Acting impartially as between the parties is a “cardinal duty” of an arbitrator¹, as enshrined in s33 of the Arbitration Act 1996 (the Act). Failure to observe this fundamental duty can lead to applications for the removal of an arbitrator on the grounds of bias, pursuant to s24 of the Act or applications under s68 of the Act, which provides for awards to be set aside on grounds of serious irregularity.² Successful challenges to the impartiality of an arbitrator under both s24 and s68 of the Act are, however, rare. 

In this article, we focus on two recent cases that have arisen in the sports arbitration context involving Premier League football teams that highlight the difficulty with bringing a claim alleging arbitrator bias. We contrast these cases with a recent decision in which the claimant successfully challenged the award of the tribunal under s68 where a serious irregularity arose as a result of the conduct of the proceedings, rather than on grounds of bias.

THE LAW

The Act provides two mechanisms by which an arbitrator can be removed for bias or an award set aside. Section 24(1)(a) of the Act permits the removal of an arbitrator while an arbitration is in progress if “circumstances exist that give rise to justifiable doubts as to [the arbitrator’s] impartiality”. Additionally, a party can challenge an award under s68(2)(a) of the Act if there has been a serious irregularity that has or will cause substantial injustice, on the grounds that the tribunal did not comply with its duty under s33 of the Act, which sets out the duty of tribunals to “act fairly and impartially as between the parties”. 

The leading decision on arbitrator bias is that of the Supreme Court in Halliburton Co v Chubb Bermuda Insurance Ltd [2020] UKSC 48, a case in which K&L Gates acted as counsel to Halliburton in the underlying arbitration proceedings and subsequent court appeals (a discussion of the case by an expert panel can be found here). It was confirmed in Halliburton that the applicable test to establish bias is that identified in Porter v Magill [2002] 2 AC 357, being “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”.³  Whether someone is biased is a question of one’s subjective state of mind. The test, however, is objective and requires a highly fact-specific approach. Two recent cases demonstrate the high threshold to be met for an application to succeed.

Newcastle United v The Football Association Premier League Limited

Newcastle United Football Company Limited v The Football Association Premier League Limited [2021] EWHC 349 (Comm) was one of the first reported cases concerning arbitrator bias after Halliburton. The claimant, Newcastle United Football Club Limited (NUFC), applied under s24 of the Act for the removal of one of the arbitrators, Michael Beloff QC, in its arbitration with the Football Association Premier League Limited (FAPL).

By way of background, the owners of NUFC wished to sell their shares to a company owned by a Saudi Arabian sovereign wealth fund (PIF) (a sale that eventually completed in October 2021, after this case was heard). In June 2020, FAPL contended that PIF was controlled by the government of the Kingdom of Saudi Arabia (KSA) and, therefore, pursuant to the definition of Section A of the Premier League Rules to which Premier League teams are subject (the Rules), KSA would become a director of NUFC. Section F of the Rules required FAPL to disqualify individuals and entities from acting as director of a club in certain circumstances. NUFC disputed this conclusion based on the definition of director under Section A of the Rules.

Two weeks after Mr. Beloff QC confirmed (as part of the appointment process following commencement of the arbitration) that there were no circumstances giving rise to justifiable doubts as to his impartiality, FAPL’s subsequently informed NUFC’s lawyers that: (i) in the last three years, FAPL’s lawyers had been involved in 12 arbitral proceedings in which Mr. Beloff QC had been an arbitrator, three of which he had been appointed by FAPL’s lawyers (two such appointments being made after Mr. Beloff QC had accepted his appointment in this arbitration) and (ii) Mr. Beloff QC had advised FAPL on four separate occasions, all in excess of two years prior to the current proceedings, including in March 2017 when he provided advice in relation to a potential amendment to Section F of the Rules (the 2017 Advice).

NUFC invited Mr. Beloff QC to recuse himself following this disclosure, which he declined. Subsequently, Mr. Beloff QC emailed FAPL’s lawyers (failing to copy NUFC) to: seek consent to disclose the details of the 2017 Advice; ask FAPL whether it wanted him to recuse himself; and to confirm whether a scheduled directions hearing should proceed. FAPL’s lawyers subsequently provided this correspondence to NUFC’s lawyers.

NUFC proceeded to issue its s24 application on four grounds: (i) the 2017 Advice would mean that Mr. Beloff QC would already have a view on the issue at hand (the dispute as to the definition of director under Section A of the Rules), as such an opinion on Section A was necessary to provide his opinion on Section F for the purposes of the 2017 Advice; (ii) Mr. Beloff QC’s previous arbitrator appointments by FAPL’s lawyers; (iii) Mr. Beloff QC’s failure to disclose his previous involvement with FAPL and (iv) the subsequent ex parte communication that occurred between Mr. Beloff QC and FAPL. The Court refused NUFC’s application, concluding that, in relation to each of the four grounds, the fair-minded and informed observer test was not satisfied. Of particular note was HHJ Pelling QC’s assessment that “it is the cumulative effect [of the grounds] that matters” and viewed cumulatively, the weight of the whole did not exceed the sum of its parts. HHJ Pelling QC also emphasized that the fair-minded and informed observer was “neither unduly sensitive nor suspicious”. 

In relation to ground (i), HHJ Pelling QC stated that the consideration of Section F in the 2017 Advice did not relate to the definition of director under Section A of the Rules. There was, therefore, no risk of prejudgment from Mr. Beloff QC. FAPL claimed privilege over the 2017 Advice, however, the Court accepted assertions from FAPL’s lawyers and Mr. Beloff QC that the 2017 Advice did not relate to Section A. The Court found that, unless there was credible evidence to the contrary, a reasonable observer would be bound to accept their assertions. Interestingly, the Court remarked that had the 2017 Advice been concerned with the definition of director, then it is at least probable that the reasonable bystander test would have been satisfied without further enquiry.

Regarding (ii) and (iii), the Court, following Halliburton, confirmed that the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines) are instructive in identifying what is an unacceptable conflict of interest and what matters may require disclosure. Although the IBA Guidelines do not take effect as if they are English law, following Halliburton, there is now a legal duty on arbitrators to disclose matters that would or might lead the fair-minded and informed observer to conclude that there was a real possibility that the arbitrator was biased. Of Mr. Beloff QC’s 12 previous appointments, only two appointments in 2018 were required to be disclosed under the IBA Guidelines. The Court held that a fair-minded and informed observer would not consider that their non-disclosure led to a real risk of bias because they did not relate to the issues at hand and did not suggest an ongoing relationship. The Court also noted that the non-disclosures were less significant in light of the fact that Mr. Beloff QC was not financially dependent on work from FAPL or their lawyers and that he was appointed as a chair in this arbitration by the two co-arbitrators. The Court also considered that, as there is a limited pool of suitably qualified and experienced sports arbitrators, the fair-minded and informed observer would be less likely to infer a real risk of bias from the non-disclosure, as recognized in the IBA Guidelines.⁴ 

In relation to ground (iv), the Court acknowledged that the communications were concerned mostly with obtaining FAPL’s consent to disclose the 2017 Advice. It was held that this communication was right to be ex parte; however, Mr. Beloff QC’s request for FAPL to confirm its position regarding his recusal and the directions hearing should have been copied to NUFC’s lawyers. In the view of the Court, however, these were merely “errors of judgment made in pressured circumstances rather than evidence of a real risk of bias”. The Court observed that second defendant’s unquestioned reputation was an important factor in coming to this conclusion. Interestingly, the Court noted that Mr. Beloff QC had previously stood down in cases where his impartiality was doubted, suggesting an awareness of the obligations of independence and impartiality.

Manchester City v Football Association Premier League Limited

In Manchester City Football Club Ltd v Football Association Premier League Limited and others [2021] EWHC 628 (Comm), the Court rejected Manchester City Football Club’s (MCFC) application to set aside an arbitral award under s68 of the Act on the grounds of arbitrator bias. MCFC was also unsuccessful in its application for the removal of all three arbitrators on the tribunal under s24. 

FAPL requested that MCFC released information in relation to potential breaches of the Rules. MCFC refused. Subsequently, FAPL commenced arbitration pursuant to the Rules to obtain the requested information. FAPL, in accordance with the Rules, provided MCFC with a list of individuals who were members of the panel from which the arbitrators were to be appointed (the Panel). MCFC and FAPL each appointed one arbitrator from the list and the selected arbitrators then appointed a chairman. MCFC submitted, as a consequence of the appointment process, the tribunal did not have the appearance of impartiality and thus failed to comply with s33 of the Act. MCFC sought an order under s68 on the basis that there was apparent bias on the part of the tribunal and under s24 for the removal of the tribunal members.

MCFC made three complaints: (i) FAPL appointed individuals to the Panel via an informal process based on word of mouth and personal connections; (ii) the members lacked security of tenure being appointed for renewable terms of three years, therefore, they were in a “subordinate position” to FAPL for appointment/reappointment; and (iii) the remuneration paid was significant and, even if it was not sufficient of itself to give rise to the real possibility of bias, there were reputational benefits to being on the Panel. Moulder J, applying the fair-minded and informed observer test, held that there was not a real possibly of bias. Notably, Moulder J also held that, had it been necessary to decide the issue, MCFC had validly waived its right to object to the process by which individuals were appointed to the Panel.

The Court acknowledged that arbitrators will often be nominated by one of the parties to the arbitration and emphasized the differences between arbitral and court procedure. The absence of an “open” competition and written selection policy for appointment to the tribunal was found not to be material. Regarding the remuneration, Moulder J held that it was not insignificant, but that even if it were viewed as material in the context of their practice from a reputational or monetary perspective, it was recognized in Halliburton that party appointed arbitrators may derive their livelihood from acting as arbitrators. The extent to which the arbitrator under challenge is financially dependent on one of the parties commonly arises in such challenges. This case suggests that it may be difficult for claimants to establish that the remuneration of arbitrators is enough to constitute bias.⁵ 

Whereas in Newcastle the claimant’s challenge was against an individual arbitrator, the claimants in Manchester City challenged the process by which the entire tribunal is selected. Both cases, however, highlight the difficulties with successfully challenging the impartiality of an arbitrator. Parallels can also be drawn between the arguments raised by MCFC and those raised by Claudia Pechstein in her long-running challenges to the Court of Arbitration for Sport process, and the decisions in those cases. It has been argued that arbitrators on panels appointed by sports governing bodies and event organizers may appear to be predisposed towards those bodies when they are parties to arbitrations against the sport’s participants. Courts, however, (including the Swiss Supreme Court and the European Court of Human Rights in the Pechstein case) have recognized that there are benefits to sports disputes being resolved quickly and inexpensively by specialist arbitral tribunals. The Courts also recognize the systems of arbitrator nominations and selection from specialist lists or panels generally complies with constitutional requirements of independence and impartiality, and has in many cases decided that those methods of arbitrator nomination and selection alone do not, without more evidence of bias or possible bias on the facts, give rise to a real possibility of arbitrator bias.

SERIOUS IRREGULARITY AND THE DUTY OF FAIRNESS 

While NUFC’s and MCFC’s s68 applications were based on a breach of the duty to act impartially under s33, in PBO v DONPRO and others [2021] EWHC 1951 (Comm) the claimant’s application related to a breach of the general duty of fairness under s33 in relation to the conduct of the proceedings.

The underlying arbitration under the Federation of Cocoa Commerce (FCC) Arbitration and Appeal Rules arose out of a series of agreements for the sale and purchase of cocoa beans, under which the parties were pursuing various claims and counterclaims. In December 2019, a tribunal in the initial arbitration (the Tribunal) found in favor of DONPRO. PBO brought appeal proceedings under the FCC Arbitration Rules. The Board of Appeal (Board) panel also made an award in DONPRO’s favor. PBO challenged this award before the High Court, both under s67 and s68 of the Act. Regarding the s68 challenge, PBO claimed a serious irregularly causing substantial injustice to PBO had occurred for two principal reasons: i) the Board did not allow PBO to make a late but material amendment to its statement of case prior to the close of the appeal proceedings following a change of its legal team (who identified new grounds of appeal); and ii) the Board departed from the way in which the case was presented by the parties without warning, thus PBO was not given any opportunity to present its case in relation to two findings by the Tribunal.

PBO’s s68 challenge was granted on all grounds. The Court held in relation to the proposed amendment to the statement of case that the Board made no attempt to identify the amendments; did not adopt applicable principles when deciding whether to grant the amendment to the statement of case, which involves a consideration of the points raised and their merits; nor did the Board consider the potential prejudice to PBO if the amendments were not allowed. The court held that the Board, therefore, reached a decision that no reasonable tribunal would have reached. It is noteworthy that a discretionary procedural decision—one that was prejudicial to the claimant by not allowing them a voice on important issues—constituted a procedural irregularity serious enough to amount to a breach of the tribunal’s duty of fairness.

COMMENT 

A fundamental principle of arbitration is that the tribunal must be impartial. Notwithstanding the importance of impartiality, the English courts have set a high bar for bringing successful s24/s68 challenges. Each case will involve a highly fact-specific analysis, meaning it can be challenging for potential applicants to assess the chances of a successful application. The Courts are also conscious of taking into account the differences in nature and circumstances between arbitral and judicial determinations of disputes in their judgments, and emphasize that the fair-minded and informed observer appreciates that context forms an important part of the material which they must consider before passing judgment. The state of the law thus means that challenges to an arbitrators’ impartiality may not be brought lightly. The successful challenge in PBO, however, suggests that the parties may find it more fruitful to claim serious irregularity based on the tribunal’s conduct of the proceedings should the facts so support it. PBO may also be of assistance to parties seeking to make late amendments to statements of case.