Facts
- A.S.M. Shipping Ltd. of India (owners) and T.T.M.I. Ltd. of England (charterers) entered a voyage charter for the vessel AMER ENERGY to carry gas oil from the Arabian Gulf to the Red Sea/Egyptian Mediterranean.
- The vessel was delayed due to repairs and arrests at Fujairah; it arrived late at the load port.
- The owners claimed freight and demurrage; the charterers counterclaimed for losses allegedly caused by late arrival.
- The dispute proceeded to London arbitration before a three-member tribunal.
- One arbitrator (“X QC”) had recently acted as counsel in another arbitration in which serious allegations were made about the integrity and disclosure conduct of the owners’ principal witness, Mr. Moustakas.
- The same solicitors who instructed X QC in the earlier arbitration acted for the charterers in the current arbitration.
- The owners applied to the Commercial Court under Arbitration Act 1996 § 68, arguing X QC should have recused himself for apparent bias.
Issues
- Whether, applying the “fair-minded and informed observer” test, there was a real possibility of apparent bias arising from the arbitrator’s prior role and the overlap involving the same key witness and solicitors.
- If apparent bias existed, whether it constituted a “serious irregularity” under Arbitration Act 1996 § 68 that caused substantial injustice to the owners.
- What relief was appropriate under § 68 where the tribunal’s constitution was compromised by apparent bias.
Decision
- The Commercial Court held that the circumstances created a real possibility of apparent bias and that X QC ought to have recused himself.
- The court found the presence of apparent bias amounted to a serious irregularity within Arbitration Act 1996 § 68.
- The court concluded the irregularity caused substantial injustice because the credibility of Mr. Moustakas, the owners’ principal witness, was central to the merits.
- The court granted § 68 relief, with the effect that the affected arbitral outcome could not stand and the dispute had to be dealt with by a properly constituted tribunal.
Legal Principles
- Apparent bias is assessed by asking whether a fair-minded and informed observer would conclude there is a real possibility the decision-maker is biased.
- An arbitral tribunal must act fairly and impartially; apparent bias may demonstrate breach of that duty and improper tribunal constitution.
- Apparent bias can qualify as a “serious irregularity” under Arbitration Act 1996 § 68.
- Where the challenged arbitrator’s potential predisposition concerns the credibility of a key witness and overlaps with prior contentious allegations advanced with the same instructing solicitors, substantial injustice may be established.
Conclusion
The court held that an arbitrator’s recent prior involvement as counsel in proceedings attacking the same key witness’s credibility, combined with repeated instruction by the same solicitors, created a real possibility of apparent bias and justified setting aside the arbitration outcome under Arbitration Act 1996 § 68 for serious irregularity causing substantial injustice.