From the perspective of an in-house lawyer, allegations of lack of independence or bias in arbitration present conflicting concerns. On the one hand, we want our cases to be decided by a fair and impartial arbitral tribunal. On the other hand, we want the arbitration to result in a final and binding award and to avoid the disruption and expense of court proceedings to resolve challenges on these grounds, particularly spurious challenges asserted solely for tactical purposes.

My company's agreements typically provide for arbitration in London or New York. There are significant differences between English law and US law (as applied by federal courts in the Second Circuit, where New York is located) on how challenges for bias are handled. In neither case is lack of independence alone a ground for challenging an arbitrator or an award. Under English law (Arbitration Act 1996), an arbitrator may be removed or an award set aside if, from the perspective of a 'fair-minded and informed observer', there is a 'real possibility of unconscious bias'. The same standard applies to judges. Under US law (Federal Arbitration Act), there is no procedure for removing an allegedly biased arbitrator and a higher standard is applied to applications to vacate an arbitral award. An award may be vacated only for 'evident partiality' which, courts in the Second Circuit and elsewhere have held, will be found only when 'a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration'. The test for bias in both places is different from General Standard 2(c) of the IBA Guidelines on Conflicts of Interest in International Arbitration, which requires a 'likelihood' of bias.

The law in each place provides that the right to challenge awards on the grounds of bias may be lost by failure to timely assert an objection. In England, the objecting party must promptly go to court in order to preserve its rights. That is generally not possible in the US, however, with the result that objections may not be resolved until after a final award has been issued.

In England, the governing statute contains no requirement of disclosure for arbitrators and, thus far, no case has imposed such a requirement in arbitration. However, case law concerning judges suggests that it is 'desirable' for an arbitrator to disclose 'any matter of which he becomes aware which could arguably be said to give rise to a real possibility of bias' and that, if, prior to any hearing, he is alerted to some matter which might throw doubt on his fitness to sit, he should 'inquire into the full facts'. US law requires disclosure, but the precise extent of that obligation remains unclear. The Court of Appeals for the Second Circuit recently attempted to clarify the basis for this requirement and, in addition, imposed, for the first time, a very limited obligation upon arbitrators to investigate potential conflicts. [Page55:]

In both England and the United States, the law is evolving, with a number of significant cases recently decided. This article will examine some of those cases and will express the views of an in-house lawyer about their possible implications for parties to arbitrations.

I. English law: Arbitration Act 1996

A. Test for impartiality

Under section 24(1)(a) of the Arbitration Act 1996, a party may apply to the court to remove an arbitrator upon the ground that 'circumstances exist that give rise to justifiable doubts as to his impartiality'. The standard to be applied in deciding such applications has recently been stated as follows:

The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. 1

This is the test for bias approved in Porter v. Magill.2 There, the House of Lords modified the common law test laid down by Lord Goff in R v. Gough3 in order to align it with the standard that had emerged from jurisprudence under Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms. 4 In Gough, Lord Goff suggested that the same standard should be 'applicable in all cases of apparent bias, whether concerned with justices or members of other inferior tribunals, or with jurors, or with arbitrators'. 5 English courts have followed this suggestion. 6 Under the Porter test, which requires the court to view matters from the perspective of a fair-minded and informed observer, it is clear that an arbitrator may be removed for apparent bias. 7 Moreover, the apparent bias may be 'unconscious'. As Lord Steyn observed in Lawal: 'Public perception of the possibility of unconscious bias is the key.'8 In ASM Shipping the court said: 'The threshold is only a real possibility of unconscious bias.'9[Page56:]

These words appear to establish a very low threshold for removal of an arbitrator. The 'justifiable doubts' language of the statute was taken from Article 12(2) of the UNCITRAL Model Law. The same language is used in General Standard 2(b) of the IBA Guidelines on Conflicts of Interest in International Arbitration. 10 Regarding the meaning of this expression, General Standard 2(c) of the IBA Guidelines states: 'Doubts are justifiable if a reasonable and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision.'11 The word 'likelihood' seems to require a showing of probability of bias for a successful challenge. 12 However, under the Porter test, a 'possibility' (albeit 'real') suffices. 13

ASM Shipping illustrates the way in which the test has recently been applied by the courts as well as certain other aspects of the law in this area. There, the court was asked to remove a practising barrister (referred to in the judgment as X QC), who had been appointed as umpire in a charter party arbitration, and to set aside an interim award dealing with what were characterized as 'preliminary issues'. 14 The grounds for the application were that (a) in a prior arbitration involving different charterers but against the same vessel owners, X QC had been instructed by the same solicitors now representing the charterers to make an application concerning disclosure; (b) in the prior arbitration, there were serious allegations made against Mr Moustakas, a witness for the owners in the current arbitration, concerning his failure to disclose documents and the authenticity of documents in his possession; and (c) in the current arbitration, there were similar allegations.

The court concluded that, in these circumstances, the independent observer would share 'the uncomfortable feeling which Mr Moustakas had that X QC would or might have detected a "pattern" of misbehaviour in relation to disclosure based upon his knowledge acquired as a barrister in the B action' and would have 'concluded that there was a real possibility that the tribunal was biased'. 15 The court stated that X QC should have recused himself and 'should not continue to act in this matter'. 16 After the judgment, X QC resigned from the reference. 17

The judgment in ASM Shipping has been the target of some criticism, with commentators suggesting that 'speculation' about X QC's 'possible negative recollection' of a witness should not have been sufficient to disqualify him as an[Page57:] arbitrator. 18 One barrister has said: 'English law in relation to apparent bias . . . now leans so heavily in favour of the litigant that in ASM Shipping v. TTMI it seems actually to have toppled over.'19

Indeed, prior cases seem to have taken a more robust view as to prior adversarial relations between an arbitrator and a party. For example, in Rustal Trading Ltd v. Gill & Duffus SA,20 the court concluded that the involvement of one of a panel of three arbitrators in a business dispute with a principal of one of the parties some two years before did not require disqualification under section 24 or setting aside of the award. The prior dispute was alleged to be 'bitter and prolonged . . . involved an allegation of fraud; and . . . involved many of the same personalities'. 21 Nevertheless, Mr Justice Moore-Bick (as he then was) saw 'little to indicate that it was really out of the ordinary run of disputes or that its character was such as might be expected to have left Mr Shaw with a sense of animosity against Mr Lalljee two years later'. 22 As for the prior receipt by X QC of instructions to act against the owners, in Locabail (U.K.) Ltd. v. Bayfield Properties Ltd, the Court of Appeal, in attempting to provide guidance on potentially disqualifying contacts to QCs sitting as part-time judges, suggested that this should rarely, if ever, be a ground for disqualification: 'Nor, at any rate ordinarily, could an objection be soundly based on the judge's . . . previous receipt of instructions to act for or against any party, solicitor or advocate engaged in a case before him . . .'23

Rather than the kind of generalized antipathy based upon prior adverse contact that was the focus of the application in Rustal, the judgment in ASM Shipping seemed more concerned with potentially prejudicial information X QC may have obtained in his instructions in the prior reference. The court noted that the instructions given in the prior case by the solicitors for the charterers in the current reference had not been (and presumably, for reasons of privilege, could not be) disclosed to the court or to the owners. It was the potentially prejudicial effect of information contained in those instructions bearing upon the veracity of an important witness for the owners that led the court to conclude that X QC should not continue to serve as umpire.

A similar concern about undisclosed and potentially prejudicial knowledge is reflected in Norbrook Laboratories Ltd v. A Tank. 24 There, Mr Justice Colman removed the arbitrator and set aside an interim award of costs under section 68 upon finding that there was a 'real possibility of bias'. 25 The sole arbitrator in Norbrook had, among other things, made direct contact with three witnesses, failed to make any exact record of those communications, and failed to disclose to the parties what the witnesses said. 26[Page58:] Mr Justice Colman concluded that, by this conduct, the arbitrator 'has or may have been exposed to information . . . which consciously or unconsciously could have influenced him in his decision and which might well influence him in his future conduct of the reference and in particular his final award'. 27

B. Should a different standard apply to setting aside an award under section 68?

Section 68 of the Arbitration Act permits a challenge against the award itself on the ground of 'serious irregularity affecting the tribunal, the proceedings or the award'. Section 68(2) provides that 'serious irregularity' means an irregularity 'which the court considers has caused or will cause substantial injustice to the applicant'. Under section 68(2)(a), 'serious irregularity' may include failure by the tribunal to comply with its duty under section 33 of the Act to 'act fairly and impartially between the parties'.

One case has suggested that, because of section 68's requirements of both 'serious irregularity' and 'substantial injustice', a stronger showing is needed to set aside an award for alleged bias under section 68 than to remove an arbitrator under section 24. In Hussman (Europe) Ltd v. Pharaon,28 the party seeking to set aside the award claimed that there was a real possibility of bias on the part of the arbitral tribunal because the court had criticized the tribunal and reduced its fees when setting aside a prior award rendered by the tribunal against the applicant. In rejecting this claim, the court said: 'It seems to me that merely to invoke an apprehension of the possibility of bias is not to establish serious irregularity. In order for Section 68 to be invoked it seems to me that Hussmann would have to show actual bias on the part of the Tribunal . . . Even if I was otherwise satisfied that the allegation of bias or the apprehension of bias could bring Section 68 into play, I should add that I would not have been satisfied that . . . serious [sic] injustice had been established.'29

However, more recent cases have collapsed the statutory tests and concluded that a showing of a 'real possibility of bias' is sufficient to establish both 'serious irregularity' and 'substantial injustice' under section 68. In ASM Shipping, Mr Justice Morrison said:

[I]f the properly informed independent observer concluded that there was a real possibility of bias, then I would regard that as a species of 'serious irregularity' which has caused substantial injustice to the applicant. I do not accept Mr Croall's submission that even if that conclusion was reached the court must then inquire as to whether substantial injustice has been caused. In my judgment there can be no more serious or substantial injustice than having a tribunal which was not, ex hypothesi, impartial, determine parties' rights. The right to a fair hearing by an impartial tribunal is fundamental; the Act is founded upon that principle and the Act must be construed accordingly. 30[Page59:]

In Norbrook, Mr Justice Colman agreed with Mr Justice Morrison's construction of section 68 and applied it in setting aside the interim award. 31

This view would seem likely to prevail in light of the frequently expressed desire of the courts to apply the same standards to arbitrators as are applied to judges. However, there is support in the language of the statute and its history for the view that, under section 68, a stronger showing is required to set aside an award than to remove an arbitrator under section 24. In support of this conclusion, the court in Hussman referred to paragraph 280 of the DAC Report concerning section 68 which states, in part:

The test of 'substantial injustice' is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action . . . In short, clause 68 is really designed as a longstop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.

The conduct of the arbitrator in Norbrook did seem to present an extreme case. His communication with witnesses outside the presence of the parties and failure to inform the parties or to make any record of those communications was 'far removed from what could reasonably be expected in the arbitral process'. As the court in Norbrook observed: 'It is . . . absolutely axiomatic that the parties should at the very least have the opportunity of access to what the witness or potential witness has said to the Arbitrator so as to enable that party to refute any statement adverse to its case or to rely upon any statement supportive of its case.'32 But it is not clear that circumstances giving rise to a 'possibility' of unconscious bias, however real, will always involve such a departure from due process.

As noted above, the common law standard for considering claims of apparent bias has been equated by the House of Lords with the standard applicable under Article 6(1) of the European Convention. 33 Recently, on appeal from the judgment in ASM Shipping, 34 the Court of Appeal rejected the argument that, under the European Convention, an objection based upon apparent bias could not be waived, stating:

There is no overarching principle laid down by the Human Rights Convention that an award tainted by apparent bias must be set aside. The national courts are allowed to decide that in some cases the award must be set aside and in some cases it need not. A margin of appreciation is accorded to the domestic court. 35

Among other things, the Court of Appeal observed that the imposition by the Netherlands of a higher threshold for setting aside an award has been determined not to contravene Article 6(1) of the Convention. 36[Page60:]

It can be argued that, if the European Convention does not forbid it, there is no reason why the Arbitration Act should not be construed to impose a higher threshold for setting aside an arbitration award under section 68 than for removing an arbitrator under section 24. As Lord Hope observed in a case not involving arbitration:

It would be easy, were we permitted to take a more robust view, to deplore a system which permits an unsuccessful litigant to challenge a judge's decision that has gone against him by searching after the event for previously undiscovered material, like a needle in a haystack, that might be thought to undermine his objectivity. One might think that the cost and delay of rehearing the case would only be justified if there was a real possibility that the wrong decision had been reached because of the alleged bias. But that is not the approach that we are required to take by article 6(1) of the European Convention on Human Rights and Fundamental Freedoms, which requires the tribunal to be independent and impartial, and by the Strasbourg authorities. 37

The Court of Appeal in ASM Shipping has determined that Article 6(1) does permit a more robust view with respect to arbitration. And the language of section 68 seems to envision such an approach. As Lord Woolf said in AT&T v. Saudi Cable:

As is apparent from the facts of this case, where millions of dollars have already been incurred in the costs of the arbitration and there have been three decisions, it would achieve injustice not justice if the arbitration awards were to be set aside if such a course were not justified. It is not to be forgotten that SCC is an entirely innocent party and it is entitled to have its interests considered when deciding whether to set aside the awards. 38

In light of these concerns, perhaps courts should not be required, invariably and automatically, to set aside awards based only upon a 'possibility' of unconscious bias. Perhaps, considering the potential injustice to entirely innocent parties, courts should be given a 'margin of appreciation' regarding whether there was, indeed, serious irregularity causing substantial injustice.

C. Waiver of objection

In theory, the question of whether an award will be set aside for apparent bias should infrequently be presented. Under section 73(1) of the Arbitration Act, unless the objecting party is able to show that 'at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for objection', he will be barred from raising that objection. 39 In ASM Shipping, a challenge against the award under section 68 was held to be precluded when the complaining party had participated in the proceedings and taken up the award after the ground for the challenge was known. 40 There, the court said:

Owners were faced with a straight choice: come to the court and complain and seek X QC's removal as a decision-maker or let the matter drop. They could not get themselves into a position whereby if the award was in their favour they would drop their objection but make it in the event that the award went against them. A 'heads we win and tails you lose' position is not permissible in the law as section 73 makes clear. The threat of[Page61:] objection cannot be held over the head of the tribunal until they make their decision and could be seen as an attempt to put unfair and undue pressure upon them. 41

Because of the waiver rule, the issue of whether an award will be set aside for apparent bias should arise only in limited circumstances-typically when there has been a failure to disclose, prior to the issuance of the award, the facts that give rise to the objection, whether inadvertent, as in AT&T v. Saudi Cable,42 or intentional, as appears to have happened in Norbrook.

D. Duty to disclose

The Arbitration Act contains no duty to disclose. In this regard, the DAC, while basing the statute on the UNCITRAL Model Law, chose not to include any provision comparable to Article 12(1) of the Model Law. Article 12(1) requires a person approached with regard to a possible appointment as an arbitrator to 'disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence' and imposes a continuing obligation on the arbitrators to make such disclosure throughout the arbitral proceedings.

Thus far, courts have not imposed such a duty on arbitrators. 43 In AT&T v. Saudi Cable, 44 the Court of Appeal upheld the refusal of AT&T's application for removal and revocation of the appointment of Yves Fortier as third arbitrator and chairman of an ICC arbitral tribunal and the setting-aside of three partial awards where Fortier had inadvertently failed to disclose to AT&T's lawyers that he was a non-executive director of Nortel, a competitor of AT&T and a disappointed bidder for the contracts out of which the dispute arose. The Court of Appeal did not accept the argument, advanced by AT&T, that there was a 'duty of disclosure on the part of an arbitrator independent of the ICC rules as both a matter of common law and as a matter of contract between the arbitrators and the parties'. 45 Lord Justice Potter stated that, except to the extent specifically required by the ICC Rules, the ICC 'should be taken as having left the question of disclosure of any matter of possible concern, and in particular the possibility of bias, to the good faith and judgment of the arbitrator'. 46

However, in Locabail (U.K.) Ltd. v. Bayfield Properties Ltd,47 Lord Woolf set out guidelines for deputy High Court judges regarding disclosure of known conflicts and investigation of potential conflicts that, one would think, would apply equally to arbitrators. In Locabail, the Court of Appeal held that a solicitor/QC, sitting as a deputy High Court judge, was not required to recuse himself for bias when it came to light during the trial that his firm had represented clients who had claims against the claimant's husband. Regarding disclosure, Lord Woolf said:

If, in any case not giving rise to automatic disqualification and not causing personal embarrassment to the judge, he or she is or becomes aware of any matter which could arguably be said to give rise to a real danger of bias, it is generally desirable that disclosure[Page62:] should be made to the parties in advance of the hearing. If objection is then made, it will be the duty of the judge to consider the objection and exercise his judgment upon it.

Regarding investigation, Lord Woolf said that, before embarking on any trial, a solicitor sitting as part-time judge should perform a conflicts search, in order to assure that his firm is not acting for or against any of the parties. More generally, he stated that, up to the commencement of the hearing, a judge has a duty to investigate potential conflicts that come to his attention.

If, before a hearing has begun, the judge is alerted to some matter which might, depending on the full facts, throw doubt on his fitness to sit, the judge should in our view inquire into the full facts, so far as they are ascertainable, in order to make disclosure in the light of them. 48

However, Lord Woolf rejected the contention that the solicitor/judge had any duty to investigate matters that came to his attention after the hearing has commenced.

But, if a judge has embarked on a hearing in ignorance of a matter which emerges during the hearing, it is in our view enough if the judge discloses what he then knows. He has no obligation to disclose what he does not know. Nor is he bound to fill any gaps in his knowledge which, if filled, might provide stronger grounds for objection to his hearing or continuing to hear the case. If, of course, he does make further inquiry and learn additional facts not known to him before, then he must make disclosure of those facts also. 49

Guidelines for disclosure such as those set forth in Locabail should logically be followed also by arbitrators. Because of the waiver provisions of section 73, awards are vulnerable to being set aside under section 68 mainly when there has been a failure to disclose. Hence, disclosure on the part of arbitrators should better protect the finality of awards. However, the omission of any disclosure requirement from the statute and the refusal of the Court of Appeal to recognize a common law or contractual obligation of disclosure reflect a considered determination that failure to disclose should not be yet another ground for setting aside an award.

E. Thoughts on ASM Shipping

It is noteworthy that, in ASM Shipping, there have so far been four reported judgments relating to allegations of bias. As mentioned above, in the first judgment, the court concluded that the arbitrator should have recused himself but held that the owners, by taking up the award, had waived their rights under section 68 to have the award set aside. 50 Although leave to appeal was denied under section 68(4), the owners appealed. The Court of Appeal dismissed the appeal, rejecting the owners' contention that the European Convention somehow conferred jurisdiction. 51 Thereafter, the owners made another section 24 application, seeking to remove the remaining two arbitrators upon the ground that they were tainted by either (a) their discussions with X QC (now identified as Mr Duncan Matthews, QC) on the subject of the interim award or (b) the views they expressed on the prior application that Mr Matthews could properly and[Page63:] should continue as an arbitrator. 52 The court, per Smith, J., concluded that the owners had waived the right to request the arbitrator's removal on these grounds and that, in any event, they should not be removed. 53 The fourth reported judgment rejected the owner's application to debar the charterers from opposing their pending application to remove the two remaining arbitrators. 54 From the time that the initial section 68 application was made in January 2005 through at least 28 June 2007-the date of Mr Justice Smith's judgment-no replacement for Mr Matthews had been designated and no further substantive proceedings had taken place. The prospect of having to pay costs should discourage groundless applications. However, this extensive satellite litigation serves to illustrate how, in the hands of a determined respondent, the procedures available under sections 24 and 68 can cause delays in arbitration proceedings.

II. US law: Federal Arbitration Act

A. Challenge of awards

A significant difference between English and US law is that the Federal Arbitration Act ('FAA') contains no procedure comparable to section 24 of the Arbitration Act 1996 for pre-award removal of an arbitrator for alleged bias. The sole remedy for bias is set forth in section 10(a)(2) of the Act, which provides that an award may be vacated 'where there was evident partiality or corruption in the arbitrators, or either of them'. 55

Courts have uniformly held that, with certain limited exceptions, an application to vacate the award is the only statutory remedy available for the alleged bias of an arbitrator. 56 Some cases have suggested that allowing challenges during the arbitration 'could have the disadvantage of enmeshing district courts in endless peripheral litigation and ultimately vitiate the very purpose for which arbitration was created'. 57 However, because of the absence of any procedure for a pre-award challenge, the position in the US is exactly the 'heads we win and tails you lose' situation found to be 'impermissible' under English law in ASM Shipping. While a party in a US arbitration must assert an objection to avoid waiving it, he may not and need not immediately go to court to resolve it. Therefore, the threat of doing so can be 'held over the head of the tribunal until they make their decision'. A further problem with leaving the determination of such challenges until after the issuance of an award is that, at that point, the parties may have devoted substantial time and resources to the arbitration, all of which will have been wasted if the award is vacated. [Page64:]

B. Test for 'evident partiality'

The starting point for any discussion of section 10(a)(2) is the decision of the Supreme Court in Commonwealth Coatings Corp. v. Continental Cas. Co.58 There, the Court held that what is now section 10(a)(2) required disclosure by arbitrators of certain business relations with the parties. Since then, courts have struggled to deduce, from the 'less than pellucid'59 opinions in the case, what standards to apply to claims of evident partiality and failure to disclose.

Courts have found Commonwealth Coatings unenlightening about what constitutes 'evident partiality'. Justice Black, writing for four justices, suggested that arbitrators, like judges, must avoid even the 'appearance of bias'. 60 However Justice White, writing for himself and Justice Marshall in a concurring opinion said:

The Court does not decide today that arbitrators are to be held to the standards of judicial decorum of Article III judges, or indeed of any judges. It is often because they are men of affairs, not apart from that of the marketplace, that they are effective in their adjudicatory function . . . This does not mean the judiciary must overlook outright chicanery in giving effect to their awards; that would be an abdication of our responsibility. But it does mean that arbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial. I see no reason automatically to disqualify the best informed and most capable potential arbitrators. 61

As the Second Circuit subsequently observed in Morelite Constr. Corp. v. New York City Dist. Council Carpenters Ben. Funds:62 'Accordingly, much of Justice Black's opinion must be read as dicta, and we are left in the dark as to whether an "appearance of bias" will suffice to meet the seemingly more stringent "evident partiality" standard of 9 U.S.C. § 10.'63

Writing upon a 'relatively clean slate', 64 the court in Morelite concluded that 'the standard of "appearance of bias" is too low for the invocation of section 10, and "proof of actual bias" too high'. 65 The court stated the appropriate standard as follows:

[W]e hold that 'evident partiality' within the meaning of 9 U.S.C. § 10 will be found where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration. In assessing a given relationship, courts must remain cognizant of peculiar commercial practices and factual variances. Thus, the small size and population of an industry might require a relaxation of judicial scrutiny, while a totally unnecessary relationship between arbitrator and party may heighten it. In this way, we believe that the courts may refrain from threatening the valuable role of private arbitration in the settlement of commercial disputes, and at the same time uphold their responsibility to ensure that fair treatment is afforded those who come before them. 66[Page65:]

In Morelite, the Court vacated an arbitration award rendered in favor of a union by a sole arbitrator whose father was the president of that union. The court said:

[W]ithout knowing more, we are bound by our strong feeling that sons are more often than not loyal to their fathers, partial to their fathers, and biased on behalf of their fathers. We cannot in good conscience allow the entering of an award grounded in what we perceive to be such unfairness. 67

Since Morelite, courts in the Second Circuit have developed strict criteria for evaluating claims of alleged bias. As recently stated in a Southern District of New York case:

To set aside an award for arbitrator partiality, 'the interest or bias . . . must be direct, definite and capable of demonstration rather than remote, uncertain, or speculative'. The appearance of bias does not satisfy the standard of 'evident partiality'. . . . Instead, in evaluating the purported bias of an arbitrator, the courts look at: (1) the financial interest the arbitrator has in the proceeding; (2) the directness of the alleged relationship between the arbitrator and a party to the arbitration proceeding; (3) and the timing of the relationship with respect to the arbitration proceeding. 68

Apart from Morelite, only one case in the Second Circuit appears to have vacated an award for evident partiality upon grounds not involving a failure to disclose. In Sun Refining & Marketing Co. v. Statheros Shipping Corp., 69 the district court, in a decision affirmed by the Second Circuit, vacated a maritime arbitration award where it found that (a) the chairman of the panel was extensively and personally involved in an ongoing arbitration by the company that employed him against the party seeking to vacate the award; and (b) the chairman and the arbitrator appointed by the prevailing party had allocated arbitration fees unevenly to increase their own fees at the expense of the arbitrator appointed by the losing party.

C. Requirement of disclosure

In Commonwealth Coatings, the Supreme Court vacated an arbitration award where the third arbitrator-'the supposedly neutral member of the panel'-had failed to disclose a prior business relationship between himself and one of the parties. The third arbitrator, an engineering consultant, had provided consulting services to the prevailing party in the arbitration, 'involving fees of about $12,000 over a period of four or five years' and included 'the rendering of services on the very projects involved in this lawsuit'. 70 Justice Black, writing for the Court, observed: 'But neither this arbitrator nor the prime contractor gave to petitioner even an intimation of the close financial relations that had existed between them for a period of years.' In concluding that failure to disclose this relationship warranted vacating the award, he stated: 'We can perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias.'71 As noted above, in his concurring opinion, Justice White, joined by Justice Marshall, made it clear that the Court's holding was limited: '[I]t is enough for[Page66:] present purposes to hold, as the Court does, that where the arbitrator has a substantial interest in a firm which has done more than trivial business with a party, that fact must be disclosed.'72

Since Commonwealth Coatings, courts in the Second Circuit have been extremely reluctant to vacate arbitration awards based upon the alleged non-disclosure of a relationship with a party. 73 This was not for lack of trying by disappointed parties. The many cases rejecting such challenges have frequently done so upon the ground that the relationship in question was 'trivial' or 'insubstantial' or 'attenuated'. 74 Another frequent ground for refusing to vacate has been that the 'complaining party should have known of the relationship . . . or could have learned of the relationship "just as easily before or during the arbitration rather than after it lost its case"'. 75

A further reason for the paucity of cases vacating awards for non-disclosure has been a relatively narrow view about the breadth of the obligation to disclose. Some cases in the Second Circuit have suggested that vacation of an award based on an undisclosed relationship is required only when the relationship itself, even if it had been disclosed and subject to an objection, would warrant vacatur for evident partiality. 76 In this vein, some district court cases in the Second Circuit, in order to determine whether a relationship should have been disclosed, have applied the same criteria used to evaluate[Page67:] whether a disclosed relationship warrants vacation of an award for 'evident partiality'. 77 It also remains questionable in the Second Circuit whether arbitrators must disclose relationships with anyone other than the parties. For example, in Lucent the court left unresolved the question whether 'an undisclosed relationship between arbitrators could be cause for vacatur under certain circumstances'. 78

D. Applied Industrial Materials

Until very recently, there was no reported case in the Second Circuit vacating an award based on the failure of an arbitrator to disclose a relationship. 79 The first such case is Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S. 80 There, AIMCOR appealed from a judgment of the district court refusing to confirm an arbitration award in its favor and granting Ovalar's motion to vacate the award. The arbitration concerned a dispute about the distribution of profits from a joint venture in which AIMCOR purchased petroleum coke and transported it to Turkey for distribution there by Ovalar. 81 The parties each appointed arbitrators who, in turn, selected as chairman Charles Fabrikant, President and CEO of Seacor Holdings, a multibillion dollar company with 50 offices in 30 countries. 82

In September 2003, before hearings started, the arbitrators were advised that AIMCOR was being sold to Oxbow Corporation and that this might be relevant to disclosure. 83 In September 2003, Fabrikant submitted a disclosure statement stating that he 'ha[d] had no personal or business relationship with any of the parties to this proceeding, or their affiliates', and would 'reserve the right to amend or add to this disclosure should future circumstances warrant'. 84 Hearings in the case were bifurcated into liability and damage phases. In April 2005, after commencement of the liability phase, Fabrikant advised the parties by email that he was amending his prior disclosure statement, stating:

Gentlemen: it came to my attention yesterday, or day before yesterday that my St. Louis office, which runs our barge operation under the name SCF, has recently been engaged with Ox-Bow of Palm Beach. The subject of conversation is a contract for the carriage of petroleum coke. I had no knowledge of such conversations taking place prior to the past week. I do not participate in contract negotiations or get involved in day-to-day operations of SCF. 85

There was no objection from Ovalar and no further disclosure by Fabrikant. Five months later, in September 2005, the panel issued a 2-1 award in favor of AIMCOR on liability. 86[Page68:]

Ovalar then hired new lawyers, who retained a consultant to inquire into the relationship between SCF and Oxbow. The consultant spoke to an SCF employee and a tugboat operator and was advised, among other things, that SCF had been providing barges to Oxbow for shipments of petroleum coke for about a year and had been soliciting additional business. Armed with this information, Ovalar's lawyers wrote to the tribunal in November 2005 and asked that Fabrikant withdraw. 87 Fabrikant declined to do so. He stated that, at the time of his disclosure of the discussions between SCF and Oxbow, he told the president of SCF that he 'wished to know nothing about SCF's conversations or be a party to information about our activities with Oxbow or be consulted concerning any business with them'. He further advised that, after receiving Ovalar's letter, he had confirmed that SCF had chartered barges to Oxbow since December 2004, continued to do so and had received revenues from contracts with Oxbow of '$274,770, approximately one-third of one percent of SCF's revenues and an imperceptible fraction of SEACOR's total business'. 88 Thereafter, AIMCOR filed an action to confirm the liability award and Ovalar moved to vacate.

The Second Circuit described the district court's holding as follows:

Citing the standards of the American Arbitration Code of Ethics for Arbitrators and the International Bar Association's Guidelines on Conflicts of Interest in International Arbitration, the district court found that '[r]eason dictates that there must be a continuous obligation on the part of the arbitrator to avoid partiality or the appearance of partiality.' The court observed that the arbitrator's 'failure to investigate the status of SCF's negotiations with Oxbow and his subsequent lack of knowledge do not excuse his lack of disclosure.' Accordingly, the district court vacated the award. 89

The Court of Appeals began its analysis by stating the basis for the obligation to disclose, explaining it in terms of the test for evident partiality established in Morelite:

Failure to disclose a material relationship with a party that is known to the arbitrator is 'evident partiality' because a reasonable person 'would have to conclude' that an arbitrator who failed to make such disclosure was partial to the party with whom he had the relationship. 90

The court held that the procedure used and standard applied by the district court were wrong.

Here, the court below did not make findings as to the nature and timing of the arbitrator's knowledge of the relationship between SCF and Oxbow. Instead, the district court focused on whether or not there was an 'appearance of partiality' on the part of the arbitrator, a standard that we have made clear is too low. . . . As a result, we cannot evaluate whether the arbitrator had knowledge of the relationship that would compel a reasonable person to conclude that he was partial. Were this the only issue before us, we would be inclined to remand to the district court for further development of this issue. [Page69:]

The court then announced a new ground in the Second Circuit for the vacation of arbitral awards under section 10(a)(2):

However, our analysis does not end there. While the presence of actual knowledge of a conflict can be dispositive of the evident partiality test, the absence of actual knowledge is not. Indeed, in Morelite, we did not address the scope of an arbitrator's duty to investigate or disclose potential conflicts of interest. We now conclude that if we are to take seriously Justice White's statement that 'arbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial,' . . . arbitrators must take steps to ensure that the parties are not misled into believing that no nontrivial conflict exists. It therefore follows that where an arbitrator has reason to believe that a nontrivial conflict of interest might exist, he must (1) investigate the conflict (which may reveal information that must be disclosed under Commonwealth Coatings) or (2) disclose his reasons for believing there might be a conflict and his intention not to investigate.

* * *

We emphasize that we are not creating a free-standing duty to investigate. The mere failure to investigate is not, by itself, sufficient to vacate an arbitration award. But, when an arbitrator knows of a potential conflict, a failure to either investigate or disclose an intention not to investigate is indicative of evident partiality. 91

Prior to Applied Industrial, district courts in the Second Circuit had held that arbitrators had no duty to investigate potential conflicts. 92 The duty now imposed by Applied Industrial is a departure from what had previously been regarded as the rule.

Other Circuits are split on the existence and extent of a duty to investigate potential conflicts. The D.C. Circuit and the Eleventh Circuit have unequivocally held that arbitrators have no such duty. 93 In Schmitz v. Zilveti, 94 the Ninth Circuit held that such a duty existed when an arbitrator's law firm represented the parent corporation of one of the parties and the rules of the arbitral body required arbitrators to make a reasonable effort to inform themselves of potential conflicts. Recently, in New Regency Prods., Inc. v. Nippon Herald Films, Inc., 95 the Ninth Circuit extended the duty beyond cases where the arbitral rules imposed such an obligation. In New Regency, the arbitrator took a job during the arbitration as a senior executive with a company that was negotiating with one of the parties to finance a motion picture. The arbitrator was unaware of these negotiations and did not make any investigation or disclosure. The Ninth Circuit held that his failure to investigate required vacation of the award.

Under these circumstances, we hold that Immerman had a duty, when he accepted the new job at Yari Film Group during the arbitration, to investigate the possible conflicts that might arise from his new employment. We hold further, in light of that duty, that[Page70:] Immerman's failure to disclose facts that show a reasonable impression of partiality is sufficient to support vacatur, notwithstanding the lack of evidence of his actual knowledge of those facts. 96

Although the Supreme Court has been disinclined to revisit this area of the law since Commonwealth Coatings, this split in authority on the duty to investigate could be an opportunity to clarify matters.

E. Implications of the duty to investigate now imposed by the Second Circuit

Clearly, the obligation to investigate established by the court in Applied Industrial is nowhere near as broad as the obligation imposed by the Ninth Circuit in New Regency. The problem, as the Second Circuit perceived it, was that Ovalar may have been misled into thinking that Fabrikant would keep it advised about its relations with Oxbow and of any new developments. But what would Ovalar have done if Fabrikant had said, in April 2005, that he was establishing a Chinese wall and would not be making any further investigation? If the lawyers then representing Ovalar thought to do so, they could have hired a consultant, learned of the relations between SCF and Oxbow, informed Fabrikant and asked him to withdraw prior to the issuance of the first award. Fabrikant would then have been faced with the choice of withdrawing or of having the award subject to a motion to vacate.

A more likely-if more cynical-scenario is that, because Ovalar had not yet lost the arbitration, its lawyers would not have made any such inquiry and would not have objected to Fabrikant's continued service as chairman. Fabrikant's statement that he was not investigating further would have effectively insulated the award from being vacated under section 10(a)(2)-unless Ovalar could prove that, contrary to Fabrikant's assertions, he had actual knowledge of his company's relations with Oxbow. Proving such actual knowledge and even getting discovery on this issue would likely have been very difficult. 97

What will be the practical effect of the rule announced in Applied Industrial? In all likelihood, unless compelled to do otherwise, for example by institutional rules or the provisions of the arbitration agreement, arbitrators, when making their disclosure, will conclude with a boilerplate disclaimer to the effect that they are disclosing only the facts then known to them concerning potential conflicts and do not intend to conduct any further investigation. Before Applied Industrial, there was perhaps a perverse incentive to take the arbitrator's disclosures at face value and to wait until after issuance of the award before making any independent inquiry into the relations between the arbitrator and the opposing party. Now, upon receiving disclosure containing the disclaimer authorized by Applied Industrial, parties will have to undertake such inquiries prior to the issuance of any award, if they wish to preserve objections for 'evident partiality' and not face the heavy burden of proving on a motion to vacate that the arbitrator's disclosure regarding known conflicts was false. [Page71:]

Conclusion

English law sets a very low threshold for challenges against arbitrators and awards upon the ground of bias. However, section 24 of the Arbitration Act 1996 permits the prompt resolution of challenges and the 'put up or shut up' provisions of section 73 limit the circumstances in which awards may be set aside. It is mainly when the grounds for the objection have not been disclosed that awards remain susceptible to challenge under section 68. However, the Arbitration Act contains no requirement of disclosure and the Court of Appeal in AT&T declined to impose such a requirement. Arbitrators should nevertheless follow the guidelines for disclosure suggested in Locabail, as this may better protect the finality of awards. The adoption of a somewhat higher threshold for applications under section 68 would furnish further protection and would help to avoid the injustice to innocent parties that may result from setting aside awards.

From the perspective of an in-house lawyer, cases like ASM Shipping seem to portend, at the very least, a change in atmosphere in London arbitration. Some years ago, my company was the claimant in a case in London in which the sole arbitrator selected by the parties was a retired Court of Appeal judge sitting in the same chambers as our counsel. 98 During the hearings, which lasted several weeks, each party organized daily lunches for its lawyers and witnesses. At first, the sole arbitrator alternated between having lunch with one party and the other. Soon, however, he gave up entirely lunching with the other side and came exclusively to our lunches. 99 There was never even the slightest suggestion that these daily ex parte meetings were in any way improper or cast any doubt on the arbitrator's impartiality. One cannot help but contrast this with a recent LCIA decision in which a sole arbitrator was disqualified because, 'during a short adjournment for lunch, the sole arbitrator and counsel for the claimant held a private meeting of approximately 15 minutes in the arbitrator's private retiring room, behind closed doors'. 100 Applying the standard used by courts under section 24 of the Arbitration Act, a division of the LCIA concluded that 'such private meetings are not recommendable, as they may lead the other party or even an external observer, in certain circumstances, to suspect a lack of impartiality on the part of the arbitrator'. 101 There were significant differences in the circumstances of the LCIA case. 102 And the division of the LCIA was careful to note that '[t]he mere fact such a meeting takes place does not, in itself, always lead to the conclusion of a real possibility that the arbitrator is biased'. 103

Under US law as applied by federal courts in New York, the scope for challenges based on bias is extremely limited. There is no procedure for the pre-award resolution of such challenges to arbitrators. Hence, objections on the ground of alleged bias may loom over an arbitration-a situation that in English law would be considered to exert 'unfair and undue pressure' on the arbitrators. It would be preferable if the FAA required[Page72:] resolution of such challenges at the beginning of a case. As a practical matter, the unavailability of such a procedure and the reluctance of courts to vacate awards upon these grounds make it incumbent upon an in-house lawyer in New York arbitration to exercise great care in the selection of a party-appointed arbitrator. It is essential to appoint someone who is sufficiently strong and experienced to ensure that the person selected as chairman will be truly independent and impartial.

The first and only time that my company, Transammonia, has faced an allegation of bias on the part of an arbitrator was earlier this year in the US District Court for the Southern District of New York. 104 Transammonia was the claimant in an arbitration arising out of an alleged antitrust conspiracy among the respondent, Stolt-Nielsen, and others to fix freight rates for ocean transportation of products aboard parcel tankers (the 'Transammonia Arbitration'). 105 When two party-appointed arbitrators were unable to agree, after several weeks, upon a chairman, Transammonia asked the court to make the appointment. Each side submitted a list of proposed arbitrators to the court. Each party's list included one proposed arbitrator who had presided in a prior case arising out of the same antitrust conspiracy: Stolt proposed Professor William W. Park, a distinguished law professor and arbitrator, who had been chairman of the tribunal in a consolidated arbitration brought against Stolt and its alleged co-conspirators by claimants who had opted out of the JLM litigation. Transammonia proposed John J. Gibbons, former judge of the US Court of Appeals for the Third Circuit and Director Emeritus of the American Arbitration Association, who had been chairman of the tribunal in an arbitration commenced by Celanese AG against Odfjell, one of Stolt's alleged co-conspirators (the 'Celanese Arbitration'). 106

In the Transammonia Arbitration, Stolt contended that Judge Gibbons was biased against Stolt because Stolt had successfully challenged an order of the tribunal he chaired in the Celanese Arbitration. 107 The court, per Rakoff, J., rejected this argument, observing that:

[O]ne has to distinguish between, in effect, being reversed on some issue and the question of bias. All the time Courts of Appeal, for example, will reverse district courts-wrongly, of course-and then will send the case back to the district court. And there is never a suggestion or insinuation that because the district court ruled one way in favor of one party that he or she is not capable of being completely objective on the new standards set on the remand. And it is extremely rare, but not unheard of, for the Court of Appeals to say this case should go to a new judge. And when they do that it is always because there's something in the record that goes beyond a mere disagreement as to what the law is to something that suggests at least an appearance of a personal bias or something like that. I don't see that here with respect to my opinion and Judge Gibbons. 108[Page73:]

Perhaps because Stolt itself was proposing an arbitrator who had served as chairman in a prior related case, it did not strongly contend that Judge Gibbons' prior service in the Celanese Arbitration was, by itself, sufficient reason not to appoint him. 109 Nor did Transammonia make such an argument with respect to Professor Park.

Some years ago, a seminal article identified the risks that may arise out of the appointment by a party of the same arbitrator in multiple disputes involving the same issues. 110 As another commentator has observed, 'it would not be far-fetched to predict that such arbitrator may base his opinion on the decision of the dispute . . . on the basis of arguments from counsel, panel deliberations, evidence and information taking place or obtained in one case but not available or shared in the other, and for that reason inequalities among the parties and imbalances in each respective arbitral panel may ensue'. 111 One might argue that these risks were compounded, in the Transammonia Arbitration, by the fact that each side's proposed chairman had served in the prior arbitration together with that side's party-appointed arbitrator. However, neither party expressed strong concern about these potential problems.

Judge Rakoff considered the familiarity of the proposed chairmen with the background of the case to be a significant advantage.

[A]n important factor in the Court's determination is [Judge Gibbons'] familiarity with the background of this case. In the end, if I had had to make a second choice, it would've been Professor Park for that same kind of reason. I think it is important and valuable and helpful to have had some background in these related factual situations. It will bring to the table knowledge that will help streamline and help inform whatever determinations are made. 112

For the same reasons of efficiency and expertise and, presumably, to avoid inconsistent results, US court rules typically provide for the assignment of multiple related cases to a single judge. 1 Clearly, the concern about inequality of knowledge is less significant in US litigation, where proceedings and court records are public and accessible, than in arbitration, which is typically private and confidential.

The provisions of English and US law permitting challenges to arbitrators and awards based upon alleged bias are important safeguards of the rights of parties to a decision by fair and impartial arbitral tribunals. In both England and the US, case law concerning arbitrator independence and bias has developed, for the most part, in an iad hoc universe. An in-house lawyer might be tempted to think that, by opting for[Page74:] administered arbitration under the auspices of an organization such as the ICC, he could insulate his company from the impact of court decisions in this area. However, there are limits to the extent to which this can be done. 1 The law in both places can, from time to time, result in the disruption of arbitration proceedings and the setting-aside of awards unlikely to have been affected by bias. It appears from the case law that judges in both places are sensitive to the competing concerns. One can only hope that the law will be construed so that it is sufficiently flexible to permit judges to make an appropriate adjustment of these interests in each case. [Page75:]

1
ASM Shipping Ltd of India v. TTMI Ltd of England, [2006] 1 Lloyd's Rep. 375; Norbrook Laboratories Ltd v. A Tank, [2006] 2 Lloyd's Rep 485. The Departmental Advisory Committee ('DAC') which drafted the Arbitration Act chose not to follow Article 12(2) of UNCITRAL Model Law on International Commercial Arbitration, UN GAOR, 40th Sess., Supp. No. 17, art. 5, UN Doc. A/40/17 (21 June 1985), 24 I.L.M. 1302 ('UNCITRAL Model Law'), which includes lack of 'independence' as an additional ground for challenge. See DAC Report on the Arbitration Bill, ('DAC Report') paras. 101-102 (1996) ('We can see no good reason for including "non-partiality" lack of independence as a ground for removal and good reason for not doing so.')

2
[2002] 2 A.C. 357. As Lord Steyn later noted in Lawal v. Northern Spirit, [2003] I.C.R. 856 at 862: 'In the result there is now no difference between the common law test of bias and the requirements under art 6 of the convention of an independent and impartial tribunal, the latter being the operative requirement in the present context.'

3
[1993] A.C. 646.

4
4 November 1950, Eur. T.S. 5 (the 'European Convention' or the 'Human Rights Convention').

5
[1993] A.C. at 670.

6
See AT&T Corp. v. Saudi Cable Co., [2000] 2 Lloyd's Rep. 127; Laker Airways Inc. v. FLS Aerospace Ltd, [1999] 2 Lloyd's Rep 45 at 48 ('The test laid down in s. 24 reflects the test in R. v. Gough.'); Rustal Trading v. Gill & Duffus, [2000] 1 Lloyd's Rep 14.

7
Although section 24 reflects the test for apparent bias, courts have also made it clear that (a) actual bias will always disqualify an arbitrator and (b) a pecuniary or proprietary interest of the arbitrator in the outcome of the arbitration will result in automatic disqualification. See Laker Airways, supra note 6, 2 Lloyd's Rep. at 45.

8
[2003] I.C.R. 856 at 862. The adoption of this standard was intended to give effect to the maxim of Lord Hewart that it is 'of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done'. R v. Sussex Justices ex parte McCarthy, [1924] 1 K.B. 256 at 259.

9
[2006] 1 Lloyd's Rep. 375 at 381.

10
IBA Guidelines on Conflicts of Interest in International Arbitration ('IBA Guidelines') (22 May 2004), <http://www.ibanet.org/images/downloads/guidelines%20text.pdf>.

11
Ibid., General Standard 2(c) (emphasis added).

12
See M. Hwang, 'Arbitrators and Barristers in the Same Chambers-An Unsuccessful Challenge' (2005) 6 Business Law International 235, 257.

13
The use of a 'likelihood' of bias standard by an arbitral institution in cases where the seat of the arbitration is England might leave an award exposed to challenge in the English courts or affect enforceability of English arbitration awards elsewhere. Although the ICC Rules do not specify the standard applied to challenges under Article 11, it has been said that: 'As an arbitration advances . . . the Court has not normally accepted to replace an arbitrator unless it appears likely that he is not, in fact, independent.' Y. Derains & E. Schwartz, A Guide to the ICC Rules of Arbitration, 2d ed. (Kluwer Law International, 2005) at 122-23 (emphasis added).

14
[2006] 1 Lloyd's Rep at 386. In a later decision in the case, the court observed that these 'effectively were the pleaded issues relating to liability for the charterers' claim'. ASM Shipping Ltd of India v. Harris, [2007] EWHC 1513 (Comm), para. 7.

15
[2006] 1 Lloyd's Rep at 376.

16
Ibid. at 390.

17
This is reported in the later decision in ASM Shipping, [2007] EWHC 1513, para. 14.

18
See e.g. G. Nicholas & C. Partasides, 'LCIA Court Decisions on Challenges to Arbitrators: A Proposal to Publish' (2007) 23 Arbitration International 1 at 11-12 ('[W]e note that no allegation was being made as to the arbitrator's links with one of the parties. Rather, one of the parties was simply speculating as to an arbitrator's possible negative recollection of one of its witnesses, whose credibility had been attacked in earlier proceedings, as so many witnesses' credibility is routinely attacked. Perhaps unsurprisingly, therefore, these circumstances are not even contemplated in the IBA Guidelines Application Lists, i.e. pursuant to the IBA Guidelines, they do not justify disclosure, much less disqualification . . . The court's decision in ASM Shipping v. T.T.M.I. Ltd is far from being an outrage (indeed it is closely reasoned) but one is left to ponder (1) whether a decision-maker more accustomed to the practice of practitioners dividing their time between counsel work and arbitrator work would have reached the same decision, and (2) how this judgment might be used or misused in supporting future challenges in the international arbitration context.')

19
S. Kverndal., 'MedArb and MedArb clauses, the future?' (Paper delivered to the LMAA, 11 May 2006) <http://www.quadrantchambers.com/ImageLibrary/MedArb%20Clauses%20publcn%20version.doc> para. 8(2)(a).

20
[2000] 1 Lloyd's Rep. 14

21
Ibid. at 19.

22
Ibid.

23
[2000] Q.B. 451 at 480.

24
[2006] 2 Lloyd's Rep at 485.

25
Ibid. at 507.

26
Ibid. at 510.

27
Ibid. See also G. Batchelor, 'Assessing Arbitrator Bias' New Law Journal (14 December 2004), which reports an unpublished judgment, identified as 'B v A, C (and others)'. There, the court upheld a challenge by B to remove under section 24 an arbitrator appointed by A who had briefly served, some years earlier, as an expert consultant to D, B's former agent, in connection with litigation between B and D. The prior case involved some of the same contracts at issue in the arbitration between B and A. The concern expressed by the court was that the arbitrator received confidential information in his role as a consultant to D that he would be unable to disclose to his fellow arbitrators or to the parties and that would affect his assessment of evidence in the current reference.

28
[2002] C.L.C 1030 (M. Brindle QC sitting as Deputy High Court Judge).

29
Ibid. at 1041. It seems likely that Mr. Brindle meant 'substantial injustice'.

30
[2006] 1 Lloyd's Rep. 375 at 387. See also Rustal Trading Ltd v. Gill & Duffus SA, [2000] 1 Lloyd's Rep 14. The statements in Rustal and Hussman regarding the standard under section 68 are also arguably dicta, as in each case the court concluded that any right to challenge the award under section 68 had been waived.

31
[2006] 2 Lloyd's Rep at 485 at 507.

32
[2006] 2 Lloyd's Rep. 485 at 486.

33
See Lawal, supra note 2.

34
ASM Shipping Ltd. of India v. TTMI Ltd of England, [2007] 1 Lloyd's Rep 136.

35
Ibid. at 140.

36
Ibid. at 140. The court cited Nordström-Janzon v. Netherlands (28101/95), 27 November 1996, where the European Commission declared inadmissible an application to overturn, under Article 6(1), a judgment of the Netherlands Supreme Court rejecting a challenge to an arbitration award. The Supreme Court held that, under Dutch law, an arbitral award could be quashed only if the arbitrator was shown to have not been independent or impartial 'in fact' or if 'the doubts as regards his independence or impartiality were so grave that the disadvantaged party could not be required to accept the arbitral award'. Ibid. See also Suovaniemi v. Finland (31737/96), 23 February 1999) ('The Court considers that the Contracting States enjoy considerable discretion in regulating the question on which grounds an arbitral award should be quashed, since the quashing of an already rendered award will often mean that a long and costly arbitral procedure will become useless and that considerable work and expense must be invested in new proceedings.').

37
Davidson v. Scottish Ministers, [2004] H.L.L.R. 934 at 967.

38
[2000] 2 Lloyd's Rep. 127 at 135. Such considerations may, in any event, play a part-perhaps an unconscious part-in a court's determination of whether an independent observer would find a 'real possibility of bias'. A somewhat higher threshold for setting aside an award would give frank recognition to these concerns.

39
Paragraph 105 of the DAC Report stated that section 73 'effectively requires a party to "put up or shut up" if a challenge is to be made'.

40
[2006] 1 Lloyd's Rep. 375.

41
Ibid. at 390.

42
[2000] 2 Lloyd's Rep. 127.

43
Nor, based on our experience, is it common in ad hoc commercial arbitration in London for disclosure to be required or offered.

44
[2000] 2 Lloyd's Rep. 127.

45
Ibid. at 133.

46
Ibid. at 140.

47
[2000] Q.B. 451 at 478.

48
Ibid. at 481.

49
Ibid.

50
[2006] 1 Lloyd's Rep. 375.

51
Supra note 34.

52
Supra note 14.

53
Ibid.

54
ASM Shipping Ltd of India v. TTMI Ltd of England (No. 2), [2007] 2 Lloyd's Rep 155.

55
9 U.S.C. §10(a)(2).

56
Aviall, Inc. v. Ryder Sys., 110 F.3d 892, 895 (2d Cir. 1997) ('[I]t is well established that a district court cannot entertain an attack upon the qualifications or partiality of arbitrators until after the conclusion of the arbitration and the rendition of an award.'); Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 490 (5th Cir. 2002); Global Reinsurance Corporation-US Branch v. Certain Underwriters at Lloyd's, London, 465 F. Supp. 2d 308 (S.D.N.Y. 2006).

57
Insurance Co. of N. Am. v. Pennant Ins. Co., 1998 U.S. Dist. LEXIS 2466 (D. Pa. 1998). Accord, Certain Underwriters at Lloyd's, London v. Argonaut Ins. Co., 264 F. Supp. 2d 926, 936 (D. Cal. 2003) ('Rather than facilitating the arbitral process, judicial intervention in the form of disqualifying an arbitrator during the pendency of the arbitration would thwart the "prime objective of arbitration law [which] is to permit a just and expeditious result with a minimum of judicial interference".').

58
393 U.S. 145 (1968).

59
Positive Software Solutions, Inc. v. New Century Mortgage Corporation, 476 F.3d 278, 281 (5th Cir. 2007) (en banc), cert. denied, 127 S. Ct. 2943 (2007)

60
393 U.S. at 150.

61
Ibid.

62
748 F.2d 79 (2d Cir. 1984).

63
Ibid. at 83.

64
Ibid. at 84.

65
Ibid.

66
Ibid. A majority of the Circuits has adopted the Morelite test or a similar formulation. See JCI Commc'ns, Inc. v. Int'l Bhd. of Elec. Workers, Local 103, 324 F.3d 42 at 51 (1st Cir. 2003); Kaplan v. First Options, 19 F.3d 1503 (3d Cir. 1994), aff'd on other grounds, 514 US 938 (1995); ANR Coal Co., Inc. v. Cogentrix of N.C., Inc., 173 F.3d 493 (4th Cir. 1999); Apperson v. Fleet Carrier Corp., 879 F.2d 1344 at 1358 (6th Cir. 1989). At least one Circuit appears to have imposed a higher threshold. Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 at 681 (7th Cir. 1983) (requiring proof of actual bias or circumstances 'powerfully suggestive of bias'). Other Circuits, while vague about the precise standard employed, have held that mere appearance of bias is not sufficient. Bernstein Seawell & Kove v. Bosarge, 813 F.2d 726 (5th Cir. 1987); Toyota of Berkeley v. Auto. Salesman's Union, 834 F.2d 751 at 756 (9th Cir. 1987).

67
Ibid.

68
Transportes Coal Sea de Venez. C.A. v. SMT Shipmanagement & Transp. Ltd, 2007 U.S. Dist. LEXIS 1802 (S.D.N.Y. 2007) (declining to vacate an arbitration award where a law firm in which the arbitrator's son had been a partner was hired to represent one of the parties in a separate concurrent arbitration); Sanford Home for Adults v. Local 6, IFHP, 665 F. Supp. 312 (S.D.N.Y. 1987) (declining to vacate an award where, inter alia, the name of an attorney for one of the parties appeared as 'counsel' on the arbitrator's letterhead).

69
761 F. Supp. 293 (S.D.N.Y. 1991), aff'd 948 F.2d 1277 (2d Cir. 1991).

70
393 U.S. at 146.

71
Ibid. at 149.

72
Ibid. at 152.

73
See Lucent Techs., Inc. v. Tatung Co., 379 F.3d 24 (2d Cir. 2006) ('This court has . . . "viewed the teachings of Commonwealth Coatings pragmatically, employing a case-by-case approach in preference to dogmatic rigidity." "We have not been quick to set aside the results of an arbitration because of an arbitrator's alleged failure to disclose information."' Ibid.)

74
e.g. Lucent Techs., Inc. v. Tatung Co., 379 F.3d 24 (2d Cir. 2006) (arbitrators' 'co-ownership of an airplane more than a decade ago is simply too insubstantial to require vacatur'); Toroyan v. Barrett, 495 F. Supp. 2d 346 (D.N.Y. 2007) (the endowment by the principal owners of one of the parties of a chair at Columbia University where the sole arbitrator taught was 'not sufficiently significant to warrant disclosure'); Transportes Coal Sea de Venez. C.A. v. SMT Shipmanagement & Transp. Ltd., 2007 U.S. Dist. LEXIS 1802 (S.D.N.Y. 2007) (hiring of a law firm in which the arbitrator's son had been a partner to represent one of the parties in a separate concurrent arbitration was too remote and attenuated to require vacation of the award for non-disclosure); Skyview Owners Corp. v. SEIU, Local 32B-J, 175 L.R.R.M. 3360 (S.D.N.Y 1004) (arbitrator's prior outside business relationship with a partner in the law firm representing the union was too insubstantial to require vacation of the award for non-disclosure); Jardine Matheson & Co. v. Saita Shipping, Ltd., 712 F. Supp. 423 (S. D.N.Y. 1989) (lease by a party's attorney of space in the office where the arbitrator worked shortly before he wrote the arbitration award was too tenuous to require vacation of the award). Courts in other circuits are in accord that the failure to disclose such insignificant relationships will not result in vacatur. See e.g. ANR Coal Co. v. Cogentrix of N.C., Inc., 173 F.3d 493 (4th Cir. 1999); Positive Software Solutions, Inc. v. New Century Mortgage Corporation, 476 F.3d 278, 281 (5th Cir. 2007) (en banc), cert. denied, 127 S. Ct. 2943 (2007); New Regency Prods., Inc. v. Nippon Herald Films, Inc., 2007 U.S. App. LEXIS 21070 (9th Cir. 4 September 2007)

75
Lucent Techs., Inc. v. Tatung Co., 379 F.3d at 28 (declining to vacate where information concerning the relationships had been made to the American Arbitration Association and could have been obtained there); Toroyan v. Barrett, 495 F. Supp. 2d 346 (D.N.Y. 2007) (declining to vacate for failure by the sole arbitrator, Professor Hans Smit, to disclose contributions made by the principal owners of one of the parties to the endowment of a chair at Columbia University when such contributions were a matter of public record); Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d 691 at 700 (2d Cir. 1978) (declining to vacate based on non-disclosure by chairman that he had frequently served with and been appointed chairman by the prevailing party's arbitrator when that information was available in the published awards of the SMA); Cook Industries, Inc. v. C. Itoh & Co. (America), Inc., 449 F.2d 106 (2d Cir. 1971) (declining to vacate for non-disclosure by the arbitrator that his employer, a large corn dealer, had extensive business dealings with the prevailing party when the losing party was also a corn dealer and knew of such dealings.); Garfield & Co. v. Wiest, 432 F.2d 849 at 854 (2d Cir. 1970) ('When parties have agreed to arbitration with full awareness that there will have been certain, almost necessary, dealings between a potential arbitrator and one of the opposing parties, disclosure of these dealings is not required by Commonwealth Coatings inasmuch as the parties are deemed to have waived any objections based on these dealings.'). Accord, Sanko S.S. Co. v. Cook Industries, Inc., 495 F.2d 1260 at 1265 (2d Cir. 1973) (remanding determination of whether the complaining party knew or should have known of relations between the arbitrator's employer and the prevailing party).

76
Lucent Techs., Inc. v. Tatung Co., 269 F. Supp. 2d 402 at 406 (D.N.Y. 2003), aff'd 379 F.3d 24 (Rakoff, J.). ('Moreover, even if (contrary to fact) Luening had failed to disclose his relationship with Lucent, the relationship itself would not compel "a reasonable person . . . to conclude that an arbitrator was partial to one party to the arbitration", the standard used in evaluating a motion to vacate pursuant to 9 U.S.C.A. § 10(a)(2)'); National Shipping Co. v. Transamerican S.S. Corp., 1993 AMC 684 1992 U.S. Dist. LEXIS 18725 (D.N.Y. 1992) ('Instead, the relationship itself, rather than mere non-disclosure, must yield a finding of evident partiality.').

77
For example in Toroyan v. Barrett, 495 F. Supp. 2d 346 (D.N.Y. 2007), the court said that, in determining whether disclosure was required, '[f]actors to consider include: (1) the financial interest the arbitrator has in the proceeding; (2) the directness of the alleged relationship between the arbitrator and a party to the arbitration; (3) and the timing of the relationship with respect to the arbitration proceeding'. Accord, Skyview Owners Corp. v. SEIU, Local 32B-J, 2004 U.S. Dist. LEXIS 19986, 17-24 (S.D.N.Y. 2004); Jardine Matheson & Co. v. Saita Shipping Ltd., 712 F Supp. 423 (S.D.N.Y. 1989).

78
379 F.3d at 31.

79
The closest the Second Circuit came was Sanko, where the court did not vacate but remanded to the district court.

80
492 F.3d 132 (2d Cir. 2007).

81
Ibid. at 134.

82
Ibid. at 135. In addition to being a wealthy businessman, Fabrikant graduated from Columbia Law School in 1968 and clerked for Justice Harlan, one of the dissenting justices in Commonwealth Coatings, <http://www.marinelog.com/DOCS/fabr.html>. He frequently serves as an arbitrator in maritime cases in New York.

83
Ibid.

84
Ibid.

85
Ibid.

86
Ibid.

87
Ibid.

88
Ibid.

89
Ibid.

90
Ibid. A clear explanation of the statutory basis for the obligation to disclose had been lacking. As the dissenting Justices complained, the Court in Commonwealth Coatings did not say where in the statute it found this obligation; 393 U.S. at 153 (Fortas, J. dissenting). One case in the Second Circuit described it as a requirement of 'federal common law'. Sun Refining, 761 F. Supp. 293 (S.D.N.Y. 1991), aff'd 948 F.2d 1277 (2d Cir. 1991). Another described it as a matter of 'fundamental fairness'; Reed & Martin, Inc. v. Westinghouse Electric Corp., 439 F.2d 1268 (2d Cir. 1971). The Court in Commonwealth Coatings did not say that the arbitrator's failure to disclose showed his 'evident partiality'. However, Justice Black seemed to imply this in his reference to the failure of the arbitrator to give the petitioner 'even an intimation' of his close financial relationship with the other party over many years. Applied Industrial now appears to have adopted this view.

91
492 F.3d at 138. There will be no further appeal in Applied Industrial, which has now been dismissed at the joint request of the parties. See Agreed Notice of Dismissal, Applied Industrial Materials Corp. v. Ovalar Marine Ticaret Ve Sanayi, A.S., 05 Civ. 10540 (RPP) (S.D.N.Y. 21 September 2007).

92
e.g. Toroyan v. Barrett 495 F.Supp.2d at 346 ('Where an arbitrator does not know of the potential conflicts, a court should not impute such knowledge, nor impose on the arbitrator a duty to investigate, as a relationship unknown to the arbitrator could not have affected the decision-making process.')

93
Al Harbi v. Citibank, N.A., 85 F.3d 680 at 683 (D.C. Cir. 1996), cert. denied 519 U.S. 981; Gianelli Money Purchase Plan & Trust v. ADM Investor Servs., Inc., 146 F.3d 1309 at 1313 (11th Cir. 1998).

94
20 F.3d 1043 (9th Cir. 1994).

95
2007 U.S. App. LEXIS 21070 (9th Cir. 4 September 2007).

96
Ibid. at * 24. The Fourth Circuit has not ruled on the question, but the Second and Ninth Circuits have found support for a duty to investigate in dicta in ANR Coal Co., Inc. v. Cogentrix of N.C., Inc. 173 F.3d 493 at 500.

97
See Lucent, 379 F.3d at 32 ('Tatung has not presented the "clear evidence of impropriety" we have held necessary before granting post-award discovery into potential arbitrator bias'); Andros, 579 F.2d at 702.

98
In Laker Airways, supra note 6, the court held that an arbitrator's partiality could not be questioned merely because he came from the same chambers as counsel for one of the parties.

99
We suspected that we had made superior catering arrangements.

100
See G. Nicholas & C. Partasides, supra note 18 at 13-14 and report of Decision 18 (dated 21 October 2005), ibid. at 37.

101
Ibid.

102
Among other things, it appears that (i) during the meeting, 'live issues in the arbitration were discussed', (ii) during an exchange about the meeting, the arbitrator had made comments casting aspersions on the integrity of counsel for the defendant; and (iii) the arbitrator had required, over the objection of counsel for the defendant, that an exchange between counsel be deleted from the transcript. Ibid.

103
Ibid. at 15.

104
See the transcript of the hearing before Hon. Jed S. Rakoff, Transammonia, Inc. v. Stolt Nielsen S.A., 07 CV 916 (JSR) (S.D.N.Y. 20 March 2007) ('Transcript').

105
The arbitration between Transammonia and Stolt was one of many proceedings against parcel tanker owners brought in the wake of the US Department of Justice's investigation of antitrust conduct in the industry and the guilty pleas that emerged from that investigation. See e.g. JLM Indus., Inc. v. Stolt-Nielsen S.A., 387 F.3d 163 (dismissing class action litigation in favor of arbitration); Animalfeeds Int't Corp. v. Stolt Nielsen, S.A., 435 F. Supp. 2d 382 (vacating a partial final arbitration award permitting class action arbitration of the claims).

106
See Odfjell ASA v. Celanese AG, 328 F.Supp. 2d 505 (S.D.N.Y. 2004).

107
Transcript at 8, line 15-9, line 2. The court, per Rakoff, J., refused to enforce an order by the arbitral tribunal requiring Stolt's former general counsel to testify about certain matters, holding that Stolt had not been given an adequate opportunity to assert objections based on attorney-client privilege. See Odfjell ASA v. Celanese AG, 380 F. Supp. 2d 297 (S.D.N.Y. 2004).

108
Transcript at 9, lines 8-21. Judge Rakoff also rejected the suggestion that Judge Gibbons was biased because the hearings involving Stolt had been 'contentious'. Transcript at 11, lines 9-13 and 14-25.

109
Stolt alluded, at one point, to the possible benefit of having a chairman who had 'not been preexposed to this case'. But Stolt's counsel then went on to extol the benefits of Professor Park's experience in the prior arbitration. Transcript at 20, lines 14-25.

110
C. Reymond, 'Des connaissances personnelles de l'arbitre à son information privilégiée' Rev. arb. 1991.3 at 11-12. ('Yet, the appointment of the same arbitrator in several related cases creates a definite risk.   For the fact that one of the arbitrators, on account of his involvement in another arbitration, has at his disposal a piece of privileged information relating to fact or law creates an imbalance within the arbitral tribunal.  Either the arbitrator, out of his respect for the adversarial nature of the proceedings, will not make known the information obtained or reflections made in the other case, and risks finding himself in a difficult position when it comes to the deliberations, for he will not be able to share them with the other arbitrators, even though such information and reflections have perhaps determined his opinion. Or he will share with his colleagues some or all of the information that he alone possesses, at the risk of causing the arbitral tribunal to issue a decision influenced by elements of facts or legal considerations that have not been discussed by the parties.' (translated from the French))

111
H.A. Grigera Naón, 'Factors to Consider in Choosing an Efficient Arbitrator' in A.J. van den Berg, ed., Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, ICCA Congress Series No. 9 (The Hague: Kluwer Law International, 1999) 286 at 302.

112
Transcript at 24, line 24-25, line 7.

113
See e.g. Rule 53 (d) of the Local Rules of the United States District Courts for the Southern and Eastern Districts of New York.

114
For example, to the extent that an arbitral institution uses a higher threshold for removal of arbitrators, its awards may be vulnerable to challenge under the 'real possibility' test applied by the English courts. While English courts will enforce ICC's rules on disclosure, they will not treat as final ICC's determination of a challenge on this basis; AT&T, [2000] 2 Lloyd's Rep. at 137. In the US, the majority of courts will not enforce arbitral institution rules on disclosure or bias and will not vacate awards for the breach of those rules; e.g. ANR Coal Co., Inc. v. Cogentrix of N.C., Inc., 173 F.3d 493 at 499 (4th Cir. 1999); Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 at 680-81 (7th Cir. 1983).