Is Lagos Pro or Anti-Arbitration?

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This article by Learned Senior Advocate, Funke Adekoya, examines a recent ruling given by the Lagos State High Court setting aside an award in the case of Global Gas and Refinery Limited and Shell Petroleum Development Company, for misconduct arising from allegations of non-disclosure of conflict of interest by the arbitration panel, allegations which had previously been dismissed by the ICC. She concludes that the court’s decision is a cause for concern to the arbitral community, both within Nigeria and abroad

Brief Facts of the Case

In the case, the court held that the presiding Arbitrator’s non-disclosure amounted to misconduct, which entitled the court to set aside the arbitral award, even though the challenge had earlier been submitted to the ICC which had dismissed the challenge. The court was of the view that “The main issue in the case centred on the bias of the President of the Arbitration Panel”.

The brief facts of the case as can be discerned from the ruling delivered, is that the Claimant commenced ICC arbitral proceedings against the Respondent, alleging breach of a gas sales and purchase agreement. During the proceedings, the Claimant challenged the appointment of the presiding Arbitrator on the grounds that he had failed to disclose information, which led to doubts as to his independence and his impartiality. The ICC Court of Arbitration reviewed the challenge, and dismissed it. The arbitration continued and concluded, with an award by the majority of the tribunal dismissing the Claimant’s claims.

The Claimant then proceeded to the Lagos High Court, seeking orders setting aside the final award dated 30th May, 2017, refusing recognition and enforcement of the final award plus other consequential orders. The grounds for the application included a ground based on misconduct of the majority of the arbitral tribunal, and one of the issues raised for determination was “whether there are proven instances of misconduct by the majority of the arbitral tribunal in the final award dated 30th May, 2017”.

The trial Judge in her ruling indicated that “one of the grounds to which they are seeking the court’s intervention to set aside the arbitral award, is the reason of non-disclosure by the arbitral tribunal who had a relationship with the parties which he failed to disclose at the ICC… Counsel argued that at the time of the arbitration the President of the tribunal had a relationship with the Respondent which he failed to disclose both to the parties and the ICC … he gave an expert opinion as a Barrister in a litigation matter involving the Respondent as a party… The ruling indicates that the tribunal chair had provided expert advice on a dispute between the Respondent and Bodo Community in Gokana Ogoni, Rivers State; (the Respondent says the chair provided an expert opinion to its parent company abroad, and not to it). The Claimant also alleged that the tribunal chair and the other member of the tribunal that constituted the majority in the arbitral tribunal, were both members of the Board of Governors of an arbitral institution of which the Respondent counsel was the chair, and that this body was formed during the pendency of the arbitration, with no notice or disclosure being made to any of the parties. The Claimant indicated that based on their membership of this arbitral institution, it had challenged the appointment of these parties at the ICC, but the ICC did not uphold the challenge; rather, it dismissed the complaint.

Allegation of Misconduct and Court’s Decision

In essence, the Claimant asserts that the undisclosed relationship with the Respondent (or its parent company as asserted by the Respondent) by providing an expert report in an unrelated matter, together with the undisclosed membership by the presiding Arbitrator, one co-Arbitrator and counsel for the Respondent of an arbitral institution, amounts to misconduct.

In the decision, the Court took the view that once an Arbitrator has been challenged, his or her obligation is to resign the appointment and not resist the challenge. The court held that “when an objection is raised on the basis of bias, it casts doubts on the process itself, notwithstanding whether the panel was constituted or not by ICC. This being so, the President of the arbitrator [sic] must exercise a duty of care towards all the cases that are before them [sic]. Therefore, it does not lie in the Arbitrators to raise a defence, or put the process in ridicule. What is expected was to have simply recluse [sic] himself, even when the system absolved him. This is the standard and nothing more is required….Consequently, it beats me hollow why the learned gentlemen, even though allowed to proceed to lead the panel ought to have graciously throw [sic] in the towel. That is the practice that all Arbitrators/Judges worldwide, should adopt. As I have said earlier in this ruling, no justification is allowed to flow from the mouth of the Arbitrator in form of a defence….”.

Test for Non-disclosure and Conflict of Interest

With all due respect, this position is not correct. The worldwide practice is set out in the IBA Guidelines on Conflicts of Interest in International Arbitration. It is the ’gold standard’ for determining what an Arbitrator needs to disclose. The IBA Guidelines seek to ensure that in the event of a challenge, there is a “guide” to determine if there has been a conflict of interest capable of affecting the independence and impartiality of the Arbitrator.

In determining whether non-disclosure constitutes a breach of an Arbitrator’s conflict of interest obligations, as recently as 2018 in Halliburton Company v Chubb Bermuda Insurance Ltd & Ors [2018] EWCA Civ 817 (19 April 2018), the English Court of Appeal stated the test at paragraph 73 of the judgement as follows: “First, the court needs to consider whether disclosure ought to have been made in accordance with the principles we have just enunciated.
Secondly, the court needs to consider the significance of that non-disclosure, in the context of the application with which the court is dealing. In the case of an application for removal of the Arbitrator in question, the court will consider on the basis of all the factual information available when that application is heard (including the fact that there has been non-disclosure), whether the fair-minded and informed observer would conclude that there was a real possibility that the Arbitrator was biased”.

Apart from this not having any legal basis in legal jurisprudence, the ‘if challenged, then resign’ posture advocated by our courts, also results in a very practical consideration. Any party that wishes to delay arbitration proceedings can merely challenge an Arbitrator, by alleging the absence of independence and impartiality; if this decision is to be followed, the failure of the Arbitrator to immediately withdraw, will result in any consequent award being set aside. This surely cannot be the intention of the challenge procedure.