ENGLISH COURT REJECTS S68 CHALLENGE MADE ON THE GROUNDS OF APPARENT BIAS

In Rabbi Moshe Avram Dadoun v Yitzchok Biton [2019] EWHC 3441 (Ch), the High Court dismissed an appeal against an arbitral award (the "Award") of the Beth Din of the Federation of Synagogues in London (the "Beth Din") under s68 of the Arbitration Act (the "Act"). While there were unilateral and undisclosed communications between a member of the tribunal and an individual involved in the case, the Court decided that this did not amount to apparent bias. The decision clearly demonstrates the high hurdle for succeeding with a s68 application.

Background

The original dispute centred on the ownership of shares in a company. A Memorandum of Agreement (the “MOA”) had been signed by the Claimant, the Defendant, the Defendant’s brother and another individual, in relation to a “quasi-partnership” between them.

The case was heard by the Beth Din, a Jewish Rabbinical Court which can be used by Orthodox Jews to arbitrate their commercial disputes, on 2 June and 4 August 2008. The Award was not produced for over five years and was finally issued on 4 April 2014, largely finding in favour of the Defendant. The Claimant subsequently brought an application to challenge the Award under s69 of the Act, on the basis that the Award contained an error of law.

In 2017 the Claimant discovered the existence of a letter dated 23 July 2013, which referred to a unilateral meeting that had taken place around 9 months before the Award was issued, between the Defendant’s brother and a member of the tribunal, the head of the Beth Din. This letter, sent by the Defendant to the tribunal member, also referred to another letter sent to the tribunal member by the Defendant’s brother on 18 July 2013. This second letter was never found and there was no evidence of any reply by the Beth Din.

The Claimant amended his application to challenge the Award to include an application under s68 of the Act, on the basis that there was a serious irregularity affecting the Award. The initial application under s69 was then stayed.

Application under s68

The Claimant sought to challenge the Award under s68 of the Act, on the grounds that the discussion was “highly suspicious”, with the unilateral communications leading to apparent bias on the part of the relevant tribunal member. This challenge was possible because awards of the Beth Din are English-seated arbitration awards and therefore subject to the supervisory jurisdiction of the English court.

The Claimant contended that:

• The discussion between the tribunal member and the Defendant’s brother was due to the Defendant’s brother deliberately attending at the Beth Din’s offices in order to have the opportunity to discuss the case.
• It would have been “implausible and inconceivable that there would not have been a discussion as to the merits of the case”.
• The further delay in producing the Award was “suspicious”, particularly as the Award was ultimately largely in the Defendant’s favour.
• The non-disclosure of both the discussion and the letters in itself amounted to serious irregularity.

Decision of the High Court

The High Court emphasised that the Defendant’s brother had been party to the initial financial arrangements between the parties and had signed the MOA. While he had not given evidence in the arbitration and was not a party, he was nonetheless “clearly a person who featured in the case”.

The Defendant had taken the position that the conversation between the Defendant’s brother and the tribunal member merely involved asking the Beth Din to make a decision in the case. The tribunal member concerned had also given evidence to the Court and confirmed that the conversation had been confined to a query about the timing of the Award.

The Court concluded that the evidence of the Defendant’s brother and the tribunal member as to the limited nature of the conversation was credible. This was because, given the circumstances in which the meeting occurred, at the end of public afternoon prayers at the Federation of Synagogues’ Offices, any conversation would necessarily have been short. The Defendant’s letter of 23 July 2013 confirmed that the discussion was limited to the question of delay and that the tribunal member had promised that the Award would be with the parties within around three weeks. The High Court noted that “the shortness and insignificant nature of the discussion is given more credence by the fact that…[the tribunal member]… did not make a note of the discussion nor inform the Claimant”. There was “no evidence at all to contradict” the accounts of the tribunal member and the Defendant’s brother.

While it was “regrettable” that the letters were not disclosed to the Claimant, there was no evidence that this was deliberate, or done in order to hide the discussion. The further delay in relation to production of the Award was not suspicious in the context of the existing delay.

The Court applied the test for apparent bias as set out in Porter v Magill, which is “whether a fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.” It noted that an enquiry by one party to an arbitrator requesting information on the likely timing of an award “cannot possibly be improper or constitute evidence of apparent bias”.

The Court referred to the leading authority on the arbitrator’s duty of disclosure, which is the Court of Appeal’s judgment in Halliburton Company v Chubb Bermuda Insurance Ltd and ors [2018] 1 WLR 3361, discussed in more detail here. The tribunal should disclose facts and circumstances that would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the arbitrator was biased. However, the Court of Appeal has emphasised that non-disclosure of a fact which does not give rise to justifiable doubts as to the arbitrator's impartiality cannot, in and of itself, justify an inference of apparent bias, as "something more is required".

The unilateral conversation in the Dadoun v Biton case did not even meet the test of being something that “should have been disclosed”. The non-disclosure of the Defendant’s letter had resulted only from a “failure of administration at the Beth Din”. Had this letter been disclosed to the Claimant at the time, he would then have learned of the conversation itself and would probably have been “totally unconcerned about that”. The non-disclosure of this letter accordingly did not provide evidence of apparent bias. As the 18 July 2013 letter had never been found, it was not possible for the Court to comment on whether it should have been disclosed. The Claimant's challenge was accordingly dismissed.

Comment

This case is a further illustration of the robust approach taken by the English courts to s68 challenges. The courts regularly emphasise the difficulty of meeting the serious irregularity test and very few applications are successful.

The threshold for showing apparent bias remains high, with the Court in this case applying the Court of Appeal’s approach to non-disclosure in Halliburton v Chubb. While the Court of Appeal determined in Haliburton v Chubb that non-disclosure of a fact which does not give rise to justifiable doubts as to the arbitrator's impartiality will not amount to apparent bias without “something more”, this requirement has proved controversial. There has been particular criticism of the lack of comment in the Haliburton v Chubb judgment about what might constitute “something more”. Haliburton v Chubb has been appealed to the Supreme Court, and the Supreme Court’s judgment is likely to provide useful clarification of the English law in this respect.

The decision in Dadoun v Biton highlights the importance of avoiding all unilateral communications with arbitrators once the tribunal has been appointed, to avoid the risk of future challenges to the award. The case is also a reminder to tribunals that the tribunal’s duty under s33 of the Act to act fairly means that any unilateral approaches, however innocuous or objectively insignificant, should be disclosed to all parties to the arbitration.

For more information, please contact Craig Tevendale, Partner, Peter Chen, Associate, Rebecca Warder, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.