By Teddy Musonda
Alternative Dispute Resolution - Arbitration
BRIEF FACTS
The parties entered into two contracts, namely; (i) a Bulk Consumer Agreement dated 16th Febury, 2006, and (ii) a Trasnsport Services Agreement dated 5th January, 2007. Therefore, the parties referred to arbitration when a dispute arose regarding the performance of both contracts. An arbitrator was duly appointed who proceeded to arbitrate the dispute which concluded with a final award in favour of the respondent.
The respondent’ Managing Director denied any personal knowledge of the arbitrator but conceded to have known the arbitrator albeit only through his wife who together with the arbitrator worked in the judiciary and the arbitration association. The respondent’ asserted that the matter was decided without any bias and impartiality on the part of the arbitrator.
The appellant therefore appealed to the Supreme Court after the High Court denied the application to set aside the award.
LEGAL ARGUMENTS
On the other hand, the respondents contended that even though they knew the arbitrator albeit not on aa personal basis, the issue was resolved on its merits. Further, the respondents claimed that the appellants action could not be entertained by the court as the appellants became aware of the relationship that existed between the arbitrator and the respondents’ Managing Director’ Wife, which presented as an opportunity for them to challenge the arbitrator as per Article 12 of the Uncitral Model Law but opted to continue with the proceedings thus accepting the competence of the arbitrator
LEGAL ISSUES
1. Whether an arbitrator is obligated to disclose any interests that they raise issues of bias or impartiality?
2. Whether an arbitrator’s non-disclosure of interests in the case goes against public policy as contemplated under section 17 (2) (b) (ii)?
HOLDING
They Court was quick to restate the law under the Arbitration (code of conduct and standard) regulations (SI No 12 o 2007), regulation 2 of the said provides as follows
"2 (1) An arbitrator shall disclose at the earliest opportunity
any prior interest or relationship that may affect
impartiality and or independence or which might
reasonably raise doubts as to the arbitrator's impartiality
and or independence in the conduct of the arbitral
proceedings.
(2) If the circumstances requiring disclosure are not
known to the arbitrator prior to acceptance of an
appointment ·or at the commencement of the arbitral
proceedings, disclosure shall be made when such
circumstances become known to the arbitrator.
(3) The burden of disclosure rests on the arbitrator and
the duty to disclose is a continuing duty which does
not cease until the arbitration has been concluded.
(4) After appropriate disclosure, the arbitrator may serve
if both parties so desire, provided that if the arbitrator
believes or perceives that there is a clear conflict of
interest, the arbitrator should withdraw, irrespective of
the expressed desires of the parties"
As the above provisions stipulate, the burden or duty of disclosure rests on the arbitrator. The court emphatically stated that, that duty is not discharged by the fact that a party becomes aware of the circumstances requiring disclosure through some other sources. Therefore, the court held that an arbitrator is under an obligation to disclose to the parties any interests or issues that may raise questions of biasness.
In reference to the second legal issue, the court cited Zambia Telecommunications Company Limited v Celtel Zambia Limited (2008 SCZ 34) where it was emphasized that it is the non-disclosure by the arbitrator which creates a perception of possible or likelihood of bias, and that is what makes the non-disclosure contrary to public policy. This is to say, the court did indeed hold that non-disclosure of an arbitrator where circumstances require so goes against public policy thereby falling within the spirit contemplated under Section 17 (2) (b) (ii) of the Act.
The Court ruled in favour of the appellant.
SIGNIFICANCE & APPLICATION
1. AN ARBITRATOR MUST DISCLOSE ANY INTEREST OR RELATIONSHIP THAT MY AFFECT THEIR PARTIALITY
The court was quick to settle this point as the law is very clear regarding this issue, the said law is provided by the Arbitration (Code of Conduct and Standard) Regulations which makes it abundantly clear that an arbitrator;
“shall disclose at the earliest opportunity any prior interest or relationship that may affect impartiality and or independence or which might reasonably raise doubts as to the arbitrator's impartiality and or independence in the conduct of the arbitral proceedings…”
2. WHAT RENDERS AN AWARD CONTRARY TO PUBLIC POLICY?
It is important to note that the ground that this appeal was based on was that the award was contrary to public policy, therefore, the court was invited to enunciate on the test to consider whether an award was in conflict with public policy.
The court cited the case of Pegasus Energy (Z) Ltd v Yougo Ltd (2006 HP/Arb/ 005) where the High Court, cited with approval the Zimbabwean case of Zimbabwe Electricity Supply Authority v Genius Joel Maposa (1999 2 ZLR 452) where it was held that
“an award that constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or acceptable moral standards that a sensible or fair minded person would consider that the conception of justice in Zambia would be intolerably hurt by the award was contrary to public policy.”
From the foregoing, it is important to note that the court will not set aside an award merely on the basis that the award given was excessive or not justly given in the circumstances of the case, this is because the court takes on a supervisory role over alternative dispute resolutions which therefore commands that the court should not replace the arbitrator’s decision with their own, or make a determination on what should have been the right thing to do. However, the court must be satisfied that the award is so outrageous that it defies logic or it falls above the normal standard of a rightful thinking member of the society generally, or that the award would cause rightful thinking members of the society look with intolerable hurt to the justice system in Zambia.
It may be fair to conclude that the court in addressing what renders an award contrary to public policy considers the award itself (amount of damages given, any orders given) and the manner in which the award was given. For instance, in the case in casu, the court was invited by the appellant to deem the amount of damages awarded to the respondent so outrageous rendering the award contrary to public policy, however, the court did in fact find the award contrary to public policy not because of the amount of damages awarded to the respondent but because of the perception of bias and impartiality of the arbitrator. So, the court found the award to be sound but the manner in which the said award was given is what rendered the award contrary to public policy (Emphasis is mine).
3. THE TEST FOR PROVING BIAS IS; THE PERCEPTION OR LIKELIHOOD OF BIAS AND NOT ACTUAL BIAS.
This pointed can not be laboured on too much as the preceding point has addressed it to a degree.
It is apparent that proving actual bias is a much higher standard therefore, the court laid the standard to; proving the perception or likelihood of bias (Emphasis is mine) which must be based on reasonable grounds however.
This case may be cited as authority for the following principles;
1. An arbitrator must disclose any interest or relationship that my affect their partiality.
2. What renders an award contrary to public policy is an award that constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or acceptable moral standards that a sensible or fair minded person would consider that the conception of justice in Zambia would be intolerably hurt by the award
3. The test for proving bias is; the perception or likelihood of bias and not actual bias.
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