The Arbitrator’s Dilemma: The Duty To Disclose Under Section 14 Arbitration Act 2005
When approached to be appointed as an arbitrator, the candidate must consider whether there are any circumstances that are likely to give rise to justifiable doubts as to his impartiality or independence. Therein lies the arbitrator’s dilemma – to disclose or not to disclose, that is the question. In such circumstances, the golden rule for an arbitrator to follow is: ‘When in doubt, disclose!’.
However, the recent Court of Appeal decision of Persatuan Kanak-Kanak Spastik Selangor & Wilayah Persekutuan v Low Koh Hwa  1 MLJ 342 (PKKS case) has raised doubts on this golden rule and has once again brought the arbitrator’s duty to disclose under Section 14 of the Arbitration Act 2005 (AA 2005) to the forefront of the arbitration sphere. Section 14 reads:
“(1) A person who is approached in connection with that person’s possible appointment as an arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to that person’s impartiality or independence.
(2) An arbitrator shall, without delay, from the time of appointment and throughout the arbitral proceedings, disclose any circumstances referred to in subsection (1) to the parties unless the parties have already been informed of such circumstances by the arbitrator.”
A dispute arose on the professional fees payable to an architect, Low Koh Hwa (LKH) for the re-construction of a spastic centre for Persatuan Kanak-Kanak Spastik Selangor dan Wilayah Persekutuan (PKKS). Both parties decided to refer their dispute to arbitration. On the first day of the arbitral proceedings, after LKH’s cross-examination, the arbitrator disclosed that he knows PKKS’ representative and witness (Dr Mohinder). No objections were made at this point or during the arbitral proceedings by LKH. Finally, an arbitral award was granted in favour of PKKS. LKH then applied to the High Court under Section 37(1) of the AA 2005 to set aside the arbitral award.
High Court Decision
The High Court allowed LKH’s application and set aside the whole award. The High Court found, among other things, that the arbitrator did not make full and timeous disclosure as required of his relationship with Dr. Mohinder before the hearing and only did so after LKH finished testifying. Further, the High Court adopted the principle in the UK Supreme Court in Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd  UKSC 48, which stated that an arbitrator’s failure to disclose is a factor for the fair-minded and informed observer in assessing whether there are justifiable doubts on the arbitrator’s impartiality (i.e. in assessing whether there is a real possibility of bias).
In coming to its decision, the High Court also applied the real possibility of bias test for apparent bias as approved by the Halliburton case. The test is basically “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”. The High Court found that in light of this breach, a fair-minded and informed observer would have an objective perception that there was a real possibility that the arbitrator was biased towards PKKS.
Court Of Appeal Decision
Dissatisfied with the High Court’s decision, PKKS successfully appealed to the Court of Appeal which found that whilst there was no compliance with the timeous disclosure requirement, the High Court was wrong in holding that there was no full disclosure of the arbitrator’s relationship with Dr Mohinder. Further, LKH was estopped from objecting to the arbitrator’s appointment under Section 15(1) of the AA 2005 as it was not done within 15 days of the date of disclosure and since the objection was only raised when the arbitrator’s award did not favour him. Therefore, the High Court was wrong to have set aside the award on the basis that there was clear or apparent bias by the arbitrator.
1.Full Disclosure Requirement
The High Court found that the arbitrator must disclose to the parties all the relevant details of the arbitrator’s relationship which would enable a ‘fair-minded and informed observer’ to decide objectively on whether there are justifiable doubts on the arbitrator’s impartiality and/or independence. The High Court held that there was no full disclosure as the arbitrator did not disclose matters like: how the arbitrator knew Dr. Mohinder; what the nature of the arbitrator’s relationship was; how long the arbitrator’s relationship was; how close the arbitrator was with Dr. Mohinder. The High Court in support of the above matters to be disclosed, stated the golden rule, i.e. ‘when in doubt, disclose!’.
However, the Court of Appeal in coming to its decision did not refer to the Halliburton case nor did it clarify the test to be applied for apparent bias. It is wanting in this respect. Nonetheless, it still found that so long as the arbitrator has disclosed fully the ‘most crucial information’ i.e. his acquaintance with the witness, it was sufficient. Indeed, the court held that such disclosure by the arbitrator was sufficient to trigger a concern of impartiality or independence such that LKH can raise a complaint and invoke Section 14(3) and Section 15 of the AA 2005 to challenge the arbitrator’s appointment. However, LKH failed to exercise this right and proceeded with the arbitration proceedings. Thus, this demonstrated his full faith in the arbitrator’s impartiality and independence, as the issue of bias was only raised as an afterthought when the award was not in his favour.
As a result, the Court of Appeal found that LKH was not prejudiced and there was no breach of public policy, especially since the arbitrator did not conceal his acquaintance with the witness and even gave LKH (who was unrepresented then) an opportunity to engage a lawyer after disclosing. Hence, LKH was estopped from objecting to the arbitrator’s appointment.
2.Timeous Disclosure Requirement
Section 14(2) provides that the arbitrator ‘shall, without delay…disclose’, as above. It is clear that Section 14(2) makes it mandatory for the arbitrator to disclose, without delay, from the time in which he has been appointed. Interestingly, the Court of Appeal agreed with the High Court that the Arbitration Act 2005 imposes a duty to make full and timeous disclosure and that the arbitrator did not declare his relationship with the witness before the proceeding commenced. In fact, the Court of Appeal acknowledged that the disclosure was not made ‘timeously’.
Nevertheless, since the arbitrator had disclosed the ‘most crucial information’, i.e. his acquaintance with the witness, it thereby disagreed with the High Court that there was no ‘full disclosure’ by the arbitrator. As a result, there was no exceptional circumstance that would warrant the High Court to set aside the whole award. The disclosure by the arbitrator was still made on the first day of the arbitral proceedings, therefore this decision cannot be interpreted to mean that the arbitrator can delay in disclosing for as long as he wants – he was still under a continuing duty to disclose.
The Court of Appeal’s finding that the challenge of the arbitrator’s independence and impartiality was an afterthought is certainly in line with international norms that if an arbitrator discloses and no objection is made, any subsequent challenge during or after the proceedings “should be unsuccessful”. Thus, it must be emphasised that any objections must be made promptly.
While the overall decision to reinstate the award partially due to, among other things, want of clear/apparent bias is a testament to the Malaysian court’s arbitration-friendly and minimalist intervention approach, the Court of Appeal in not clarifying the applicability of the Halliburton case and the proper test to be applied for apparent bias to arbitrators still leaves much to be desired.
Further, the Court of Appeal’s decision suggests that so long as the arbitrator discloses fully the ‘most crucial information’, the disclosure then need not be made timeously, nor must every detail be disclosed. Hence, this provides more flexibility to the arbitrators in disclosing only the ‘most crucial information’, thereby making the duty to disclose less onerous as compared to the High Court’s decision. However, this flexibility comes at the cost of raising doubts on the strict application of the golden rule and Section 14 itself. As a result, the dilemma of an arbitrator to determine what and when to disclose remains an enduring challenge that will haunt arbitrators for years to come.
 Dato Dr. Muhammad Ridzuan bin Mohd Salleh & Anor v Syarikat Air Terengganu Sdn Bhd  3 MLJ 737; General Standard 3(d) of the IBA Guidelines on Conflicts of Interest in International Arbitration  Nigel Blackaby, et al, Redfern and Hunter on International Arbitration, 6th edn (Oxford University Press, 2015)
29 May 2023