C Ltd v D & X [2020] EWHC 1283 (Comm)

“I was not asked to respond by the Claimant to the Challenge to my position under Article 10.5. I was asked to and refuse to resign my position. However I do not wish my lack of response to be taken as any acceptance of the allegations against me in the Challenge under Article 10 of the LCIA rules. Accordingly, I make 2 short comments; 1. I refute any allegations of bias or impartiality . On the contrary, I have tried very hard to give the Claimant time to make all her arguments as fully as she wishes recognising her position as a litigant in person and I have listened and understood these arguments. I have acceded to requests for more time from the Claimant and postponed the first hearing at the Claimant's request despite the Respondent objecting due to a member of their team not being available. As part of the Interim measures decision I have not made any findings on the merits of the substantive case and indeed have accepted that there may be a prima facie case to answer on the claims. However I found that the grounds for interim measures had not been made out. 2. In so far as allegations against me regarding my competence, I simply point out that I have been a qualified lawyer for over 35 years; undertaken many LCIA arbitrations as counsel and have been familiar with their rules for many years now. Further, I was a Disputes partner in one of the foremost IP law firms in the country for over 10 years and understand well the IP issues in this matter. I object strongly therefore to any suggestions that I lack competence to hear the case . Finally, my resume was before the parties on my appointment last year and no objections were taken as to my competence at that stage. I have no more to say on the matter and am content to leave this to the determination of the LCIA Court.”

“I was quite taken aback by that response. Firstly, I was struck by the fact that the Arbitrator had not said in the response that [they] had acted as arbitrator before, at all. Instead, [X] was now saying only that [they] had "undertaken many LCIA arbitrations as counsel". Secondly, I got the strong impression that the Arbitrator was behaving defensively, and that [they were] angered by the (perceived) suggestion that [they] lacked competence, describing that as an "allegation", when in fact no such allegation had been made. Describing it as an " allegation" was also a highly combative way of responding to complaints about [X’s] handling of the arbitration. This further reinforced my view that [C] could not receive a fair hearing from this Arbitrator if [they] were not removed.” 30. On 3 May 2019 C’s solicitors wrote: “We understand that you had not been appointed, before this reference, as an arbitrator in an arbitration under the LCIA Rules. If there remains any doubt about that and you are not willing to confirm, then we will invite the LCIA Court to ask the LCIA Secretariat to confirm the matter from its records. However we do not consider that this should be necessary, since that matter has already been confirmed to our client by the LCIA Secretariat. We remain concerned that you have not clarified the question of your previous experience as arbitrator in arbitrations other than under the LCIA Rules, notwithstanding our direct request for you to do so. This issue was raised in the Challenge, and you responded in some detail in relation to the matter of your experience, but without stating that you had been appointed as an arbitrator before this reference. In those circumstances, it is our position that, in the absence of confirmation to the contrary, the LCIA Court can and should proceed on the basis that you had not been appointed as an arbitrator before this reference. We will make further submissions to the LCIA Court on that issue on Tuesday 7 May 2019, when we will ask for this inference to be drawn in the absence of contrary confirmation. We mean no disrespect by pursuing this inquiry but we consider we have an obligation to do so, in the interests of fairness and openness, and of proper resolution of the issues in the Challenge, and related matters. Given the ongoing Challenge, which we would expect to be resolved by the LCIA Court with its usual expedition, we consider it important that this issue is addressed promptly.”

“51. As regards the second ground of challenge, the submission notes at paragraph 10 that the Claimant had been informed orally by the LCIA Secretariat that this arbitration is the arbitrator’s first appointment as arbitrator in an LCIA arbitration. The Claimant then seeks to develop a case that the failure to state that this was the first arbitration the arbitrator had ever undertaken (if that be the case) gives rise to justifiable doubts as to the arbitrator’s impartiality, and constitutes a breach of the Arbitration Agreement and a material misrepresentation of the position regarding [X’s] experience. The breach of the Arbitration Agreement arises from Article 14.5 of the LCIA Rules that requires all parties to act at all times in good faith.”

“55. However, it would be wrong to dismiss the second challenge merely on a technicality. If the matters asserted are indeed of any relevance or importance to the Claimant, it is inexplicable why the matter was not pursued as soon as [X] was appointed. The implication of the second Challenge is that it is relevant to the arbitrator’s conduct of the case that [they] had not or may not have been appointed as arbitrator in any other case. 56. In my view, such an assertion could not properly ground a challenge based on Article 10.2 of the LCIA Rules without evidence of a lack of fairness or impartiality or other questionable conduct to support the challenge. The appointment of arbitrators is a matter for the LCIA Court who can be expected to investigate the arbitrator’s general experience and specific experience in arbitration matters. In the case of [X], as [X’s] response states and as confirmed in [X’s] CV, [they have] an impressive career involving wide experience in dispute resolution and experience specifically in arbitration matters as counsel and in other areas short of sitting as arbitrator. In addition, [X’s] conduct of the present arbitration up to and including the application for interim relief was entirely consistent with the requirements of the LCIA Rules of efficiency, diligence and industry in disposing effectively of difficult and contentious issues in a cost effective manner.”

“2. I adopt a neutral approach in these proceedings. Should any submission be required as to matters of law or other representations on my behalf, they shall be made by counsel. 3. I have read the statements submitted by the balance of the parties. I wish to provide the Court with assistance on two factual issues that I do not believe have been directly addressed in evidence. I do so as I wish to ensure that the Court has evidence on all issues that may be relevant to its determination. I have deliberately not addressed contentious issues of fact, nor contentious regarding conclusions or inferences that the Court ought to reach on the basis that these points will be decided by the Court by reference to the available evidence and it would be inconsistent with my neutral position to engage in them. At the same time, I make no admissions. …. 5.1. My CV accurately records my experience and expertise as a commercial disputes lawyer over a 35 year career; 5.2. The vast majority of that experience is as Counsel and/or Solicitor of the record in the proceedings, or as mediator. I have previously been engaged as Mediator in an LCIA proceedings that did not proceed to Award. My Mediator CV was on the LCIA Mediator list following this matter; 5.3. In discussions in March 2018 with the LCIA with regards to me providing a CV for potential Arbitration appointments I was transparent about my arbitration experience. In particular, that since retiring from [] in 2017 I had a number of appointments as mediator, but not as arbitrator. My Arbitration CV was added to the LCIA database following these discussions; 5.4. Given my profile and experience the LCIA indicated that they would consider me in appropriate matters as arbitrator, including those that would benefit from my mediation skill set which lends itself to dealing with litigants in person, in disputes where a relationship might be resurrected or in disputes where mediation might be a useful complementary process to the actual arbitration; 5.5. Where I certainly appreciated the opportunity to sit as an arbitrator, I did not actively seek appointments, nor aim to present myself in a more favourable light to gain any appointments, including in this arbitration. Since retiring from [], I have been more than busy with mediation work and considered any arbitrator appointments as an adjunct to my mediator appointments; 5.6. My Arbitration CV was provided to the LCIA in this context and consistent with the approach adopted by a number of lawyers embarking on mediator and arbitrator focused careers, whereby broad experience and expertise is provided with no specific delineation between disciplines; 5.7. The LCIA approached me in November 2018 as they said that they had an urgent matter suitable for an arbitrator familiar with Mediation and the related expertise in dealing directly with litigants; 5.8. I have significant expertise and experience with regards to the subject matter and legal issues arising in these arbitration proceedings and therefore felt able to agree to this appointment by the LCIA. I would not have accepted the appointment unless I was entirely confident that I had the required experience and skill set. I did not amend or alter my CV for the purposes of this appointment; …” 5.1. My CV accurately records my experience and expertise as a commercial disputes lawyer over a 35 year career; 5.2. The vast majority of that experience is as Counsel and/or Solicitor of the record in the proceedings, or as mediator. I have previously been engaged as Mediator in an LCIA proceedings that did not proceed to Award. My Mediator CV was on the LCIA Mediator list following this matter; 5.3. In discussions in March 2018 with the LCIA with regards to me providing a CV for potential Arbitration appointments I was transparent about my arbitration experience. In particular, that since retiring from [] in 2017 I had a number of appointments as mediator, but not as arbitrator. My Arbitration CV was added to the LCIA database following these discussions; 5.4. Given my profile and experience the LCIA indicated that they would consider me in appropriate matters as arbitrator, including those that would benefit from my mediation skill set which lends itself to dealing with litigants in person, in disputes where a relationship might be resurrected or in disputes where mediation might be a useful complementary process to the actual arbitration; 5.5. Where I certainly appreciated the opportunity to sit as an arbitrator, I did not actively seek appointments, nor aim to present myself in a more favourable light to gain any appointments, including in this arbitration. Since retiring from [], I have been more than busy with mediation work and considered any arbitrator appointments as an adjunct to my mediator appointments; 5.6. My Arbitration CV was provided to the LCIA in this context and consistent with the approach adopted by a number of lawyers embarking on mediator and arbitrator focused careers, whereby broad experience and expertise is provided with no specific delineation between disciplines; 5.7. The LCIA approached me in November 2018 as they said that they had an urgent matter suitable for an arbitrator familiar with Mediation and the related expertise in dealing directly with litigants; 5.8. I have significant expertise and experience with regards to the subject matter and legal issues arising in these arbitration proceedings and therefore felt able to agree to this appointment by the LCIA. I would not have accepted the appointment unless I was entirely confident that I had the required experience and skill set. I did not amend or alter my CV for the purposes of this appointment; …”

“Without waiving privilege as to advice provided by [the adviser] or this Firm, the Second Respondent’s decision to resign was driven almost entirely by the SRA referral, which took place on 6 January 2020. In short, it rendered the Second Respondent’s status as arbitrator wholly untenable. Based on my own direct knowledge and on information and belief from the Second Respondent and [the adviser] (no waiver of privilege), the following factors were salient: 10.1 SRA investigations on average take 12 months to resolve; often longer. During any investigation there is usually a requirement to engage with the SRA in writing and sometimes even in person, in order to address the allegations made in detail. The process can be demanding and intense; 10.2 Although there is no general rule, the appropriate approach in cases where (i) dishonesty is alleged and (ii) ongoing interactions with the complainant are likely, is for the party subject to the investigation to step aside until the investigation is complete; 10.3 Continuing to sit as arbitrator in circumstances where the s. 24 challenge failed but an SRA investigation remained pending, could give rise to a real risk of perceived bias. It seemed that any arbitrator would have to balance their conclusions in the arbitration with the perception that any decision they made (either way) would be tainted by the fact that there was a pending regulatory investigation alleging dishonesty, in this instance instigated by the Claimant; 10.4 The view was formed that the Claimant appeared to have lost all sense of objectivity, given its strategy of overt aggression, intimidation and antagonism (demonstrated, among other things, by the tone and content of the correspondence and witness statements). The referral to the SRA seriously aggravated this and indicated that the position was not likely to change; if anything, it was likely to become more acute; 10.5 The failure of the Claimant’s s. 24 challenge would not resolve the SRA issues, which would still need to be investigated and resolved. This would leave the arbitrator presiding over the arbitration proceedings with the factors above hanging over [them] and [their] conduct of the proceedings. This was neither realistic nor tenable.”

“II. THE CLAIMANT’S APPROACH TO THESE PROCEEDINGS 18. A review of the evidence and correspondence reveals that the Claimant and its legal advisors have sought to overcome the deficiencies in the Claimant’s case by resorting to a strategy of overt aggression, intimidation and antagonism. The obvious aim has been to bully the Arbitrator into resigning in circumstances where the facts and authorities are entirely against such an outcome. This is unbecoming and is not an approach that should have been adopted. 19. What is now clear to us as a Firm, particularly by reference to the Claimant’s latest ploy (SRA referral), is that the Claimant has lost all sense of objectivity and is not addressing the real and relevant issues in a rational manner. This is not likely to change once the proceedings are determined against the Claimant and the First Respondent. Instead, it is likely that the Claimant’s lack of objectivity will only be aggravated. This will inevitably adversely impact and delay the conduct of the arbitration. This is not in the interests of the parties generally and is inconsistent with the Arbitrator’s desire to diligently execute [their] role as Sole Arbitrator. III. THE PROPOSAL 20. In light of the matters addressed above, we are instructed that the Second Respondent is prepared to agree to a consent order that dismisses the court proceedings, following which the Second Respondent shall resign as sole arbitrator in the arbitration proceedings, retaining [their] fees of the arbitration to-date. 21. It is not the Second Respondent’s intention to seek [their] costs as part of this proposal: [they] will leave it to the Claimant and First Respondent to agree a sensible position as to their own.”

“For the avoidance of doubt, I refute the challenges that were levelled against me by the claimant, C, in LCIA Arbitration No. 184118. These challenges were rejected by Professor John Uff CBE QC, Former Vice-President of the LCIA, in his decision dated 27 June 2019. Subsequent to Professor Uff’s decision, the claimant made an application to the Commercial Court to remove me as arbitrator pursuant to section 24 of the Arbitration Act 1996. The claimant’s Commercial Court application is essentially based upon the same challenges as were raised against me in the LCIA Court. These proceedings are ongoing. I refer to the letter from King & Spalding (my solicitors) dated 10 January 2020 that sets forth the position with regards to the challenge and my decision to resign.”

“(a) conduct before, as well as during, the proceedings …; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. …”

"15 So, looking at the matter in the round I take the view that once the application had been issued and its grounds explained in the supporting witness statement, both Knowles and Mr. Bingham can be criticised (1) for not responding positively to the proposals which were made to resolve the issues and also (2) for continuing to participate actively in the proceedings in the way which they did, which I accept is not quite as “neutral” as they claimed. If one looks at the points being made by them in the evidence, in the written skeletons and in oral submissions, they did involve positive points being made against the application, as the claimant submits. 16 I take the view that it would not be right to say that all the fault here lies with either Knowles or Mr. Bingham. Both of them were in a position to bring these proceedings to an end on like terms to those being proposed in August 2015 and both can be criticised for failing to take matters further forward then or subsequently. 17 That being my overall view, in my judgment in the exercise of my discretion the appropriate order for costs is that the claimant should bear the costs of issuing their application and their supporting witness statement. It was not until that was done that either defendant could be expected to adopt any positive position in relation to the allegations being put forward, which up to that time had not been particularised in any very clear manner. Thereafter both defendants should have done more to seek to resolve the matter through agreement, or through agreed revocation or resignation. In all the circumstances I consider in the exercise of my discretion that both the defendants should be liable for Cofely’s costs, other than the cost of the application notice and the supporting witness statement."

“In the circumstances we have concluded that [X] has admitted that [X’s] CV was false and misleading, in that: 1. It stated that [X] had been appointed as arbitrator before when [X] had never been appointed as, or acted as arbitrator before; 2. It gave the impression that [X] had been appointed as arbitrator before in numerous cases when [X] had never been appointed; and 3. It listed a series of matters which [X] claimed as matters in which [X] had experience as counsel or arbitrator when, in fact, [X] had copied that list from another CV in which [X] had listed exactly the same set of matters, as cases in which [X] had experience as mediator. [X] has not provided any explanation for the falsity of [X’s] CV other than effectively acknowledging that it was prepared in order to try to attract more arbitration appointments. [X] has not provided any explanation for creating the list of arbitration cases in which [X] claimed to have experience by copying the list of cases from [X’s] mediation CV in which [X] had acted as mediator.”

“58. … the merits of the s.24 Application can only provide a reason to depart from the usual rule if [D] or [X] can establish that the s.24 Application had no merit (perhaps on the strike-out standard), that it was pursued in bad faith and without belief in its merit and that [X]'s resignation was only secured by such bad faith conduct. 59. This is because, in an ordinary case, where the relief sought has been conceded, a Defendant cannot realistically be heard to say that the claim had no merit. If the Defendant properly maintained that the claim was hopeless, it would (and should) simply have contested it to a hearing and won. The authorities referred to in § 44 above are relevant. Exceptional circumstances (such as fraud, abuse of process or bad faith) should be required before the Court will allow a Defendant who has conceded the result to argue the merits of a case, with a view to avoiding a costs order. 60. This is particularly important in a case such as this, because the availability of a challenge procedure is fundamental to the legitimacy of arbitration. A Claimant should not be criticised for challenging an arbitrator (or denied his costs in the event the challenge succeeds) unless either (1) the challenge is dismissed or (2) the Court is convinced that it was brought abusively or in bad faith. …”

“The LCIA's figures for appointing first-time arbitrators are lower than that of the parties, in part reflecting the fact that the LCIA Court selects three times as many sole arbitrators and five times as many chairs as the parties select, for which roles prior experience of LCIA arbitration is typically required.”

“Any fair-minded observer would not be able to ignore the likely feelings of anger and discomfort that this may give rise to on the part of [X], and the potential professional difficulties it might cause [X], giving rise to justifiable doubts as to [X]'s ability to treat C fairly and impartially (or without the "ill-will" which was identified as a hallmark of partiality by the Chief Justice, ViceChancellor and Master of the Rolls in Locabail (UK) Ltd v Bayfield Properties at [2].”

“62. If, as I have found, there is no other justifiable ground for doubting M’s impartiality, it is immediately apparent that the point is misconceived. If there are no circumstances which objectively give rise to the possibility of an appearance of bias, it can never be a proper ground for removal of an arbitrator that the process of unsuccessfully advancing misconceived submissions to the contrary has of itself created such a possibility. The argument is in effect that the possible offence taken by an arbitrator at an unmeritorious attempt to remove him should itself raise justifiable doubts as to his future conduct of the reference, with the paradoxical result that the more obnoxious the challenge the stronger this ground will be. It is self-evidently misguided. 63. The argument also has wider ramifications. In order to uphold the principle of party autonomy and the efficacy of the arbitral process, arbitrators and the courts should be vigilant not to accede to removal applications merely because the arbitrator would feel more comfortable if he or she did not have to sit in judgment over a party who has been critical and avowed a lack of confidence in the impartiality of the tribunal, albeit one which no fair-minded observer would feel. No tribunal wishes a party to be nursing a sense of grievance, however unjustified. However that is not a good reason for resignation or removal. … 65. Moreover courts and tribunals will be vigilant to detect and guard against improper tactical deployment of such challenges which are made in the hope that the tribunal will provide some grounds for removal in its response to the challenge.”

“55. The parties are before the Court due to C's insistence in pursuing a costs order. As the correspondence shows, D1 would have been content for the proceedings to be concluded with each party agreeing to bear its own costs. However, now that the parties are, unfortunately, before the Court, D1 submits that an order for costs in its favour is appropriate. 56. D1's legal representatives are acting pro bono. D1 therefore seeks a PBCO against C. A case could be made for such an order in respect of the time incurred by D1's legal representatives for the entire duration of these proceedings. However, D1 will limit itself to seeking a costs order in respect of the period since C rejected D1's offer of 29 October 2019, whereby the parties would agree to invite the arbitrator's resignation on the basis that each party would bear its own costs of both the s24 proceedings and the LCIA Challenges (even though D1 had a costs order in its favour). This was an eminently reasonable offer, which gave C the substantive relief that it was seeking. The offer was made, without any concession on the merits of the s24 application, as soon as D2's evidence had been served. Only C's unnecessarily aggressive approach to these proceedings has prolonged them beyond October 2019 and caused further time or costs to be incurred by all parties. 57. D1 therefore seeks an order pursuant to s194 Legal Services Act 2007 that C should be ordered to pay £44,867.50 to the prescribed charity. This amount represents the costs that D1 would have incurred (albeit using rates prescribed by the Senior Courts Costs Office, rather than Allen & Overy's normal rates), and which C would have been ordered to pay, following its offer of 29 October 2019 to the end of the hearing, had it not been represented free of charge.”