Introduction
The hallmark of arbitration is the neutrality of the process and the twin pillars of neutrality are impartiality and independence of an arbitrator. The requirements of impartiality and independence “represents core obligations of an arbitrator” that are “so widely recognized that they amount to general international principles and are therefore incumbent on any arbitrator in all circumstances.”[1] The basis for challenging the impartiality or independence of an arbitrator in most jurisdictions including under the UNCITRAL Model Law[2] is any circumstance that is likely to give rise to justifiable doubt. The Arbitration and Conciliation Act[3] (“ACA”) which is the principal legislation governing arbitration in Nigeria, also adopts the same approach. Specifically, sections 8 and 45 of the ACA, applying to domestic and international arbitration respectively, impose a duty on an arbitrator to disclose to the parties, any circumstance that is likely to give rise to any justifiable doubts as to his impartiality or independence when approached in connection with an appointment, when appointed, and throughout the proceedings. These sections also empower a party to challenge an arbitrator if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.[4]
Notably, as is the case in many jurisdictions, the ACA does not provide the circumstances that would require disclosure by an arbitrator. Thus, leaving arbitrators to apply discretion or rely on soft law instruments in considering circumstances justifying disclosure. The effect of non-disclosure may affect the enforceability or otherwise of the arbitral award and have grave consequences on the arbitration process. The recent case of Global Gas and Refinery Limited v Shell Petroleum Development Company[5] exemplifies the foregoing. Interestingly however, the Lagos State High Court in Global Gas held that in order to preserve the integrity of the arbitral process and not subject it to ridicule, an arbitrator against whom an objection of bias is raised, should resign from the tribunal instead of putting up a challenge.
Global Gas therefore presents interesting perspectives on disclosure considerations, raising pertinent questions and issues including; What should be disclosed and when should disclosure be made? Does objection of bias automatically justify recusal? and Does the Global Gas case provide appropriate guidance and standard for dealing with issues of an arbitrator’s bias resulting from non-disclosure of conflict of interest in Nigeria?
This article considers all these questions with a view to recommending the best practice approach for Nigerian courts and arbitrators alike when considering issues relating to independence and impartiality. Prior to distilling the questions and issues raised, it is important to present the facts of the Global Gas case.
Facts of the Global Gas Case
In this case, a dispute arose from an agreement between Global Gas and Shell who are both Nigerian entities. Pursuant to the agreement, the dispute was referred to domestic arbitration presided over by a tribunal consisting of three arbitrators and administered by the International Chamber of Commerce (“ICC”) under the ICC Arbitration Rules in Force as from 1 March 2017 (“ICC Rules”). During the course of the proceedings, Global Gas challenged the impartiality and independence of the presiding arbitrator and another member of the tribunal for their alleged failure to disclose their relationship with the respondent which was that the challenged arbitrators and the respondent’s counsel were members of the board of governors of an arbitration institution and that the presiding arbitrator’s firm had given an expert opinion to the parent company of the respondent in another litigation matter in the past. Based on the power conferred on it by Article 11(4) of the ICC Rules, the International Court of Arbitration of the ICC (“ICC Court”) considered and dismissed Global Gas’ challenge. The tribunal then proceeded with the matter and made an award in favour of Shell.
Thereafter, Global Gas submitted an application to a Lagos State High Court, requesting that the award be set aside on the grounds of misconduct by the arbitrators owing to their non-disclosure of conflict of interest. Shell relied on the guidance provided by the IBA Guidelines on Conflicts of Interest in International Arbitration[6] (“IBA Guidelines”) for disclosure and effect of non-disclosure on the arbitrator and the proceedings, in making its case against the challenge. The court disregarded the ICC Court’s decision and refused to be persuaded by the IBA Guidelines. According to the court, the IBA Guidelines is a soft law instrument that is not binding in Nigeria. Thus, the court ruled that in order to preserve the integrity of the arbitral process and not ridicule, an arbitrator against whom an objection of bias is raised should resign from the tribunal instead of putting up a challenge, because an objection of this nature casts doubt on the arbitral process itself, regardless of whether the arbitrator was properly appointed or the tribunal was properly constituted.
What should be disclosed and when should disclosure be made?
The UNITRAL Model Law, the ACA, the IBA Guidelines and rules of various national and international arbitral institutions like the ICC Rules, the Arbitration Rules of the London Court of International Arbitration[7] (“LCIA Rules”) and the 2018 Lagos Court of Arbitration Rules (“LCA Rules”), all require arbitrators to disclose any facts or circumstances that might make the parties justifiably doubt the arbitrator’s independence or impartiality. This disclosure is to be made at the time an arbitrator is approached in connection with an appointment and the disclosure obligation continues throughout the arbitral proceedings until the arbitration is completed.[8] Although the question of when to disclose seems clear, the question of what to disclose continues to be contentious in the arbitration community, particularly because of the difficulty of providing a closed list of facts or circumstances that will require disclosure. There is currently no national law, international instrument or arbitral institution rules that provide an exhaustive list of the circumstances that an arbitrator must disclose. Owing to this difficulty, courts in jurisdictions like the UK and US have adopted tests for determining challenges of an arbitrator’s non-disclosure and conflict of interest that are similar to the common law objective test for finding apparent bias.
Unlike the ACA, the UK Arbitration Act 1996 (“UK Act”) does not impose a duty of disclosure on an arbitrator, however section 33(1) of the UK Act requires an arbitrator to act fairly and impartially as between parties. Pursuant to section 68(2)(a) of the UK Act[9], a breach of section 33(1) constitutes a serious irregularity which may result in the setting aside of an award if proven to have caused or is likely to cause substantial injustice to a party. The non-disclosure must have resulted in an apparent bias against the party challenging the award. Accordingly, the UK Court of Appeal developed a two-step test for finding apparent bias resulting from an arbitrator’s non-disclosure of conflict of interest in Halliburton Company v Chubb Bermuda Insurance Ltd[10] as: (i) a consideration of whether the disclosure ought to have been made at all, and (ii) whether at the time of the challenge, the arbitrator’s non-disclosure taken together with any other relevant factors would lead a fair-minded and informed observer, having considered the facts, to conclude that there was in fact a real possibility of bias.
Similar to the UK Act, the US Federal Arbitration Act 2012 (“FAA”) does not impose a duty of disclosure on an arbitrator. Additionally, the FAA is silent on how a challenge against an arbitrator on the basis of bias resulting from his non-disclose of conflict of interest should be handled. Case law however reveals that US courts have subsumed an arbitrator’s non-disclosure of conflict of interest into the ground of evident partiality contained in section 10(a)(2) of the FAA for setting aside awards. The effect of this is that a US court may annul an award where a party is able to show that the arbitrator’s failure to disclose conflict of interest resulted in ‘evident partiality’ against him. Majority of the US courts have in line with the decision in Andersons Inc. v Horton Farms Inc[11], agreed that the test for finding ‘evident partiality’ is ‘an appearance of bias’ standard which requires an objective assessment of whether a reasonable person would conclude that the arbitrator was partial to a party to the arbitration. Furthermore, the alleged partiality must be direct, definite, and capable of demonstration, and the party asserting evident partiality must establish specific facts that indicate improper motives on the part of the arbitrator.[12] This principle was applied by the US Supreme Court in ANR Coal Co. v Cogentrix of North Carolina, Inc[13] and by the US Court of Appeals, Sixth Circuit in Nationwide Mut. Ins. Co. v Home Ins. Co[14]
The objective tests adopted by courts in the UK and US discussed above, are similar to General Standard 2(c) of the IBA Guidelines which provides that doubts to an arbitrator’s impartiality and independence are justifiable if a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision. The IBA Guidelines further attempts to classify the relevant facts and circumstances by providing a non-exhaustive ‘traffic light’ colour coded list broken down into Non-Waivable Red List, Waivable Red List, Orange List and Green List respectively in its General Standard 4. Amongst these lists, circumstances listed under the Non-Waivable Red List are those that give rise to justifiable doubts, and even if disclosed, the arbitrator will still be required to decline his appointment or withdraw from the tribunal regardless of if the parties agree for him/her to continue.[15]
Circumstances covered under the Waivable Red List are considered to be serious situations that give rise to justifiable doubt but are not severe, and an arbitrator that fails to disclose can still continue to act if the parties, after being aware of same, expressly allows the arbitrator to continue or if the authority considering the objection raised by a party decides that the challenge does not meet the objective test for disqualification.[16] Circumstances covered by the Orange List are those that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence and must be disclosed by the arbitrator, but the arbitrator may continue to act if the parties fail to raise timely objections or allow the arbitrator to continue to act after being aware of the conflict of interest.[17] The time limit for raising an objection of conflict of interest is within 30 days from the date the party raising the objection became aware of relevant facts or circumstances whether disclosed or not.[18] Lastly, circumstances covered by the Green List are situations where no appearance and no actual conflict of interest exists from an objective point of view. Thus, an arbitrator has no duty to disclose such situations.[19]
Does objection of bias automatically justify recusal?
Most national laws, international instruments and rules of arbitral institutions provide for the procedure to be adopted in relation to challenges of an arbitrator’s impartiality or independence. Similar to Article 13 of the UNCITRAL Model Law, section 9 of the ACA empowers the parties to an arbitration to determine the procedure to be followed, and where no procedure is determined, the challenge is to be determined by the arbitrator except the arbitrator withdraws from office or the other party agrees to the challenge. The ACA however added that the party raising the challenge must do so within 15 days of becoming aware of the constitution of the arbitral tribunal or any circumstances giving rise to justifiable doubt.[20]
The procedures for challenge contained in the ICC Rules[21], the LCIA Rules[22] and the LCA Rules[23] respectively, contain provisions that are similar to those of Section 9 of the ACA except for few variations in the timeline for a party to submit its challenge as well as the authority chosen to consider the challenge. Furthermore, in the spirit of upholding the principle of fair hearing, the rules of these arbitral institutions specify that except the arbitrator withdraws from office or the other party agrees to the challenge, the chosen authority will decide on the admissibility and merit of the challenge after taking submissions from the challenged arbitrator, the other party or parties, and other members of the tribunal.[24]
The foregoing therefore indicates that objection of bias does not automatically justify recusal, as the challenged arbitrator and other party or parties are to first be given an opportunity to respond to the challenge before a decision will be made by the authority responsible for deciding the challenge.
Does the Global Gas case provide appropriate guidance and standard for dealing with issues of an arbitrator’s bias resulting from non-disclosure of conflict of interest in Nigeria?
The decision in the Global Gas case no doubt sparked debates in both the domestic and international arbitration community and caused questions to be raised on whether Nigerian courts are committed to supporting arbitration. While Onukwugha lauded the decision as the much-needed precedent that will provide a little more guidance on an arbitrator’s disclosure that is not contained in the ACA,[25] Adekoya criticized the new rule of “if challenged, just resign” created by the court as having no basis in legal jurisprudence and may result in spurious challenges being submitted for the sole purpose of replacing an arbitrator that a party is not happy with or for setting aside an award that is not favourable to that party.[26]
Irrespective of the divide of the argument one may be standing on, the application of the findings analyzed under the preceding questions to the Global Gas case reveals that the decision of the court does not provide appropriate guidance or standard for dealing with issues of an arbitrator’s bias resulting from non-disclosure of interest in Nigeria. This is because, the rule of “if challenged, just resign” which means automatic recusal following a challenge constitutes a direct affront to the principle of fair hearing, as the arbitrator and the other party/parties will not be given the opportunity of responding to the challenge. As discussed earlier, the principle of fair hearing is taken into cognizance in the provisions for procedure of challenge contained in the ACA, international instruments and rules of arbitral institutions.
Perhaps, the court would have taken a different approach if the fair hearing argument was made before it, as well as the argument that the subjective power given to parties to challenge an arbitrator on grounds of bias resulting from non-disclosure of conflict of interest has the high potential of allowing recalcitrant parties to raise frivolous challenges that would frustrate arbitration proceedings and lead to reduced confidence in arbitration as a viable mechanism for resolving disputes. This subjective power has therefore been curbed by the development of objective tests as seen in the UK and US, as well as the development of procedures and objective criteria for determining challenges of an arbitrator’s bias as contained in the ACA, IBA Guidelines and rules of arbitral institutions, aimed at guaranteeing fair hearing and dismissing frivolous challenges.
Consequently, as it stands today, since the tests applied in other jurisdictions and the guidance provided by the IBA Guidelines is not binding on Nigerian courts, the existing precedent to be followed for determining a challenge of bias against an arbitrator for non-disclosure of conflict of interest is the rule established in Global Gas and until the decision is overturned by a superior court, once an arbitrator is challenged by any party on the basis of bias, he is obliged to resign from the proceedings regardless of whether there is substance to the challenge.
This may no doubt result in a floodgate of frivolous applications from parties who want to frustrate arbitral proceedings especially when decisions are not in their favour or when they do not have a strong case. The ripple effect of the decision is the heightened concerns and aspersions cast on Nigeria’s efforts towards becoming a viable seat of arbitration and an investment destination. As stated by Adekoya “For as long as the decision stands unchallenged, Lagos cannot claim to be pro-arbitration”[27].
Conclusion and Recommendation
From the above, it is imperative for Nigeria to have its own binding domestic standards that will provide guidance to the courts, arbitrators and parties in relation to arbitrators’ disclosure and challenges of arbitrators’ independence and impartiality especially resulting from non-disclosure of conflict of interest. Drafters of the binding domestic standards may consider being guided by the objective tests for finding bias or partiality developed in the UK and US respectively, as well as the standards in the IBA Guidelines and rules of arbitral institutions discussed in this piece.
References
[1]S Greenberg and others, International Commercial Arbitration: An Asia-Pacific Perspective (Cambridge University Press, 2011) 270 (as cited in J Ng (n 93) 25 – 26).
[2] UNCITRAL Model Law on International Commercial Arbitration (1985) UN Doc A/40/17, annex 1, sub-art 12(2).
[3]Arbitration and Conciliation Act, Cap A18, Laws of the Federation of Nigeria, 2004.
[4]ACA, ss 8(3)(a) and 45(3).
[5]Global Gas and Refinery Limited v The Shell Petroleum Development Company of Nigeria (HC, 25 February 2020).
[6] IBA Guidelines on Conflicts of Interest in International Arbitration Adopted by resolution of the IBA Council on Thursday 23 October 2014, Updated on 10 August 2015.
[7]Arbitration Rules of the London Court of International Arbitration Effective on 1 October 2020.
[8]Article 12(1) of the UNCITRAL Model Law; Sections 8 and 45 of the ACA; General Standard 3(a) of the IBA Guidelines; Articles 5.4 and 5.5 of the Arbitration Rules of the LCIA Rules, and Article 14 of the LCA Rules.
[9]Section 68 of the UK Act lists the grounds constituting serious irregularities pursuant to which an award may be set aside.
[10]Halliburton Company v Chubb Bermuda Insurance Ltd [2018] EWCA Civ 817; [2020] UKSC 48.
[11]Andersons Inc. v Horton Farms Inc. [1998] 166 F.3d 308 [328-329].
[12]Ibid 329.
[13]ANR Coal Co. v Cogentrix of North Carolina, Inc., [1999] 528 U.S. 877. In this case, the court held that mere non-disclosure does not in itself justify vacatur of an award.
[14]Nationwide Mut. Ins. Co. v Home Ins. Co. [2002] 278 F.3d 6th Cir. 621.
[15] IBA Guidelines, Part II: Practical Application of the general Standards, para 2.
[16] Ibid.
[17] IBA Guidelines, Part II: Practical Application of the general Standards, para 3.
[18] IBA Guidelines, Explanation to General Standard 4, paragraph (a).
[19] 7 Part II IBA Guidelines
[20] ACA Section 9(3)
[21]Pursuant to sub-arts 14(2) and 14(3) of ICC Rules a party objecting to an arbitrator’s independence of impartiality must submit his challenge within 30 days of becoming aware of the constitution of the arbitral tribunal or any circumstances giving rise to justifiable doubt and the ICC Court iso empowered to determine the challenge.
[22]Pursuant to sub-arts 10.1 and 10.3 of the LCIA Rules a party objecting to an arbitrator’s independence of impartiality must submit his challenge within 30 days of becoming aware of the constitution of the arbitral tribunal or any circumstances giving rise to justifiable doubt and the LCIA Court is empowered to determine the challenge.
[23]Pursuant to sub-arts 15(4) and 15(7) of ICC Rules a party objecting to an arbitrator’s independence of impartiality must submit his challenge within 30 days of becoming aware of the constitution of the arbitral tribunal or any circumstances giving rise to justifiable doubt and the President of the LCA is empowered to determine the challenge.
[24] ICC Rules, sub-art 14(3); LCIA Rules, art 10.5; LCA Rules, art 16(4).
[25]M Onukwugha, ‘Nigeria: Lesson on disclosing conflicts of interest in arbitration learned from Global Gas and Refinery Ltd v SPDC’ (Business Day, 2020) <https://businessday.ng/opinion/article/nigeria-a-lesson-on-disclosing-conflicts-of-interest-in-arbitration-learned-from-global-gas-and-refinery-ltd-v-spdc/amp/> accessed 23 October 2020.
[26]F Adekoya, ‘Global Gas and Refinery Limited and Shell Petroleum Development Company: Is Nigeria Pro or Anti-Arbitration? The Lagos High Court Says That When Challenged, an Arbitrator Should Just Resign’ (Kluwer Arbitration Blog, 16 May 2020) <http://arbitrationblog.kluwerarbitration.com/2020/05/16/global-gas-and-refinery-limited-and-shell-petroleum-development-company-is-nigeria-pro-or-anti-arbitration-the-lagos-high-court-says-that-when-challenged-an-arbitrator-should-just-resign/> accessed 19 September 2020.
[27]Ibid (n 8).
