The appointment of an arbitrator is a critical step in any arbitration. The advantages of arbitration depend, to a large extent, on the persons appointed as arbitrators. In other words, while the same dispute may be resolved in a satisfactory and efficient way, it might turn into a lengthy and costly proceeding with a questionable outcome if arbitrators are not carefully chosen.
In arbitration, parties are generally free to select an arbitrator and to agree on how the arbitrator will be appointed. The appointment procedure may be included in a special provision in the arbitration agreement itself. Alternatively, parties may agree on appointment by resorting to an arbitral institution providing for an appointment mechanism. National arbitration laws frequently also allow judges to appoint arbitrators in the event of disagreement.
In the case ARI v. WXJ  EWHC 1543 (Comm), the Commercial Court in London ruled on the valid steps for the appointment of an arbitrator in a London Maritime Arbitrators Association (LMAA) arbitration. In its ruling, Mr Justice Foxton considered (1) whether, in the exchange of emails with the party, the arbitrator had accepted the appointment, and (2) whether the nominating party had validly appointed the arbitrator under the LMAA rules.
Facts that Led to the Dispute
The dispute arose out of a Reconciliation Agreement entered into between the claimant and the defendant in relation to vessels that were chartered to the defendant.
Clause 6 of the Reconciliation Agreement stipulated that “[f]or the purpose of executing this Agreement, the governing law is the law that currently governs the Bareboat Charters in force.” The same Clause further provided that “[i]n case of any dispute […], the parties elect the forum stipulated in the Bareboat Charter contracts for the resolution of disputes.”
The referred dispute resolution forum was included in the Bareboat Charter standard of the BARECON form (Clause 30(a)), which provides for LMAA arbitration governed by English law:
This Contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.
The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.
The BARECON form also requires the parties to appoint their arbitrators to commence the proceedings within a time limit:
The reference shall be to three arbitrators. A party wishing to refer a dispute shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint in its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement.
On 22 December 2021, the claimant sent to the defendant a notice appointing GGG as its arbitrator. In the same notice, the claimant indicated that the defendant had 14 days to appoint an arbitrator. If the defendant failed to appoint its own arbitrator within 14 days, GGG would be appointed as the sole arbitrator.
On 5 January 2022 (i.e., the last day of the 14-day period), the defendant appointed JJJ as its arbitrator, copying claimant, GGG and JJJ to the email.
On 1 February 2022, JJJ informed the parties that he would not be able to act as co-arbitrator due to a disagreement regarding the arbitrators’ remuneration. The defendant sought to appoint another arbitrator to replace JJJ, whereas the claimant sought to appoint GGG as the sole arbitrator.
Whether There Had Been a Valid Acceptance of the Arbitrator
Foxton J first considered whether JJJ had accepted his appointment. The Commercial Court adopted a pragmatic approach and rejected the claimant’s submission that, for the purpose of Clause 30 of the BARECON form, an appointment would require a concluded contract between the nominating party and the putative arbitrator.
A “pragmatic” approach had been followed by English courts in previous decisions. In Tradax Export SA v. Volkswagenwerk AG (La Loma)  QB 537, the Court of Appeal found that there was no valid appointment where one party had appointed an arbitrator without securing the confirmation of that arbitrator to act. In this regard, the crucial point for the acceptance to be effective was the arbitrator’s communication of his “willingness to act”:
Edmund Davies LJ referred to the fact that “acceptance” of the appointment by the arbitrator was necessary, approving a passage in the-then current edition of Russell on Arbitration that “an appointment should not be considered effective until the person appointed has agreed either expressly or tacitly to exercise the functions of the office.”
Considering the above, the Commercial Court concluded that the question of whether the arbitrator had accepted the appointment for the purpose of Clause 30 of the BARECON form lies on whether there had been a clear and unconditional communication of acceptance. Conversely, if an arbitrator’s response to the appointment is subject to other conditions, there would be no acceptance until those conditions are satisfied.
Whether There Has Been a Valid Appointment in the Arbitration
In addition to the arbitrator’s acceptance, the Commercial Court also considered that for a valid appointment it was necessary:
- to confirm the arbitrator’s acceptance; and
- to give the other party appropriate notice.
More generally, Foxton J accepted that when construing the effect of notices said to have commenced an arbitration, as per Section 14 of the English Arbitration Act, a “broad” and “non-technical” approach should be adopted.
In this respect, Foxton J explained, “[A]rbitration is widely use by commercial parties, often acting without the benefit of legal advice”:
I am satisfied that the issue of whether an arbitrator has been “appointed” for the purposes of a clause such as clause 30 of the BARECON form should be approached with similar considerations in mind. Even when lawyers are involved in appointing an arbitrator, the process frequently involves no more than the exchange of a small number of very brief communications, which essentially involve the party asking the arbitrator if they are willing to accept the appointment, the arbitrator confirming their willingness to do so, and the appointment then being notified to the other party, with the arbitrator copied in. That is particularly the case in maritime arbitrations such as those conducted under the rules of the LMAA. That rapid and informal process suits the needs of both parties to the interaction.
Analysis: Making a Valid Appointment in Arbitration Proceedings
In light of the foregoing, Foxton J went on to analyse the communications between the defendant and JJJ.
The defendant contacted JJJ on 3 January 2022. In his response, JJJ stated that, subject to conflicts, he would be available for the mission.
On the next day, by email, JJJ confirmed that he was conflict free. According to the Commercial Court, JJJ’s confirmation removed the only condition that the arbitrator imposed when he was first contacted by the defendant.
The defendant then acknowledged receipt and informed that it would proceed with the appointment:
The Defendant then replied “Thank you for your confirmation. We will… confirm your appointment and the way forward in due course after tomorrow.” I accept that in this communication, the Defendant was signalling that it had yet to confirm the appointment. However, it was also making it clear that it was proceeding on the basis that it was entitled unilaterally to proceed to do so by notifying the Claimant. There was no response from JJJ.
On 5 January 2022, the defendant gave notice to the claimant on the appointment of JJJ, with JJJ and GGG on copy:
On 5 January 2022, the Defendant emailed the Claimant, copying JJJ and GGG, stating “[the Defendant] gives notice that it appoints [JJJ] as arbitrator in connection with [the Claimant’s] Notice”. That communication clearly communicated the Defendant’s confirmation of JJJ’s appointment following JJJ’s unconditional confirmation of their willingness to act, both to JJJ and to the Claimant.
At this point, Foxton J was satisfied that:
- JJJ had unconditionally expressed his willingness to serve as co-arbitrator; and
- the defendant unequivocally communicated the appointment to both JJJ and the claimant.
In particular, Foxton J noted that while JJJ appeared to be proceeding on the subjective basis that the appointment had not become effective, the communications exchanged after 5 January 2022 were irrelevant to the extent that the appointment was validly concluded on 5 January 2022:
Mr Leabeater QC also submits that no relevant contract had been concluded because the parties had not “agreed upon all essential terms,” which I understand to be a reference to the failure to agree the financial terms later raised by JJJ. However, unless JJJ made acceptance, or confirmation of their willingness to accept, the appointment conditional on agreement as to particular terms of retainer, the fact that there had been no discussion of the financial or other terms on which JJJ would act did not preclude JJJ’s appointment as arbitrator. Indeed, it is relatively common for arbitrators to accept appointments without any express agreement as to fees, in particular in LMAA arbitrations.
While the recent decision of the Commercial Court in London arises in the context of a maritime arbitration under the BARECON form, it provides useful insights as to the question of the validity of an arbitrator’s appointment, which may be of more general application. The pragmatic approach adopted by the Commercial Court is particularly useful for ad hoc arbitrations where the appointment of arbitral tribunals is not overseen by arbitral institutions.