Halliburton Company (Appellant) v Chubb Bermuda Insurance
The UK Supreme Court has handed down its highly anticipated judgment in Halliburton Company (Appellant) v Chubb Bermuda Insurance. A link to the full judgment can be found here.
This case is the most significant decision in English arbitration in the past decade; its significance to the law on arbitrator bias was such that several arbitral institutions were permitted to make submissions as intervening parties, including ICC, LCIA, CIarb, LMMA and GAFTA.
The Supreme Court unanimously dismissed Halliburton’s appeal to remove a court-appointed arbitrator, holding that there was no apparent bias and therefore no grounds to remove the arbitrator. However, the Supreme Court found that the arbitrator had failed in his duty to disclose a potential conflict of interest. The Supreme Court clarified the legal test that applies to the duty of disclosure, and the assessment of possible bias of an arbitrator, along with considering the interplay of the duties of privacy and confidentiality in arbitration. This case presents a useful prompt for parties and arbitrators to revisit their arbitration agreements.
Background to case
Halliburton’s arbitration claim against Chubb arose from the Deepwater Horizon tragedy of 2010, with a dispute as to insurance cover under a Bermuda Form liability policy. The US Government claimed substantial damages from BP, Halliburton and Transocean. Halliburton reached a settlement with the US Government and sought to make a claim under its insurance policy with Chubb, which refused cover so a dispute arose. Transocean also settled its claims with the US Government, and also sought to claim against its liability insurers, which included Chubb. Chubb refused cover for Transocean on substantially similar grounds.
Halliburton commenced arbitration against Chubb (the “Halliburton Arbitration”). The English High Court appointed Mr Kenneth Rokison QC as the third arbitrator. Halliburton served its statement of claim on 18 September 2015, and Chubb served its defence on 11 December 2015.
In December 2015, Mr Rokison accepted an appointment as arbitrator by Chubb in relation to a dispute with Transocean arising out of the Deepwater Horizon tragedy (the “Transocean Arbitration”). Before accepting that appointment, Mr Rokison disclosed his appointment in the Halliburton Arbitration and in other Chubb arbitrations. Transocean did not object. However, Mr Rokison did not disclose to Halliburton his appointment as arbitrator in the Transocean Arbitration. This non-disclosure forms the central subject of Halliburton’s appeals, and the judgment of the Supreme Court. In 2016, Mr Rokison also accepted appointment as a substitute arbitrator in a claim brought by Transocean against a different insurer (“Transocean Arbitration 2”). This appointment was also not disclosed to Halliburton.
When Halliburton learned of Mr Rokison’s appointment in the Transocean Arbitration and Transocean Arbitration 2, it sought the removal of Mr Rokison as arbitrator in the Halliburton Arbitration on the grounds that circumstances existed which gave rise to justifiable doubts as to Mr Rokison’s impartiality.
Supreme Court upheld the decision of Court of Appeal
First, it is worth noting that this case does not relate to any actual bias, but rather the appearance of bias. The Supreme Court held that Mr Rokison’s failure to disclose his appointment in the Transocean Arbitrations was a breach of his legal duty of disclosure.
However, the Supreme Court refused to hold that Mr Rokison should be removed as arbitrator, upholding the decision of the Court of Appeal. This was for five reasons:
- There was a lack of clarity regarding the legal duty of disclosure.
- The timing and sequence of the arbitrations in question could explain why Mr Rokison disclosed the Halliburton Arbitration, but did not tell the Halliburton about the Transocean Arbitration.
- There would not be any overlap in evidence or legal submissions in the Transocean Arbitrations (which would be resolved by preliminary issue) and the Halliburton Arbitration.
- There was no question of Mr Rokison having received any financial benefit.
- There was no basis for inferring unconscious bias in the form of subconscious ill will.
" The Supreme Court unanimously dismissed Halliburton’s appeal to remove a court-appointed arbitrator, holding that there was no apparent bias and therefore no grounds to remove the arbitrator. "
Two key issues determined by the Supreme Court
(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
The Supreme Court held that where an arbitrator accepts appointments in multiple references concerning the same or overlapping subject matter with only one common party this may, depending on the relevant custom and practice, give rise to an appearance of bias.
(ii) Whether and to what extent the arbitrator may do so without disclosure
The Supreme Court held that unless the parties to the arbitration otherwise agree, arbitrators have a legal duty to make disclosure of facts and circumstances which would or might reasonably give rise to the appearance of bias. The fact that an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with only one common party is a matter which may have to be disclosed, depending upon the customs and practice in the relevant field. In cases in which disclosure is called for, the acceptance of those appointments and the failure by the arbitrator to disclose the appointments taken in combination might well give rise to the appearance of bias.
Analysis by Supreme Court
In reaching its decision on the two key issues above, the Supreme Court considered and provided guidance on the following five issues:
i) The duty of impartiality in the context of arbitration
The Supreme Court confirmed that the test to be applied is whether the fair-minded and informed (or objective) observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. The fair-minded and informed observer “will appreciate that the context forms an important part of the material which she must consider before passing judgment” and is “neither complacent nor unduly sensitive or suspicious”.
The Supreme Court discussed the importance of impartiality in the context of arbitration. First, as arbitration is generally conducted in private, there is a premium on frank disclosure. Secondly, there are limited powers of review in arbitration as an arbitrator is not subject to appeals. Thirdly, arbitrators are privately paid and therefore have a financial interest in further appointments. Fourthly, diversity in the professional background of arbitrators can lead to a divergence of views on ethically acceptable conduct. Fifthly, privacy of arbitration means that parties who are not common to various arbitrations have no way of informing themselves of other arbitrators. Finally, in arbitrations with party-appointed arbitrators, the Chair of the Tribunal has a particularly important role to ensure impartiality and fairness.
ii) Whether an arbitrator is under a legal duty to disclose particular matters or whether such disclosure is merely good arbitral practice
The Supreme Court held that there is a legal duty of disclosure, unless the parties to an arbitration have expressly or implicitly waived their right to disclosure of matters which could give rise to justifiable doubts about an arbitrator’s impartiality. Such disclosure is not just a question of best practice but is a matter of legal obligation. The Supreme Court upheld the Court of Appeal’s decision that:
“the present position under English law [is] that disclosure should be given of facts and circumstances known to the arbitrator which, in the language of section 24 of the Act, would or might give rise to justifiable doubts as to his impartiality . . . Under English law this means facts or circumstances which would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the arbitrator was biased.”
iii) How far the obligation to respect the privacy and confidentiality of an arbitration constrains his or her ability to make disclosure
The Supreme Court noted that the law in this area is developing and noted the variety in arbitral practices in relation to the disclosure of multiple appointments in arbitrations with overlapping subject matters. The Supreme Court held that the duty of disclosure does not override the duty of privacy and confidentiality. Disclosure can be made only with the consent of the parties to whom a duty of privacy and confidentiality is owed. If a prospective arbitrator does not obtain the consent of the parties to either an existing arbitration or to a later arbitration to make a necessary disclosure about the respective arbitration, the prospective arbitrator must decline the second appointment. The consent may be either express to or inferred from the arbitration agreement in the context of the custom and practice in the relevant field. The judgment referred to Article 11(2) of the ICC Arbitration Rules, Article 5.4 of the LCIA Rules and Rule 6(2) of the ICSID Arbitration Rules as examples of when it may be inferred that parties consent to the disclosure of information about their arbitration to parties to another prospective arbitration.
iv) Whether a failure to disclose such matters demonstrates a lack of impartiality
A failure to disclose may amount to apparent bias. Where an arbitrator has accepted an appointment in multiple arbitrations in circumstances which might reasonably give rise to justifiable doubts as to his or her impartiality, or is aware of other matters which might reasonably give rise to those doubts, a failure in his or her duty to disclose those matters to the party who is not the common party to the arbitrations deprives that party of the opportunity to address and perhaps resolve the matters which should have been disclosed. The failure to disclose may demonstrate a lack of regard for the interests of the non-common party and may in certain circumstances amount to apparent bias.
v) The times at which (a) the duty of disclosure falls to be assessed
A determination as to whether an arbitrator has failed to perform a duty to disclose can only be made by reference to the circumstances at the time the duty arose and during the period in which the duty subsisted.
vi) The times at which (b) the possibility of bias falls to be assessed
When assessing the possibility of bias, the circumstances as they exist at the date of the hearing of the application to remove the arbitrator should be assessed. The test is to ask whether the fair-minded and informed observer, having considered the facts then available to him or her, would conclude that there is a possibility that the arbitrator is biased.
In Lady Arden’s judgment, she also noted that the primary duty of an arbitrator is to act fairly and impartially (pursuant to section 33 of the Arbitration Act 1996). To remove any doubt of apparent bias, an arbitrator may choose to disclose matters to parties. Therefore, the duty of disclosure is a consequence of the duty of impartiality, rather than an independent, self-contained duty.
This significant Supreme Court judgment highlights the importance of proper disclosure as a means of maintaining the integrity of international arbitration. It draws focus to the statutory duties of arbitrators to act fairly and impartially, pursuant to section 33 of the Arbitration Act. Given that clarity has now been provided as to the legal duty of disclosure for arbitrators, the courts will no doubt adopt a stricter approach with regard to future decisions as to potential arbitrator bias.
This judgment also provides a useful prompt for parties to revisit their arbitration agreements and consider if they expressly (or impliedly) permit the disclosure of information to other parties, in the context of related arbitrator appointments. This judgment suggests that in Bermuda Form arbitrations, ad hoc arbitrations, and arbitrations under institutional rules with no relevant provision, arbitrators are permitted to disclose the existence of a Bermuda Form arbitration, without the express consent of relevant parties, absent any agreement to the contrary.
The Supreme Court addressed the concern that the recognition of a legal duty of disclosure would increase the number of challenges to arbitrator appointments and give rise to personal claims against arbitrators. The Supreme Court did not appear to find any reason for obvious concern, noting that previous challenges to arbitrators rarely succeeded and that there was very little evidence of personal claims against arbitrators for breach of legal duties of disclosure. However, the Supreme Court suggested that arbitrators, parties and institutions can adapt their contracts or rules to confer a wider immunity against personal claims in light of this ruling.