The arbitration panel could not have prevented the $11bn fraud award, according to Lord Hoffman.
- A proposed amendment to the Arbitration Bill would not have influenced the outcome.
- Lord Hacking suggested the tribunal should safeguard against fraud and corruption.
- The High Court found corruption absent during arbitration, says Lord Hoffman.
- The government sees no need for legislative changes to address corruption in arbitration.
In a recent discussion, Lord Hoffman, the former law lord who led an arbitration panel later implicated in a fraudulent $11bn award, stated that the tribunal could not have altered the outcome. His comments came as the Arbitration Bill undergoes scrutiny, with proposed amendments aiming to impose a duty on tribunals to prevent fraud and corruption. It is, however, Lord Hoffman’s belief that such measures would have been ineffective in this instance.
Lord Hacking, a Labour peer and former lawyer, introduced the amendment during the bill’s report stage, advocating for a stronger stance against corruption in arbitrations where England is the seat. He proposed that arbitrators at the commencement of proceedings should instruct counsels and parties that corruption and fraud are unacceptable. Drawing from his own experience, Lord Hacking remarked that such preemptive measures during preparation could unveil potential fraud.
Despite the high-profile fraud ruling by Mr Justice Robin Knowles against the Federal Republic of Nigeria, which highlighted corruption in the case, Lord Hoffman contended that the arbitration panel had conducted its duties without knowledge of any deceit. For Hoffman, the notion of asking parties upfront about corruption seemed impractical, as arbitration is a “consensual arrangement” and not alluding to unmentioned issues is customary both in arbitration and regular litigation settings.
Lord Hoffman raised concerns over the implications of such amendments, suggesting that a tribunal engaging in active investigations might inadvertently create grounds for parties to question the arbitration’s validity. This notion found agreement among debate participants, including Liberal Democrat Lord Beith, who noted that the High Court’s detection of corruption indicates the current system’s adequacy in handling such issues.
As the debate concluded without adopting Lord Hacking’s amendment, suggestions emerged for possible legal attention beyond the bill concerning discoveries of corruption by arbitral tribunals. This includes a proposal by Lord Mance, former deputy president of the Supreme Court, recommending provisions for disclosure to public authorities when corruption is identified, arguing that common law already permits this under the absence of privilege in iniquity.
The discourse around the Arbitration Bill reflects the broader governmental consensus that legislative reform is unnecessary at this stage, as existing frameworks already provide pathways to challenge and address corrupt practices effectively. Lord Ponsonby, addressing the issue, highlighted the adequacy of current provisions that allow arbitrators and parties to maintain proceedings’ integrity without further legislative interventions.
The debate underscores a significant consensus on maintaining current arbitration practices while acknowledging potential areas for non-legislative improvements.
