English Court considers unilateral communications between arbitrator and party and anonymisation of judgments related to an arbitration

In a recent challenge to an award made under s68 of the English Arbitration Act 1996, in Symbion Power LLC v Venco Imtiaz Construction Company the English Court considered the issue of unilateral communications between a party-appointed arbitrator and its appointing party. Further, and of particular interest to parties who choose arbitration to keep the resolution of their disputes confidential, the Court also addressed the circumstances in which a judgment resulting from an application to challenge an award may be published without anonymization of the parties' names. On this point, a party seeking to maintain confidentiality will need to be able to provide evidence of the positive detriment which it will suffer if the judgment is not anonymized. 

Unilateral communications between an arbitrator and a party

During the proceedings, Arbitrator A contacted the counsel of its appointing party by email indicating difficulties which he and his co-arbitrator were having with the conduct of the chairman, and noting that the chairman would be encouraged to resign. Arbitrator A put in the subject line: “HIGHLY CONFIDENTIAL: NOT TO BE USED IN THE ARBITRATION”. He justified sending the email on the ground that it concerned the "selection" of the chairman, but indicated that it should not be referred to in the arbitration or afterwards.  Counsel replied saying simply that he did not feel the need to discuss the matter, but would keep the confidence. The arbitration proceeded and the email was disclosed only in connection with the application to challenge the award under s68 (as evidence as to why, if the challenge was successful, the award should not be remitted to the tribunal). 

The application under s68 failed, so the Court did not have to decide whether the award would have been remitted to the tribunal or set aside. However, the Court concluded that it would have been "reluctant to set it aside rather than remit".  This was the case despite the "somewhat awkward working environment" that may have been created by the disclosure of Arbitrator A's email. 

The Court observed that it is inevitable that there will be some unilateral discussion between a party and its nominee prior to appointment to which the other party will not be privy (which will typically address a very narrow range of subjects regarding suitability and availability for appointment). The Court noted that the discussion may extend to the selection of the chairman for similar reasons.  However, the Court made clear that once the tribunal is appointed, it is "wholly inappropriate for one arbitrator to communicate with the party that appointed him without notice to the other members of the tribunal and the other party". In practice, there must be no unilateral contact at all. Any other approach may "give rise to concerns that that arbitrator is not acting fairly or impartially for the simple reason that it creates the impression of a close relationship between the arbitrator and the party and raises the spectre of other such communications". These are entirely unsurprising observations.

Unilateral communications - comment

Undoubtedly, the sensible approach for both arbitrators and counsel is to restrict unilateral communications between an arbitrator and a party to those circumstances permitted by the parties' arbitration agreement, the lex arbitri, and/or any applicable institutional rules.

The approach taken by the English Court in restricting unilateral communications to very limited circumstances is accepted internationally as being necessary to support the integrity of the arbitral process.  Arbitrator A put counsel in an invidious position – as the communication itself was inappropriate, disclosure of the communication at the time by counsel would have been consistent with upholding ethical norms. However, it would have risked disrupting the arbitration, potentially leading to Arbitrator A's challenge and/or his resignation half-way through proceedings. Further, in maintaining Arbitrator A's confidence, counsel took the risk that the email may later come to light and provide a basis for a challenge to the eventual award after the costs of the proceedings had already been incurred. 

The expectation of confidentiality in arbitration

The Court also considered whether its judgment on the s68 application should be published in an anonymized form. It considered the decision of the English Court of Appeal in Economic Department of City of Moscow v Bankers Trust Co. [2004] EWCA Civ 314, concluding that whilst that case was concerned with whether a judgment on a s68 application should be published at all, the same principles were broadly applicable to the issue of anonymization.

The Court drew a distinction between the hearing of an application under section 68 (for which a private hearing is the default position), and the publication of the judgment. It noted that "[t]here is a strong public interest in the publication of judgments, including those concerned with arbitrations, because of the public interest in ensuring appropriate standards in the conduct of arbitrations", which interest had to be "weighed against the parties’ legitimate expectation that arbitral proceedings and awards will be confidential to the parties". The Court therefore needs to weigh the various factors, including the interest of the parties in the litigation before it, and whether, in the absence of other good reason for publication, a party before it would suffer some real prejudice from publication or the publication would disclose matters which the parties expected to be confidential.

Matters which the Court took into account in this case were that: the award was already in the public domain because of the proceedings in the US to enforce it; the US  proceedings had to be brought because the applicant was refusing to satisfy the award against it; a representative of the applicant had commented on the US proceedings, which was inconsistent with seeking to preserve the confidentiality of the award; the applicant had brought a bad challenge leading to the judgment in question; and the applicant had not adduced evidence that it would suffer detriment if the judgment is published without anonymization.  This being a case in which there was no reason to anonymize the judgment, the Court declined to do so.

Confidentiality - Comment 

This judgment is a reminder that the perceived characteristic of "confidentiality" in arbitration may prove to be a false assumption. The position with regard to the confidentiality of proceedings associated with an arbitration may be far more nuanced. A party wishing to preserve confidentiality by anonymization of an English judgment related to arbitration proceedings will need to adduce solid evidence of the prejudice which disclosure of details of the parties will cause.   

For more information, please contact Craig Tevendale, Partner, Hannah Ambrose, Professional Support Consultant, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.