V & N v K

DMC/Arbn/26/01

England

V & N v K

English Commercial Court: Calver J: [2025] EWHC 1523 (Comm): 19 June 2025

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2025/1523.html

Chirag Karia KC and Jacob Turner (instructed by Zaiwalla & Co) for V&N

Marcus Mander and James Bailey (instructed by Reed Smith) for K

ARBITRATION: SHIP SALE & PURCHASE CONTRACT: RESPONDENT BUYER DID NOT PARTICIPATE IN ARBITRATION HEARING: FINAL AWARD MADE BY THREE-PERSON TRIBUNAL IN SELLERS’ FAVOUR: APPLICATION TO CHALLENGE THE AWARD UNDER SECTION 68 OF THE ARBITRATION ACT 1996 FOR A SERIOUS IRREGULARITY: APPLICATION TO CHALLENGE THE AWARD UNDER SECTION 67 OF THE ARBITRATION ACT 1996 FOR LACK OF JURISDICTION: APPARENT BIAS OF ARBITRATOR: MARITIME MARKET UNDERSTANDING OF REPEAT APPOINTMENT AS ARBITRATOR

DMC Rating: Confirmed

Summary

The Court dismissed a challenge to an arbitration award, framed as a challenge for procedural irregularity and/or lack of jurisdiction. The only ground maintained at the hearing was that of apparent bias by one arbitrator, by reason of his repeat appointment by one party in previous arbitrations and (it was alleged) the arbitrator’s concealment of those appointments. The Court was very critical of the challenging party, who raised various other grounds in the claim but did not pursue them at the hearing. The Court held that the challenge had no merit and was forthright in supporting the ‘impeccable’ conduct of the tribunal. The Court reflected this in an unusually high award of costs against the challenging party.

Case note contributed by Matthew McGhee, Barrister at Twenty Essex

Background

K commenced arbitration against V and N, alleging that K was entitled to terminate an agreement to sell a vessel to V and N by reason of sanctions subsequently imposed on V. The arbitration was commenced under the Terms of the London Maritime Arbitrators Association. Both parties appointed an arbitrator, with the two arbitrators appointing a third arbitrator to constitute the Tribunal fully. All of the arbitrators were KCs.

V and N served Defence and Counterclaim Submissions in the arbitration, but later alleged that the Tribunal had repudiated their agreements with the parties – to conduct the arbitration in accordance with the Arbitration Act 1996 – which repudiation V and N had purported to accept. V and N therefore considered the engagement of the Tribunal to be terminated and took no further part in the arbitration. K proceeded to a final hearing, following which K’s claim was upheld.

V and N brought challenges under ss. 67 (substantive jurisdiction) and 68 (serious irregularity) of the Arbitration Act 1996. Six grounds were identified in the claim and the evidence, but only one ground was relied on at the hearing.

The ground that was relied on was that one of the three arbitrators had been appointed by K’s solicitors 14 times in five years, out of a total of 99 arbitrator appointments. V and N alleged that this gave rise to an apparent bias on the part of K’s arbitrator.

Judgment

The Judge made two initial observations.

First, the abandonment of the five other grounds in the face of questioning by the Court, but not before, was “troubling”. This was particularly so where V and N had previously relied on the cumulative unfairness in those five grounds as relevant “context” to the ground based on the arbitrator’s repeat appointments. Where those grounds were abandoned, the Judge held that the ‘context’ undermined – rather than amplified – the case of apparent bias.

Second, the abandonment of the five other grounds was held by the Judge to extinguish the s.67 challenge.

The Judge then proceeded to consider in detail the numerous complaints that V and N had made about the conduct of the arbitration proceedings. The Judge variously commented that V and N’s account was “wrong” and “an unjustified and grossly misleading summary”, or constituted a complaint that was “without merit and seeks to re-write the relevant events”. The Judge held that V and N’s complaint as to the Tribunal’s conduct of the proceedings “was purely tactical, had and has no merit whatsoever, and indeed should never have been made”.

The remaining issues in dispute were whether one of the arbitrators had been evasive or inconsistent in their disclosure to the parties of their connections with  K’s solicitors, and whether the connection with K’s solicitors was such as would lead a fair-minded and informed observer to conclude that there was a real possibility of bias.

The Judge considered the questions that the solicitors for V and N had put to the arbitrator in question. The Judge held that the first question was broadly framed, in general terms, and that it was answered by the arbitrator. Indeed, it was answered to the apparent satisfaction of V and N’s solicitors at the time. The second request was also responded to, likewise a third. The Judge explained carefully how the requests were on each occasion made and answered, and apparently understood by all relevant persons. Insofar as there was any potential inconsistency, it was explicable – or at least not clear evidence of the lack of candour alleged by V and N.

That therefore only left the question of whether the arbitrator ought to have disclosed his repeat appointments sooner, perhaps volunteering them rather than doing so only in response to a question.

The Judge held that the nature of London maritime arbitration, particularly under the LMAA Terms, was such that there was no need for this voluntary disclosure. Significant attention was paid to the LMAA Advice on Ethics, which the Judge concluded evidenced that there was “in the London maritime market, a custom or practice of the appointment of the same arbitrator in different cases such that disclosure of those appointments is not required (absent some other special feature(s) making disclosure in the particular case necessary).” This was in part because there was a relatively limited pool of suitably qualified and experienced arbitrators. There was therefore no apparent bias in the arbitrator’s non-disclosure.

Comment

Although arbitrating parties are now broadly aware of the potential for repeat appointments to give rise to apparent bias on the part of the appointed arbitrator, this judgment explains that this rule is not invariable. In some specialist fields, such as maritime, commodities and insurance disputes, the pool of suitable arbitrators is such that the market understanding is that repeat appointments do take place and are not – of themselves – cause for concern.

The Judge paid close attention to the terms of the LMAA’s Advice on Ethics, which was found to be evidence of the custom in the maritime market. The Judge also remarked that the Advice was periodically updated. It is reasonable to expect that a shift in the stance of the Advice could be relied on as a shift in the perspective of the market. So this decision should be seen as being reflective of the point in time that it was concerned with, but not necessarily representing a position that will stand unchanged into the future.

The Judge was very critical of the conduct of V and N, who sought to challenge the award. The Judge subjected the original grounds of their claim, and their previous correspondence with the Tribunal, to close scrutiny. The provocative approach of V and N before K’s arbitrator, and their subsequent challenge based on numerous grounds were relied on by the Judge when assessing the claim which was advanced.

V and N’s conduct certainly informed the Judge’s approach to costs, which was the subject of a later judgment: [2025] EWHC 1704 (Comm). The Judge awarded costs to K, who successfully resisted the challenge. K was awarded its costs in full, with 70% of those costs to be assessed on the indemnity basis. The Judge proceeded summarily to assess those costs, which were claimed at £261,000. The Judge awarded costs of £245,000. This is an unusually high figure for a summary assessment, even allowing for the indemnity aspect of the costs decision.