English Commercial High Court (QBD): Duty of Continuous Disclosure of Already Disclosed Disputes If Such Disputes Later Becomes Litigious

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On 17 January 2019, the English Commercial High Court in Soletanche Bachy France S.A.S v. Aqaba Container Terminal (PVT.) Co. [2019] EWHC 362 (Comm) dealt with an application to set aside an award under Section 67 & 68 of the English Arbitration Act, 1996 on the ground of lack of disclosure on the part of one of the arbitrators in a three members Arbitral Tribunal. The interesting question which spur the attention of many was whether there exists a continuous duty of disclosure on the arbitrator to disclose even the developments in respect of a dispute which he has already disclosed in the initial stage as being utterly unrelated with the dispute in hand. Read the case analysis below.

Background

The dispute culminated from a construction contract. When the Claimant was about to finish the construction work, the Defendant terminated the contract and proceeded with another contractor named BAM.

This led the Claimant to invoke arbitration where the Claimant contended wrongful termination and repudiatory breach by the Defendant. The Defendant contested the arbitration relying on the work contract which stipulated the Claimant to work with due diligence and without delay.

The award was passed in favour of Defendant by three arbitrators. Subsequently, the Claimant challenged the award vide its application under Section 67 and 68 of the English Arbitration Act 1996 urging to set aside that award in the present proceedings.

Duty of Disclosure of Conflict

Challenge to the award came up when the Claimant submitted fresh documents which reflected that there had been corruption by an employee of the Respondent and BAM, leading to the obtaining of the successor contract by BAM.

Immediately thereafter, one of the arbitrators, X, made a disclosure before the parties that he is instructed by BAM in a joint venture in an unrelated project. The Claimant explicitly waived any conflict that may exist in respect of X in this regard.

Later, the Claimant withdrew the allegation of corruption and accepted that the documents submitted were forgeries and could not be relied upon. The Award was passed by the Arbitrators.

Challenge against the Award

After the award was passed, X was asked by the Claimant to account for his activities in respect of BAM. X gave detailed response regarding his involvement with BAM.

The Claimant found that BAM was mentioned in the list of names supplied by X in its disclosure form to the arbitral institution i.e. ICC which led Claimant to challenge the award on the basis of lack of disclosure by X which, as per Claimant, was a serious irregularity pursuant to section 68 of the English Arbitration Act.

Judgement

The Court held as under:

  • Merely because BAM’s name was in the list of names supplied by X to ICC, there is no duty of disclosure on X because it was simply a helpful list, and it would not have affected the duty of disclosure by X, which was at that stage covered by an ICC Rule which did not expressly require disclosure of any relevant entity unless it was an entity connected with one of the parties and had a financial interest in the litigation;
  • There is a continuing duty to disclose on an arbitrator (relying on Halliburton Co v Chubb Insurance Limited & Ors [2018] 1 WLR 2361). Applying Halliburton, the Court opined that no reasonable observer, no objective observer, would conclude that there had been any risk at any time of a lack of impartiality by X, whether as a result of his non-disclosure or otherwise;

Note: In Halliburton, the English Court of Appeal inter alia held that the test to establish arbitral bias is whether, at the time of the hearing to remove, the non-disclosure taken together with any other relevant factors would have led a fair-minded observer to conclude a ‘real possibility of bias’.

  • X had disclosed enough at the initial stage and once it was known to X that he was retained and instructed by BAM in relation to a dispute, the fact that the dispute subsequently became active, in the sense of an arbitration, made no material change whatever. Further, it does not matter that the dispute which he had disclosed had become litigious.

Conclusion

In this case, the Court has re-affirmed that there exists a continuing duty of disclosure on the part of an arbitrator to disclose every possible issue which might raise doubts of arbitral bias but carved out an exception to this rule.

In my view, as per the law set out in this case, in a scenario where, the arbitrator discloses a dispute which is wholly unrelated to the dispute in hand, at the time of initial disclosure, then he will not be under a continuous duty of disclosure in respect of further developments taking place in such unrelated disputes which were already disclosed by him at the initial stage.

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