THE AUTHOR:
Daniel Greineder, Senior Counsel and Head of International Arbitration at Albertson Solicitors
In this case note, the author considers the decision of the English High Court in Aiteo Eastern E&P Company Limited v Shell Western Supply and Trading Limited and Others in which Jacobs J summarizes and applies English case law on arbitrator disclosure in dismissing a challenge to four related arbitral awards because of a co-arbitrator’s failure to make adequate disclosure.
The Judgment of the United Kingdom Supreme Court [2020] UKSC 48, 27 November 2020 in Halliburton v. Chubb Bermuda, can be daunting. It systematically sets out the position as to arbitrator disclosure under English law in sometimes abstract terms, while the facts of the case, involving repeat appointments in the insurance sector, are idiosyncratic and easily distinguishable. In the detailed judgment of the English High Court in Aiteo Eastern E&P Company Limited v Shell Western Supply and Trading Limited and Others [2024] EWHC 1993 (Comm), 1 August 2024 Jacobs J provides essential commentary in setting out the English approach after Halliburton.
Background
The underlying dispute and arbitrations arose out of two finance agreements, referred to as “the Offshore Facility Agreement” and “the Onshore Facility Agreement.” These had a combined value of some USD 2 billion and related to the Nigerian oil sector. The Claimant (“Aiteo”) entered into the Offshore Facility Agreement with the First Defendant (“Shell”) and the Onshore Facility Agreement with the remaining eight Defendants or “the Onshore Lenders.” In the High Court proceedings, the Defendants, whose interests were aligned, are jointly referred to as “the Lenders.” The agreements are respectively governed by English and Nigerian law, and each provides for disputes to be referred to London-seated arbitration under the ICC (International Chamber of Commerce) Arbitration Rules (2017).
The Arbitrations
In December 2020, the Offshore and Onshore Lenders brought two separate arbitration proceedings against Aiteo, “the Offshore Arbitration” and “the Onshore Arbitration.” Shell and the Onshore Lenders each nominated Dame Elizabeth Gloster, a distinguished commercial lawyer and former judge of the English Court of Appeal, as a party-appointed arbitrator in the three-member tribunals. In 2021, Aiteo successfully protested to the ICC that she should not sit in both arbitrations. She remained, however, Shell’s appointee in the Offshore Arbitration, sitting with Aiteo’s appointee, Lord Neuberger, and the presiding arbitrator, Geoffrey Ma Tao-li, former senior members of the judiciaries of England and Hong Kong respectively.
As an arbitrator in the Offshore Arbitration, Dame Elizabeth Gloster was involved in rendering four awards, each unanimous and each against Aiteo. On 15 March 2022, the tribunal rendered a partial award accepting jurisdiction (“the Offshore Jurisdiction Award”). Then, on 22 July 2022, the tribunal rendered two further partial awards, its Award on Costs awarding Shell its costs in relation to the jurisdictional phase, and another ordering the consolidation of the Onshore Arbitration with the Offshore Arbitration (“the Consolidation Award”).
On 11 April 2022, Aiteo brought a claim before the High Court challenging the Offshore Jurisdiction Award on jurisdictional grounds. On 19 August 2022, Aiteo filed another claim to set aside the Consolidation Award. Foxton J dismissed both applications in the Judgment of the High Court of Justice of England and Wales [2022] EWHC 2912, 17 November 2022.
On 25 August 2023, the by then sole Arbitral Tribunal found jurisdiction over the disputes in the Onshore Arbitration (“the Onshore Jurisdiction Award”). Aiteo did not challenge that award on jurisdictional grounds.
On 10 November 2023, Dame Elizabeth Gloster disclosed that the Lenders’ counsel, the international law firm Freshfields, had instructed her to provide a legal opinion. Aiteo requested details of all her recent work with Freshfields, which she provided on 9 December 2023. Aiteo then challenged Dame Elizabeth Gloster’s appointment before the ICC.
The ICC Court considered representations from the parties and evidence from Dame Elizabeth Gloster’s fellow arbitrators, who confirmed that she had been independent, impartial and free from bias, actual or apparent, during the proceedings. Nonetheless, the ICC Court upheld the challenge in an unreasoned decision on 17 January 2024. Shortly thereafter, Colin Edelman KC replaced Dame Elizabeth Gloster on the Arbitral Tribunal.
The Disclosures
Shortly after the ICC Court’s decision, before the High Court, Aiteo sought to have all four awards set aside. It argued that Dame Elizabeth Gloster had continually failed fully to disclose, or only belatedly disclosed, a total of seven professional “relational contacts” – not counting the present case – with the Lenders’ counsel, Freshfields. The contacts and the manner of their disclosure allegedly created an appearance of bias, though not actual bias. That appearance of bias breached the Arbitral Tribunal’s general duty under section 33 of the Arbitration Act 1996 and supposedly amounted to a “serious irregularity affecting the Tribunal” under section 68(2)(a), which caused Aiteo “substantial injustice.”
The “relational contacts” are typical of the professional contacts between a sought-after senior lawyer and international law firm. At the outset, in December 2020, Dame Elizabeth Gloster disclosed 42 arbitrator appointments and that, in the preceding two years, parties represented by Freshfields had appointed her twice as arbitrator, but not that she had given legal advice to a Freshfields client during June and July 2020 in an unrelated matter. Then, in June 2021, a party to an arbitration replaced its counsel with Freshfields, having previously appointed Dame Elizabeth Gloster. She did not disclose this until 2023, when she also first disclosed that Freshfields had instructed her during February and March 2022 to provide an expert declaration in foreign law proceedings.
On 29 April 2022, Dame Elizabeth Gloster disclosed her nomination by the co-arbitrators as presiding arbitrator in another case in which Freshfields was representing a party. On 10 November 2023, she informed the parties that Freshfields had appointed her to provide an expert opinion on English law. This last disclosure led Aiteo’s counsel to demand full details of Dame Elizabeth’s dealings with Freshfields, which in turn triggered Aiteo’s application to the ICC and then the High Court.
Analysis of Jacobs J
Jacobs J starts from Halliburton, which variously states and restates the principles for the evaluation of bias and an arbitrator’s related disclosure obligations. In arbitration as in litigation, apparent bias arises where there is a real possibility that a tribunal is biased. The law is concerned not only that justice is done but that it should “manifestly and undoubtedly” [173] be seen to be done, hence a possibility may suffice to disqualify an arbitrator.
In assessing this, English law applies an objective standard, using the “judicial construct” of the “the fair-minded and informed observer.” [45] The observer is a cousin of the “officious bystander” or “reasonable man” of old, who is sometimes invoked as a measure of well-informed good sense and whose judgement is uncluttered by legal nicety. Additionally, this observer shares the peculiar sensibilities of arbitral practice.
In Halliburton, the Supreme Court stressed the general importance of disclosure. In assessing belated disclosure, it held that the facts relevant to judging whether a disclosure should be made were those at the appropriate time of disclosure. In contrast, in deciding whether disclosed information disqualified an arbitrator, the court would consider all the available facts, including an arbitrator’s conduct after the disclosure was or ought to have been made.
Applying these and other principles, Jacobs J gives a nuanced analysis of Dame Elizabeth Gloster’s “relational contacts,” which will serve as a model to arbitrators, counsel and institutions faced with issues that may, but need not, give rise to a conflict of interest.
For example, Jacobs J distinguishes an appointment as a party-appointed arbitrator from an appointment as a presiding arbitrator, which typically requires the agreement of all the parties and often the co-arbitrators. Nor, on the facts, does he attach any weight to a case where, as happened here, Freshfields replaced the law firm that originally appointed her as an arbitrator, at a later stage in the proceedings.
As to the ICC Court’s decision to disqualify Dame Elizabeth Gloster, Jacobs J does not accord it res judicata or other preclusive effect, finding it to be administrative and procedural rather than judicial in nature. However, the decision is a weighty consideration in assessing Aiteo’s claim. This, it is suggested, is the right approach. Courts should respect parties’ choice of institutional rules and practices, yet the choice of institution should not deprive courts of their supervisory jurisdiction.
Ultimately, Jacobs J found that Dame Elizabeth Gloster had failed to make adequate timely disclosures of relevant dealings with Freshfields, which gave rise to an appearance or real possibility of unconscious bias. Aiteo did not allege that she was actually biased.
Jacobs J stopped short, however, at setting aside the awards. While an appearance of bias amounted to a serious irregularity for the purposes of section 68(2), it did not inevitably follow that it would always cause substantial injustice to the applicant. Here weighty factors largely overcame any substantial injustice.
The Offshore Jurisdiction Award had been subject to a full de novo review by the High Court and found to be sound. On that basis, it could not be tainted by any appearance of unconscious bias. As to the Consolidation Award, Jacobs J set great store by the fact that the three arbitrators had independently of each other decided to consolidate the two arbitrations. The award recorded this in particular detail for reasons unrelated to arbitrator disclosure. Again, the award was safe. The decision in the Award on Costs followed from the jurisdictional decision, leaving the Onshore Jurisdiction Award, a fully reasoned and footnoted award of over 80 pages. Jacobs J remitted this to the partially newly constituted Arbitral Tribunal, in which Colin Edelman KC had replaced Dame Elizabeth Gloster, to consider whether it betrayed signs of apparent unconscious bias on her part.
Discussion
It appears that Freshfields was a little too eager in courting Dame Elizabeth Gloster, while her disclosure fell short of best practice. Yet, the decision in Aiteo recognizes the importance of arbitrator disclosure but resists a kneejerk reaction to set aside at least three sound awards. An arbitrator’s “relational contacts” are often indicative rather than conclusive as to his independence, and he may rise above them in behaving unimpeachably.
Jacobs J’s cathartic rather than self-incriminatory view of disclosure, which is supported by case law, deserves wider currency in international practice. Too often disclosure resembles a game of bingo, where zealous counsel pounce on an arbitrator’s ties to block their opponents’ preferred appointee. Jacobs J suggests that timely disclosure might have dispelled any doubts as to Dame Elizabeth Gloster’s independence. In his view, disclosure brings contacts to light and helps arbitrators to challenge and check their own conscious or unconscious biases, thus purging them of inappropriate sympathies.
Jacobs J frames his conclusions in terms of specifically unconscious bias. Alleging apparent unconscious bias allows parties to challenge an arbitrator without impugning his integrity: the appearance arises from only a possibility, while the bias is unknown to the arbitrator. This sub-Freudian view of dark forces preying on the virtuous conscious mind may be more an expedient legal construct than a psychological model. Whether a bias is unconscious is neither here nor there to the parties and, as a subjective state, will likely elude the scrutiny of courts: bias will be inferred from an arbitrator’s objectively ascertained conduct or connections. In evidentiary terms, however, alleging unconscious bias probably lowers the threshold for establishing bias, since it becomes harder to argue that the probity of a deservedly respected arbitrator counteracts an appearance of bias. This may be a subject for further analysis.
Finally, whatever Dame Elizabeth Gloster’s mistakes, they were not so serious that justice was not seen to be done. This follows from Jacobs J’s upholding three awards and ordering only gentle remedial measures in respect of the fourth. In effect, the actuality of her conduct defeated the possibility – or appearance – of bias to a significant degree.
As set out, English law assesses the effect of failures of disclosure ex post facto. Especially given the support of her co-arbitrators, the claim could have been disposed of more briskly: in spite of failures of disclosure and conduct, the arbitrator’s behaviour during the arbitrations was such overall that no appearance of bias actually arose. Thus, there was no serious irregularity, and the question of substantial injustice would not have arisen. To follow this line of argument would, however, have been to question, albeit implicitly, the decision of the ICC Court to disqualify Dame Elizabeth Gloster and the long arm of arbitral institutions.
ABOUT THE AUTHOR
Daniel Greineder is Senior Counsel and Head of International Arbitration at Albertson Solicitors. An English-qualified barrister with over 15 years of experience, he has acted in over 40 arbitrations valued between USD 2 million and USD 1 billion under leading arbitral rules. He has practised at leading international firms and chambers in London, Geneva and Doha and is fully fluent in English and German. He trained as an English barrister and has particular experience of disputes arising in the energy and construction sector as well as of joint venture and corporate disputes. He was educated at Oxford University and City University, London.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
