Adjudication is a dispute resolution mechanism that applies to the UK’s construction industry. Parties to construction contracts cannot contract out of the adjudication procedure. It is a 28 day procedure allowing for a decision to be made which can then be enforced by the Technology and Construction Court (TCC).
Arbitration is a type of voluntary alternative dispute resolution governed by the Arbitration Act 1996. All parties must agree to submit the dispute to arbitration for it to commence. The arbitrator’s decision is final and binding.
Recent cases emphasise the need for parties to understand these processes prior to utilising them to ensure that each party prepare successfully. In this series of articles, we look at a number of these cases to help you avoid mistakes and make the best dispute resolution decision.
Removal of an arbitrator
In H v L, the English Commercial Court considered an application to remove an arbitrator under section 24. An application made under section 24(1)(a) is to remove the arbitrator where there are circumstances that “give rise to justifiable doubts as to his impartiality”. The test for determining such an application is whether a fair-minded and informed observer, having considered the facts, would consider that there was a real possibility that the tribunal was biased.
In this case, H’s claims against L under a Bermuda form insurance policy, which had been underwritten by L, were referred for arbitration in London. After the party nominated arbitrators had been unable to agree who would be the chairman, the Commercial Court appointed M. M had been L’s preferred appointee.
Prior to his appointment, M had disclosed that he had previously acted as an arbitrator in a number of arbitrations to which L was a party.
After M’s appointment, M accepted further appointments in relation to claims against L. These appointments were not disclosed to H. Upon H finding out about these appointments, M stated that he would only resign where H and L had made a decision as to a mutually agreeable chairman to take his place.
H applied under section 24(1)(a) to remove M, relying on (1) M’s acceptance of the further appointment relating to L, (2) M’s failure to inform H of these appointment, and (3) M’s response to the initial challenge to his impartiality.
The Commercial Court dismissed H’s application. It was held that (1) it was common ground that a fair-minded and informed observer would conclude that there was no actual bias created through M taking the subsequent appointments, (2) there was minimal overlap between the appointments and arbitrators are able to distance themselves from each case, and (3) M’s response to the challenge did not establish any apparent bias.
This case provides a helpful understanding of allegations of bias and apparent bias. In order for bias to be proven, all of the facts need to be taken into account and the objective test above will have to be determined. The case emphasises that the courts will defend arbitrators’ decision and will uphold their integrity.
Parties preparing for adjudication should take time and care to ensure that all of the relevant facts and evidence are put forward in their notice and referral notice in a clear and concise manner. This will ensure that the adjudicator understands the issues involved and make a fully informed decision.
Both the notice and the referral notice cannot be amended once submitted which can leave some parties with a restricted decision where they have not included the full claim or all of the relevant evidence.
Parties preparing for an arbitration should ensure that they comply with the Arbitration Act 1996 and should be aware of the arbitrator’s duties, the ability to challenge an arbitrator’s decision under section 69 Arbitration Act 1996 and the ability to remove a bias arbitrator where necessary under section 24 Arbitration Act 1996.
For more information please contact Tim Berg.