regard to what Arbitrator A did:

“Requiring the communication to be kept confidential does not remedy the problem: if anything, it highlights the arbitrator’s awareness that this is communication he should not be having. Whether in any individual case there is the appearance of bias will, of course, turn on its particular facts but I have no doubt that such communications between one arbitrator and one party should be avoided.”

Parallels with adjudication

We occasionally see questionable contact between an adjudicator and one of the parties in adjudication enforcement proceedings. When it occurs, it raises the question of whether the adjudicator has failed to comply with the rules of natural justice.

The case law can be traced back to HHJ Bowsher QC’s judgment in Discain Project Services Ltd v Opecprime Developments, where he described a couple of conversations between the adjudicator and the contractor’s employees as “distasteful”. It was conduct that could not be endorsed: he could not bring himself to “enforce an adjudication which has been arrived at in that way”. It did not matter that the adjudicator did not initiate the conversations, it was the fact that they were not recorded or communicated with the other party.

Over the years, there have been other examples, most notably perhaps in recent years was Paice and another v MJ Harding (t/a MJ Harding Contractors), where Coulson J considered that the adjudicator’s failure to disclose his knowledge of the claimants’ telephone call to his office two months before the adjudication gave rise to the possibility of bias. The court held that the telephone call should have been disclosed. Because the adjudicator had chosen not to do so, it meant a fair-minded observer would consider that there was bias (applying Re Medicaments). It did not matter when the telephone call took place, it was the content of the conversation that was relevant.

What do I take from all this?

It is perhaps an understatement to say that the judgment provides a reminder that party-appointed arbitrators should not correspond privately with their appointing parties, just like adjudicators should not have private contact with one party to the adjudication and, if they do, they should make the other party aware immediately.

MCMS Ltd Jonathan Cope

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