In the Aiteo Eastern E&P Co Ltd v Shell Western Supply and Trading Ltd case, there was held to be apparent bias on the part of an arbitrator.
In Aiteo Eastern E&P Co Ltd v Shell Western Supply and Trading Ltd, the English Commercial Court found that a series of professional relationships between an arbitrator and the firm representing the party who had nominated her, along with failures to disclose these connections, amounted to apparent bias on the part of the arbitrator.
Background
Aiteo Eastern E & P Company Limited ("Aiteo") and Shell Western Supply and Trading Limited ("Shell") undertook an arbitration in relation to breaches by Aiteo of facility agreements between the two parties. Four partial awards were issued by a three-member arbitration tribunal ("the Tribunal") appointed by the International Chamber of Commerce (ICC).
Shell, represented by Freshfields, had appointed the Rt. Hon Dame Elizabeth Gloster DBE (DEG) in the arbitrations. Soon after the first proceedings commenced in December 2020, DEG disclosed two prior arbitral appointments by Freshfields in her ICC Arbitrator Statement. Disclosures over the next three years revealed DEG had been subject to three arbitral appointments by Freshfields and three unrelated advisory/ expert engagements between 2018 and 2023. By the time the last of these had been disclosed in December 2023, the Tribunal had rendered all four partial awards in the present case.
Aiteo lodged an apparent bias challenge in respect of DEG with the ICC Court. This challenge was upheld by the ICC Court in January 2024, and DEG was replaced for the remainder of the arbitrations.
Aiteo then applied to the English Commercial Court under the Arbitration Act 1996 s.68 to set aside the four partial awards, arguing there was apparent bias on the part of DEG, which was a serious irregularity affecting the Tribunal. Aiteo also applied for an extension of time in order to bring this challenge.
Decision of the English Commercial Court
Drawing on the decision in Halliburton Company v Chubb Bermuda Insurance Ltd, Justice Jacobs considered whether the "fair-minded and informed observer" would believe there was a real possibility of bias on the part of DEG. This does not require actual bias to be established.
The Court held that based on the cumulative picture, a fair-minded observer would indeed consider there to be a risk of bias.
Key factors included:
- DEG's significant number of appointments and engagements by Freshfields in a relatively short period of time;
- DEG's failure to make timely disclosure of these appointments;
- the ICC Court's decision to remove DEG, which gives further credence to the risk of bias (especially considering the rarity of successful challenges); and
- "aggravating factors", such as DEG's inconsistent timing in disclosing similar engagements.
The Court held that a finding of apparent bias creates an inference of substantial injustice, but this can be rebutted. When applying this to three of the four partial awards, the following was found:
- Offshore jurisdiction and costs awards: there had been a full re-hearing which rejected Aiteo's jurisdictional challenge and had been unaffected by any bias. Therefore, any bias of the Tribunal was insignificant.
- Consolidation award: "unusual circumstances" removed the impact of any potential bias and made it such that this inference was rebutted. The question of individuality and independence had been considered by each member of the Tribunal; therefore the Tribunal had reached its decision independently of the individual views of DEG.
- Onshore jurisdiction award: substantial injustice was found here, due to DEG's apparent bias.
Aiteo's claim for extension of time was allowed, and the award affected by DEG's apparent bias was remitted to the reconstituted Tribunal.
Key considerations
A number of key considerations arise from this case:
- apparent bias in arbitral proceedings is subject to the "fair-minded observer" test;
- early disclosure of all professional relationships that could give rise to the appearance of bias is crucial;
- apparent bias does not in itself lead to substantial injustice but creates a strong inference of it; and
- apparent bias can lead to a decision being successfully challenged, even if no actual bias is established.
These points apply primarily to arbitrators but are also relevant to adjudicators.
For more insights reading regarding arbitrator apparent bias and the duty of an arbitrator to disclose information that may lead to doubts relating to their impartiality, please see our summary of the Halliburton case.
This article was co-authored by Trainee Valentin Pyataev.
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