Once challenged, should an arbitrator withdraw? A consideration of Nigerian jurisprudence

Hamid Abdulkareem

Three Crowns, London; Co-Chair, IBA Arb40 Subcommittee

hamid.abdulkareem@threecrownsllp.com

Lolade Tijani

Aluko & Oyebode, Lagos

lolade.tijani@aluko-oyebode.com

Introduction

In a recent decision, the High Court of Lagos set aside an arbitral award entered against Global Gas and Refinery Limited (GGRL) and in favour of Shell Petroleum Development Company (SPDC), on the grounds that the president of the tribunal fell short of the required standard of disclosure by omitting to disclose his participation as an expert in an earlier (unrelated) litigation involving the parent company of SPDC.[1] The Court held that the president of the tribunal was obliged to recuse himself once his appointment was challenged, even where the arbitral institution under whose auspices the arbitration was being conducted (the International Court of Arbitration of the International Chamber of Commerce (ICC)), had dismissed the challenge.

The GGRL decision has generated much controversy. One senior Nigerian practitioner criticised the decision,[2] triggering a rejoinder from another senior practitioner.[3] This article aims to place the discussion within the context of earlier jurisprudence of Nigerian courts in matters concerning alleged conflicts of interest of arbitrators. We conclude that the GGRL decision would appear to be an outlier.

Earlier Nigerian court decisions on alleged arbitrator bias

We discuss below four reported decisions from the Nigerian Supreme Court, Court of Appeal and Federal High Court concerning allegations of conflicts of interest of arbitrators. The allegations were dismissed in a majority of the cases.

In the case of Lagos Statement Development and Property Corporation v. Adold Stamm Int. Ltd (1994),[4] the appellant (a corporation owned by the Lagos State Government) sought to set aside an arbitral award on the basis inter alia that the sole arbitrator was biased. The appellant contended that the arbitrator had ‘anti-Lagos State tendencies’ because he and the Lagos State Government had (at the time that the arbitration was ongoing) competing claims over a parcel of land. In addition, in a different matter, the arbitrator was contesting the assessment of outstanding tax liabilities made by the Lagos State Government against a company in which the arbitrator appeared to have an interest. There is no indication in the judgment that these matters were disclosed by the arbitrator, although the respondent did argue that these were matters known to the appellant. The appellant attended the preliminary meeting in the arbitration without objection, and only raised its allegations of bias on the eve of the hearing. On the first day of the hearing, the arbitrator rejected the allegations for being unsubstantiated, and adjourned to the next day. The appellant failed to attend on the next day. The arbitrator conducted the hearing and subsequently issued his award in favour of the respondent. The appellant challenged the award on the basis inter alia of the arbitrator’s alleged bias. The Supreme Court found the allegations to be unsubstantiated[5] and held that, since they concerned matters alien to the dispute submitted to the arbitrator, they served as no evidence of bias.[6]

Triana Ltd. v. U.T.B Plc. (2009)[7] concerned a tripartite warehousing managing agreement in respect of a facility extended by the respondent bank to a third party, Globus Enterprises Ltd. The appellant was the warehouse manager. When the respondent found out that some of the warehoused goods were missing, it commenced arbitration against the appellant and won. The appellant claimed that the arbitral award ought to be set aside because the (three-person) tribunal had misconducted itself via the failure of the appellant’s own nominee to disclose that he had represented another bank against Globus Enterprises Ltd in a dispute arising from a separate facility. The Court of Appeal rejected the appellant’s argument, on the basis that the subject matter of the case in which the arbitrator had acted as counsel was completely unrelated to the current arbitration. The Court of Appeal also noted that one of the appellant’s lawyers was aware of the arbitrator’s previous work against Globus Enterprises Ltd when the arbitrator was instructed,[8] a factor that further undermined the appellant’s arguments.

In Owah Unik Consultants v. Chevron Nigeria Limited (2006)[9], the appellant had written a petition to the Chartered Institute of Arbitrators against the sole arbitrator, on the ground of the arbitrator’s delay in publishing his award. The award was published after this petition, but this was one year and eight months after closing submissions were made by the parties. The appellant challenged the subsequent award, which went against it, on the ground inter alia that the petition caused the arbitrator to be biased against the appellant. The appellant also argued that the arbitrator was biased because he had failed to disclose that a partner in his law firm had previously been employed by the respondent (although that employment relationship ended 13 years before the arbitration was commenced). The Court of Appeal rejected both allegations of bias, holding that the award bore no evidence of animosity occasioned by the appellant’s petition, so that the appellant’s fulmination was nothing but ‘conjecture’. Given the remoteness of the alleged relationship between the arbitrator’s partner and the respondent, the court found that the arbitrator had no disclosure obligation in respect thereof.[10]

We have identified one case in which the court upheld an allegation of bias – the case of Gobowen Exploration and Production Limited v Axis Petroconsultants Limited (2015)[11]. In this case, one of the grounds for challenging the arbitral award was that one of the arbitrators had failed to disclose that the claimant’s lead counsel was his brother-in-law. In addition to the arbitrator’s non-disclosure of his relationship with the claimant’s lead counsel, there were other circumstances which concerned the court: (1) the claimant’s lead counsel was also a director in a company that provided company secretarial services to the claimant, and (2) a partner in the firm acting as lead counsel to the claimant was a director of the claimant. The court held that the undisclosed relationship objectively created a real likelihood of bias.[12] In addition, the court considered that the fact of non-disclosure in the circumstances of this case raised questions as to the arbitrator’s impartiality,[13] and that in failing to disclose the relationship, the arbitrator had deprived the parties of the option of considering and possibly granting him an express waiver.[14] The court was unpersuaded by the argument that the existence of the undisclosed relationship was well known to the respondent’s lead counsel. The court set aside the award solely on the basis of the arbitrator’s non-disclosure.

The above decisions strongly suggest that Nigerian courts set a high bar for successful allegations of bias. In Triana, the Court held that ‘the court should not be tempted to set aside arbitral awards duly entered on any flimsy complaint because that would open a wide door for all sorts of attempts to get rid of arbitrators deliberately chosen by the parties’. Thus, the allegations of bias must be substantiated (see LSDPC). Second, it is not sufficient to cast aspersions on an arbitrator by reference to circumstances that may subjectively arouse concern. Possible enmity between an arbitrant (or its related party) and the arbitrator was roundly rejected in both LSDPC and Owah Unik Consultants. Indeed, in the latter case, the court stated that the complaining party must demonstrate from the award how the alleged enmity influenced the arbitrator’s decision.[15] LSDPC and Triana demonstrate that allegations pertaining to matters which have no connection with the dispute submitted to arbitration will be roundly dismissed. It is hard to quibble with the decision in Gobowen, given the nature of the undisclosed relationship. The relationship in Gobowen would fall under the waivable red list in the IBA Guidelines on Conflicts of Interest in International Arbitration.

It is worth noting, in passing, that the approach of the Nigerian courts in the above arbitration cases is broadly reflective of the courts’ attitude to allegations of bias made against judges in litigation matters. In that forum, the credo is that courts are reluctant to uphold charges of bias unless there is cogent evidence to support the charge.[16] For instance, the courts have dismissed allegations of bias:

• where a judge (in a criminal case) had granted consent for a charge to be preferred against an accused person, even though the judge was listed on the charge as a witness for the prosecution;[17]
• where the trial judge was the wife of a state governor, and the case involved a measure which her husband had signed,[18] and
• where the losing party in an appeal sought to set aside the judgment on the ground that the judge who read the lead judgment had (when he was at the Bar) acted as counsel for the losing party, and they had had a falling out.[19]

Given this context, it is unsurprising that allegations of arbitrator bias are closely scrutinised by the courts.

The GGRL decision

Against the above backdrop, we turn to the recent GGRL decision, and the Lagos High Court’s ruling that an arbitrator ought to withdraw from a case when his appointment is challenged.

First, the relevant facts: GGRL and SPDC had entered into a Gas Processing Agreement (GPA) in March 2002, by which GGRL was to process the wet gas supplied to it by SPDC, sell the lean gas extracted, and split the proceeds of the sale with SPDC. A dispute arose in respect of the performance of the contract and GGRL instituted ICC arbitration against SPDC, to which SPDC filed a counterclaim. On 2 June 2017, the tribunal published its award, with a majority of the panel dismissing the claimant’s claims and SPDC’s counterclaim. GGRL was ordered to bear 70 per cent of the costs of the arbitration, while SPDC would bear 30 per cent of the costs.

GGRL applied to set aside the arbitral award on the ground of misconduct of the arbitrators, alleging inter alia that:

• the president of the tribunal had a relationship with the respondent because he had given an expert opinion in an earlier litigation before the High Court in England, involving the parent company of SPDC; and
• the president of the tribunal and the other arbitrator constituting the majority became (during the pendency of the arbitration) members of the board and/or court of a new arbitral institution, along with the respondent’s counsel.

These grounds of challenge were raised during the arbitration and dismissed as unmeritorious. At best, the grounds covered in this case fall under the Orange List in the IBA Rules[20] for which non-disclosure should not automatically be grounds for disqualification of the arbitrator or setting aside of an award.[21]

The High Court upheld GGRL’s challenge in respect of the president, holding that the president was obliged to recuse himself from the proceedings once the challenge was launched, notwithstanding that the ICC had considered and rejected the challenge. The court held ‘it does not lie in the arbitrators to raise a defence or put the process in ridicule. What it is expected was to have simply recuse himself, even when the system absolved him. This is the standard and nothing more is required’.[22] The court further considered that the president had failed to comply with his obligation[23] to disclose his relationship with any of the parties to the suit.

Commentary on the GGRL decision

In Trianna and Lagos Statement Development and Property Corporation, the courts made clear that the strictness applied in construing allegations of bias against arbitrators was warranted because the absence of such scrutiny would create room for spurious attempts to scuttle arbitral proceedings or challenge arbitral awards. The holding in GGRL, that an arbitrator who is challenged should make no defence but should simply withdraw, runs directly contrary to the guidance in these earlier decisions. Fortunately, under Nigeria’s system of stare decisis, the earlier decisions remain binding precedent.

More substantively, it is unclear from the GGRL decision the basis on which the presiding arbitrator’s earlier work was considered to constitute a conflict of interest in respect of the arbitration. Not only had the earlier case involved the parent company of the respondent in the arbitration, but the presiding arbitrator was instructed by the adverse party of that parent company. The subject matter of both proceedings had no parallels, other than the observation of the GGRL court that both matters arose from the Nigerian oil and gas industry. As such, applying the first rubric in Halliburton Company v Chubb Bermuda Insurance Ltd,[24] it is not clear that there was any disclosable conflict in the first place. Even if there was, it is hard to square the court’s decision to set aside the award with the approach in the earlier decisions in Trianna, Lagos Statement Development & Property Corporation, and Owah Unik Consultants. Objectively, there was no ‘relationship’ to speak of between the presiding arbitrator and the respondent in the arbitration – much less a relationship that could create justifiable doubts as to the presiding arbitrator’s impartiality or independence.

Conclusion

The analysis above demonstrates that the GGRL decision[25] is an outlier in terms of Nigerian court decisions on allegations of arbitrator bias. The earlier, more orthodox decisions remain good law, having been made by courts higher up the judicial hierarchy. Therefore, notwithstanding the ripples caused by the GGRL decision, it is safe to conclude that Nigerian law does not hold that a challenged arbitrator must immediately resign. Tribunals must continue to scrutinise allegations of bias, and where they are unsubstantiated or fanciful, they can be rightly rejected.