Sumukan Ltd v Commonwealth Secretariat

An arbitral tribunal’s defective appointment process does not, without more, establish either lack of jurisdiction or serious irregularity causing substantial injustice. The tribunal’s constitutive instruments must be construed purposively. A provision preserving office pending appointment of a successor prevents an interregnum; it does not permit indefinite avoidance of the appointment process. A member may continue with a case already substantially commenced where the applicable rule is intended to avoid wasted time and expense. Apparent bias is assessed by asking whether a fair-minded and informed observer, considering both the appointment process and the appointee’s qualifications and independence, would conclude that there was a real possibility of bias. Under section 73 of the Arbitration Act 1996, waiver requires knowledge, or grounds reasonably to suspect, the essential facts constituting the objection.

Sumukan entered into a consultancy agreement with the Commonwealth Secretariat containing an arbitration clause referring disputes to the Commonwealth Secretariat Arbitral Tribunal. The Tribunal awarded ownership of the relevant website to the Secretariat. Sumukan applied under sections 67 and 68 of the Arbitration Act 1996, alleging that the Tribunal lacked substantive jurisdiction because Professor Chappell had not been properly appointed or remained in office, and that the appointment process created a real possibility of unconscious bias.

The Secretariat denied the allegations and relied alternatively on section 73, arguing that Sumukan had waived its objections by participating in the arbitration. The central issues were whether Professor Chappell had jurisdiction to act in 2005, whether the circumstances established serious irregularity causing substantial injustice, and whether section 73 barred the objections.

1. Application dismissed. The court rejected both the jurisdictional challenge and the complaint of serious irregularity. The dismissal was not based on waiver.
2. The appointments of Professor Chappell as a Tribunal member and later as President did not comply with the consultation requirement in the 1999 statute. Nevertheless, Article 4.7, read with the remainder of Article 4, prevented an interregnum pending proper appointment of a successor. It did not authorise the Secretariat indefinitely to avoid the appointment process. Professor Chappell therefore remained President until Mr Justice Banda succeeded him on 1 January 2005.
3. Rule 3 had to be construed purposively. Its object was to permit a panel already seized of an application to complete it despite the expiry or termination of a member’s office, thereby avoiding delay, wasted time and unnecessary expense. By the end of 2004 the panel had been constituted, directions had been given and the arbitration was ready for its substantive hearing. Professor Chappell consequently had jurisdiction to continue acting until the arbitration concluded.
4. The institutional features of the 1999 statute did not by themselves establish serious irregularity under section 68. The appointment provisions were reasonably designed to secure members of high moral and professional standing. The court assessed the appointment process together with Professor Chappell’s qualifications, personal independence and the extent to which the process could fairly be regarded as tainting confidence in his impartial judgment. A fair-minded and informed observer would not have concluded that there was a real possibility or real risk of bias.
5. Obiter, had such a possibility of bias been established, it would have constituted serious irregularity causing substantial injustice within section 68.
6. Under section 73(1), a party is not barred from objecting to facts which it neither knew nor had grounds reasonably to suspect. Participation with knowledge of an irregularity, or with grounds to believe that one existed, may amount to waiver. It would be unjust and disproportionate to treat a party as having waived the right to an impartial tribunal without knowledge of the relevant facts or grounds for suspicion.

First-instance decision in the Commercial Court. The judgment records an earlier decision of Colman J, [2006] EWHC 304 (Comm), concerning the enforceability of the exclusion agreement, but the present application was determined independently.