Barings Plc & Ors v Co Lybrand & Ors

Factual and Procedural Background

The appeal arises from an arbitration dispute involving two appellants and one respondent, heard initially in the Queen's Bench Division, Commercial Court, before a judge. The core issue concerns allegations of bias and misconduct against an arbitrator appointed in the arbitration proceedings. The appellants challenged the arbitrator's impartiality based on his non-executive directorship of a competitor company, which was not disclosed prior to appointment, and alleged procedural breaches of the arbitration agreement and ICC Rules. The appeal was brought before the Court of Appeal (Civil Division) to review the lower court's decision rejecting these allegations and dismissing the appellants' challenge.

Legal Issues Presented

1. What is the appropriate legal test for apparent or unconscious bias in arbitrators under English law, and whether it differs from that applied to judges and tribunals in the public administration of justice.
2. Whether the non-disclosure of the arbitrator's non-executive directorship constituted bias or gave rise to a real danger or reasonable suspicion of bias.
3. Whether the arbitrator's conduct amounted to misconduct or procedural mishap under section 23 of the Arbitration Act 1950, justifying removal or setting aside of awards.
4. The extent to which the ICC Rules, particularly Article 2.7 and related provisions, impose obligations of independence and disclosure on arbitrators, and the scope of judicial review of ICC Court decisions.

Arguments of the Parties

Appellants' Arguments

• The arbitrator's non-executive directorship of a competitor company created a real danger or reasonable suspicion of bias, warranting removal or setting aside of awards.
• The arbitrator failed to comply with Article 2.7 of the ICC Rules by not disclosing his connection, constituting misconduct or procedural mishap under the Arbitration Act 1950.
• The finality provision in the ICC Rules should not preclude English courts from reviewing the ICC Court's decision dismissing their complaint.
• Concerns about confidentiality breaches due to the arbitrator's connection to a competitor justified their objection to his appointment.
• The test for bias in arbitrations should be lower (reasonable suspicion) than the "real danger" test applied to courts, especially in international arbitration contexts.

Respondent's Arguments

• The "real danger" test from the Gough decision should apply universally, including arbitrators, and no bias was established under this objective standard.
• The non-disclosure was inadvertent and did not affect the arbitrator's independence or impartiality.
• The arbitrator's role as a non-executive director was limited and incidental, unlikely to influence his conduct.
• The ICC Rules' finality clause does not bar the English courts' supervisory jurisdiction under the Arbitration Act 1950.
• There was no evidence of misconduct or procedural mishap sufficient to warrant removal or setting aside of awards.
• The confidentiality concerns are addressed by the arbitrator's duty of confidence, not by the independence requirement under ICC Rules.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R. v. Gough [1993] AC 646	Established the "real danger" test for apparent bias applicable universally to judges, tribunals, and arbitrators.	The court reaffirmed the binding nature of this test for arbitrators and rejected calls for a lower threshold in arbitration cases.
Locabail (UK) Ltd v Bayfield Properties Ltd	Discussed alternative tests for bias, including reasonable suspicion or apprehension.	Referenced to contrast approaches in other jurisdictions and in support of the real danger test's applicability.
Laker Airways Inc v FLS Aerospace Limited [1999] 2 Lloyds Rep 45	Application of the Gough real danger test in an arbitration context.	Supported the application of the Gough test to arbitrators in English law, reinforcing consistency.
R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256	Principle that justice must not only be done but must be seen to be done.	Underpinned the court's emphasis on objective standards for bias and the importance of public confidence.
Ex parte Dallaglio [1994] 1 WLR 148	Clarified the nature of apparent bias and unconscious bias in judicial and arbitral contexts.	Guided the court's understanding that the appearance of bias is examined with regard to real danger, not mere suspicion.
Margulies Brothers Limited v Dafnis Thomaides & Co (UK) Limited [1958] 1 Lloyds Rep 250	Defined misconduct of an arbitrator to include non-compliance with arbitration agreement terms.	Supported the court's analysis of alleged breaches of ICC Rules as potential misconduct.
R -v- Camborne Justices ex parte Pearce [1955] 1 QB 41	Balance between justice being done and justice appearing to be done.	Used to support the court's reasoning that the real danger test balances appearance and substance effectively.
The "Elissar" [1984] 2 Lloyd's LR 84; Bremer Handelsgesellschaft -v- Ets Soules et Cie [1985] 1 Lloyd's LR 160; Tracomin S.A. -v- Gibbs [1985] 1 Lloyd's LR 586	Consideration of bias and misconduct in arbitration cases prior to Gough.	Reviewed as part of the historical context for the development of the bias test in arbitration.

Court's Reasoning and Analysis

The court began by reaffirming the binding nature of the "real danger" test from the Gough decision as the appropriate standard for assessing apparent or unconscious bias in arbitrators under English law. It rejected the appellants' argument for a lower threshold test (reasonable suspicion) in arbitration cases, emphasizing the public interest in the integrity of justice and the need for consistency across judicial and arbitral decision-makers.

The court carefully examined the facts surrounding the arbitrator's non-executive directorship of a competitor company. It found no objective basis to conclude there was a real danger of bias, noting the arbitrator's experience, limited involvement with the competitor, lack of knowledge of relevant projects during appointment, and his readiness to resign when challenged. The non-disclosure was deemed an innocent mistake insufficient to establish bias or affect independence under ICC Rules.

Regarding misconduct, the court interpreted section 23 of the Arbitration Act 1950 as granting discretion to remove an arbitrator or set aside awards if misconduct or procedural mishap is established. It held that non-compliance with ICC Rules, specifically Article 2.7 on independence, could constitute misconduct if proven. However, the court found no breach of these rules on the facts, and the ICC Court's finality provision did not exclude judicial review under the Act.

The court distinguished between independence and impartiality, noting that the ICC Rules focus on independence and do not explicitly require disclosure of all possible biases. It concluded that the appellants' confidentiality concerns, while understandable, relate to duties of confidence rather than independence or impartiality under the ICC Rules. The arbitrator's conduct did not demonstrate any breach of confidence or prejudice.

Finally, the court considered whether the procedural mishap of non-disclosure justified removal or setting aside awards. It concluded that the appellants failed to show any prejudice or injustice warranting such measures, especially given the advanced stage of arbitration and the costs already incurred.

Holding and Implications

The Court of Appeal DISMISSED THE APPEAL.

The court held that the "real danger" test for bias applies equally to arbitrators and judges, and no real danger or reasonable suspicion of bias was established against the arbitrator. The inadvertent non-disclosure of the arbitrator's non-executive directorship did not amount to misconduct or procedural mishap sufficient to justify removal or setting aside of awards under section 23 of the Arbitration Act 1950. The ICC Rules' finality provision does not bar the English courts' supervisory jurisdiction. The decision preserves the integrity of arbitration awards and reinforces the application of established legal principles to arbitrations governed by English law. No new precedent was set beyond affirming the applicability of the Gough test and the court's supervisory role.