Facts
- A shipowner (Veritas) and a charterer (Anglo-Canadian Cement) entered a May 1964 charter party containing a London arbitration clause requiring each party to appoint one arbitrator, with an umpire if needed.
- A dispute arose and arbitration commenced under the clause.
- Veritas appointed Mr. Clyde as its arbitrator and demanded that Anglo-Canadian Cement appoint its arbitrator.
- Anglo-Canadian Cement nominated Dr. Wallersteiner, its managing director, by a nomination letter authored and signed by Dr. Wallersteiner on the company’s behalf, effectively a self-appointment.
- Veritas objected that Dr. Wallersteiner’s managerial role created an unacceptable lack of independence and that the method of appointment was improper.
- Anglo-Canadian Cement refused to appoint another arbitrator, and Dr. Wallersteiner refused to withdraw.
- Veritas applied to the High Court under the Arbitration Act 1950 seeking removal of Dr. Wallersteiner and appointment of a replacement.
Issues
- Whether a party may validly appoint its managing director as arbitrator under a standard two-party arbitration clause, given concerns about impartiality.
- Whether an appointment is invalid or removable where the proposed arbitrator effectively appoints himself by issuing the nomination letter on the party’s behalf.
- Whether, and on what basis, the court may remove an arbitrator and appoint a substitute under the Arbitration Act 1950 §§ 23 and 25(1).
Decision
- The Queen’s Bench Division (McNair J) granted relief to Veritas.
- The court removed (or treated as not to stand) Dr. Wallersteiner’s appointment as arbitrator.
- The court exercised its statutory authority to appoint another arbitrator in his place so the arbitration could proceed before a properly constituted tribunal.
Legal Principles
- Arbitrators perform a quasi-judicial role and must meet minimum standards of impartiality; a close managerial connection to a party may create a disqualifying appearance of bias.
- Party autonomy in selecting arbitrators is constrained by the requirement that the tribunal be capable of acting as a neutral decision-maker under the parties’ agreement.
- An appointment process that blurs the distinction between a party’s nomination and the arbitrator’s acceptance (including effective self-appointment) may support judicial intervention to protect the regularity of the arbitral process.
- Under Arbitration Act 1950 § 23, the court may remove an arbitrator where fairness or proper conduct of the arbitration is compromised.
- Under Arbitration Act 1950 § 25(1), once removal (or failure of appointment) occurs, the court may appoint a substitute arbitrator to carry out the parties’ agreement to arbitrate.
Conclusion
The court held that appointing a party’s managing director as its arbitrator—particularly through an effective self-appointment—was incompatible with the impartial character required of an arbitral tribunal, and it used its statutory powers to remove the appointee and appoint a replacement.