A string of cases concerning the appointment of arbitrators and adjudicators have highlighted issues with the system. Is it time for nominating bodies to review their appointment process?
The recent decision in Cofely Ltd vs Anthony Bingham and Knowles Ltd follows on from the Eurocom Ltd vs Siemens plc, and MJ Harding vs Gary Paice and Kim Springall cases.
All relate to problems over the appointment of arbitrators/adjudicators and issues of conflict and bias. Cofely revolved around apparent bias. This is different to actual bias. It relates to circumstances which cause concern. The court does not need to conclude there is bias or anything actually untoward, merely that an objective third party might conclude that there is a serious risk of that. This links to the old adage, justice must be seen to be done.
The source of the problem in Cofely mirrored that in Eurocom; the actions of Knowles when seeking appointments of adjudicators/arbitrators. In Eurocom they had sought to narrow the available options by a process of defining the qualities needed, excluding persons they wrongly regarded as conflicted and naming preferred appointees. In Cofely, an arbitration appointment, Knowles had asked by name for Bingham to be appointed in a case which concerned their own multi-million pound fee claim dispute.
Cofely became concerned about the appointment when it heard about the details in the Eurocom case. It asked a series of questions. It wanted to know about the number of appointments Bingham obtained through Knowles, how those cases were decided and what fees were earned. It struggled to get full answers from Knowles and the arbitrator. As a result it brought an action to have the arbitrator removed which was successful.
It is likely that nominating bodies will try to weed out overly selective applications or, at the very least, to test the merits of the reasoning the applicant party is applying
Central to the court’s reasoning in this matter, and previously in the Paice case, was the conduct of the adjudicator/arbitrator when challenged about the circumstances. While it is understandable that a person normally involved in deciding the fate of others is unhappy when questioned themselves, they need to conduct themselves very carefully when subject to such challenge: attack is not the best form of defence - to the contrary, it is the sure fire way of making the whole situation a lot worse. The problem is that the responses given will also be judged as to whether they are the kind of conduct that could cause an independent third party to objectively conclude that there was a risk of bias. In Paice the conduct was “unapologetic” and “aggressive”.
In Paice, the adjudicator’s conduct of supporting the enforcement of his decision went against the adjudicator. Whether the decision is enforceable and whether it should be enforced is for the court not the decision maker. In Cofely, a hearing was called which, in itself, may not have been an unreasonable step if used to explore the issue and the information needed. But it was used as a vehicle to press for a conclusion to the issue and to make a decision afterwards that the matter should continue. That was wrong.
It is notable that the nominating bodies have not been in court over these issues. While they are unlikely to be a named party in proceedings, they will all wish to review the considerable ramifications this recent line of cases has in terms of the nominating body process, completion of application forms and completion of acceptance forms by adjudicators/arbitrators when selected. It is likely that nominating bodies will try to weed out overly selective applications or, at the very least, to test the merits of the reasoning the applicant party is applying. There is no reason why a nominating body faced with an application which looks as if it is trying to achieve an overly specific purpose should not raise that with the applicant and seek clarification. This could render the appointment “blacklist”, as it is called in Cofely, ineffective.
Nominating bodies may also be encouraged to ensure appointments are more widely spread and that no individual gets a lot of appointments relating to a particular party or an adviser. Perhaps it is time that the cab-rank rule is applied more frequently.
Both nominating bodies and those appointed will want to look critically at how they complete acceptance forms. If there is anything of possible concern, disclose it at the outset. Properly disclosed information openly proffered counters the risk of challenge; matters coming out later raise the risk of a successful challenge. Nominating bodies may look more closely at a failure to say anything on the acceptance form regarding any potential conflict. If the adjudicator or arbitrator is well known and handles a lot of cases, the nominating body might be surprised at a nil disclosure and could question that before making the appointment.
If matters are not disclosed at the outset and are then raised later, the correct approach appears to be a helpful neutral disclosure and leave others to work out the consequences of that which is disclosed: don’t go on the attack, however emotional or personal it may feel.
James Bessey is a partner in the construction team of Blake Morgan