Arbitrators — Fees — Appointment without agreement on fees — Arbitrators proposing commitment fee — Whether arbitrators entitled to demand commitment fee — One party prepared to accept fee arrangement — Whether bias — Whether misconduct if arbitrators agree commitment fee with one party
In January 1987, and in accordance with the terms of an arbitration agreement, the parties each appointed an arbitrator and they, in turn, appointed a third arbitrator. The appointments were accepted by the arbitrators without any reference to fees. Because of the size of the dispute and the exceptionally busy nature of the arbitrators, the parties asked the arbitrators to reserve a 12-week period in 1992 for the hearing. The arbitrators were prepared to agree to this subject to fees for a 12-week hearing of £120,000, with a non-returnable 10% fee being payable on fixing the date of the hearing and the balance being payable in installments. The plaintiffs, who were agreeable to these proposals, sought declarations that their acceptance of the terms would not raise any imputation of bias and that the arbitrators were fit and proper persons; the defendants contending that the arbitrators had misconducted themselves by making and persisting in certain requirements as to their fees.
Held By accepting their appointments the arbitrators undertook to enter on and proceed with the arbitration and became entitled to a reasonable remuneration for their services. There is an implied term in the contract of their appointment that the parties may, at any stage, withdraw their request for the arbitrators’ services as a result, for instance, of settling their dispute. Acceptance of an appointment by an arbitrator does not carry with it any right to a commitment fee, which is payable regardless of whether loss is suffered by the arbitrator as a consequence of the withdrawal of the demand for his services. There is no basis for implying a term into a contract for the appointment of an arbitrator as to a commitment fee. It is misconduct where an arbitrator who has accepted an appointment without reservation subsequently insists on a commitment fee as a condition of continuing his services. It was improper of the arbitrators to insist on the commitment fee but it was not misconduct rendering them unfit to continue.
Once an arbitrator has accepted his appointment, it is undesirable for him to conclude an agreement about fees or any other matter that affects him personally with one party if the other party is not prepared to join in that agreement. If one party objects to such an agreement, it is hard to conceive of any circumstances where it will be appropriate for an arbitrator to conclude an agreement with the other party only. It would be improper for the arbitrators in the present case to conclude an agreement with one of the parties for a commitment fee.
Jonathan Sumption QC and Mark Howard (instructed by Clifford Chance) appeared for the plaintiff; and Michael Beloff QC and Timothy Wormington (instructed by Ince & Co) appeared for the defendants.
