Gloster: Three disclosure failures
A former Court of Appeal judge’s failure to disclose her links with top City firm Freshfields has led to a decision she helped make in an international arbitration being set aside.
Mr Justice Jacobs said the mistakes by Dame Elizabeth Gloster (DEG) raised a risk of apparent bias on her part.
An unusual feature of the case was that the ICC Court – part of the International Chamber of Commerce, a leading arbitral institution – had already upheld a challenge to DEG’s appointment, a rare occurrence.
The arbitration arose from an offshore facility agreement between Nigeria-based Aiteo Eastern E&P Company and oil giant Shell, and an onshore facility agreement between Aiteo and eight lenders, which together provided Aiteo with $2bn of funding to buy an interest in certain Nigerian oil fields.
The agreements provided for disputes to be resolved through ICC arbitrations seated in London, which were triggered after the lenders asserted breaches.
Shell and the onshore lenders both nominated DEG for their separate arbitrations, although it was later decided she could only sit on one. Freshfields acts for all of the lenders.
She stayed with the Shell arbitration, where she was joined by former Supreme Court president Lord Neuberger, appointed by Aiteo, and presiding arbitrator Geoffrey Ma Tao-li, former chief justice of the Hong Kong Court of Final Appeal.
Aiteo’s challenge under section 68 of the Arbitration Act 1996 was to set aside four partial awards (decisions on some issues) made by the tribunal, including one consolidating the two cases.
This was on the basis that DEG had not disclosed all of her professional connections with Freshfields until after the awards were made.
The arbitration process is continuing with Colin Edelman KC having replaced DEG following the ICC Court decision.
In an ICC arbitrator statement in December 2020, DEG disclosed that had been party-appointed in two other unrelated arbitrations in the previous years by Freshfields clients, but did not disclose the fact that, in June and July 2020, she gave expert advice in conference to a client of Freshfields in an unrelated matter.
She said her clerk had inadvertently failed to disclose this, although accepted it was her responsibility to check the disclosure statement sent out under her signature.
In March 2022, at around the time the tribunal issued one of the awards, DEG was instructed by Freshfields to give an expert declaration in foreign law proceedings in an unrelated matter. This was only disclosed in December 2023 when she was asked by Aiteo.
DEG said that it “did not cross my mind at the time to disclose this retainer. If I should have done so, I can only apologise”. Jacobs J held that she should have done, although described the failure as “inadvertent”.
Finally, in November 2023, DEG disclosed that she had recently been instructed by Freshfields to provide an expert opinion on English law in the context of potential foreign insolvency proceedings.
The work had been completed by then and again Jacobs J said this should have been disclosed when Freshfields first approached her.
“It is not clear why it did cross DEG’s mind to disclose this October 2023 engagement, but did not cross her mind to disclose the somewhat longer February-March 2022 engagement.
“It is not unusual, however, for things to occur to a person in one context, having slipped their attention in a different context, and I suspect that this is the most likely explanation here.”
Aiteo then lodged the challenge to her appointment at the ICC Court, which it upheld without giving reasons.
Jacobs J rejected Aiteo’s argument that res judicata applied, noting that the ICC Court “is not a conventional court which convenes a hearing and hears evidence and argument with a view to reaching a decision on the legal rights of the parties”.
At the same time, it was clearly a factor in determining whether the fair-minded and informed observer would consider there was a real possibility that DEG was biased.
Jacobs J held that they would, which the ICC Court decision would reinforce. DEG had accepted three arbitral appointments and three advisory/expert engagements from Freshfields, and had also been unsuccessfully nominated for the onshore arbitration.
“The observer would consider that this was a significant number of appointments and engagements by a single firm in a relatively short space of time. DEG had retired from the Court of Appeal in June 2018, and therefore the 6 or 7 appointments/engagements were within a period of around 5 years or thereabouts.”
The observer would regard the three non-disclosures as “highly relevant to the question of real possibility of bias, and as adding to the cumulative picture of a significant number of arbitral appointments by Freshfields”.
DEG’s “reputation and indeed great distinction as a judge” was a relevant, but not determinative, factor, while case law said the fact that she was not dependent on Freshfields for a significant amount of work was not.
The final hurdle was whether Aiteo could show it had suffered substantial injustice. Jacobs J said it was “inherently likely” in this situation, but in relation to three of the awards there were circumstances which rebutted this inference.
Aiteo had unsuccessfully challenged two of the awards in the High Court. “The jurisdictional issue [and related costs award] has been fully considered afresh by a court, which is unaffected by any apparent bias on the part of DEG and indeed where the reasoning of the tribunal played no part in the court’s analysis.”
In relation to the third award, about consolidating the two cases, the tribunal members took the unusual step of each deciding the question and then reaching a collegiate view.
“We took that course, and, fortunately, each of us, individually and independently, reached the same conclusion,” the tribunal ruling said.
Jacobs J said this showed the tribunal reached its decision “independently of the individual views of DEG” and thus rebutted the presumption.
But these factors did not appear in relation to the fourth award – in which the tribunal ruled it had jurisdiction over disputes under the onshore arbitration – and so “an inference of substantial injustice does arise from the fact that the arguments were addressed by a tribunal where one member was affected by apparent bias”.
Jacobs J ordered that the award be remitted to the reconstituted tribunal for reconsideration.
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