In a contentious arbitration case, former law lord Lord Hoffman addressed the constraints faced by arbitrators in a major fraud case involving Nigeria.
The arbitration panel, led by Lord Hoffman, came under scrutiny after an $11bn award against Nigeria was found to have been fraudulently obtained. Lord Hoffman stated that no different actions could have been undertaken by the panel to uncover the fraud during the arbitration process.
During the report stage of the Arbitration Bill, Lord Hoffman participated in discussions concerning an amendment proposed by Labour peer Lord Hacking. The amendment aimed to impose a duty on tribunals to shield proceedings from fraud and corruption. However, Hoffman expressed skepticism about its effectiveness, questioning what more arbitrators could feasibly do.
Lord Hacking proposed that the amendment would signal a strong stance against fraud and corruption in arbitrations seated in England. He suggested that counsel and parties should be reminded at hearings to ensure proceedings are devoid of corruption, drawing on his experience as a legal professional.
Lord Hoffman recounted the specifics of the Nigeria case, a dispute over a long-term contract for gas supply. While the contract breach was debated, the underlying corruption was not apparent to the arbitrators during the proceedings. It was only during a High Court hearing that bribery and corruption issues emerged.
He further argued that arbitration is a consensual process and it would be inappropriate for tribunals to probe issues that the parties do not raise. This could transform arbitration into an investigatory process, which it is not intended to be.
Lord Mance, a former deputy president of the Supreme Court, suggested a need for legal provisions to allow disclosure of corruption found by the tribunal, although he noted that existing common law might already permit this.
Despite backing from other peers, the amendment was withdrawn. Former justice minister Lord Wolfson urged the government to consider a prompt for arbitral bodies to be more vigilant about potential corruption. Yet, Lord Ponsonby articulated that current frameworks already offer mechanisms to challenge and address corrupt practices.
The debate highlights ongoing challenges in balancing the proactive identification of fraud in arbitration with the fundamental consensual nature of the proceedings. While additional legislative measures were considered, existing legal structures were deemed sufficient by government representatives, leaving the arbitral process largely unchanged.
