AT&T Corp vs Saudi Cable Co

7/23/2019 AT&T Corp vs Saudi Cable Co

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AT&T Corporation v Saudi Cable Co (SCC) [2000] APP.L.R. 05/15

Background:

This is an appeal by AT&T Corporation and Luent Tehnolo!ies "n. #olleti$elyalled %AT&T% unless the ontet other'ise re(uires) *ro+ the ,ud!+ent o* -r ustieLon!+ore 'hih ruled

#a) dis+issin! AT&Ts appliation *or the re+o$al and re$oation o* theappoint+ent o* -r L $es ortier 3C as third arbitrator and hair+an o* an"CC Tribunal4 and

#b) the settin! aside o* three Partial A'ards by the Tribunal in *a$or o* therespondents audi Cable Co+pany.

The !rounds o* the appliation 'ere that6 be*ore 27th 8o$e+ber 17796 AT&T 'asuna'are that Mr Fortier was a non-executive director of a competitorcompany of AT&T.

The o+petitor is 8ortel o* Canada #%8ortel%). 8ortel 'as not si+ply a o++erialri$al o* AT&T in the :eld o* teleo++uniations. "t had also been a disappointedbidder *or the ontrat out o* 'hih the disputes bein! arbitrated arose and ould bea o+petitor *or *urther ontrats.

FACTS:

AT&T has a $ast teleo++uniations business. 8ortel is a substantial Canadiano+pany ati$e in the sa+e :eld. ;oth o+panies 'ere a+on! se$en #<)international teleo++uniation o+panies seleted by the audi Arabian -inistryo* Post Telephone and Tele!raph to sub+it bids *or the audi =in!do+s > th teleo++uniations epansion pro,et #%T?P@>%). The pro,et 'as $alued at aboutB .> billion.

The -inistry re(uired that the able to be used *or T?P@> should be a(uired *ro+CC. "n 177D6 prior to the sub+ission o* bids6 SCC approached each bidder with aview to establishing a commercial relationship for the supply of cable for TEP-6 inanticipation of such bidder being ultimately successful.

On 10 August 1! AT&T and SCC signed a "re#Bid Agree$ent (%"BA%) Thearbitration onerns a dispute or disputes arisin! out o* that a!ree+ent and6 in

partiular6 out o* para!raph > o* the P;A 'hih pro$ided as *ollo's

"... upon award of any cable related contract to T!T in connection withTEP-6 ... #the parties shall$ meet promptly and negotiate in good faithmutually satisfactory agreements essential to carrying out both partiesresponsibilities e.g. supply and service agreements %as applicable&."

The P;A also pro$ided that any disputes arisin! out o* or in onnetion 'ith the P;Ashould be :nally settled by arbitration. The arbitrators decided that the PBAwas governed by the aw of !ew "or# 'hih reo!niEes the pro$ision (uotedabo$e as a bindin! ontratual obli!ation. The P;A pro$ided *or sub+ission o*disputes to the "nternational Cha+ber o* Co++ere #%"CC%)6 the plae o* arbitrationbein! London. Aordin!ly ?n!lish la' is the proper la' o* the arbitrationa!ree+ent.

The tender *or the T?P@> pro,et 'as ontested6 beause o* its strate!i si!ni:ane.The contract was awarded to AT&T after high eve poitica obbying on

the part of the competitors. The a'ard o* ontrat to AT&T 'as ritiiEed in theindustry and by thepress.

8ortel 'as espeially a!!rie$ed beause it had ter+inated a 55@year old pre*erentialsupplyarran!e+ent 'ith ;ell Canada in return *or a pro+ise o* Fo$ern+ent support.Gn Au!ust to epte+ber 1776 AT&T and CC +et to ne!otiate supply and ser$iea!ree+ents as pro$ided *or in para!raph > o* the P;A. The ne!otiations *ailed.

Gn 8o$e+ber 1776 AT&T sent a letter to CC ter+inatin! the P;A sayin! that the parties coud not mutuay agree in good faith. Later on6 AT&T :led a re(uest*or arbitration 'ith the "CC lai+in! that the P;A 'as $alidly ter+inated. CClai+ed ho'e$er that the ontrat 'as not $alidly ter+inated. CC asHed *or anorder that AT&T o+ply 'ith the a!ree+ent and ne!otiate in !ood *aith.

T'e Appoint$ent o t'e Arbitrators

AT&T no+inated -aitre -ihael hneider6 a Fer+an la'yer pratiin! in Fene$a.CC no+inated -r Robert Ion -ehren6 a partner in a 8e' orH la' :r+. They wereboth con'rmed in due course.

A*ter so+e disussions bet'een the parties6 the na+e o* -r ortier6 'ho is ane+inent Canadian la'yer pratiin! in -ontreal 'ith $ery onsiderable eperieneas an arbitrator6 'as su!!ested.

Gn 1< -arh6 -r ;eehey #on behal* o* AT&T) *aed -r ortiers oJe in -ontrealasHin! hi+ i* to at as hair+an o* the Tribunal6 tellin! hi+ so+ethin! o* the disputeand re(uestin! hi+ to *or'ard a urriulu+ $itae.

Gn 20 -arh -r ortier alled -r ;eehey and they had a on$ersation about thedispute.Mr Fortier said that there were no facts or circumstances which woud cainto $uestion his independence as an arbitrator. Ke also +aintained that he+entioned his onnetion 'ith 8ortel.

-r ;eehey lai+s he does not re+e+ber said dislosure by -r ortier. Ke sayse$en i* -r ortier +entioned his onnetion 'ith 8ortel6 he 'ould not ha$e been inany position to say that the diretorship 'ould pose a proble+.

"n his aJda$it6 -r ortier aHno'led!es that any +ention o* the diretorship 'ouldnot ha$e been +ade in the ontet o* +aHin! dislosure6 but +erely to indiate thathe had so+e eperiene o* the teleo++uniations industry.

-r ;eehey reei$ed a opy o* the CI 'aitin! on 20 -arh 1775. !o mentionappeared in the % of Mr Fortier's directorship of !orte a+on! the nu+bero* diretorships 'hih 'ere +entioned. Ko'e$er6 on the sa+e day6 -r ortier alsosent a opy o* his CI to -r II Ieeder 3C o* ?sse Court Cha+bers in London for anunrelated purpose6 'hih opy bears a reord o* his diretorship o* 8ortel.

-r ortier he has an ad+inistrati$e assistant and a seretary. Gne CI 'as sent *ro+theo+puter :le operated by the 'ord proessor o* one6 and the other CI 'as sent*ro+ the 'ord proessor operated by the other. (t is accepted between the parties that the omission was due to secretaria error and was notintentiona .



"t has been a standard pratie by the "CC that one an arbitrators no+ination ison:r+ed6 it sends opies o* his CI to the parties to!ether 'ith a si!ned tate+ento* "ndependene. The (CC did not do so on this occasion. "t already held a opy o* -rortiers CI 'hih sho'ed his diretorship o* 8ortel. Ko'e$er6 on this oasion aopy o* -r ortiers CI 'as not sent to the parties.

(t is AT&T's contention that) had it been aware that Mr Fortier was a non-executive director of !orte) it woud not have consented to hisappointment.8e$ertheless6 the parties a!reed on -r ortier as the hair+an o* the Tribunalsub,et to "CC appro$al and the "CC asHed -r ortier #as 'ell as the other arbitrators)to si!n a tate+ent o* "ndependene on a standard printed *or+.

The *or+ re(uired hi+ to delare to the "CC his 'illin!ness to at as an arbitratorand to heH one o* t'o boes.

The tet beside the :rst bo reads "( am independent of each of the parties andintend to remain so) to the best of my *nowledge there are no facts orcircumstances past or present that need to be disclosed because they might be of such nature as to call into +uestion my independence in the eyes of any of the

parties."

The tet beside the seond bo reads "( am independent of each of the parties andintend to remain so) however in consideration of rticle , paragraph of the (CCules of rbitration ( wish to call your attention to the following factors and

circumstances which ( hereafter disclose because ( consider that they might be ofsuch a nature as to call into +uestion my independence in the eyes of any of the parties. #se separate sheet i* neessary).%

-r ortier plaed a ross in the :rst bo and si!ned the dou+ent on 29 -arh1775. *e was then con+rmed by the (%% as the third arbitrator andchairman of the Tribuna. The ,ud!e stated that he 'as satis:ed that6 'hen -rortier si!ned the dou+ent6 he onsidered hi+sel* to be independent o* the parties6that he intended to re+ain so and it ne$er ourred to hi+ that his non@eeuti$ediretorship o* 8ortel ould all into (uestion his independene in the eyes o* eithero* the parties.

"t 'as *ound later on that in addition to his non@eeuti$e diretorship o* 8ortel6 -rortier also held < 8ortel shares in aordane 'ith his pratie o* a(uirin! ashareholdin! in any orporation on 'hose board he sat. "t also appears 'ithin his

share port*olio that he heldD00 "common% shares in AT&T. !either sharehoding was discosed prior to hisappointment. Ko'e$er6 the substane o* AT&Ts o+plaint relates to -r ortiersdiretorship o* 8ortel6 rather than to his s+all #and eeti$ely insi!ni:ant)shareholdin!.

T'e Course o Arbitration

First "artial Aard

The ter+s o* the P;A 'ere le!ally bindin! and that the parties 'ere obli!ed to +eetpro+ptly and ne!otiate in !ood *aith. "t *ound that the P;A had not been $alidlyter+inated.

Throu!hout the proess o* the arbitration6 AT&T +ade Hno'n its onerns about

dislosin! on:dential in*or+ation *or the purpose o* atte+ptin! to reah a!ree+enton a *air prie *or the ables to be bou!ht *ro+ CC. Ater a nu$ber o $eetings

beteen t'e parties* no agree$ent as reac'ed and in +une 1, SCCsub$itted a clai$ to t'e e-ect t'at AT&T 'ad ailed to negotiate in goodait'

Second "artial Aard

The tribunal held that AT&T had not ne!otiated in !ood *aith.

AT&T.s C'allenge

"n Autu+n 17796 the audi Teleo+ Co+pany6 a pri$atiEed part o* the -inistry6in$ited bids *or a pro,et Hno'n as T?P@9. ;oth 8ortel and Luent #no' a separateo+pany *ro+ AT&T) 'ere in$ited to tender bids.

Gn 27 8o$e+ber 17796 -r Keindel6 President o* Luents audi Arabian ;ranh6'hile undertaHin! researh into Luents o+petitors in relation to that bid6reviewed !orte's (nternet site. *e noticed that Mr Fortier was isted in!orte's Annua ,eport as a director. Ke i++ediately in*or+ed Luents la'yers6 'ho 'rote to -r ortier.

/n repl* r Fortier o-ered to resign 'is directors'ip 2oever* AT&Tre3ected suc' o-er and it issued a c'allenge pursuant to Article 45 o t'e/CC 6ules:

challenge of an arbitrator whether for alleged lac* of independence or

otherwise is made by the submission to the Secretary /eneral of the Courtof a written statement specifying the facts and circumstances on which thechallenge is based.

0or a challenge to be admissible it must be sent by a party either within 12days from receipt by that party of the noti'cation of the appointment orcon'rmation of the arbitrator by the Court) or within 12 days from the datewhen the party ma*ing the challenge was informed of the facts andcircumstances on which the challenge is based if such date is subse+uentto the receipt of the aforementioned noti'cation.

T'e /CC dis$issed AT&T.s c'allenge it'out reasons Gn 15 epte+ber 17776the Tribunal published its Third Partia Award on the (uestion o* (uantu+. "ta'arded da+a!es to CC as partial o+pensation *or AT&Ts breah o* the P;A.

Thus6 a*ter "CCs dis+issal o* AT&Ts hallen!e6 AT&T o++ened le!al proeedin!spursuant to setions 1 and 2D o* the Arbitration At 1750 *or an order that AT&T beat liberty to revo#e and ma#e void the appointment and authority of MrFortier and have him removed and for the Partia Awards to be set aside.

-r ustie Lon!+ore heard the appliation by AT&T. ;y his order6 he dis+issedAT&TMs appliations 'ith osts. Ke !ranted per+ission to AT&T to appeal to theCourt. [Please see N D0 o* the ori!inal ase *or the basis o* Lon!+oreMs deision]

/SS78: OG8 -r ortier o++itted a breah o* his obli!ation to dislose the *ats'hih +i!ht all his independene into (uestion under the Rules o* the "CC

289: 8G. AT&T 'as unable to sho' any !rounds *or settin! aside the a'ards orre+o$in! -r ortier based on ;"A and -"CG8CT.

As to t'e issue o B/AS



The Court ruled

QOas there a real dan!er here6 $ie'in! the +atter ob,eti$ely6 that -rortier 'as predisposed or pre,udied a!ainst AT&T beause he 'as a non@eeuti$e diretor o* 8ortel As to this6 adoptin! our role o* personi*yin! thereasonable +an6 " onsider that Lon!+ore 'as entitled to o+e to thedeision 'hih he did *or the reasons he !a$e. "n o+in! to +y onlusion6" taHe into aount that

#a) -r ortier is an etre+ely eperiened la'yer and arbitrator 'ho6liHe a ,ud!e6 is both austo+ed and 'ho an be relied on todisre!ard irrele$ant onsiderations. "n sayin! this 'e +aHe it lear 'edo not attah any i+portane to the *at that -r ortier at all ti+esbelie$ed hi+sel* to be atin! appropriately. Ke +ust be ,ud!ed byob,eti$e standards.

#b) There is no reason to re,et -r ortiers state+ents in the letter o*20 epte+ber 1777 that he 'as entirely una'are o* the T?P@9 pro,etuntil ee+ber 1779 and the T?P@> pro,et until he bea+e in$ol$edin the arbitration proess. ntil he 'as a'are o* the pro,ets thereould6 o* ourse6 be no possibility that they ould pre,udie hi+ andso no obli!ation to dislose his onnetions 'ith 8ortel.

#) Any bene:t 'hih ould indiretly arue to 8ortel as a result o*the outo+e o* the arbitration 'ould be o* suh +ini+al bene:t to -rortier that it 'ould be unreasonable to onlude that it ould

inSuene hi+.

#d) -r ortiers in$ol$e+ent 'ith 8ortel as a result o* his non@eeuti$e diretorship 'as li+ited. "t 'as aurately desribed as aninidental part o* his pro*essional li*e. The role o* non eeuti$ediretors an dier but the nature o* -r ortiers diretorship is 'ellillustrated by his letter o* 20 epte+ber 1777.

#e) -r ortier did not attah i+portane to his in$ol$e+ent 'ith8ortel. This is illustrated by his readiness to resi!n his diretorship'hen he 'as hallen!ed by AT&T.

#*) -r ortier onduted hi+sel* in the ourse o* the arbitration in a+anner 'hih pro$ided no support *or any su!!estion that he 'aspre,udied and the ontrary has not been su!!ested.

"t 'as etre+ely un*ortunate that the +istaHe about the diretorship +eantthat it 'as not dislosed6 but6 on the e$idene 'hih is a$ailable6 thatinnoent non@dislosure pro$ides the Si+siest o* ar!u+ents that theindiret interest o* -r ortier in 8ortel 'ould or +i!ht aet the 'ay heper*or+ed his responsibilities as an arbitrator. " there*ore re,et theritiis+ o* the ,ud!es deision on bias.

As to t'e issue o /SCO;7CT

The Court said

QAT&Ts pri+ary o+plaint about -r ortier is that they 'ould not ha$eseleted hi+ as an arbitrator beause they 'ould not ha$e 'ished todislose on:dential in*or+ation to e$en a non@eeuti$e diretor o* ao+petiti$e ri$al.

ir ydney =entrid!e stressed in his sub+issions the dan!ers to AT&T o*in*or+ation bein! +ade a$ailable to -r ortier 'hen he o'ed the duties o*a non@eeuti$e diretor to 8ortel. "* an arbitrator dislosed on:dentialin*or+ation to a o+petitor o* a party to an arbitration in the ourse o* theproeedin!s6 he 'ould ertainly be open to a har!e o* +isondut. ;ut this+isondut 'ould not in$ol$e a breah o* any obli!ation to be3independent3. As ir ydney de$eloped his sub+issions6 it bea+einreasin!ly lear that6 'hile AT&T 'ere o+plainin! o* bias6 their onerns'ere e(ually6 i* not +ore stron!ly6 *oused on their need to preser$eon:dentiality. Artile 2.< and the arbitrators delaration are notaddressin! this need. The need *or on:dentiality6 'hih an be ritial inan arbitration6 does not depend on Artile 2.<6 but on the duty o* anyarbitrator not to breah the obli!ations o* on:dene 'hih he o'es to theparties to the arbitration.

-r ortier 'as under the i+pression he had !i$en a o+plete CI. ;eauseo* the error AT&T 'as not a'are o* his onnetion 'ith 8ortel. This

onnetion 'as ob$iously a +atter o* 'hih AT&T 'ould ha$e 'ished to bea'are be*ore it a!reed to -r ortiers appoint+ent. "* it had been6 it 'ouldha$e been per*etly reasonable *or AT&T to indiate that it 'ould pre*er anarbitrator 'ho 'as not a non@eeuti$e o* 8ortel beause o* its onerns asto on:dentiality. AT&T as deprived o t'is opportunit* but t'e /CC6ules do not provide an support or an allegation t'at r Fortieras guilt o $isconduct because o t'e error in t'e C<

"n any e$ent6 Mr Fortier having been appointed an arbitrator and thearbitration having reached the stage it has) it woud beinappropriate) in the absence of bias) to set aside the awards or toremove Mr Fortier.

urther+ore6 althou!h AT&Ts onerns as to the need to preser$eon:dentiality are understandable6 in the ase o* an arbitrator as

eperiened as -r ortier6 the risH o* his atually +aHin! dislosure o*on:dential in*or+ation to 8ortel6 onsiously or unonsiously6 issuJiently re+ote to be i!nored. (n any event) Mr Fortier oered toresign his non-executive directorship but) no doubt recognisingthe reaity of the situation) AT&T did not accept this oer. Thatbein! so6 " :nd this alle!ation to be laHin! in on$ition.

AT&T Corp vs Saudi Cable Co

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