The right to determination by an impartial and independent arbitrator is a fundamental principle of the Arbitration Act 1996 (Act) as parties and the public must have confidence in the administration of justice through arbitration [1]. Legal commentators have said that impartiality means lack of interest and independence means lack of connection [2]. Broadly speaking, to be impartial is to be fair to both parties, treating both equally whereas to be independent means to have no conflicting relationship with either party. Actual bias differs from apparent bias, in that the latter is unconscious, although both are unacceptable. We discuss apparent bias below.

Challenging appointment 

The objective test for apparent arbitratior bias [3], is whether “the reasonable, informed observer would think that the impartiality of the adjudicator might be / might have been affected” [4] in the resolution of the dispute, after considering the entirety of the dispute and the surrounding circumstances of the matter. This is determined by a factual inquiry [5]. There have been very few cases of arbitral bias found in New Zealand.  

Arbitrators are subject to stringent disclosure obligations from the time of appointment and throughout the proceedings regarding circumstances that may give rise to justifiable doubts as to their impartiality or independence [6]. They are held to the same standard as judges and others acting in adjudicatory capacities, in that “justifiable doubts” as to the arbitrator’s impartiality or independence under Article 12(2) of Schedule 1 of the Act will be raised if the apparent bias test has been met, as set out above. Failure to disclose circumstances which may give rise to justifiable doubts as to the arbitrator’s impartiality or independence may risk the award’s validity being questioned or exposing the arbitrator to liability [7].

With New Zealand being a comparatively small jurisdiction and the legal market being relatively contained, arbitrators may run into potential conflicts such as financial interests in the outcome of the arbitration or having close personal relationships with the parties. It is relevant that arbitrators can decline to accept an appointment, and often they are the best placed to predetermine whether they may unconsciously or consciously demonstrate bias in the matter prompting them to refuse appointment. 

Procedure for challenging an arbitrator

Under Article 13(2), either party may, within 15 days after becoming aware of circumstances giving rise to potential bias (Article 12(2)), challenge the arbitrator’s appointment by applying to the arbitral tribunal. This is the default procedure when parties have not agreed on a different procedure under Article 13(1).  If either avenue is unsuccessful, the party can apply to the High Court to decide the outcome under Article 13(3). The Court’s decision is not appealable. Grounds for challenging an arbitrator are limited, being either inadequate qualifications or justifiable doubts as to arbitrator’s impartiality or independence.

After an award is issued, if a party is concerned that the arbitrator conducted themselves in a biased manner, that party can apply to set aside the arbitral award. Under Article 34(3) of Schedule 1, this must be done within three months of receiving the award [8]. The Court’s discretion is broad but subject to the Act’s principles [9]. 

To avoid practical difficulties, it is recommended that parties raise any objections they have regarding an arbitrator prior to their appointment. Provided these objections are validly set out, the parties can negotiate to appoint a different person or panel, where appropriate. 

Footnotes

[1] See for example Banks v Grey District Council [2004] 2 NZLR 19.
[2] Stephen Blakeley Green & Hunt on Arbitration Law & Practice (online looseleaf ed, Thomson Reuters) at [DA4.6.01].
[3] See Auckland Co-op Taxi Soc Ltd v Perfacci Ltd HC Auckland CIV-2003-404-5495, 10 October 2003.
[4] David AR Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [5.7.4]. See also Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 72, [2010] 1 NZLR 35 at [37].
[5] Todd Taranaki Ltd v Energy Infrastructure Ltd HC Wellington CIV-2007-485-2684, 19 December 2007.
[6] Williams and Kawharu at [5.6].
[7] Willy and Sissons at [4.A.6.11.2].
[8] See Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2014] NZHC 249; [2014] NZAR 311 where an award was overturned under Article 34 of Schedule 1.
[9] Williams and Kawharu at [17.2].