Apparent Bias Arbitral Challenge & UNICTRAL Interim Measures

20 September, 2022

In an anonymised judgment delivered in public on Friday 16 September 2022, Mr Justice Andrew Baker dismissed a set of curial challenges brought by an arbitral respondent / award debtor (Claimant) against the arbitral claimants / award creditors (Principal Defendants) and arbitral tribunal (Tribunal) pursuant to sections 24, 67 and 68 of the Arbitration Act 1996 (1996 Act).  The judgment will be issued in approved form in due course bearing the title EGF v. HVF & Others.

The underlying dispute concerns payment for wholesale power supply worth over US$500m which is pending before the Tribunal in consolidated arbitration proceedings under the UNCITRAL Arbitration Rules (2010) (Rules).  A final merits hearing took place over four days in September 2021.  Three weeks after its conclusion, the Claimant (as putative arbitral claimant) commenced further arbitrations against the Principal Defendants (as putative arbitral respondents) before a different tribunal seeking rescission of the relevant agreements and deceit-based damages on the basis of alleged dishonest misrepresentations.  On application by the Principal Defendants, the Tribunal consolidated the (purported) new references with or within the pending arbitral proceedings and made directions for a further substantive merits hearing with provision for additional evidence.  The Tribunal also ordered the Claimant to pay the sum of US$250m to the Principal Defendants by way of interim or provisional payment (‘IPO’ for short) pursuant to Article 26 of the Rules and s.39 of the 1996 Act.  The Tribunal issued a partial award to such effect (Award).

The Claimant sought to remove the Tribunal under s.24 of the 1996 Act on the basis of (i) alleged apparent bias (s.24(1)(a)) and (ii) alleged procedural misconduct (s.24(1)(d)) in relation to a specific procedural ruling – involving refusal of additional cross-examination – made during the hearing in September 2021 and an alleged refusal to provide full reasons for such ruling until its final award, which allegations also supported a separate challenge to the IPO in the Award under s.68(2)(a) for alleged serious irregularity (Apparent Bias Challenge).   The Claimant separately challenged the IPO on the basis that the Tribunal (iii) lacked substantive jurisdiction to make such an order (s.67), alternatively (iv) exceeded its powers in making such order at all or in the form of an award (s.68(2)(b)) (Arbitral Powers Challenge).

The hearing of the arbitration claim was heard on an expedited basis as vacation business in the Commercial Court.  Andrew Baker J dismissed all challenges.  The Claimant’s liability to pay the costs of the Principal Defendants (and the Tribunal, who were separately represented at the hearing) on the indemnity basis was dealt with in a separate ruling given in private.

In outline, the Court held as follows:

Apparent Bias Challenge.  Both the impugned procedural ruling and the Tribunal’s decision to defer giving its full reasons for such ruling were paradigm case/hearing management decisions within the remit of the Tribunal and could not be said create an objective appearance of a risk of bias through pre-judgment of any issue before or decision by the Tribunal.  The dictum of Schiemann LJ in the Court of Appeal in Porter v. Magill [2002] AC 357 at 399H-400A was cited as a helpful guide in evaluating the relevant procedural decisions, vis. “not so odd that they lead one to suspect that the explanation for the oddness might be bias”.  The impugned procedural ruling took place on the final day of the substantive merits hearing before the Tribunal, immediately prior to oral closing submissions; it was manifestly fair to both sides in the arbitral proceedings when evaluated in its proper context.  On analysis there was never any serious or reasonable basis for the allegation of apparent bias on the part of the Tribunal.

Arbitral Powers Challenge. There was no basis for concluding that the Tribunal lacked substantive jurisdiction to make the IPO; hence the s.67 challenge failed.  The alternative challenge under s.68(2)(b) failed because there was no specific pleading and no evidence to show that the IPO (in the Award) had caused or will cause any substantial injustice to the Claimant.  The Court observed obiter that (a) the power to make an order in the nature of the IPO exists under Article 26 of the Rules, (b) s.39 of the 1996 Act contemplates the exercise of an arbitral power to grant such interim relief in the form of an award or order, but (c) Article 34.2 of the Rules, by requiring that all awards “shall be final and binding” upon the relevant parties, precludes the grant of such interim relief by way of award; cf. Paulsson & Petrochilos, UNCITRAL Arbitration (Kluwer Law, 2017).

A copy of the judgment will added here once it becomes available.

Stephen Houseman KC acted for the Principal Defendants, instructed by James Freeman of Allen & Overy LLP.