Have you appointed a valid arbitrator?

What happens when Arbitration Agreements are unclear | BDM Blog | BDM Law

Followers of our blog may recall our last article on things to watch out for when drafting arbitration clauses. One of the things we highlighted was that parties should be careful about being overly restrictive on who the arbitrators can be. Recently, one of our clients, up against a time bar, found themselves in trouble as they could not find a commercial person conversant with shipping who was currently engaged in chartering operations. There are plenty of arbitrators with experience of chartering but to be currently engaged in chartering operations narrows down the field considerably. Potential arbitrators also have to be very careful about conflict issues. If they are also working in chartering operations then the chances are that they may have a potential conflict if they work with or have worked with one or other of the parties in dispute. Fortunately, we managed to resolve the problem by agreement and there was no need for clients to apply to the High Court for relief under the Arbitration Act. However, if you are up against a time bar and appoint an invalid arbitrator then, arguably, you may find yourself time barred.  Moral of the story is to take early action to deal with the situation.

One recent case that may be of interest is Tonicstar Limited v (1) Allianz Insurance PLC; (2) Sirius International Insurance Corporation [2017] EWHC 2753 (Comm).  In this case, a reinsurance policy contained a provision that “[u]nless the parties otherwise agree the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance”. The issue was whether a senior insurance barrister with more than ten years’ experience as a lawyer in insurance and reinsurance disputes fulfilled the requirements of the clause. Mr Justice Teare decided that the appointed arbitrator was not qualified. The Court of Appeal disagreed. Legatt LJ held that “experience of insurance or reinsurance” should not be restricted to experience obtained only in the insurance or reinsurance industry itself but also legal experience. The case is testament once again to the support that the English Courts will give to try to uphold arbitration clauses.

This case demonstrates that it is important to give careful thought when drafting arbitration clauses. We see our fair share of unclear arbitration clauses and we often find ourselves applying to the Court to resolve problems. Our most recent example was where the parties agreed an arbitration clause that provided for UK law and arbitration in London. Fortunately that was fairly easy to deal with. UK law is of course somewhat meaningless but, following the decision in Emtek v Alkem Labs [2015] EWHC 3158, the law to be applied was that of England and the legal seat of the arbitration was clearly in England thus giving our clients access to the High Court’s powers under the 1996 Arbitration Act.

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