ASM Shipping v. Harris (June 2007)

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ASM Shipping Ltd of India v. Bruce Harris & Others (2007)
English High Court: Andrew Smith J: [2007] EWHC 1513 (Comm); 28 June 2007
Sarosh Zaiwalla & Kumarlo Menns, instructed by Zaiwalla & Co, for ASM Shipping (Owners)
Simon Croall, instructed by Waterson Hicks, for TTMI Shipping Ltd (Charterers)
Mr Bruce Harris and his fellow arbitrator, Mr A G Scott, were not represented and did not appear

In the case, the court held that there was no invariable rule, nor was it necessarily the case, that where one member of a tribunal was tainted by apparent bias the whole tribunal was affected second-hand by apparent bias, and therefore should recuse themselves, or should be excluded, from the proceedings. Further, the applicant was prevented by s.73 of the Arbitration Act 1996 from raising other objections to the remaining members of the tribunal continuing to act, since - by not withdrawing from them ‘forthwith’ – it had ‘continued to take part in the proceedings’.

Note: a note on the earlier case on the issue of apparent bias between the Owners and Charterers can be accessed by clicking here

DMC Category Rating: Confirmed and Developed

ASM Shipping made an application under section 24 of the Arbitration Act 1996 for an order for the removal of the two remaining arbitrators in a reference of a dispute between them as owners, and TTMI Shipping Ltd of England, as charterers. The application is opposed by the charterers. The two arbitrators, Mr. Bruce Harris and Mr. A G Scott, were parties to the application but did not appear and were not represented before the judge.

By a charterparty on an amended Exxonvoy ’84 form entered into on 11 December 2000 the owners chartered the vessel "Amer Energy" to the charterers for a single voyage from 1/2 safe ports/places Arabian Gulf to 1/2 safe ports/places Red Sea or Egyptian Mediterranean to carry a cargo of gasoil. The charterparty contained a clause providing for arbitration "before a board of three persons consisting of one arbitrator to be approved by owner, one by charterer and one by the two so chosen". The parties chose London as the venue.

The charterers began the arbitration in March 2001 and the parties appointed Mr. Harris and Mr. Scott. In the reference the owners claimed freight and demurrage, and the charterers claimed damages in excess of US$1million, alleging that the vessel arrived late at the loadport, Kuwait, as a result of the owners’ various breaches of the charterparty. 

On 26 April 2002 the arbitrators made an award in the owners’ favour in respect of their freight claim in the sum of US$640,100 (plus interest and costs). The parties agreed that US$707,500 should be paid into an escrow account pending determination of the remaining claims on the arbitration.

On 4 August 2004 Mr. Harris and Mr. Scott appointed Mr. Duncan Matthews Q.C. as the third arbitrator. 

n October 2004 the three arbitrators conducted a hearing of what were called preliminary issues but effectively were the pleaded issues relating to liability for the charterers’ claim. In the course of the hearing, in circumstances which are fully described in a judgment of Morison J. [2005] EWHC 2238 (Comm), the question arose whether Mr. Matthews should recuse himself, but he did not do so. 

On 23 December 2004 the tribunal of three arbitrators published their interim award on the preliminary issues. It was substantially in the charterers’ favour.

In January 2005 the owners challenged the award under section 68 of the 1996 Act. Their only complaint relevant for present purposes was that Mr. Matthews should have recused himself from the reference because the owners’ principal witness at the hearing of the preliminary issues was a broker called Mr. Petros Moustakas and on a previous occasion Mr. Matthews, instructed by Waterson Hicks, who acted for the charterers on this application and in the arbitration that gave rise to it, had appeared as an advocate on an application under section 43 of the 1996 Act for disclosure of documents by Mr. Moustakas, who had apparently been involved in broking a charter the terms of which were in dispute.

Mr. Matthews disclosed this matter at the hearing of preliminary issues after Mr. Moustakas had given evidence, but stated, "I am satisfied that there is no basis for any objection to my continuing and considerable basis for objecting to my ceasing to do so. I consider it would be wrong in principle for me to recuse myself and the Owners dealing fairly with the situation should now acknowledge the same". 

On 17 October 2005 Morison J. rejected the section 68 application. He held that Mr. Matthews should have recused himself from the reference but that "by taking up the award, at the very least" the owners had lost any right that they might have had to object to the interim award. After the judgment of Morison J., Mr. Matthews resigned from the reference on 24 November 2005. He was not removed by any order of the court. 

In relation to the s.68 application, Mr. Matthews had, on 21 March 2005, written to the court explaining his understanding of the matters giving rise to the application and, on 29 March 2005, Mr. Harris, in a letter to the court which Mr. Scott endorsed, confirmed what Mr. Matthews wrote so far as he knew it, and said, "When Mr. Matthews first became aware of the potential difficulty … he discussed it with us and it was agreed that he should raise it with the parties. As the point developed it was discussed further. At all relevant stages we were in total agreement that there was no reason for Mr. Matthews to recuse himself and I remain of that view". Thus, the two arbitrators engaged in discussions with Mr. Matthews about the implications for his position of Mr. Moustakas being a witness, and took a view about Mr. Matthews’ continued involvement in the arbitration that was rejected by Morison J. 

The owners sought permission to appeal from the decision of Morison J. dismissing their section 68 application. Morison J. refused the application and (despite section 68(4) of the 1996 Act) the owners applied to the Court of Appeal. 

On 29 December 2005 the owners, by their solicitors, expressed their view that the two arbitrators should not continue with the reference "as they were part of the tribunal of which one member was found by the court to have had apparent bias". On 16 March 2006, the owners made the present application to remove the remaining two arbitrators, but all concerned agreed that no steps would be taken in relation to the application until the decision of the Court of Appeal on the s.68 application was known. The Court of Appeal dismissed the appeal on 16 October 2006. 

The judge defined the issues with which he had to deal as follows: 
i) Do circumstances exist that give rise to justifiable doubts as to the impartiality of the two arbitrators?
ii) Are the owners precluded from raising complaints about the two arbitrators continuing or from having the two arbitrators removed, because they took part in the proceedings or continued to do so without making their objection timeously.

(The judge referred simply to "the two arbitrators" because he found no reason to distinguish between the position of Mr. Harris and that of Mr. Scott. Either both were to be removed or neither of them was to be.)

Section 24(1) of the 1996 Act allows a party to an arbitration to apply to the court for the removal of an arbitrator on four grounds, the relevant one in this case being that stated in sub-section (a), which reads: 

"A party to arbitral proceedings may … apply to the court to remove an arbitrator on any of the following grounds –
(a) that circumstances exist that give rise to justifiable doubts as to his impartiality; 
… and that substantial injustice has been or will be caused to the applicant."

The judge held that he was did not need to consider the question of substantial injustice separately from the question of justifiable doubts about impartiality. Like Colman J. in Norbrook Laboratories Ltd v A Tank [2006] EWHC 1055 (Comm), he agreed with paragraph 39(3) of the judgment of Morison J. in the s.68 application, in which he said:

"In my judgment, if 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 …that even if that conclusion was reached the court must then inquire as to whether substantial injustice has been caused."

The principles to be applied were, the judge held, set out in the judgment of Moore-Bick J in the case of Rustal Trading Ltd. v Gill & Duffus SA, [2000] 1 Lloyd’s Reports 14, where he said (at p.18):

"Perhaps the two most important principles to bear in mind in the present case are, first, that the court must make its judgment on the basis of the circumstances as it finds them to exist and is not concerned with [whether] the arbitrator did or did not in fact allow his mind to be affected by them; secondly, the circumstances must be such as objectively to justify doubts as to the arbitrator’s impartiality".

As regards issue (i), the owners had argued that when one member of a tribunal is tainted by (actual or apparent) bias, the whole tribunal and each member of it is tainted. It followed that there would be justifiable doubts about the impartiality of each member so that the matter had to continue in front of a tribunal composed entirely of new members. 

In support of this contention, the owners cited R v Sussex JJ ex. P McCarthy, [1924] 1 KB 256 and R v Bow Street Metropolitan Stipendiary Magistrate ex p.Pinochet Ugatre (No 2), [2000] AC 119, in both of which it was directed that there be a re-hearing in front of a freshly constituted panel. Owners also referred to the judgment ofthe Court of Appeal given by Lord Phillips M.R. in Re Medicaments and Related Classes of Goods (No 2), [2001] WLR 700. 

The judge was, however, "unable to accept that there is an invariable rule, or it is necessarily the case, that where one member of a tribunal is tainted by apparent bias the whole tribunal is affected second-hand by apparent bias, and therefore should recuse themselves, or should be excluded, from the proceedings… I reject the suggestion that it follows from the authorities cited by [the owners] or it follows as a matter of law from the finding of apparent bias on the part of Mr. Matthews, that the whole of the original arbitral tribunal and each member of it are tainted by apparent bias. The enquiry depends upon the particular facts of the case.

On the facts of this case, "any objection to the two arbitrators continuing with the reference because Mr. Moustakas will be a witness would not be on the basis of any involvement that they themselves have had with Mr. Moustakas. It could only be made on the basis that there was a risk that they would be other than impartial because they have been influenced by discussions that they had with Mr. Matthews. It seems to me that this suggestion would be fanciful. The question is one of apparent bias, not actual bias, but it is to be considered against the background that Mr. Matthews stated during the hearing that he recalled nothing relating to the previous case that gave rise to any doubt in his mind as to the propriety of Mr. Moustakas’ conduct, and there is no suggestion that that was not the case."

That being so, the judge could not accept "that a fair minded and informed observer would conclude that there was any real possibility that there have been discussions between Mr. Matthews and the two arbitrators that might improperly influence their assessment of Mr. Moustakas’ evidence or detract from their impartiality."

As to issue (ii ), the judge, having dealt with the issue of principle, then considered other grounds advanced by the owners for the removal of the two remaining arbitrators, based on events that had occurred prior to 29 December 2005. The judge held that, as the owners were well aware of these matters before they ‘took the point’ on 29 December 2005, they had lost the right to object by reason of s.73 of the Arbitration Act. This provides: 

"(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith…, any objection –

(b) that the proceedings have been improperly conducted,

(d) that there has been any other irregularity affecting the tribunal or the proceedings,

he may not raise that objection later, before the tribunal or the court, unless he shows 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 the objection." 

In determining whether the owners had "continued to take part in the proceedings" before they raised objection on 29 December 2005, the judge applied the reasoning of Moore-Bick J in Rustal (see above) where he said: 

"Once arbitration proceedings have been commenced there may well be many periods during which no formal step is required of one or other party, but it would not be right as a matter of ordinary usage to say that during such periods either party is not taking part in the proceedings. I think the same can be said of the period between the conclusion of the hearing and the publication of the award. Nothing further may be required of either of them at that stage, but that does not mean that they have in any real sense ceased to take part in the proceedings. In my judgment, unless a party make it clear that he is withdrawing from the proceedings, he continues to take part in them until they reach their conclusion, normally in the publication of a final award." 

In this case, the judge held that the owners had continued to take part in the proceedings "simply because they did not withdraw from them." He explained that "it is not sufficient for the purpose of section 73 that a party indicates that an objection might be made. He must make his objection. Similarly…an objection under section 73 must be stated in properly specific terms." 

The judge held finally that there had been nothing in the arbitrators’ conduct after objection was taken in December 2005, that gave rise to justifiable concerns about their impartiality. In consequence, the court had no grounds for removing them under s.24.

The application failed.

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