The English Commercial Court's recent decision in Africa Sourcing Cameroun Limited & Anr v LMBS Société Par Actions Simplifiée & Anr has provided useful guidance on the approach to arbitrators' disclosure obligations, particularly in relatively small markets where arbitral participants are well known to each other and/or interact in other professional capacities.
A dispute had arisen between the parties in relation to transactions in cocoa futures. The relevant contracts required disputes to be referred to arbitration in accordance with the Federation of Cocoa Commerce (FCC) arbitration and appeal rules and while the claimants (who were not FCC members) initially attempted to pursue French court proceedings, in January 2021 they applied to the FCC for the appointment of an arbitration tribunal. In due course the tribunal held in the claimants' favour, but the respondent appealed to an FCC Board of Appeal (the "Board"). The Board subsequently held that the claim was time-barred, overturning the award in favour of the claimants.
The claimants contended that circumstances existed which gave rise to justifiable doubts as to the impartiality of the chair of the Board, and so applied to set aside the appeal award under section 68 of the Arbitration Act 1996.
Apparent bias and the duty of disclosure
The test for apparent bias is objective – would the fair-minded and informed observer, having considered the facts, conclude that there was a real possibility that the tribunal was biased?
In Halliburton Co v Chubb Bermuda Insurance Ltd (2020), the Supreme Court confirmed that under English law, arbitrators have a statutory duty to disclose facts and circumstances which would, or might reasonably, give rise to the appearance of bias. A failure to disclose such facts and circumstances will be one factor the fair-minded and informed observer would take into account when considering whether there was a real possibility of bias.
The Supreme Court added that, in applying the test for apparent bias to arbitrators, it is important to bear in mind that arbitration is generally conducted in private with limited public oversight and powers of review, so there is a "premium on frank disclosure" by arbitrators of circumstances which may give rise to doubts as to their impartiality. However, an arbitrator, like a judge, must be alive to opportunistic or tactical challenges, and must not 'set hares running', with the additional delay and expense that might entail, by disclosing matters which could not possibly give rise to the fair-minded and informed observer having such doubts.
The claimants contended that in this case the chair of the Board, who was an experienced cocoa trader, a member of the FCC and had been an arbitrator for the FCC for over 20 years, should have disclosed four key matters at the time of his appointment, and that the failure to do so would or might cause the fair-minded and informed observer to conclude there was a real possibility the chair was biased:
- The chair attended an FCC council meeting some 13 months prior to his appointment which was also attended by the respondent's owner. At that meeting the first claimant's application for membership of the FCC was considered, and there was some discussion of the dispute between the claimants and respondent. The chair had voted (with the majority) to postpone consideration of the application.
- In 2018 and 2019 the chair attended three networking dinners with the owner and/or a senior employee of the respondent.
- In 2017 the chair, acting for his employer, had bought a consignment of cocoa from the respondent.
- The chair had known the respondent's owner for some 15-20 years, having both worked with the FCC (albeit they were not friends and did not know each other well).
The judge did not accept that the chair had a duty to disclose these matters. He noted that the fair minded and informed observer will inform themselves on relevant matters, and appreciate that context forms an important part of the material which must be considered before passing judgment. In this case that context was that of traders in a relatively small commodities market, competing against each other for business. Members were likely to know, or at least to know about, others in the market. Further, the context was of a trade association providing an arbitration service for settling disputes, with the rules providing that arbitrators were to be drawn from amongst the members of the trade association. The meant arbitrators were likely to be experts in the type of disputes which could arise, and arbitration costs may be lower, but equally meant that any appointed arbitrator was likely to know and have dealt with others in the trade engaged in the relevant dispute.
The judge did not consider that what was discussed and decided at the September 2020 council meeting constituted circumstances which would or might reasonably give rise to the appearance of bias, and similarly, the fair-minded and informed observer would not conclude that the dinners the chair had attended needed to be disclosed. As to the relationship between the chair and the defendant's owner, the judge found that it was an acquaintanceship formed in the course of their work in the same, relatively small commodities market which did not give rise to any justifiable doubt as to the former's impartiality.
In any event, even if there was a failure to disclose giving rise to justifiable concerns as to the chair's impartiality, the judge did not consider that the non-disclosure was so egregious that substantial injustice was inherently likely, and there was no reason to believe the outcome of the arbitration would have been different even if the chair had not participated. Accordingly, the judge found that the claimants would not have met the test for setting aside the award, even if apparent bias had been shown. Finally, the judge held that the claimants were prevented from raising these issues by section 73(1)(d) of the Arbitration Act (which provides that a party that takes part in arbitral proceedings without making any objection that there has been any irregularity affecting the tribunal, may not raise that objection before the court, unless they can show that, at the time they took part in the proceedings, they did not know, and could not with reasonable diligence have discovered, the grounds of objection).
Assessing what to disclose before accepting an appointment can often be a tricky question for arbitrators. While it is vital to disclose circumstances which might give rise to apparent bias, the distinction drawn by the Supreme Court in Halliburton between disclosing relevant circumstances, but not 'setting hares running', can be very difficult for arbitrators to address in practice. It seems unlikely that the Chair of the Board would have been criticised for over-disclosure if he had made the disclosures the claimants alleged he should have made in this case.
The Commercial Court's decision in this case assists in understanding the Halliburton distinction, by emphasising context is key. Where parties are operating in a relatively narrow industry, and making use of the arbitral services of a trade association such as the FCC which draws its arbitrators from amongst its members, they may well be taken to have understood and accepted that participants are likely to be familiar to each other.