Arbitration Independence and Bias: Testing the Limits

• Author: Graeme Mew
• Pages: 129-148

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chapter five

Arbitration Independence and Bias:

Testing the Limits

GrAEmE mEW

A. INTRODUCTION

This chapter focuses on challenges to arbitral awards based on

allegations of bias or procedural breaches said to be of sucient

magnitude to render the resulting awards unfair.

Notwithstanding the overarching demand for fairness and

equal treatment of the parties to an arbitration, there is as a prac-

tical matter a degree of tolerance for imperfections in the arbitral

process, whether as a result of perceived bias or failure to adhere

to agreed-upon procedures. This reality is considered in the fol-

lowing sections through an analysis of a number of cases, focus-

ing on the three introduced below.

In Jacob Securities Inc v Typhoon Capital BV, an award was chal-

lenged because it was alleged that an arbitrator’s independence

had been compromised by his failure to disclose that his former

law rm had acted for the underwriters of and for a prospective in-

vestor in a project that was the subject of a commercial arbitration.1

1 2016 ONSC 604 [Typhoon Capital]. The author of this decision is the author

of this chapter. Nothing in this chapter is intended to analyze or explain

this court decision.

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Even if a particular arbitrator has no apparent conict of inter-

est or bias, if an arbitral institute with appointing authority is in-

suciently independent of the parties, the fairness of the arbitral

process itself could be compromised. A decision of the German

Federal Court of Justice, the Bundesgerichtshof, in a long-running

dispute between Claudia Pechstein, a German speed skater, and

the International Skating Union over an antidoping rule viola-

tion addressed concerns arising from how arbitrators are appoint-

ed and by whom to cases heard by a sports arbitral institution, the

Court of Arbitration for Sport.2

In Popack v Lipszyc, the tribunal — a rabbinical court — met ex

parte with a rabbi who had been the arbitrator in a previous at-

tempted arbitration between the parties.3 One of the parties moved

to have the award set aside. The application judge agreed that the

ex parte meeting without notice to the parties had breached the

procedure that the parties had agreed upon but concluded that

she would not set aside the award despite the procedural error by

the panel because the error had not aected the reliability of the

result, fairness, or appearance of the fairness of the process. Her

decision was armed by the Court of Appeal.

Also discussed are a number of English cases that illustrate

where the line is drawn between errors made by arbitrators that

do not render the process as a whole unfair and errors that do.

B. INDEPENDENCE AND BIAS GENERALLY

It is trite to say than an arbitrator should be independent of the

parties and act impartially.4 Arbitrators exercise a function that

2 Pechstein/International Skating Union, 7 June 2016. The decision in Ger-

man can be accessed, online: http://juris.bundesgerichtshof.de/cgi-bin/

rechtsprechung/document.py?Gericht=bgh&Art=pm&Datum=2016&Sort=

3&anz=97&pos=0&nr=75021&linked=urt&Blank=1&le=dokument.pdf. An

English translation is online: www.tas-cas.org/leadmin/user_upload/

Pechstein___ISU_translation_ENG_nal.pdf.

3 2016 ONCA 135, a’g 2015 ONSC 3460.

4 While both domestic and international arbitration laws in Canada require

arbitrators to be independent of the parties and to act impartially re-