Delay at your peril: High Court holds that two week delay causes party to lose right to object to irregularity in arbitration

In Radisson Hotels v Hayat Otel, (1). the High Court found that the claimant ("Radisson") had lost its right to challenge an arbitration award (the "Award") by continuing to take part in the proceedings for a period of two weeks after becoming aware of improper conduct by one of the arbitrators (the "Arbitrator").

Background

Radisson brought a challenge to the Award on the grounds of serious irregularity under sections 68(a) and (c) of the Arbitration Act 1996 (the "Act"). (3)

It was common ground between the parties that the Arbitrator (4). nominated by the Defendant ("Hayat") had multiple ex parte communications regarding the proceedings with representatives of Hayat and an expert engaged by Hayat in the arbitration (the "Expert"). (5)

The Arbitrator's ex parte communications came to light through discussions between Radisson, Hayat's former in-house counsel, and the Expert nearly one year after the evidential hearing. Radisson later obtained a USB drive containing a Word document that apparently reproduced the text of internal emails between the members of the arbitral tribunal relating to the arbitration ("Tribunal Emails"). Around two weeks later, Radisson obtained native versions of the Tribunal Emails. It transpired from the Tribunal Emails that the Arbitrator had forwarded the Tribunal Emails to the Expert. One such email contained a member of the tribunal's preliminary views on the merits of the dispute. 

Around two weeks after Radisson discovered the Tribunal Emails, the ICC Secretariat wrote to the parties informing them of the resignation of the presiding arbitrator due to health issues. The next day, Radisson's lawyers wrote ex parte to the ICC Secretariat, attaching the Tribunal Emails and requesting that the ICC Court refrain from appointing a new arbitrator pending Radisson's forthcoming application for the replacement of the Tribunal.

Decision 

The main issue for determination by the High Court was whether Raddisson had lost its right to challenge the Award under section 73(1) of the Act by continuing to take part in the arbitration proceedings without objecting in a timely fashion to the Arbitrator's conduct.

Section 73(1) provides:

"73 Loss of right to object.

(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection—

…

(b) that the proceedings have been improperly conducted,

(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or

(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."

The judge ultimately held that Radisson was precluded from raising its objection to the award by s. 73 of the Act.

The judge's starting point was to determine what Radisson's "grounds of objection" were for the purpose of s. 73. In applying the established principle that the grounds of objection should be broadly construed,(6) the judge concluded that the entire foundation of Radisson's case was to infer from the Arbitrator's ex parte communications that she was guilty of actual bias (or, alternatively, apparent bias).

Having established the "grounds for objection", the judge stated that the burden was then on

Radisson to show that, in continuing to take part in the proceedings, it did not know about the grounds and could not with reasonable diligence have discovered them.

The relevant test was not when Radisson had obtained the "cogent evidence" necessary to bring its s. 68 challenge before the court (i.e. the native versions of the Tribunal Emails). Rather, the proper test was when it believed it had grounds for objecting to the improper conduct of the Arbitrator. On the evidence, the court held that Radisson believed it had grounds for objecting when it obtained the Word document containing the text of the Tribunal Emails. This was two weeks prior to raising any objection to the Arbitrator's conduct. Radisson did not need the native versions of those emails to have a belief in the existence of grounds for objecting.

Confidentiality

The court also rejected Radisson's subsequent application seeking to preserve the confidentiality of the underlying arbitration by anonymising and redacting the identities of the parties and any details which might identify them in the judgment.

The judge stated that the court must balance the parties' expectations of privacy in arbitral proceedings against the public interest in open justice. While the judge acknowledged Radisson's desire to keep the arbitration confidential, she found that it failed to identify any confidential information the disclosure of which would amount to a specific detriment. The judge further noted that no details of the arbitration would be disclosed in the judgment, even if it were to be published with no redactions.

In finding that Radisson's expectation of privacy in the arbitration did not outweigh the public interest in judgments being publicly available, the judge also had regard to the following factors:

• The fact of the arbitration was referred to in Radisson's financial accounts for 2019, which were publicly available;
• Hayat had no objection to the publication of the judgment in unredacted form;
• The proposed anonymisation of the parties and witnesses would make the judgment difficult for the reader to follow; and
• There is a public interest in understanding how courts apply the law to maintain fairness in the conduct of arbitrations, and such an interest exists regardless of whether the judgment raises matters of general importance or novelty.

Comment

Generally, the principles applied in Radisson Hotels are consistent with the pre-existing authorities on when a party loses a right to challenge an award on the basis of an irregularity under s. 73 of the Act. (7).But it is noteworthy that the court considered Radisson's two week delay, between discovering the Tribunal Emails and raising an objection to the ICC Secretariat, was sufficient to lose the right to object under s. 73 of the Act. The case therefore serves as a warning to parties and their lawyers of the significant risk in delaying the raising of an objection even for what may seem like a relatively short period, and even if the purpose of the delay is to allow a party time to consider its strategy.

The judgment is consistent with the relevant established authorities in finding that a party to an arbitration must act promptly if it considers that there are grounds on which the effectiveness of the proceedings may be challenged (8). The purpose of s. 73 is to ensure a party that believes it has grounds for objecting on the basis of a serious irregularity should raise that objection upon discovering it. A party is not permitted to allow the arbitral proceedings to continue without alerting the tribunal and the other party to a serious irregularity which the party believes renders the whole arbitral process invalid.

However, the judgment also makes clear that if a party develops concerns regarding a potential irregularity in the proceedings that warrants further investigation, this alone will not necessarily amount to grounds for objecting unless the information is sufficiently specific. For example, the information supplied verbally at an earlier stage to Radisson by Hayat's former in-house counsel regarding the Arbitrator's ex parte communications was not specific enough to amount to grounds for objection. 

Finally, strategically speaking parties to an arbitration should be mindful that a challenge to an award under s. 68 is likely to result in certain information about the arbitration entering the public domain. Parties can take steps to minimise this risk by applying to have confidential information redacted in the judgment. However, they will need to point to compelling reasons to persuade the court that the preservation of confidentiality outweighs the public interest in open justice in judicial proceedings.

(1) Radisson Hotels APS Danmark v Hayat Otel Işletmeciliği Turizm Yatırım Ve Ticaret Anonim Şirketi [2023] EWHC 892 (Comm).

(2) Radisson Hotels APS Danmark v Hayat Otel Işletmeciliği Turizm Yatırım Ve Ticaret Anonim Şirketi [2023] EWHC 892 (Comm).

(3) In particular, Radisson alleged under s. 68(2)(a) that the tribunal had failed to comply with its general duty under s. 33 of the Act 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". Radisson further alleged under s. 68(2)(c) that the tribunal had failed to conduct the proceedings in accordance with the procedure agreed by the parties.

(4) The Arbitrator was a Turkish hospitality professional who is not legally qualified.

(5) The Expert was not ultimately called to give evidence by Hayat and did not submit any reports in the Arbitration.

(6) Province of Balochistan v Tethyan Copper Company Pty Ltd [2021] EWHC 1884 (Comm) at [110].

(7) See e.g. Federal Republic of Nigeria v Process & Industrial [2020] EWHC 2379 (Comm); Thyssen Canada Ltd v Mariana Maritime S. A & Another [2005] EWHC 219 (Comm); Rustal Trading Ltd v Gill & Duffus SA [2000] C.L.C. 23; Province of Balochistan v Tethyan Copper Company Pty Ltd [2021] EWHC 1884.

(8) Rustal Trading Ltd v Gill & Duffus SA [2000] C.L.C 231; Thyssen Canada Ltd v Mariana Maritime S.A. & Another [2005] EWHC 210 (Comm) at [18].