Introduction
The Grain and Feed Trade Association (“GAFTA“) operates one of the most prominent commodity arbitration systems in the world, with arbitrations seated in England and governed by English law. All GAFTA-qualified arbitrators are subject to the Association’s Rules and Code of Conduct for Qualified Arbitrators and Qualified Mediators. GAFTA arbitration is a two-tier system: if a party is dissatisfied with the first-tier award, it may appeal to a Board of Appeal composed of five experienced arbitrators appointed by GAFTA. The seat of the arbitration is designated as England under Arbitration Rules No. 125, Rule 1.2, and the courts of England have exclusive jurisdiction over the arbitration.
This article examines three interrelated questions concerning the challenge of arbitrators in GAFTA arbitrations. First, it considers the relevant provisions of the Arbitration Act 1996 and the case law on when arbitrators may be challenged, including known cases involving GAFTA arbitrators specifically. Second, it analyses GAFTA’s Code of Conduct for Qualified Arbitrators and Qualified Mediators, and whether that Code creates a freestanding right for parties to challenge arbitrators, or merely constitutes a disciplinary framework governing the relationship between GAFTA and its arbitrators; it also addresses whether exhaustion of any internal GAFTA challenge procedure is a prerequisite to an application under section 24 of the Arbitration Act 1996. Third, it considers whether a challenge to a GAFTA arbitrator is possible at all where the allegations of partiality concern things said or done in the award itself – something specifically excluded from the scope of the Code of Conduct. The article concludes with an anonymised case study drawn from a recent GAFTA arbitration that illustrates many of these issues in practice.
The Statutory Framework: Section 24 of the Arbitration Act 1996
Since GAFTA arbitrations are seated in England, the Arbitration Act 1996 (the “Act“) governs the supervisory jurisdiction of the English courts. The Act is founded upon the principle that “the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.” Section 33(1) imposes a general duty on the tribunal to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent“.
Section 24(1) of the Act provides that 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; (b) that he does not possess the qualifications required by the arbitration agreement; (c) that he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity to do so; and (d) that he has refused or failed properly to conduct the proceedings, or to use all reasonable despatch in conducting the proceedings or making an award, and that substantial injustice has been or will be caused to the applicant.
It is notable that section 24(1)(a) refers only to “impartiality” and not to “independence.” The Departmental Advisory Committee concluded that the lack of independence, unless it gave rise to justifiable doubts about the impartiality of the arbitrator, was of no significance. As Morison J observed in ASM Shipping Ltd of India v TTMI Ltd of England [2005] EWHC 2238 (Comm), there was a “difference without distinction” between the two concepts. The Court of Appeal confirmed in Halliburton Co v Chubb Bermuda Insurance Ltd [2018] EWCA Civ 817 that independence is not in itself a separate ground for removing an arbitrator.
Section 24 is a mandatory provision of the Act, meaning the parties cannot contract out of it. The arbitrator concerned is entitled to appear and be heard by the court before any order is made, and leave of the court is required for any appeal from a decision under the section.
Crucially, section 24(2) provides that “if there is an arbitral or other institution or person vested by the parties with power to remove an arbitrator, the court shall not exercise its power of removal unless satisfied that the applicant has first exhausted any available recourse to that institution or person“. This exhaustion requirement is of particular importance in the GAFTA context, as discussed further below. An arbitral tribunal may continue the proceedings and make an award whilst an application under section 24 is pending, a provision designed to reduce the risk of unmeritorious applications made to delay proceedings.
The Test for Apparent Bias in English Law
The test for apparent bias applicable to arbitrators has been aligned with that applicable to judges. In R v Gough [1993] AC 646, the House of Lords held that the court should ask itself whether, having regard to the relevant circumstances, there was a “real danger of bias” on the part of the tribunal member, “in the sense that he might unfairly regard (or have unfairly regarded) with favour, or disfavour, the case of a party“. The test was subsequently reformulated by the House of Lords in Porter v Magill [2001] UKHL 67 as whether a “fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased“.
In AT & T Corporation v Saudi Cable Co [2000] 2 Lloyd’s Rep. 127, the Court of Appeal made clear that arbitrators are held to be subject to the same standard as judges. The test is objective: it focuses on whether there is a real possibility of bias, rather than on the probability of bias.
Case Law on Arbitrator Challenges: Illustrative Examples
A number of English cases illuminate the circumstances in which arbitrators may or may not be successfully challenged.
In Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyd’s Rep 45, Rix J held that no appearance of bias arose when the arbitrator was from the same set of chambers as counsel for a party to the arbitration. Although this is not usually considered an issue in England, it can cause disquiet amongst parties and practitioners from other parts of the world.
In ASM Shipping Ltd v Harris [2007] EWHC 1513 (Comm), Andrew Smith J held that the remaining two arbitrators on a tribunal had not been “infected” by an individual arbitrator’s apparent bias, even though they had “aligned themselves” with his refusal to recuse. There is accordingly no automatic disqualification of the other members of a tribunal when one arbitrator is removed or recuses himself.
However, business links between an arbitrator and a party, even a party’s associated company, will be strong enough to give rise to an appearance of bias. Similarly, in Cofely Ltd v Bingham [2016] EWHC 240 (Comm), a challenge was upheld where the arbitrator had been very frequently appointed in cases involving the respondent and had been reluctant to respond to requests for information regarding those appointments.
In A v B [2011] EWHC 2345 (Comm), Flaux J held that it would not be reasonable to apprehend possible bias merely because the arbitrator had previously been instructed as counsel by the solicitors acting for a party. In that case, the arbitrator’s most recent instructions from those solicitors had concluded approximately two years before the arbitration commenced, and Flaux J considered that the passage of time, combined with the indirect nature of the relationship (with the solicitors rather than the party itself), meant there were no justifiable doubts as to impartiality.
The case law also establishes that the fact that an arbitrator has previously expressed a professional view bearing on an issue in the case does not generally indicate a closed mind. In Amec Capital Projects Ltd v Whitefriars City Estates Ltd [2004] EWCA Civ 1418, the fact that the same adjudicator was appointed the second time round and reached the same conclusion was not thought to be indicative of bias.
Furthermore, comments made by an arbitrator that show how the tribunal is thinking do not, of themselves, constitute grounds for challenge: see Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyd’s Rep 14, in which Moore-Bick J held that an arbitrator’s indication of a provisional view does not give rise to an appearance of bias.
A party must also raise any objection to an arbitrator’s impartiality promptly. Failure to make a timeous objection may result in the party being barred from relying on that ground thereafter. As section 73(1) of the Act provides, a party must object promptly to any impropriety or irregularity in the proceedings.
GAFTA-Specific Cases
Challenges to GAFTA arbitrators are decided on the same principles as arbitrator challenges in other contexts.
Although there is limited reported authority on challenges to GAFTA arbitrators specifically, the GAFTA system has not escaped judicial scrutiny entirely. In Ascot Commodities NV v Olam International Ltd [2002] CLC 277, Toulson J set aside an award when a GAFTA Board of Appeal failed to deal with the central issue raised on appeal, which constituted a serious irregularity under section 68(2)(d) of the Act. Whilst that case concerned a challenge to the award rather than the arbitrator, it demonstrates the English courts’ willingness to intervene in GAFTA proceedings where fundamental procedural standards are not met.
Although not a GAFTA case, the Court of Appeal’s decision in Sumukan Ltd v Commonwealth Secretariat [2007] EWCA Civ 243 is instructive on the supervisory jurisdiction of the courts over trade and institutional arbitration. In that case, the Commonwealth Secretariat successfully claimed state immunity, which precluded the court from entertaining a section 68 challenge to an award made under the Commonwealth Secretariat Arbitral Tribunal rules. The Court nonetheless acknowledged that the Porter v Magill [2001] UKHL 67 test for apparent bias—whether a fair-minded and informed observer would conclude there was a real possibility of bias—applies to institutional arbitration. The decision also confirms that compliance with basic standards of due process, including the right to be heard and the impartiality of the tribunal, represents a fundamental requirement of any arbitral process.
In Norbrook Laboratories Ltd v Tank [2006] EWHC 1055 (Comm), the Commercial Court addressed the standards expected of arbitrators in specialist commodity trade arbitration. Although the case arose under a different trade association’s rules, the principles are applicable to GAFTA arbitration. The court emphasised that trade arbitrators, whilst often drawn from industry rather than the legal profession, are nonetheless held to the same fundamental standards of impartiality and procedural fairness as professional arbitrators.
GAFTA’s Internal Challenge Mechanism: The Code of Conduct
All GAFTA-qualified arbitrators are subject to the Association’s Rules and Code of Conduct for Qualified Arbitrators and Qualified Mediators. GAFTA’s materials make clear that the Code of Conduct governs the behaviour of arbitrators, stipulating inter alia that private communications between arbitrators and parties to disputes are not permitted and would be contrary to the spirit of GAFTA arbitrations, and a breach of the Code of Conduct. Furthermore, such private communications would be likely to infringe section 68 of the Arbitration Act 1996.
The arbitrators appointed to a GAFTA tribunal must not be interested in the transaction in dispute, either as a member or employee of a company or firm named as a party to the arbitration, nor as someone who is financially retained by such a company, or by a company associated with any party to the arbitration. Once appointed, arbitrators will have no further direct contact with either of the parties; all communications must be routed through GAFTA. This routing of communications through the Association “underscores the point that arbitrators are impartial“.
There is, however, a critical distinction to be drawn between the GAFTA Code of Conduct as a disciplinary mechanism and as a challenge mechanism available to parties. The Code of Conduct is primarily a disciplinary code governing the relationship between GAFTA and its arbitrators – that is to say, it regulates the conduct expected of GAFTA-qualified arbitrators as a condition of their registration and continued qualification. It is analogous to the codes of conduct that many arbitration commissions issue to regulate the conduct of their arbitrators, including disclosure obligations; violation of such codes may result in the arbitrator ceasing to be listed on the institution’s panel.
Rule 7 of the Code sets out the grounds on which a complaint may be made and the procedure to be adopted. Rule 7.1.1(a) deals with allegations of impartiality, and Rule 7.1.1(c) with allegations that proceedings have not been conducted properly. The procedure requires that a complaint be made to the Director General (or nominee); if the complaint cannot be resolved at that stage, an Arbitration Complaints Committee is convened. Under Rule 7.1.9, the Committee can dismiss a complaint, seek to resolve the matter by agreement, or revoke an arbitrator’s authority to act. The decision of the Committee is stated to be “final and binding” on the parties to the complaint under Rule 7.1.12.
Critically, however, Rule 7.1.13 of the Code provides: “For the avoidance of doubt, any complaint which relates to an Award of arbitration, whether at First Tier or on Appeal, will not be considered“. This carve-out appears to mean that where a party’s allegations of impartiality concern things said or done in the award – for example, the manner in which the tribunal dealt with substantive or procedural issues in or relating to the award – no complaint under Rule 7 can be entertained by GAFTA. It is not entirely clear how GAFTA applies this rule in practice, although there is a recent illustration of this in the case study discussed below.
Whether the GAFTA Code of Conduct amounts to an “arbitral or other institution or person vested by the parties with power to remove an arbitrator” for the purposes of section 24(2) of the Act is accordingly a significant and contested question. GAFTA itself takes the view that, for the purposes of section 24(2), it is an arbitral institution with the power to remove an arbitrator (see case study below). However, the contrary position is that the Code is not expressly incorporated into the Arbitration Rules No. 125, is referred to only on one occasion at Article 3.9(a) under the heading “Appointment of the Tribunal,” and does not confer any rights on the parties. On this view, the Code governs the relationship between GAFTA and the arbitrators rather than forming part of the Rules to which the parties agreed. Furthermore, if Rule 7.1.12 were interpreted to oust the jurisdiction of the court (given that its decisions are stated to be “final and binding“), this would be contrary to the mandatory nature of section 24.
In the GAFTA context, the question remains unresolved by the courts. GAFTA’s own position is clear – it considers itself an arbitral institution with removal powers – but a party facing the Rule 7.1.13 carve-out in respect of award-related complaints may reasonably argue that there is no available recourse to exhaust.
Challenges Based on Things Said or Done in an Award
The question of whether allegations of partiality can be founded upon things said or done in an award is one of considerable difficulty in arbitration law generally, and raises particular issues in the GAFTA context.
The general principle is that the content of an award is not ordinarily a basis upon which to challenge an arbitrator for partiality. The reasoning and conclusions of an arbitral tribunal are, in most jurisdictions, not subject to substantive review by national courts. A party’s subjective disagreement with the tribunal’s rulings on fact or law cannot, without more, justify a finding of partiality. An arbitrator may be wrong on a point of law or a finding of fact but still be independent and impartial: see ASM Shipping Ltd v Harris [2007] EWHC 1513 (Comm).
Similarly, the fact that an arbitrator has ruled against a party in one case does not preclude that arbitrator from acting impartially in relation to the same party in another case. The deciding co-arbitrators in Vivendi v Argentina asked “whether an arbitrator could rule against a party in one case and still be impartial to that same party in another case,” and concluded that the answer to that question was in the affirmative.
Under English law, the appropriate remedy where an award is affected by the arbitrator’s lack of impartiality is more likely to lie under section 68 of the Act (challenge for serious irregularity). In the context of GAFTA, this has to be preceded by an internal GAFTA appeal to the Board of Appeal. Section 68 permits a challenge on the ground that “the tribunal was not properly constituted” or that “the tribunal has failed to comply with section 33 (general duty of tribunal)“. However, the party must demonstrate that the irregularity has caused or will cause “substantial injustice” to the applicant.
Where an arbitral tribunal has rendered a partial or interim award but remains seised of further issues, a party who has concerns about the tribunal’s impartiality may seek removal under section 24 rather than (or in addition to) challenging the award under section 68. This approach is prospective in nature: its aim is to prevent future biased decision-making on the remaining issues, rather than simply to set aside the award already made. In ASM Shipping Ltd v Harris [2007] EWHC 1513 (Comm), the Commercial Court confirmed that a section 24 application can be founded on matters arising from an arbitrator’s conduct during the proceedings or reasoning in a partial award. Andrew Smith J applied the Porter v Magill apparent bias test – whether a fair-minded and informed observer would conclude there was a real possibility that the arbitrator would not bring an impartial mind to the remaining issues. However, the mere fact that an arbitrator has made findings adverse to a party, or even erred in law or fact, does not establish apparent bias. The challenge in that case was unsuccessful, but the judgment confirms that section 24 is an available mechanism where a party’s concern relates to the tribunal’s future conduct rather than the validity of an award already rendered.
Rule 7.1.13 of the GAFTA Code of Conduct expressly provides that complaints relating to an award will not be considered. This creates a gap: where a party’s allegations of impartiality are founded on things said or done in an award, GAFTA will not entertain a complaint under Rule 7, and the party is therefore left with no internal recourse to exhaust. In such circumstances, the party may argue that section 24(2) poses no bar to an application to the court, precisely because there is no available recourse to exhaust. Where the tribunal remains seised of other issues in the arbitration – the result might be that the affected party has to both file an appeal with the GAFTA Board of Appeal and challenge the arbitrators under section 24 before the Court to prevent the apparently biased arbitrators from rendering future awards.
Case Study: An Arbitrator Challenge in a Recent GAFTA Commodity Dispute
The issues discussed above have recently arisen in stark form in a GAFTA arbitration involving a dispute over a soybean meal contract worth approximately USD 20 million. The following account is anonymised.
Background and the Section 24 Application
A commodity trading company (“the Respondent”) was a party to a GAFTA first-tier arbitration. Over the course of the proceedings, the Respondent became dissatisfied with the tribunal’s procedural conduct and issued an Arbitration Claim Form in the Commercial Court seeking an order under section 24 of the Act to remove all three arbitrators. The Respondent relied on two grounds: section 24(1)(a) (justifiable doubts as to impartiality) and section 24(1)(d)(i) (failure properly to conduct the proceedings causing substantial injustice).
The Respondent alleged that the tribunal had prejudged the dispute before pleadings were complete; had not permitted the Respondent properly to plead its defence or advance its counterclaim; had ruled on applications without affording the Respondent an opportunity to comment; and had created procedural disorder by first bifurcating the proceedings so as to exclude the counterclaim, and then dismissing the Respondent’s set-off defence in a partial award on the basis that it had not been pleaded – a consequence of the tribunal’s own bifurcation order. The Respondent contended that this conduct, taken cumulatively, fell below the standard expected of professional arbitrators in high-value commodity disputes and demonstrated prejudgment amounting to bias.
The Tribunal’s Position: Section 24(2) Defence
The tribunal, through its solicitors, rejected the claim and raised a preliminary defence under section 24(2). The tribunal’s position was that GAFTA’s Code of Conduct contained, at Rule 7, a comprehensive complaints procedure by which the parties could apply for the removal of an arbitrator on grounds including impartiality. Since the Respondent had not first exhausted that procedure, the tribunal argued the section 24 application was premature and fatally defective.
The Respondent’s Rebuttal
The Respondent advanced three arguments against the section 24(2) defence. First, the Code was not expressly incorporated into the Arbitration Rules No. 125 and did not confer any rights on the parties; it governed the relationship between GAFTA and its arbitrators. Second, even if the Code were incorporated, Rule 7.1.13 provided that complaints “relating to an Award of arbitration, whether at First Tier or on Appeal, will not be considered” – and the Respondent’s complaint related in substantial part to the award. Third, the Code was not intended to replace or preclude a section 24 challenge; if Rule 7.1.12’s “final and binding” provision were interpreted to oust the court’s jurisdiction, it would be contrary to the mandatory nature of section 24. The Code was explicable and lawful only when viewed as a disciplinary framework, as supported by its reference to “disciplinary action” as an available sanction.
GAFTA’s Position
When approached, GAFTA’s General Counsel confirmed that GAFTA considered itself, for the purposes of section 24(2), to be an arbitral institution with the power to remove an arbitrator. GAFTA drew attention to the Rule 7 complaints procedure but noted that complaints are “ordinarily” made at an early stage of the arbitral proceedings. GAFTA made no specific comment as to whether complaints relating to awards would be considered.
The Offer to Resign and its Withdrawal
Before the application was heard, the tribunal offered to resign from the arbitration, conditional upon the Respondent discontinuing the section 24 proceedings. The Respondent accepted this offer and filed a notice of discontinuance. However, the following day, the tribunal purported to withdraw its offer.
The Respondent maintained that a binding agreement had been formed and issued a pre-action letter seeking specific performance – namely, that the arbitrators resign as agreed. The Respondent also argued that the adversarial correspondence itself gave rise to further justifiable doubts as to the tribunal’s impartiality, on the basis that the tribunal’s solicitors had characterised the Respondent as someone “abusing the process of the Court” and advancing “contrived arguments” – language suggesting the arbitrators could no longer approach the remaining counterclaim neutrally.
The tribunal, through its solicitors, rejected this argument, maintaining that it would continue to perform its duties “properly and diligently” and that a party could not rely on the fact of the tribunal defending a section 24 claim as evidence of bias. Following further correspondence, the Tribunal nonetheless again chose to resign.
Practical Lessons
This case study illustrates several important points. The section 24(2) exhaustion requirement is a live and contested issue in GAFTA arbitrations, with the tribunal and GAFTA taking one view and the challenging party another. Rule 7.1.13’s carve-out for award-related complaints creates a significant gap – where the challenge is founded on things done in an award, there may be no internal recourse to exhaust. There is no authority on the interpretation of Rule 7.1.13, and GAFTA has not clarified the issue in this case. A party considering a section 24 challenge in a GAFTA arbitration should engage the GAFTA complaints process voluntarily – expressly reserving its position that doing so is not a prerequisite to court proceedings and does not constitute a waiver of any right.
Conclusion
The challenge of arbitrators in GAFTA arbitrations engages a complex interplay between the statutory framework of the Arbitration Act 1996, the institutional rules and Code of Conduct maintained by GAFTA, and the general principles of English law on arbitrator impartiality.
The governing statutory provision is section 24 of the Act, which permits a party to apply to the court to remove an arbitrator on the ground, inter alia, that circumstances exist giving rise to justifiable doubts as to the arbitrator’s impartiality. The test is objective, based on the perception of a fair-minded and informed observer.
GAFTA’s Code of Conduct – specifically Rule 7 – does appear to provide a complaints mechanism that can result in the revocation of an arbitrator’s authority to act. GAFTA considers itself an arbitral institution with the power to remove an arbitrator for the purposes of section 24(2). However, whether the Code constitutes a mechanism whose exhaustion is a prerequisite to a section 24 application remains contested, and there are strong arguments – particularly in relation to the Rule 7.1.13 carve-out for award-related complaints – that a party may proceed directly to the court without first making a complaint to GAFTA.
Challenges based on things said or done in an award are theoretically possible but difficult to sustain. The content of an award is not ordinarily a basis for inferring bias. Rule 7.1.13 closes off the internal GAFTA route for such complaints, potentially leaving the party free to apply to the court directly under section 24 – but it must still satisfy the high threshold of demonstrating that the tribunal’s procedural conduct or reasoning gives rise to justifiable doubts as to impartiality, rather than merely reflecting disagreement with the outcome.
Parties engaged in GAFTA arbitrations should be mindful that the relatively small pool of qualified arbitrators, the trade-specific expertise required, and the inquisitorial powers conferred upon GAFTA tribunals create a distinctive environment in which questions of impartiality may arise. Early and prompt objection to any perceived lack of impartiality is essential, both to preserve the right to challenge and to maintain the integrity of the arbitral process. A party considering a section 24 challenge would be well-advised to notify GAFTA of its concerns in any event, both as a practical matter and to forestall any argument under section 24(2) – whilst expressly reserving its position that doing so is not a prerequisite to court proceedings and does not constitute a waiver of any right.
