Partner Ioannis Alexopoulos and Associate Ryan Cable examine the case of Koshigi Ltd v Donna Union, and discuss the reasoning behind the High Court’s decision to penalise a party who wrongly alleged bias on the part of an arbitrator.
This article was first published in the The Times Law Brief, 13 February 2019, and can be read here.
Lawyers can be warm and friendly – at least to their colleagues – even if they are sometimes opponents.
“Warm and friendly” relationships between lawyers were recently considered in Koshigi Ltd v Donna Union  EWHC 122 (Comm). At issue was liability for costs in two discontinued arbitration claims, concerning a shareholders’ dispute.
The three-member tribunal was appointed by the LCIA Court, including the Chair – a prominent, experienced arbitrator. Towards the end of the hearing in October 2017, the respondent in the arbitration raised questions about alleged non-disclosure by the Chair. After the hearing concluded, the respondents’ Counsel investigated matters which they believed compromised the Chair’s independence.
Last March, the Tribunal found for the arbitration claimant on liability. Shortly afterwards, lawyers for the respondent stated they would apply to set aside the Award on the grounds of serious irregularity (s. 68 of the Arbitration Act 1996), including bias, and invited the Chair to recuse himself. The Chair declined.
In the Commercial Court, Sir William Blair had to decide which party would pay costs. The Chair’s alleged connections with the claimants’ Counsel and solicitor (including the Chair and solicitor having worked together at an international law firm and maintaining a “warm and friendly relationship”). It was also argued that the Chair had recently sat as co-arbitrator in another arbitration with the QC representing the claimant. The Court held that there was no bias or impartiality and awarded costs against the arbitration respondent.
A Google search by the respondent had initially sparked the bias allegations: an arbitration centre website showed that the Chair was also Chairman of that centre, and the claimants’ QC an adviser to the centre’s board. Once these circumstances were explained, the Court ruled “this is very unlikely to have given rise to circumstances which would or might have led the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the Chair was biased… the fact that the Chair and the QC for [the claimant] have served, or serve, as co-arbitrators in unconnected arbitrations, was very unlikely… to have given rise to bias in the legal sense, or to have required disclosure.”
As to the Chair having previously worked with the claimants’ solicitor, this was deemed to be “well outside the three-year period identified in the Orange List of the IBA Guidelines,” and so “disclosure was not required under the Guidelines.” Finally, the Court found that a “warm and friendly relationship is a long way from the ‘close personal friendship’ referred to in the Orange List” in the IBA Guidelines which gives rise to a duty to disclose.
The case highlights, firstly, the relatively small and collegiate nature of the London international arbitration market, and secondly, that challenges to arbitrator appointments should be made early and not be left until it is clear you will not be successful.