Article: Supreme Court provides clarity on arbitrators' duty of disclosure and impartiality

Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48 

The Supreme Court clarifies an arbitrator’s duty of disclosure in circumstances of multiple appointments and overlapping subject matter that could give rise to a possibility of bias. Disclosure is dependent on the facts of the case, the nature of the arbitration, whether a fair-minded and informed observer would infer an apparent bias.

Background

This appeal follows on from a dispute arising out of the Deepwater Horizon BP oil rig explosion and fire in the Gulf of Mexico in 2010. The appellant, Halliburton Company ('Halliburton'), provided cementing and well-monitoring services to BP. Transocean Holding LLC ('Transocean') owned the rig and provided crew and drilling teams to BP. Both Halliburton and Transocean had an insurance contract with Chubb Bermuda Insurance Ltd ('Chubb'), the respondent.

Following the Deepwater Horizon disaster, numerous civil claims were brought against BP, Halliburton and Transocean. Blame was apportioned in a US trial, after which Halliburton settled US government claims against it in the amount of US$1.1 billion. Halliburton sought to recover part of this from Chubb. Chubb rejected Halliburton’s claim on the basis that the settlement amount was not reasonable and Halliburton commenced arbitration proceedings against Chubb in London.

Halliburton and Chubb each appointed their own arbitrator. However, the arbitrators could not agree on the 3rd arbitrator and chair, and the High Court appointed Kenneth Rokison QC following an application by the parties. He was Chubb’s first-choice candidate.

The dispute arose in November 2016 once Halliburton became aware of Mr Rokison’s appointment in two other arbitrations. These arbitrations both arose out of the Deepwater Horizon incident and were in relation to the following:

1. Transocean’s settlement of US Government claims against Chubb
2. A similar dispute between Transocean and another insurer.

Upon discovery of the above arbitrations, which Mr Rokison did not disclose to Halliburton and Chubb, Halliburton applied to the court under section 24(1)(a) of the Arbitration Act 1996 to have Mr Rokison removed on the basis of perceived bias.

The High Court and the Court of Appeal both dismissed Halliburton’s claim. Both decisions were determined using the common law objective test and answering whether a fair-minded and informed observer would find that the circumstances gave rise to bias. The Court of Appeal expanded on this, confirming that an arbitrator has a legal duty to disclose any facts or circumstances that would or might give rise to justifiable doubts as to their impartiality. Thus, whilst Mr Rokison did not act improperly and his removal was not required, the Court of Appeal found that best practice in international commercial arbitration would have required disclosure of his subsequent appointments to Halliburton.

The Appeal to the Supreme Court

The main issues before the Supreme Court were:

(i) 'whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias, and
(ii) whether and to what extent the arbitrator may do so without disclosure.' [para. 2 of the judgment, see footnote 1]

Considering the importance of the issues at stake in international arbitration, the LCIA, ICC, CIArb, GAFTA and LMAA (the 'Interveners') were all permitted to make submissions before the Supreme Court.

The LCIA, ICC, and CIArb’s submissions were in support of Halliburton’s appeal calling for a strict duty of disclosure to apply to arbitrators.

GAFTA and the LMAA explained the specialist nature of their industries, the limited number of available arbitrators and how multiple appointments arising out of an incident are regularly made to the same arbitrator(s). Arbitrators are not required to disclose multiple appointments unless it is arguable that the circumstances to be disclosed give rise to the appearance of bias [para 44].

The decision

In dismissing the appeal, the court explored the duty of impartiality in arbitration which equally applies to both (i) party-appointed arbitrators and (ii) those independently appointed (for example, on application to court or the arbitral body). The relevant test was that considered in the previous judgments namely whether a fair-minded and informed observer would find a possibility of bias [para 52]. This test is objective (ie the view of the party alleging bias is not a sole determinant) and considers the particular characteristics of international arbitration and the private nature of most arbitrations.

The arbitrator’s duty of disclosure was examined and looked alongside that of confidentiality, with the court finding that the duty of disclosure did not override the arbitrator’s entirely separate duty of privacy and confidentiality. Nevertheless, the duty of disclosure was held to be a legal duty under English law and a key component of the arbitrator’s obligation of fairness and impartiality.

The court held that Mr Rokison’s failure to disclose his appointment in the subsequent two arbitrations was a breach of his legal duty of disclosure. This was taken into consideration when deciding whether the circumstances of multiple appointments involving Chubb and the same subject matter gave rise to an appearance of bias. Despite this breach, the court found that it could not be held that there was a real possibility of bias.

In deciding this, the court took into account the general practice in the field of arbitration and the facts of the case at the time of determination, which was the date of the hearing in January 2017 (rather than the date of appointment due to the wording in section 24(1)(a) of the Arbitration Act)., In particular, some time in advance of the hearing, Halliburton had previously questioned Mr Rokison about his failure to disclose his appointment in the other arbitrations, to which he provided an explanation. He explained that the duty was not clear, and he did not believe there would be any material overlap. Crucially, Halliburton accepted this. Further supporting the lack of bias was that Mr Rokison did not receive any secret financial gain and nor was there any basis to suggest any ill-will on his part. Thus, on this basis the court determined that, at the time of the removal hearing, a fair-minded and informed observer would not infer a real possibility of bias.

Commenting on the Interveners’ submissions, the court accepted the LCIA, ICC, and CIArb’s request for the recognition of a legal duty of disclosure in international arbitrations. Moreover, the court acknowledged the LMAA and GAFTA’s submissions noting that when parties chose to arbitrate under specialist rules it is accepted that there might be a small pool of arbitrators involved who engage in overlapping arbitrations arising from the same events, which does not need to be disclosed. This was not the case in Bermuda Form arbitrations [para 137].

Comments

Based on the normal practice in the shipping industry and under LMAA rules, it was accepted that overlapping appointments are common and this does not, in itself, give rise to any doubts about an arbitrator’s impartiality or create the need for an LMAA arbitrator to disclose similar appointments.  There is, of course, nothing to stop an arbitrator erring on the side of caution and doing so anyway, while observing the duty of confidentiality.

This judgment is fundamental in clarifying circumstances in which arbitrators should disclose circumstances that might give rise to justifiable doubts as to their impartiality. In analysing the legal duty of disclosure, the court was clear in explaining that this is an obligation and not simply good practice. In doing this, the court also highlighted the relationship between disclosure and the duty of privacy and confidentially, which is dependent on the practice in field of arbitration and any express or implied agreement between the parties.

The decision by the court not to impose significant consequences, such as removal from the tribunal, despite the arbitrator’s breach of his duty of disclosure reinforces, once again, the non-interventionist approach adopted by the English courts when it comes to challenging arbitrators. The court’s comments that there may be merit in having an express statement from the relevant institutions as to the existence of a duty of disclosure may, however, encourage bodies like the LMAA or ICC to define closely such a duty thus bringing even more clarity in future claims.

[1]A copy of the judgment can be found here
[2]H v L & Ors [2017] EWHC 137 (Comm)
[3]Halliburton Company v Chubb Bermuda Insurance Ltd & Others [2018] EWCA Civ 817

カテゴリー: Defence