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09 April 2020
The constitution of an arbitral tribunal and the appointment of an arbitrator are two critical decisions that parties will have to make in an arbitration. Parties and their counsel typically spend considerable resources conducting due diligence to select the appropriate appointee and review the nomination of other tribunal members.
However, this important process can be frustrated if arbitrators fail to disclose information that could affect their independence and impartiality to adjudicate the underlying dispute. Such an omission could compromise the entire arbitration process as an improperly constituted tribunal will serve as a ground to have the entire award set aside and resist its enforcement in many jurisdictions, including France.(1) To prevent this problem, the Code of Civil Procedure (CCP) requires arbitrators to disclose any circumstances that may affect their independence or impartiality before and after the acceptance of their appointment.(2)
On 25 February 2020 the International Chamber of the Paris Court of Appeal rendered five decisions on setting-aside proceedings against five awards issued in the same arbitration. It was alleged that the tribunal had been improperly constituted as a party-appointed arbitrator had failed to disclose information that affected his independence and impartiality.(3)
On 22 December 2000 Brazilian companies Dommo Energia SA, Barra Energia do Brasil Petróleo e Gás Ltda and Queiroz Galvão Exploração e Produção AS (now Enauta Energia SA) concluded a joint operating agreement (JOA) to pursue an offshore exploration and production petroleum project in Brazil. The JOA included the financial obligations of consortium members and designated Enauta as the operator.
A dispute arose relating to Dommo's non-payment of 'cash calls' issued by the consortium, which were allegedly necessary to fund cost overruns resulting from Enauta's delays in delivering the project. In accordance with Clause 8.4(D) of the JOA, on 11 October 2017 Barra and Enauta notified that they would exclude Dommo from the consortium. This prevented Dommo from selling its interest in the consortium.
Dommo initiated arbitration proceedings against Barra and Enauta under the London Court of International Arbitration (LCIA) Rules, seeking the annulment of Clause 8.4(D) of the JOA under Brazilian law in order to prevent any actions against its interest in the consortium, as well as compensation.
Dommo appointed Cristiano de SZ as arbitrator. Barra and Enauta appointed Timothy M. Both arbitrators sent their declarations of independence and impartiality on 11 and 27 November 2017 respectively. Timothy M enclosed a copy of his CV extracted from the website Who's Who to his declaration, which contained no mention of his previous employment as an attorney at Saudi firm Dr Saud Al-A. His declaration also failed to mention that Dr Saud Al-A was affiliated with the firm Blakes, which had acted for two US investment funds with a majority shareholding in Barra: First Reserve Corporation and Riverstone Holdings LLC (together, the funds).
On 11 January 2018 the parties jointly appointed Alexis M as the tribunal's president. The LCIA confirmed the appointment on 16 January 2018.
Shortly thereafter, the arbitral tribunal split the proceedings into several phases.(4) On 24 September 2018 the tribunal rendered its first award on Phase I, ruling that Clauses 8.4 and 8.6 of the JOA were valid under Brazilian law.
On 2 November 2018 Barra informed the parties and the tribunal that a new lawyer had joined its counsel team. As a result, on 5 November 2018 Timothy M issued an updated declaration of independence. This prompted Dommo, on 31 December 2018, to request additional information on Timothy M's relationship with the newly-appointed lawyer and Blakes, which Dommo had discovered had acted for the funds between 2008 and 2014.
Timothy M responded on 2 January 2019, stating that between April 2012 and July 2015 he had worked as senior international counsel at Dr Saud Al-A in Saudi Arabia and that the firm had an alliance with Blakes. He also stated that he did not know anything about the investment fund First Reserve Corporation nor any work that Blakes had undertaken for this fund during his time at Dr Saud Al-A. In a subsequent declaration, Timothy M also denied any knowledge of the fund Riverstone Holding LLC.
On 17 January 2019 Dommo challenged arbitrator Timothy M before the LCIA. This challenge was rejected on 20 February 2019.
On 5 April 2019 Dommo initiated proceedings before the Paris Court of Appeal to annul the 24 September 2018 award on Phase I pursuant to Article 1520(2) of the CCP on the ground that the arbitral tribunal had been improperly constituted. Four additional decisions had been rendered by the tribunal after Timothy M had updated his declaration of independence on 5 November 2018,(5) and the arbitration appears to be ongoing and proceeding to Phase III. Dommo initiated annulment proceedings against the other four decisions on similar grounds. The comments below relate to all five annulment decisions.
On 25 February 2020 the International Chamber of the Paris Court of Appeal concluded that from the moment of his appointment, Timothy M had had a duty to disclose his employment with Dr Saud Al-A and the links to Blakes because that information was relevant to the arbitration process and not easily accessible to the public. However, taking all of the circumstances of the case into account, the court held that this information was insufficient to establish a link between Timothy M and the funds (and hence the majority shareholding of Barra) which could objectively cast reasonable doubt in the minds of the parties as to his independence and impartiality. The court accordingly rejected Dommo's request for annulment.(6)
Before addressing the merits, the court observed that neither Barra nor Enauta had sought in their requests for relief a declaration that Dommo's annulment request was inadmissible as it had been initiated late. The court noted that Barra had mentioned the delay in its pleadings only at the start of its case on the merits. Applying Article 954(3) of the CCP, the court therefore concluded that it would not rule on the inadmissibility of the request for annulment.
Applicable standard when assessing arbitrators' duty to disclose
The court confirmed that by virtue of Article 1520(2) of the CCP (which applies to international arbitration), the provisions governing arbitrators' duty to disclose in Article 1456(2) of the CCP (which applies to domestic arbitration) were relevant in this case.
Pursuant to this provision, the court explained that arbitrators' duty to disclose applies before and after their acceptance of the appointment "depending on whether the incriminating circumstances pre-exist or arise after such acceptance". The "circumstances" that require disclosure are varied and may "relate to possible conflicts of interests, relationships of interest or a course of business that the arbitrator may have had with the parties or third parties likely to be interested in the dispute". Compliance with this duty is assessed by looking at:
As regards the first point, the court noted that arbitrators are not required to disclose "easily accessible public information". However, the mere fact that relevant information is published on a publicly accessible website is insufficient for it to be deemed easily accessible. The court reasoned that information should not be considered "easily accessible" if it is not found in a "clear, evident, and transparent manner" through a simple consultation of the website and if the enquirer is required to undertake "several successive operations" within the website to access the information.
As regards the other two points, the court remarked that the mere non-disclosure of information that should have been disclosed is not in itself sufficient to establish an arbitrator's lack of independence and impartiality. Rather, the court still has to objectively assess, in light of the specific circumstances of the case, whether the information reveals a link to the dispute or any circumstance that could affect the arbitrator's judgement, which would "give rise to a reasonable doubt in the minds of the parties as to the arbitrator's impartiality and independence".
Timothy M had been required to disclose his involvement with Blakes
The court observed that Timothy M's first declaration of independence, dated 27 November 2017, which included his CV from the website Who's Who, made no reference to his prior professional experience at any law firm. It was only after Barra had introduced a new counsel to its team and Dommo had enquired about Timothy M's relationship with the new appointee and Blakes – whose clients had once included the funds which owned a controlling interest in Barra – that Timothy M had disclosed his employment as senior international counsel at Dr Saud Al-A between 2012 and 2015 and that firm's alliance with Blakes.
The court further observed that Timothy M's involvement with Blakes was not mentioned on his website in a clear, evident and transparent manner. That information could be found only after "researching each of the eleven conferences listed on the 'Disputes' Related Experience' page of the site and by looking up the details of these conferences". The court also noted that only an advanced consultation of his publications listed on the "Knowledge Publications" page of his website revealed that two of these publications mentioned Blakes.
The court concluded that access to the relevant information was possible only "after a thorough analysis and careful consultation of the arbitrator's website" and noted the need to "open all the links relating to the conferences in which he has participated and to consult one after another the content of the publications to which he has contributed" in order to retrieve the information. The court reasoned that the need to deploy these "several successive operations" meant that the relevant information was not easily accessible and thus lacked the requisite notoriété that would have released Timothy M of his duty to disclose. For this reason, the court held that Timothy M had been under a duty to disclose his involvement with Blakes in his first declaration of independence and impartiality.
Circumstances did not create reasonable doubts as to Timothy M's independence and impartiality
The court observed that Timothy M denied any knowledge of the existence of the funds and Blakes' work for them between 2008 and 2014. The court expressed surprise, noting that:
Notwithstanding this remark, the court also noted that nothing on the record showed that Timothy M had at any time "advised, represented or assisted the shareholders of Barra". The fact that he worked as senior international counsel with Blakes in Saudi Arabia and had used Blakes' email address was insufficient to establish "the existence of any link whatsoever between Mr M and the shareholders of Barra" or create a reasonable doubt as to his independence and impartiality. This was particularly true because the links between Timothy M and Blakes were "indirect, through law firm Dr Saud Al-A and had ceased two and a half years before the commencement of the arbitration". The court remarked that this period alone might be insufficient to absolve the arbitrator from his duty to disclose, but nonetheless considered this point irrelevant because "there [was] no evidence that there could have been any connection between Mr M and the Barra shareholder companies at the time when Mr M worked for Dr Saud Al-A, or afterwards".
The court concluded that even if Timothy M had known of the funds that controlled Barra, it could not be established that his involvement with Dr Saud Al-A and Blakes constituted "a direct or indirect, material or intellectual, link" with the funds or their subsidiaries or that "a business relationship existed between [him] and [the funds]". It also could not be established that Timothy M had ever had any interest in Blakes that was likely to create a conflict of interest. The court thus held that it could not be objectively established, in light of the circumstances of the case, that Timothy M's involvement with Blakes had created reasonable doubts as to his independence and impartiality in the mind of the parties.
This decision confirms existing jurisprudence in France with regard to the general standard applicable to an arbitrator's duty to disclose.(7) However, there is one aspect concerning the duty to disclose easily accessible information that was not fully articulated by the Paris Court of Appeal – potentially because it was considered unnecessary in resolving the underlying dispute.
In enunciating the standard, the Paris Court of Appeal confirmed arbitrators' duty to disclose information which may reveal a potential conflict before and after accepting their appointment, but noted that arbitrators are not obliged to disclose any information with the requisite degree of notoriété (ie, any easily accessible public information). However, the French Court of Cassation recently held that it is "incumbent on the arbitrator to inform the parties of any circumstances likely to affect [their] independence or impartiality arising after acceptance of [their] appointment" even if the new circumstances could be easily accessible in the public domain.(8) Parties are not required to investigate potential conflicts after arbitration commences.(9)
Therefore, on the notoriété aspect of the duty, the prevailing jurisprudence in France seems to require arbitrators actively to reveal throughout the course of an arbitration any circumstances that may give rise to reasonable doubts in the minds of the parties as to their independence and impartiality – even if those circumstances (whether easily accessible to the public or not) arise after they have accepted the appointment. Parties' obligation to investigate potential conflicts of interest ceases to exist after arbitration commences.
The question of the exact scope of arbitrators' duty to disclose remains – in particular, what an arbitrator must disclose and how. However, this decision has shed some light on these issues.
In terms of what arbitrators appointed to a French-seated arbitral tribunal should disclose, it seems advisable to provide the following information from the outset:
It seems prudent to go back as many years as possible, but in any case no less than three.
In terms of how arbitrators must disclose information, the information could be disseminated directly to the parties along with the arbitrator's declaration of independence and impartiality or made easily accessible to the public before acceptance of the appointment. It seems prudent for aspiring or established arbitrators to maintain an updated CV online, with all relevant information listed clearly on the main page of the website (ie, without requiring additional steps to retrieve information). Any change in the arbitrator's career (eg, a move to a different law firm) arising after the start of the arbitration must be promptly communicated to all parties involved in the arbitration.
This decision also provides guidance on the level of involvement that an arbitrator should have with a party to the dispute in order to establish reasonable doubts in the minds of the parties as to the arbitrator's independence and impartiality. Accordingly, the mere failure to reveal information that had to be disclosed will not suffice to establish an arbitrator's lack of independence and impartiality. An objective assessment of the nature of the information in the circumstances of the case is still required. The mere fact that an arbitrator once worked in a local law firm whose affiliated global law firm acted for the majority shareholders of a party to the arbitration approximately three years before the arbitration was initiated may not be considered sufficient to create reasonable doubts. A stronger link would be required – for example, if the arbitrator advised, represented or assisted those shareholders at any relevant time or maintained a business relationship with them. Moreover, the fact that the arbitrator ceased any employment relationship with that law firm and its affiliate some three years before the arbitration commenced may help to establish the absence of a conflict of interest.
The ultimate goal of the French rules governing arbitrators' duty to disclose remains the prevention of issues arising during the arbitration process and the enforcement and recognition of an award. Although the specific elements and circumstances discussed in this decision offer helpful guidance to prospective arbitrators sitting in France, the decision should not be seen as offering an exhaustive list of information that arbitrators must disclose. For each appointment, arbitrators must still:
Proper disclosure would show an arbitrator's ability to exercise wise judgement from the outset of the proceedings and avoid unnecessary delays and costs to the most important actors of the arbitration market: the parties.
For further information on this topic please contact Yuri Mantilla at Freshfields Bruckhaus Deringer by telephone (+33 1 4456 4456) or email (firstname.lastname@example.org). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
(7) Cass 1st civ, 16 March 1999, D 1999, Jur, p 498, note P Courbe; Rev arb 1999, p 308; RTD com 1999, p 850, obs E Loquin: the arbitrator must disclose all information that may "give rise to a reasonable doubt in the minds of the parties as to the arbitrator's impartiality and independence". However, see Cass 2nd civ, 25 March 1999, Rev arb 1999, p 319, note C Jarosson; Paris 28 November 2002, Rev arb 2003, p 445, note C Belloc: "the duty to disclose must be assessed in the light of both the notoriety of the situation at issue and its foreseeable impact on the arbitrator's judgment"; Paris, 15 September 2015, Rev arb 2015, p 1221; Cass 1st civ, 25 June 2014, Rev arb 2015, p 75, note S Bollée: the arbitrator must disclose only information relating to the dispute.
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