The High Court has penalised a party who wrongly alleged bias on the part of an arbitrator due to his links with lawyers involved in the case.
Sir William Blair, sitting in the Commercial Court, said the claimant in Koshigi Ltd & Anor v Donna Union Foundation & Anor had brought a ‘very weak’ case of bias and non-disclosure and should pay indemnity costs covering two discontinued arbitration claims.
The court heard that the chair of the arbitration tribunal, who was not named in the judgment, was selected by the LCIA Court for a shareholders’ dispute and was a well-known and experienced international arbitrator. The tribunal, which found in favour of the defendant, sat for nine days in September and October 2017, but during proceedings the claimant found through a Google search that the chair was known to the defendant’s lawyers. At the time of the dispute, the chair was sitting as a co-arbitrator with the defendant’s QC in at least two arbitrations and in 2016 had approached the QC to act as adviser to the board of an international arbitration.
The chair had also worked with the defendant’s solicitor at an international firm between 2005 and 2008 and continued to have what was described in court as a ‘warm and friendly relationship’ with him.
But the judge made clear that these links were not inappropriate when judged against guidelines from the International Bar Association relating to potential conflict and issues of bias.
Sir William said the fact that the chair and counsel for one of the parties had previously served together as arbitrators was not included in the guidance as giving the appearance of conflict. The court held that their working together on unconnected arbitrations was ‘very unlikely’ to have given rise to bias, or to have required disclosure.
The ‘warm and friendly relationship’ between the chair and solicitor was a long way from a ‘close personal friendship’ - the marker for conflict in the IBA guidelines. Their period working together was also well outside the three-year period identified in the guidelines as a relevant time for being of concern.
Sir William queried the claimant’s suggestion the chair had been ‘aggressive’ and ‘unapologetic’ when links were raised as an issue during the hearing, saying this was not borne out by the transcript.
The judge made an order for £400,000 in indemnity costs to be paid by the claimant, with 70% paid within 14 days of the hearing.