Sierra Fishing Company & Ors v Farran & Ors

Under section 24 of the Arbitration Act 1996, the question is whether a fair-minded and informed observer would conclude that there was a real possibility of arbitrator bias. Relevant circumstances may include substantial legal or financial connections with a party, involvement in negotiating or drafting an agreement whose meaning the arbitrator must later determine, and conduct which appears to favour one side.

Section 73 does not cause loss of the right to object unless the party has taken part, or continued to take part, without raising the objection forthwith. Requests to suspend or adjourn an arbitration, silence after revival, and an indication that a party will appoint an arbitrator are neutral and do not themselves amount to taking part.

The claimants applied under section 24(1)(a) of the Arbitration Act 1996 for the removal of the third defendant, Mr Ali Zbeeb, as arbitrator on the ground that circumstances gave rise to justifiable doubts as to his impartiality.

The alleged circumstances included Mr Zbeeb’s legal and business connections with the first defendant and Finance Bank, his involvement in negotiating and drafting later agreements relied upon in the arbitration, and his conduct of the arbitral reference. The defendants contended that the circumstances did not establish apparent bias and, alternatively, that the claimants had lost their right to object under section 73 by taking part in the arbitration.

1. Application allowed. Mr Ali Zbeeb was removed as arbitrator under section 24(1)(a) of the Arbitration Act 1996.
2. The applicable test was whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the arbitrator was biased. The test reflected the common law test identified in Locobail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451 and stated by Lord Hope in Porter v Magill [2002] AC 357.
3. The evidence established sufficient circumstances independently and cumulatively. There was a real possibility that Mr Zbeeb had provided substantial legal services to Finance Bank and that his firm, through his father, had continuing and financially significant work for the first defendant and the bank. The court also treated his failure to disclose known connections, and his denial of any duty to do so, as reinforcing the doubts.
4. Mr Zbeeb’s involvement in advising on and drafting the Execution Agreement and Amendment Agreement created a real possibility that he would favour the parties whom he or his father had advised when deciding the meaning and jurisdictional effect of those agreements. His later refusal to defer the award and his argumentative communications, which appeared to advance the defendants’ case, further undermined the required objectivity.
5. Section 73 did not bar the application. A party does not take part in an arbitration unless it invokes the tribunal’s jurisdiction over the merits or its jurisdiction to determine its own jurisdiction, as explained in Broda Agro Trading v Toepfer [2011] 1 Lloyds Rep 243 and Sovarex v Romero Alvarez [2011] 2 Lloyd’s Rep 320. Once participation has begun, silence or inactivity may amount to continuing to take part, as recognised in Rusal v Gill & Duffus [2000] 1 Lloyd’s Rep 14.
6. Requests or agreements to freeze or adjourn the arbitration, silence after revival, and an indication that a party would appoint its own arbitrator were neutral acts. They did not invoke the tribunal’s jurisdiction. In any event, the claimants raised the relevant objections forthwith once the material circumstances became capable of supporting them.