Complaint to SRA forces arbitrator to resign

Henshaw: Application would likely have failed

The claimant in an arbitration forced out the solicitor arbitrator who it argued had provided a misleading CV by complaining to the Solicitors Regulation Authority (SRA), the High Court has heard.

The unnamed arbitrator, known only in Mr Justice Henshaw’s ruling as X, initially resisted an attempt to remove them on the ground that they had not been fair in an interim hearing, but resigned their appointment because the complaint put them in an untenable position.

He ruled that the attempt to remove X under section 24 of the Arbitration Act 1996 would likely have failed.

Although X’s resignation made the hearing moot, C pressed on to claim its costs, on the basis that the defendant (D) and X contested C’s prior challenge before the London Court of International Arbitration (LCIA) and the section 24 application itself.

The parties spent £256,000 in respect of the section 24 application, against the value of C’s monetary claim in the underlying arbitration of €166,000, albeit that C made non-monetary claims of intellectual property rights.

C and D are both companies which carry on activities with philanthropic aims, the judge recounted. The dispute concerned an app designed by C, and D’s attempt to terminate the agreement between them.

C applied to the LCIA to appoint an arbitrator on an expedited basis, and it appointed X. X’s CV was provided to the parties, stating they had 35 years of experience as counsel, solicitor and mediator in commercial disputes, including LCIA proceedings.

X’s evidence was that they made clear to the LCIA that they had not been previously appointed as an arbitrator.

After a hearing, X dismissed C’s request for interim measures in relation to IP rights. C filed its first challenge with the LCIA court, complaining that X had failed to treat the parties fairly and impartially in their decision and the procedure leading up to it, adding that in part this might have arisen due to X’s lack of experience as an arbitrator.

C said it then discovered that X promoted themself online as a mediator using another CV which included a list of “examples of cases mediated” that was identical to the list of cases of X’s experience as “counsel or arbitrator” in their arbitration CV.

C said it took this as strong evidence that X did not have the experience as arbitrator – or, probably, as counsel in arbitration – claimed in the arbitration CV at all, and that the CV provided to the LCIA was deliberately misleading.

C filed a second challenge, alleging that X’s response to the first challenge – which they refuted – gave rise to justifiable doubts as to their independence and impartiality and, further, that X had made an allegedly false or misleading statement regarding their experience on the CV.

The former vice-president of the LCIA court, Professor John Uff QC, rejected both challenges, finding that C was already on notice of X’s lack of experience from the date of their appointment or shortly thereafter.

C went on to make the section 24 application to the High Court. X instructed solicitors and resisted this, until C made its referral to the SRA, which it said it felt obliged to do under the new reporting rule in the Standards & Regulations that came into force last November.

X resigned, telling the High Court that their position was untenable for several reasons, including the likelihood of having to step aside during any SRA investigation, and the antagonism C clearly felt.

In a letter to C following the referral, X’s solicitors accused C and its lawyers of trying to “overcome the deficiencies in C’s case by resorting to a strategy of overt aggression, intimidation and antagonism”.

It continued: “The obvious aim has been to bully the arbitrator into resigning in circumstances where the facts and authorities are entirely against such an outcome. This is unbecoming and is not an approach that should have been adopted.”

Henshaw J said “costs awards against arbitrators are extremely rare” and rejected C’s argument that it was the successful party.

“The mere fact that X retired as arbitrator clearly cannot of itself mean that C should be treated as the successful party, as against X and D, for costs purposes.”

The evidence indicated that X retired in the light of C’s referral to the SRA, and not because of the section 24 application.

The judge said there were “cogent reasons” for X stepping down following the SRA referral.

“An SRA investigation could reasonably be expected to take a year or more to resolve, and to be demanding and stressful in the meantime.

“There could be no assurance that this court’s decision on the section 24 application would resolve the matter… Sitting as arbitrator during an ongoing SRA investigation could also have created a reasonable perception of bias.

“Moreover, the terms in which the SRA referral here was expressed are bound to have augmented the perception that C was actively hostile to X.”

Henshaw J found the tone of the referral to be “more that of a direct attack on X than a neutral report”, and suggested it was also misleading in some respects.

For example, the claim that X had effectively acknowledged using a false CV in order to try to attract more arbitration appointments was “a highly tendentious and unfair characterisation of X’s evidence”.

The judge said he considered it likely that C would have lost the section 24 application: “X’s evidence is that they told the LCIA at the outset that they had no prior experience sitting as arbitrator. C has put forward no real basis on which that evidence could be challenged…

“Nor can C have been misled in any relevant respect by X’s CV, for the simple reason that following the expedited appointment of a tribunal (at C’s request), X’s lack of experience as an arbitrator would not have provided any ground on which C could have challenged X’s appointment.”

In any event, any cause for complaint on C’s part about the contents of X’s CV “would not have provided any justifiable doubts about X’s impartiality”, caused a substantial injustice or impinge on the conduct of the proceedings.

Both defendants were represented on a pro bono basis, apart from X’s junior counsel, and Henshaw J considered make a pro bono costs order, but decided against doing so given that it would mean “a large payment from one philanthropic enterprise (C) to others”.

But he ordered C to pay the costs of X’s junior counsel.

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