Appointing an Arbitrator: As Simple as It Sounds?

October 5, 2022

The High Court recently held that no complex contractual analysis is required to determine whether an arbitrator was validly appointed.  Read on for analysis of the court’s decision in ARI v WXJ, which found that where an arbitrator clearly accepts or expresses unconditional willingness which the appointing party then acts on by giving notice to its opponent, there is a valid appointment.

In ARI v WXJ [2022] EWHC 1543 Comm., following the approach taken in Tradax Export SA v Volkswagen AG (The Loma) [1970] QB 537, Foxton J found an appointment to be valid where:

  1. there has been a clear and unconditional communication of acceptance of the appointment by the arbitrator, which is then notified to the other party in the dispute; or
  2. there is a communication of unconditional willingness by the arbitrator to accept the appointment, which the appointing party then acts upon by communicating the appointment to the appointee and the other party.

Timing of the appointment

Identifying the date an arbitrator has been validly appointed can be critical in several scenarios, particularly where the date of appointment is linked to commencement of proceedings, or where a tribunal needs to be constituted urgently to deal with orders at an early stage in proceedings.

In ARI v WXJ, having received notice of the claimant’s appointment of an arbitrator (GGG), if the respondent had not appointed an arbitrator of its own and given notice to the claimant within 14 days, the claimant would have been entitled to appoint GGG as the sole arbitrator. The respondent provided notice of its own arbitrator appointment (JJJ) on the final day of the period, so the crucial question was whether JJJ had actually been appointed by that time. It might be observed, perhaps, that the respondent did not help itself by approaching JJJ only two days before the expiry of the 14-day window for appointment.

In this case, when first approached, the only caveat JJJ had provided to the appointment was that it was subject to clearing conflict. When JJJ subsequently indicated there was no conflict, the respondent considered it was free to communicate the appointment of JJJ, which it proceeded to do. The fact that all terms of the engagement had not been settled was not relevant to the question of the time of the appointment under, and for the purposes of, the applicable arbitration rules. The lack of conditionality imposed by JJJ and the notification by the respondent meant the appointment was valid under the applicable rules, and before the expiry of the 14-day deadline.

Commercial approach

The High Court emphasized that commercial parties often use arbitration without the benefit of legal advice and acknowledged that, particularly in maritime arbitrations, rapid and informal processes suit the needs of both parties.

With these considerations in mind, the claimant’s submission that a formal contract was necessary for an appointment to have taken place was rejected. An email from the respondent’s proposed arbitrator stating “it appears that I can act here without any firm conflicts” was sufficient to constitute an unconditional communication of acceptance. The fact that the arbitrator’s remuneration had not been agreed at that stage was not enough to scupper the validity of the appointment in the eyes of the court.

This pragmatic approach will be of some comfort to practitioners. Given the urgent backdrop against which tribunals often form, it can be impractical to draw up a formal, bilateral contract agreeing all matters between the appointor and the arbitrator in advance of deadlines. This judgment suggests that remuneration can be agreed at a later date without invalidating an appointment.

Of course, had JJJ raised other conditions that were still unresolved by the expiry of the 14-day deadline, then the outcome may have been quite different on the facts. There is merit in starting the arbitrator selection and appointment process well before the end of the permitted time period.

Conclusion

Though the court found that the arbitrator had been validly appointed, ARI v WXJ does provide a stark reminder to arbitration practitioners that pushing deadlines to their limits can engender trouble. There is a better chance of negating technical challenges to the constitution of a tribunal if appointments are made well ahead of time. If there are genuine issues with finding an arbitrator to accept the appointment, it will also afford sufficient time to raise that issue and seek relief from the strict consequences of failing to meet the deadline.

Subscribe
Back to top