Facts
- Saudi Arabia invited telecommunications companies, including AT&T and Nortel, to bid for a major expansion project (“TEP-6”).
- A bidding condition required successful bidders to purchase cable from Saudi Cable Company (SCC).
- AT&T and SCC entered a Pre-Bid Agreement (PBA) to establish a cable-supply relationship tied to TEP-6.
- The PBA provided that New York law governed the substantive obligation to negotiate, while disputes were to be resolved by ICC arbitration seated in London under English law for the arbitration agreement.
- After AT&T won the bid, negotiations with SCC broke down; AT&T commenced ICC arbitration seeking, among other relief, a declaration that it validly terminated the PBA.
- The parties appointed arbitrators under the ICC Rules; Mr. L. Yves Fortier QC was appointed as the third arbitrator and chair and signed an ICC declaration of independence.
- Due to an administrative error, his curriculum vitae did not disclose that he was a non-executive director (and a small shareholder) of Nortel, a competitor of AT&T and an unsuccessful bidder on TEP-6.
- The tribunal issued three partial awards favoring SCC: (1) the obligation to negotiate in good faith under the PBA was binding under New York law; (2) AT&T breached that obligation; and (3) damages were assessed at approximately US$30 million.
- After substantial proceedings (and before the final partial award), AT&T learned of the Nortel connection, challenged Fortier before the ICC, and the ICC rejected the challenge pursuant to its rules.
- AT&T then applied in the Commercial Court under Arbitration Act 1950 § 23 to remove the arbitrator and set aside the partial awards for alleged misconduct/bias; the application was dismissed, and AT&T appealed.
Issues
- Whether the English-law test for apparent bias in international commercial arbitrations differs from the test applied to judges, and if so, what standard governs.
- Whether the arbitrator’s undisclosed non-executive directorship and minor shareholding in a competitor of a party created apparent bias requiring removal and/or setting aside of the awards.
- Whether an inadvertent failure to disclose such a connection under ICC disclosure expectations amounts to “misconduct” under Arbitration Act 1950 § 23 warranting removal of the arbitrator and nullification of the awards.
Decision
- The Court of Appeal dismissed the appeal and upheld the refusal to remove the arbitrator or set aside the partial awards.
- The court applied the R v. Gough apparent-bias standard: whether there was a “real danger” of bias, assessed by the court.
- On the facts, the arbitrator’s non-executive role and minimal shareholding in a non-party competitor did not create a real danger of bias.
- Any non-disclosure, treated as inadvertent, did not constitute “misconduct” under § 23 absent a real danger of bias or serious procedural unfairness.
- The contractual finality of the ICC’s internal challenge decision did not eliminate the court’s supervisory jurisdiction over bias, but the court would not treat an arguable ICC disclosure breach as sufficient, by itself, to undo awards.
Legal Principles
- Under English law, the same apparent-bias test applies to arbitrators and judges: the court asks whether there is a real danger of bias on the evidence.
- A non-executive directorship and minor shareholding in a competitor of a party is not an automatic disqualification; the court assesses the closeness and materiality of the interest and the practical risk of partiality.
- Failure to disclose a connection expected to be disclosed under institutional rules does not, without more, establish apparent bias or “misconduct” justifying removal or setting aside of awards.
- Institutional rules may make the institution’s decision on challenges contractually final as a matter of procedure, but courts retain power to intervene where bias or misconduct is established under the applicable arbitration statute.
Conclusion
The Court of Appeal refused to disturb ICC partial awards where the chair’s undisclosed, indirect connection to a competitor did not create a real danger of bias and the inadvertent non-disclosure did not amount to statutory misconduct warranting removal or nullification.