⚖️ The Hague Court declined to set aside the NAI award, although it found that the arbitrator should have disclosed his business relationship with a party to the dispute

The employee held the position of Chief Executive Officer at MetaCorp and held shares in the claimant pursuant to a share valuation agreement (the “Agreement”). Following his retirement, the employee was required to transfer the shares to MetaCorp, while MetaCorp was required to pay the employee compensation in return.

A dispute arose over the date for valuing the shares for the purposes of calculating the employee’s compensation. The employee argued that the relevant date was the end of the financial year preceding the termination of his employment, while MetaCorp maintained that it should be the end of the year in which the employment actually terminated.

The employee commenced arbitration under the Netherlands Arbitration Institute (NAI) Rules pursuant to the Agreement’s arbitration clause. The three-member tribunal comprised an arbitrator appointed by the employee from Curaçao, an arbitrator appointed by MetaCorp from the Netherlands, and a Dutch chair. The tribunal ultimately upheld the employee’s claims.

MetaCorp applied to the Hague Court of Appeal, as the court at the seat of arbitration, seeking to set aside the arbitral award on the following grounds:

👀Since 2001, the arbitrator from Curaçao had maintained business relationships with the employee who had appointed him. The employee had regularly retained the arbitrator to provide advice on matters, including matters relating to MetaCorp;

👀The arbitral tribunal awarded interest from a date that had not been pleaded by either party. Consequently, the award came as a “surprise” to the parties.

The Court agreed with MetaCorp and noted that the arbitrator should have disclosed his business relationship with the employee and should have understood that MetaCorp could have had legitimate doubts as to his impartiality and independence. However, the Court did not consider this sufficient grounds for setting aside the award for the following reasons:

🔘An arbitral award may be set aside on grounds of an arbitrator’s lack of impartiality only where the arbitrator was in fact biased, or where the doubts as to his impartiality are so serious that it would be unreasonable to require the unsuccessful party to accept the award;

🔘The contacts between MetaCorp and the arbitrator from Curaçao were not close. First, the arbitrator had participated in the employee’s advisory matters only occasionally and had not devoted significant time to them. Second, most of the advice had been provided a long time ago and was not relevant. Third, the employee had merely acted as the contact person in those matters, whereas MetaCorp itself was the actual client;

🔘The award was rendered unanimously by all three arbitrators, meaning that no particular influence of the arbitrator from Curaçao on the outcome of the dispute could be established;

🔘MetaCorp had not challenged the arbitrator during the arbitration proceedings, although it had had the opportunity to do so, and had therefore lost its right to object;

🔘In light of the above, in the present case the doubts as to the arbitrator’s impartiality and independence were not sufficiently serious to warrant setting aside the award.

As regards MetaCorp’s arguments concerning interest, the Court held that the arbitral award had not come as a “surprise” to the parties. During the arbitration, the parties and the arbitral tribunal had discussed the issue. Accordingly, the parties could have expected that the arbitral tribunal might determine the commencement date for the accrual of interest in accordance with the applicable law. In line with established practice, the arbitral tribunal determined the commencement date for the accrual of interest as the date on which the arbitration was commenced.

Accordingly, the Hague Court of Appeal refused to set aside the NAI arbitral award.

📎The court decision is available here.

TRANSLATED BY AI
Original see here