Among the duties arbitrators are obligated to uphold is the duty to disclose conflicts of interest. However, issues sometimes arise where arbitrators fail to disclose a potential conflict of interest. Imagine, for instance, disputing parties have selected three arbitrators to form the arbitral panel. Somewhere in the middle of the arbitral process, Party A discovers that the president of the arbitral tribunal has a material holding in Party B’s sister company. Party A also finds that an arbitrator on the panel serves on the same committee of the Bar Association on which Party B’s barrister serves. Though Party A attempts to challenge the two arbitrators, the arbitral proceeding carries on and results in an award that favours Party B.
Indeed, an arbitrator’s failure to disclose his or her conflict of interest or withdraw from the proceeding when challenged could seriously disadvantage the opposing party. If the hypothetical scenario above sounds familiar, that is because it is not an unusual occurrence. Many arbitrators have concealed their interests or adjudicated with bias, some deliberately and dishonestly, some successfully. The topic of disclosure of interest in arbitration was the theme of the recent case heard in the Lagos High court: Global Gas and Refinery Limited v Shell Petroleum Development Company, Suit No. LD/1910GCM/2017. The ruling was delivered on February 25, 2020.
The facts of the case
The dispute between Global Gas and Refinery Ltd. (Global Gas) and Shell Petroleum Development Company (SPDC) arose after Global Gas alleged that SPDC had breached their gas sales and purchase agreement. Global Gas commenced the parties’ arbitral proceeding through the International Chamber of Commerce (ICC) in ICC case number 20331/TO. In the course of the proceeding, Global Gas challenged the appointment of Oba Nsugbe, QC, SAN, the President of the arbitral tribunal, on the ground that he failed to disclose potential conflicts of interest that may have compromised his independence and impartiality. The ICC court of Arbitration reviewed and dismissed the challenge. Hence the proceeding continued and the resulting award dismissing Global Gas’ claims delivered on May 30, 2017.
Still, Global Gas took the award to the Lagos High court to request for an order to set it aside so that the award could neither be recognized nor enforced. At the High court, Global Gas implicated Nsugbe, QC, SAN and Doyin Rhodes-Vivour, SAN in the case as the two arbitrators who misconducted themselves. The trial judge considered the following salient legal issues: Whether the two arbitrators’ non-disclosure amounted to misconduct; and whether the award should be set aside.
The judgment
Regarding the first issue, the counsel to Global Gas argued that the president of the arbitral tribunal failed to disclose that he had given an expert opinion as a barrister in a case against SPDC and the Bodo Community in Ogoni, River State in the past. However, SPDC’s counsel countered that the expert opinion was given not to it but to its parent company.
Moreover, Global Gas alleged that both Professor Nsugbe, QC, SAN and Mrs. Rhodes-Vivour, SAN were both members of the Board of Governors of the arbitration institution that SPDC’s counsel chaired; and further that this Board was established while the arbitral proceeding was pending without notice to any of the parties. According to Global Gas, its challenge of the appointment of the aforementioned arbitrators who form the majority of the arbitral panel before the ICC court was based on these non-disclosures. Essentially, Global Gas believed that the arbitrators’ failure to disclose amounted to misconduct.
Justice Taofiquat Oyekan-Abdullahi, the presiding judge, took the position that an arbitrator who has been challenged ought to resign from the proceeding instead of resisting the challenge, whether or not the information in fact did not amount to a conflict of interest. The court ruled that the arbitrators must exercise a duty of care in all cases heard before them so as to dispel any doubt as to the impartiality and independence of the arbitrators and to uphold the parties’ confidence in the arbitral process. Further, Justice Oyekan-Abdullahi iterated that the standard of care all arbitrators must maintain requires abstinence from raising a defence whether legitimate or not, and instead removing themselves from the particular proceeding altogether.
Thus, the court ruled that the arbitrators’ non-disclosure amounted to misconduct and that, on this basis, the award would be set aside.
Commentary
This case has set a much-needed precedent that will provide a little more guidance on arbitrators’ duty of disclosure that the Arbitration and Conciliation Act Cap A18 Laws of the Federation of Nigeria 2004 does not. By calling for arbitrators to refrain from defending a challenge against them and instead remove themselves from the case, the Lagos High court has raised the standard of the duty of care arbitrators owe to the parties. Therefore, this ruling does not show that Lagos State is a hostile environment for arbitration but instead that it is willing to impose higher standards on arbitrators in order to protect justice and preserve the sanctity of the practice of arbitration in Nigeria.
It would be inappropriate to draw any conclusion about whether the case deserved a different ruling or not without exploring the guidance on arbitration provided by the ICC International court of Arbitration, as that is the institution that heard the arbitral proceeding. Guidance on the ICC’s rules of arbitration are captured in the “Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration”, adopted unanimously by the Bureau of the ICC International court of Arbitration. The ICC expressed in paragraph 22 of the aforementioned Note, that “disclosure does not imply the existence of a conflict” and that “failure to disclose is not in itself a ground for disqualification.” In fact, according to the ICC Dispute Bulletin No. 2 of 2018, only 12.5 percent of the challenges brought to the ICC court of Arbitration were accepted.
Still, it is a wonder that the ICC court did not accept Global Gas’ challenge given the non-exhaustive list of circumstances that may raise doubt as to an arbitrator’s independence or impartiality in Paragraph 23 of the Note. Among the circumstances listed are those in which an arbitrator or his law firm has represented or advised a party or its affiliate, as well as those in which the arbitrator has a professional relationship with the counsel to one of the parties. These two particular circumstances apply to the present case, as Professor Nsugbe, QC, SAN had previously given his expert opinion to SPDC’s parent company on a case involving it, and both he and Mrs. Rhodes-Vivour, SAN had a business relationship with SPDC’s counsel on the Board of Governors.
In the present case and any other case on the subject matter of arbitration, the choice of law and arbitration guidelines to which the parties chose to subject themselves should be among the first considerations a court explores. If the parties had elected to abide by, for example, the International Bar Association (IBA) Guidelines instead, then it would have been more appropriate for the judges to come to the conclusion that the arbitrators had not misconducted themselves. That is because the two circumstances in question involving Professor Nsugbe, QC, SAN and Mrs. Rhodes-Vivour, SAN are covered in the orange and green lists of circumstances that do not generally necessitate disclosure in Part II of the Guidelines. Thus, the arbitrators in the present case would not have had duties to disclose the information aforementioned had the IBA Guidelines been the guiding document.
However, there was no indication in the case that the IBA Guidelines or any other international guidelines and standards must have been observed. Thus, the parties were subject to the relatively less comprehensive guidance provided by the Arbitration and Conciliation Act, as well as the guidance from the aforementioned Note that ICC arbitrators must follow. The ICC even clarified in the ICC International court of Arbitration’s 2009 Bulletin (Vol. 20, No. 2) that any reference to the IBA Guidelines the Secretariat makes is neither binding nor an application of the Guidelines but instead only for information. If the judges had decided to refer to any other international source, such sources could only be persuasive and not compulsory to follow.
One point of concern over the judgment stems from Justice Oyekan-Abdullahi’s statement that arbitrators should automatically resign if challenged. If this rule were to be solidified in a later case, then parties looking to delay arbitration proceedings could abuse this rule by challenging an arbitrator. Consequently, the arbitrator would be obliged to resign, thereby initiating a replacement process that would suspend the proceeding.
Regardless of the proposed “resign if challenged’ rule, the Lagos High court has indeed resounded to arbitrators and those considering arbitration as their method of resolving disputes the high importance placed on disclosure of interests. Arbitration, though deemed cheaper and more expedient than litigation in most instances, still requires a great deal of time, money, and energy from all the parties involved in the proceeding. To avoid wasting these things and potentially obstructing justice or confidence in the process, it is advisable that arbitrators disclose as much information as possible before the appointment so that the parties can decide whether they believe a conflict of interest may arise.
Note: This article is intended to offer general guidance on the subject matter. It is advised that you seek expert advice about your specific circumstance.
This publication is a product of The Research Unit of the Nigerian Institute of Chartered Arbitrators (NICArb).
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