Aiteo Eastern E & P Company Limited v Shell Western Supply and Trading Limited & Ors

For a challenge under section 68 of the Arbitration Act 1996 based on apparent bias, proof of apparent bias does not automatically establish substantial injustice. Substantial injustice will ordinarily be inferred where one member of the tribunal was apparently biased, because a party is entitled to have its case determined by an unbiased tribunal. That inference may be rebutted by the circumstances, including where the relevant issue was independently and afresh determined by an unaffected court or tribunal.

An arbitral institution’s decision removing an arbitrator does not create res judicata, but is a significant factor for the fair-minded and informed observer. Where an award is affected by apparent bias, remission to a reconstituted tribunal is generally appropriate unless it would be inappropriate to do so.

Aiteo applied under sections 68 and 80(5) of the Arbitration Act 1996 to challenge four partial awards made in consolidated ICC arbitrations concerning facility agreements with Shell and other lenders.

The challenge alleged apparent bias by one arbitrator, Dame Elizabeth Gloster, arising from multiple professional engagements and appointments involving Freshfields, the solicitors acting for the lenders, together with failures to make timely disclosure. The ICC Court had upheld Aiteo’s challenge and replaced the arbitrator, but had given no reasons.

The issues were whether the fair-minded and informed observer would see a real possibility of bias, whether substantial injustice resulted, whether time should be extended, and what relief should follow.

1. Apparent bias. Applying Halliburton, the fair-minded and informed observer considers the cumulative circumstances of international arbitration, including repeat appointments, professional engagements and failures of disclosure. The three undisclosed or late-disclosed advisory or expert engagements, considered together with the Freshfields appointments and nominations, created a real possibility of unconscious bias. The ICC Court’s decision was not binding, but the informed observer would accord it considerable respect and use it as a significant cross-check.

2. Disclosure. The June–July 2020 advisory engagement and the February–March 2022 expert declaration should have been disclosed under Article 11 of the ICC Rules. The October 2023 engagement was also disclosable, and disclosure after its completion was not immediate. The failure to disclose was inadvertent, but that did not remove its significance.

3. Substantial injustice. Section 68 requires substantial injustice to be established separately. However, apparent bias affecting one member of a tribunal is a case in which substantial injustice is inherently likely, and will normally be inferred unless rebutted. The inference was rebutted for the Offshore Jurisdiction Award because the jurisdiction issue had been reheard independently by Foxton J under section 67. It was also rebutted for the Consolidation Award because each arbitrator had independently considered consolidation before reaching a collegiate decision.

4. The inference was not rebutted for the Onshore Jurisdiction Award. Aiteo’s principal jurisdictional arguments were reasonably arguable and had been considered by a tribunal containing a member affected by apparent bias.

5. Extension and relief. Time was extended under section 80(5). Aiteo acted reasonably once the full facts emerged and promptly pursued the ICC challenge before issuing the section 68 application. The Onshore Jurisdiction Award was remitted to the reconstituted tribunal for reconsideration under section 68(3). The other three challenges were dismissed. Costs and consequential matters were reserved.

First-instance decision of the High Court (Commercial Court). The judgment records earlier section 67 decisions by Foxton J, who dismissed Aiteo’s challenges to the Offshore Jurisdiction Award and Consolidation Award: [2022] EWHC 2912 (Comm) .