Court removes ‘biased’ arbitrator in construction dispute

The High Court has removed an arbitrator from a construction dispute because he may have been biased towards one of the parties involved.

The case involved a developer and an integrated services company. A dispute arose during a construction project and the matter had to go to arbitration.

The arbitrator was appointed by the Chartered Institute of Arbitrators at the request of the developer.

During the proceedings, the services company began to suspect that the arbitrator was biased. It then discovered that he had worked on several other disputes involving the developer.

The company requested information about the professional relationship between the arbitrator and the developer. It asked him how many of the developer’s cases he had been involved with over the previous three years, and what proportion of his income had resulted from such appointments.

The arbitrator did not respond. He refused to answer the questions, and demanded to know why the company had asked them. He issued a ruling that he had no conflict of interest and declined to withdraw from the case.

The High Court ruled in favour of the services company. It said the evidence indicated that over the previous three years, 18% of the arbitrator’s appointments and 25% of his income derived from cases involving the developer.

The Chartered Institute of Arbitrators’ Code of Professional and Ethical Conduct for Members required its members to disclose “all interests, relationships and matters likely to affect the member’s independence or impartiality”.

The “acceptance of nomination” form required disclosure by the arbitrator of “any involvement, however remote” with either party over the last five years. Acting as arbitrator or adjudicator in previous cases involving one of the parties was “involvement” for the purposes of the Code of Practice.

The evidence showed that the defendant influenced arbitrator appointments by putting forward the name of its chosen representative or a list of potential appointees whom it considered inappropriate, or by identifying required characteristics that would only be shared by a small pool of people.

It was particularly significant that it had an appointment “blacklist” whereby arbitrators could fall out of favour depending on their conduct. That would be important for an adjudicator whose income was materially dependant on cases involving the developer.

The arbitrator’s lack of awareness of his conduct being inappropriate demonstrated a lack of objectivity and an increased risk of unconscious bias. He should therefore be removed from the case.

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