COVID-19 Developments and Legal Updates

Daniela Bassan, QC

Using its COVID-19 Protocol, the English Technology and Construction Court (TCC) handed down remotely a decision about the role of experts in international arbitration and how multiple retainers by a global firm can be problematic in A v B, [2020] EWHC 809. The case, which was heard in private and did not identify party names, also confirms core principles – including duties of confidentiality, independence, and loyalty – which are familiar to Canadian common law and could be invoked in future domestic arbitration or litigation.

The context

The claimant is the developer of a petrochemical plant which was delayed in its construction. Two arbitrations were started in connection with the project: firstly, by the main contractor against the claimant regarding project delay costs, and secondly, by a third party against the claimant regarding amounts owned under project agreements. Among other things, the claimant sought to pass on to the third party, which was responsible for the issuance of construction drawings on the project, any claims for disruption and delay.

The first defendant (based in Asia) was engaged as an expert by the claimant on the first arbitration. The second defendant (domiciled in England) was retained by the third party to advise on the second arbitration.

The defendant group as a whole is managed and marketed as a global firm with common financial interests. The defendants internally decided that they were able to proceed with both retainers and put in place information barriers (or confidentiality screens) to separate the expert teams from the different offices.

The positions

The claimant subsequently took the position that the dual retainers by the defendants in the two arbitrations represented a conflict of interest. The defendants disagreed. The claimant applied to the TCC to formally restrain the defendants from acting as experts for the third party.

The claimant argued that its retainer of the expert defendant group gave rise to a fiduciary duty of loyalty and that this duty was breached when the defendants agreed to provide expert services to the third party in relation to the same project.

The defendants argued that they did not have a fiduciary duty of loyalty, but rather an overriding duty of independence and impartiality to the tribunal.

The decision

The key legal issue was whether the defendants owed a fiduciary duty to the claimant. The Court concluded that a duty did exist in the circumstances. The Court also found that the duty was not limited to an individual person or a specific office at the defendant firm, but rather extended to the whole defendant group given their global and financial connections.

The key practical question was whether the physical and ethical screens put in place between the defendants – so as to prevent any sharing of confidential information related to the two retainers – satisfied the duty of loyalty. The Court concluded that the screens were not enough because the fiduciary obligation of loyalty is not just about preserving confidentiality and privilege. It requires that the “fiduciary must not place himself in a position where his duty and his interest may conflict”.

Applying this test, the Court found that “there is plainly a conflict of interest” for the defendants to provide expert services for the claimant in one arbitration and against the claimant in the other arbitration on the same project. The duty of loyalty was therefore breached by the defendants.

As a result, the Court granted the claimant’s request for an injunction so as to prevent the defendants from providing expert services to the third party.

The take-away

There are a number of legal and practical considerations arising from the decision. First, it is an open question whether, and to what extent, the same fiduciary principles could be applied to expert witnesses in other common law jurisdictions such as Canada. Second, even in the English context, the decision does not preclude parties from including more express conflict-of-interest language in their retainer agreements or from seeking the written consent of all parties in advance of any dual expert retainers. Third, the decision suggests that the manner in which an expert firm is structured financially, and promoted globally, can impact the scope of the firm’s fiduciary duty to clients. Once again, this issue goes beyond English borders due to the multinational nature of many expert firms. Fourth, the existence of a robust conflict-of-interest system may not be sufficient where the duty of loyalty of an expert (as opposed to the duty of confidentiality) is engaged or challenged by a client.

This article is provided for general information only. If you have any questions about the above, please contact a member of our Intellectual Property group.

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