In a judgment handed down in February, the High Court in Newcastle United Football Company Limited v The Football Association Premier League Limited and others [2021] EWHC 349 (Comm) found that an arbitrator’s failure to disclose certain elements of his professional relationship with one of the parties to the arbitration was not sufficient to establish apparent bias.
Background
Newcastle United Football Club (Newcastle United) currently plays in the top flight of English football, which is controlled by Premier League Limited (PLL). Newcastle United is a shareholder in PLL and is bound by PLL’s rules. Section F of those rules oblige PLL to disqualify individuals and entities from acting as a “Director” of a club in some situations and to refuse to agree a change of control or the proposed appointment of a director for similar reasons.
Newcastle United’s current owners wished to sell their shares in it to a company ultimately owned by a Saudi Arabian sovereign wealth fund. Applying the definition contained in section A of its rules, PLL considered that the fund was ultimately controlled by the Kingdom of Saudi Arabia, which would become a director of Newcastle United following the proposed sale. In June 2020, PLL issued a decision letter confirming its decision under section A. Newcastle United did not accept PLL’s conclusions and questioned the lawfulness by which they had been reached.
Mr Beloff’s appointment and the failure to disclose
In accordance with PLL’s rules, the dispute was referred to arbitration before a panel of three arbitrators. As the rules stipulated, the parties each appointed an arbitrator who between them appointed a chair. The arbitrators appointed Mr Beloff QC, a respected barrister, arbitrator and retired Deputy High Court Judge as chair of the arbitration. PLL and Newcastle United both indicated that they did not object to Mr Beloff’s appointment.
The appointment process for arbitrators under PLL’s rules required each arbitrator to provide a statement of impartiality. Mr Beloff provided such a statement, which contained the following wording: “there are no circumstances which exist that give rise to justifiable doubts as to my impartiality in that role”. However, PLL subsequently disclosed to Newcastle United that Mr Beloff had advised PLL on four occasions, one of which related to section F of its rules (the Section F Advice). PLL also disclosed that their solicitors had been involved in 12 arbitrations over the previous three years in which Mr Beloff was arbitrator. These details had not been disclosed by Mr Beloff before he was appointed as chair. Newcastle United claimed that they would not have consented to Mr Beloff’s appointment had they known the information subsequently disclosed and invited him to recuse himself.
Mr Beloff then entered into ex parte correspondence with PLL’s solicitors regarding the Section F Advice. Specifically, he asked whether he could either disclose it or, if not, disclose that it was not relevant to the issues to be determined in the arbitration. After that correspondence concluded, Mr Beloff wrote to all parties maintaining his decision not to recuse himself. PLL then sent Newcastle United the emails Mr Beloff had sent them on an ex parte basis, and explained that it would not waive privilege over the Section F Advice so that it could be disclosed to the Club. Newcastle United issued an application to remove Mr Beloff as an arbitrator pursuant to section 24 of the Arbitration Act 1996 (the Act) shortly afterwards.
The Section 24 Application
Section 24 of the Act gives the court the power to remove an arbitrator on five grounds. The ground on which Newcastle United relied was “that circumstances exist that give rise to justifiable doubts as to [the arbitrator’s] impartiality”. This is sometimes referred to as “apparent bias”.
The test for apparent bias is objective: would “the fair-minded and informed observer, having considered the facts…conclude that there was a real possibility that the tribunal was biased”. One of the four factors said by Newcastle United to lead such an observer to conclude that Mr Beloff was biased was his failure to disclose the fact that he had previously advised PLL and his previous appointments by PLL’s solicitors as an arbitrator.
In reviewing the law on their duty of disclosure, the Judge noted that arbitrators have a duty to disclose facts that could arguably lead the fair minded and informed observer to conclude that there is a real possibility of bias. Such disclosure establishes impartiality on the part of the arbitrator from the outset. The duty of disclosure applies to a broader collection of matters than, on consideration, will actually lead to arbitrators recusing themselves. That is because, absent disclosure, the parties will be unaware of the matter and therefore unable to challenge the arbitrator’s appointment as a consequence of it. Not all matters that a prospective arbitrator is obliged to disclose will require recusal, but failing to disclose even those matters which do not, after consideration, justify recusal, may point to a conclusion of apparent bias.
The Judge also explained that the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (IBAG) use a traffic light system to categorise potential conflict situations. The Orange List, which sets out matters that may engender doubts over impartiality and so should be disclosed, is relevant. Included on the Orange List are situations where the arbitrator has, within the last three years, served as counsel for one of the parties or has previously advised a party but they have no ongoing relationship, and where the arbitrator has been appointed on more than three occasions by the same counsel or law firm.
The Judge commented that failures by an arbitrator to disclose may support (though will not invariably lead to) a conclusion that there is a possibility of bias. However, the Judge concluded that such a conclusion would be inappropriate in this case. The Section F Advice did not concern matters relevant to this arbitration and was given outside the three year period set out in the IBAG’s Orange List. Though some other advice was given in 2018 that should have been disclosed, it was not alleged that that advice related to issues with which the arbitration was concerned. Given that and the fact that he found the failure to disclose to be unintentional, the Judge concluded that the fair minded and informed observer would not have concluded that there was a real possibility that Mr Beloff was biased from the fact of non-disclosure.
That observer would, the Judge considered, have taken the same view on the failure to disclose the other arbitral appointments. Only three of the 12 appointments were appointments by PLL’s solicitors and two were made after Mr Beloff had accepted the appointment that this application concerned. Those three were not disclosable in any event because they were not made within three years of Mr Beloff’s appointment to the chair in this arbitration and none of them concerned the same subject matter as the reference in this application.
Comment
In dismissing Newcastle United’s application, the Judge applied the principles confirmed by the Supreme Court last year concerning arbitrators’ duties in the decision in Halliburton Company v Chubb Bermuda Insurance Ltd, and provided valuable guidance on the approach of the court in assessing perceived arbitrator bias. It may be tempting, especially in hard-fought disputes where large sums of money or serious commercial issues are at stake and where matters have become particularly fractious, for parties to seize on any failure of disclosure by an arbitrator as indicative of apparent bias. However, while each case will turn on its facts, this decision demonstrates the high threshold required by the court to establish apparent bias. Before deciding on the action to take in relation to such a failure, parties should put themselves in the position of the fair minded and informed observer rather than rely on their own subjective opinions to determine whether, as a matter of law, such disclosure failure might justify an inference of apparent bias.
Alasdair McDowell