UK: Conflict Of Interest – Apparent Bias Of Arbitrator – IBA Guidelines

In the case of W Limited v M SDN BHD [2016] EWHC 422, Mr Justice Knowles of the Commercial Court considered an application to have two awards set aside on the grounds of apparent bias. His Judgment, which was handed down on 2 March 2016, is important for international arbitration as it considers not only the common law test for apparent bias but also highlights a number of weaknesses in the 2014 edition of the IBA Guidelines.

The facts

Following an arbitration between M SDN BHD and W Limited, relating to a project in Iraq, W Limited applied to have two awards set aside pursuant to s.68 of the Arbitration Act 1996 on the grounds of apparent bias based on an alleged conflict of interest.

Mr David Haigh QC ("the arbitrator") was the sole arbitrator and had been appointed in May 2012. He is a partner in a medium-sized Canadian law firm although he has worked almost exclusively as an international arbitrator for a number of years with virtually no involvement in the running of the firm. For instance, he had not attended partnership meetings for the previous six or so years.

At the time of the arbitrator's appointment, a company ("Q") was a client of the firm. M SDN BHD was a subsidiary of another company ("P") and, following an announcement in June 2012, P acquired Q meaning that Q (as with M SDN BHD) became a subsidiary of P. This resulted in Q and M SDN BHD becoming affiliates and, following the acquisition, the law firm continued to provide substantial legal services to Q.

The arbitrator carried out conflict checks at the time of his appointment and made various disclosures to the parties but the conflict checks did not identify that Q was a client of the law firm.

It was not until the arbitrator handed down his final award on costs that the potential conflict was raised by W Limited in correspondence with the arbitrator. The arbitrator responded promptly stating that he had no knowledge of his firm's work for Q and had he known, he would have disclosed the potential conflict to the parties.

The parties were agreed that the common law test for apparent bias was as set out in Porter v Magill [2002] AC 357 at 102: i.e. whether "a fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased".

However, W Limited argued that, given the facts of the case, the fair-minded and informed observer would conclude that there was a real possibility that the tribunal was biased or lacked independence or impartiality. W Limited also relied on the fact that the position with the arbitrator's law firm acting for Q meant that this conflict was caught by paragraph 1.4 of the Non-Waivable Red List of the IBA Guidelines which states: "The Arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom".

The issue

Was there apparent bias?

The decision

Mr Justice Knowles concluded that a fair-minded and informed observer would not conclude that there was any real possibility of bias and dismissed the application accordingly. He was of the view that the arbitrator, although a partner, operated effectively as a sole practitioner using the firm for secretarial and administrative assistance. The arbitrator had made other disclosures where, after checking, he had knowledge of his firm's involvement with the parties. Given this commitment to transparency, the Judge was of the view that the arbitrator would have made a disclosure in this case had he been alerted to the situation.

With regard to W Limited's reliance on the IBA Guidelines, the Judge acknowledged that the conflict fell within the description given in paragraph 1.4 but this did not result in him altering his decision as he identified two weaknesses in the guidelines. First, it was only in 2014 that paragraph 1.4 of the IBA Guidelines was amended to include scenarios where advice was provided to an affiliate without the arbitrator's involvement or knowledge. The Judge found it hard to understand why this situation should now warrant inclusion in the Non-Waivable Red List. Secondly, including such a situation in the Non-Waivable Red List meant that there was no consideration of whether the particular facts could realistically have any effect on impartiality or independence (including where the facts were not known to the arbitrator).

W Limited sought permission to appeal but this was refused on the basis that the proper forum for the determination of the wording of the IBA Guidelines was the International Bar Association and not the Court of Appeal.


Paragraph 6 of the IBA Guidelines makes clear that the guidelines are not legal provisions and do not override any applicable national law or arbitral rules chosen by the parties and this decision merely confirms the position that the English Courts will not be bound by the IBA Guidelines.

Nevertheless, the international arbitration community will, no doubt, continue to use the IBA Guidelines, but the point has now been made that a strict approach to the guidelines when determining conflict is not necessarily the right one to take. The specific facts of a particular case must also be taken into consideration. 

This decision gives those responsible for the next review of the IBA Guidelines plenty to think about.

International Quarterly is produced quartely by Fenwick Elliott LLP, the leading specialist construction law firm in the UK, working with clients in the building, engineering and energy sectors throughout the world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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