It is said that, not so long ago, Prometheus was tasked with splitting an Ox into two equal portions: one for the Olympian Gods; one for Mankind. Due to his love of the people, he surrendered to bias and in punishment he was condemned to eternal torment for this transgression. Owing to the size of the UK construction industry, participants to an adjudication will often be familiar with each other and, like Prometheus, the adjudicator may have to wrestle with a conflict of interest (COI). This chapter reviews best practice management of COIs and proposes a novel conceptual framework to assist the adjudicator in assessing potential COIs.

The test for a conflict of interest is synonymous with the test for apparent bias as coined by Lord Hope in Porter v Magill [2001] UKHL: “The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased“. Where there is a COI, the adjudicator must resign.

Examples of such conflicts can be found in the International Bar Association’s traffic light system and the RICS Guidance Note ‘Conflicts of interest for members acting as dispute resolvers’. The adjudicator should be aware that a COI is not restricted to her own person but extends to her company and / or associates and it is mandatory that the adjudicator has a suitable system in place to identify potential conflicts.

Pre-Appointment

When approached by a nominating body, the prospective adjudicator must satisfy herself that she has the requisite expertise on the matters in dispute, she has capacity to undertake the appointment and that she has no COI within the dispute.

At a minimum, the RICS requests that the prospective adjudicator has made appropriate enquiries and has had no involvements within the last 5 years that would give rise to a real or perceived conflict. The adjudicator is to disclose to the RICS any matter which could potentially lead to a fair-minded and informed observer to conclude there is a real possibility of bias. These disclosures might relate to the following: relationships between the prospective adjudicator and the subject matter of the dispute; conflicts with an existing appointment; current and historic relationships with the parties and their representatives; more remote relationships, such as with the adjudicator’s employer / partners / associates; other connections that may influence the result of the adjudicator’s decision.

The RICS GN suggests as an overriding principle, the question is whether the adjudicator can maintain impartiality, and this should be applied to every relationship that might constitute a COI. These relationships should extend to colleagues in the same company and their relationships should be regarded as equally important. To achieve this a company should have a system in place, appropriate to the size and nature of the company, to carry out reliable checks.

The authorities on disclosure mainly revolve around the arbitration arena and those authorities show that most problems arise after a failure of the dispute resolver to disclose what was considered too trivial a matter. The failure to disclose is then argued to be evidence of a real possibility of bias to the fair-minded and informed observer.

To step away from the nomination through an ANB for a moment, the adjudicator James Pickavance stated that when a regular client seeks his appointment as adjudicator, he discloses to the other party how many times he has been appointed in the last 5 years. This transparent approach attempts to negate any COI issue arising.

Post-Appointment

At this stage, the prospective adjudicator has been appointed after undergoing suitability checks by the ANB. As best practice the adjudicator might consider it appropriate to disclose the same information to the parties. If the decision is to disclose, the parties should be invited to comment. The adjudicator might indicate that she considers the matter remote and inconsequential and not warranting resignation.

The adjudicator should continue to monitor any COI and disclose, as necessary. James Bessey in Building.co.uk suggested best practice should an issue arise thereon in: “If matters are not disclosed at the outset and are then raised later, the correct approach appears to be a helpful neutral disclosure and leave it to others to work out the consequences of that which is disclosed: don’t go on the attack however emotional or personal it may feel“.

Equally, when the adjudicator seeks independent advice on substantive matters, the RICS guidance recommends that the parties should be invited to comment to avoid a possible COI. In any event, the adjudicator should not allow a party to derail the procedure and persuade her to resign without sufficient cause.

Relevant Legal Authorities

There are a few important cases dealing with conflicts of interest. In Eurocom v Siemens [2014], the court found that the referring party fraudulently represented a list of individuals to the RICS so that certain adjudicators were excluded, and so summary judgment was not granted. If the responding party raises a jurisdictional challenge in this respect, then the adjudicator should investigate and request an explanation.

Cofely v Bingham [2016], although an arbitration, shed some light on when a working relationship becomes a COI. Cofely was successful in removing the arbitrator when, during the course of the previous 3 years, 18% of his workload and 25% of his income was from the other party to the arbitration. This issue, inter alia, led to a finding of apparent bias and as such might be considered a yardstick on when it might be appropriate to resign.

In the earlier adjudication summary judgement of Fileturn v Royal Garden Hotel [2010], the adjudicator had 5-10% of its business from the party representative. The court found that party representatives well known to the adjudicator is a quirk of the job and this alone gave no rise to apparent bias. These authorities also give rise to the argument that the Courts might distinguish between the party and the party representative when considering the weight of any conflict of interest.

Building on the Traffic Light System

The RICS traffic light system maps out a schedule of real-world examples to guide adjudicators through the minefield of COIs. Although by no means determinative (W Ltd v M SDN BHD [2016]), the hierarchical structure gives some assistance to adjudicators to demonstrate what might objectively be considered a COI. A red light shows a situation where the adjudicator should resign. An orange light shows a situation which suggests there might be a COI and the adjudicator might be persuaded to take action. A green light shows a situation when no COI exists, and the adjudicator is safe to act.

The traffic light system builds upon the authorities and attempts to apply the test for bias to common real-world examples. Far from the philosopher’s stone, the examples given lack specificity and they only cover a handful of the multiplicity of potential scenarios facing the adjudicator. As such the author proposes a new model to provide the adjudicator with a more comprehensive quantitative tool to assess conflicts of interest.

This model attempts to define COIs in relation to two dimensions. The first dimension is the adjudicator’s relationship with the individuals in the dispute. These might be professional or personal relationships and include both direct and indirect relationships. These relationships might be quantified through a spectrum relating to the proximity of that relationship. You might think of immediate family being the ultimate value on that spectrum. The following image shows some of these relationships with the traffic light background to crudely show how relationships might differ in terms of COI:

The second dimension identified to measure a COI is in relation to the financial connection between the adjudicator and the dispute. This might be thought of in terms of future business dealings and assessed as the business dealing in the recent past between the adjudicator and individuals involved in the dispute. This extends to the adjudicator’s company and associates. The case law referred to above can be applied to this dimension to quantify the level of COI. For example, as per Cofely, 25% of earnings in the previous 3 years might be considered a red light.

By way of example, if an individual involved in the adjudication is known to the adjudicator outside of work – the Proximity of Relationship dimension – that in itself is not necessarily a COI. Equally, if the adjudicator has recovered 10% of her recent fee from a party – the Financial Impact dimension – that is not necessarily a COI. However, should the two premises exist at the same time then the fair-minded and informed observer might conclude there is a real possibility of bias.

The graph above applies these two dimensions to represent any potential COI. The orange area labelled the ‘Corridor of Uncertainty’ represents the orange traffic light and when the adjudicator must proceed with caution.  In order to test the model’s efficacy, several of the COIs listed in the RICS Guidance Note have been plotted.

On evaluation of the results, there is a strong correlation between the new tool and the traffic light system which suggests that the tool successfully measures COIs. Therefore, in order to validate the reliability of these results, further research should be undertaken which might include testing the tool against extended real-world examples. If that research draws the same conclusions, it might be that this quantitative tool could reproduce the same conclusions as the fair-minded and informed observer and be a useful tool in the adjudicator’s arsenal.

Conclusion

The proposition is often submitted that if the adjudicator is asking herself whether a conflict of interest exists, it might be appropriate to resign. As much as there is merit in that proposition, the test applied by the Courts is objective and therefore the effectiveness of this subjective thought process might be considered unsatisfactory. It is posited that this thought process, alongside the case law and the traffic light system, might be complimented with this novel tool.