Remove an arbitrator on the ground of apparent bias

A recent High Court judgment involved a rare case where the court granted the removal of an arbitrator based on his potential impartiality in the Arbitration proceedings.

Background:

In H1 & Anor v W & Ors ([2024] EWHC 382), the Claimants (the “Insurer”) sought the removal of the sole arbitrator (the first Defendant) on the ground of apparent bias in an arbitration between them and the second and third defendants, being a film company and a firm production guarantor (the “Insured”), under section 24(1)(a) of the Arbitration Act 1996. The underlying arbitration relates to a claim under a policy of film production insurance issued by the Insurer in connection with the filming of a television series.

Judgment and analysis:

Section 24(1) of the Arbitration Act 1996 provides a list of grounds where a party to arbitral proceedings may apply to the court to remove an arbitrator, including:

• when circumstances exist that give rise to justifiable doubts as to an arbitrator’s impartiality;
• when an arbitrator does not possess the qualifications required by the arbitration agreement;
• when an arbitrator is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his/her capacity to do so;
• when an arbitrator has refused or failed
• properly to conduct the proceedings, or
• to use all reasonable dispatch in conducting the proceedings or making an award and,
• substantial injustice has been or will be caused to the applicant.

By invoking section 24(1)(a), the Insurer must prove that they have justifiable doubts as to the arbitrator’s impartiality. Among others, the Insurer’s key concern is the arbitrator’s knowledge of the Insured’s factual and expert witnesses, which gave rise to an apprehension that the arbitrator had pre-determined favourable view of those witnesses and pre-determined negative views of the Insurer’s witnesses.

In determining whether there is apparent bias as alleged by the Claimant, the judge adopted a legal test: whether the fair-minded and informed observer, having considered the facts, would conclude that there was “a real possibility” that the tribunal was biased.  Such an informed observer “will adopt a balanced approach” and “is neither complacent nor unduly sensitive or suspicious”.

Based on the facts submitted by the parties, the judge concluded that:

1. There could not be any justifiable doubts about the arbitrator’s impartiality based purely upon the degree of professional acquaintance shown by the details of his past relationship with witnesses.
2. However, the arbitrator’s suggestion that it was unnecessary to call any expert witnesses of the Insured side because he “knew them all personally extremely well” indicated that he would accept their evidence at face value, thereby pre-judging the merits of the dispute.
3. Therefore, a fair-minded and informed observer would likely consider that his prejudice in favour of the Insured’s expert witnesses would prevent an impartial assessment of the evidence of the Insurer’s witnesses.

The judge pointed out that the parties might expect the arbitrator to use his special knowledge of the industry to understand the evidence that is given at the arbitration and any usages of the trade, but they would not expect him to use his special knowledge to pre-determine that he would prefer the evidence of an industry insider whom he knew over one whom he did not know. Accordingly, the judge considered that the arbitrator should be removed.

Comments:

Section 33 (1) of the Arbitration Act 1996 imposes a general duty of the tribunal to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent”. Failure by the tribunal to perform this duty constitutes a serious irregularity, which will not only lead to the arbitrator(s) being removed, but may also constitute grounds for setting aside an arbitral award if it has caused or will cause substantial injustice according to Section 68 (2) (a) of the Arbitration Act.

Similarly, Article V.1(b) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) provides that recognition and enforcement of an arbitral award may be refused if the party against whom the award is invoked was unable to present his case. Although this ground is seldom cited, this case is still a wake-up call to arbitrators and parties alike, reminding arbitrators to be fair, independent and unbiased in handling arbitration proceedings as well as in their awards.

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