Halliburton Company v Chubb Bermuda Insurance Ltd

[2020] UKSC 48  

The Supreme Court here had to consider when an arbitrator should make disclosure of circumstances which may give rise to justifiable doubts as to their impartiality.

Following the explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico, Halliburton commenced arbitration against Chubb, but were unable to agree on the appointment of a third arbitrator as chairman. An arbitrator (Chubb’s proposal) was appointed by the court. Subsequently and without Halliburton’s knowledge, that arbitrator accepted appointment as an arbitrator in two separate references also arising from the Deepwater Horizon incident, including one made by Chubb.  

Halliburton applied to the court under section 24 of the Arbitration Act 1996 for the removal of the arbitrator. The CA held that, while the arbitrator should have disclosed his proposed appointment in the other arbitrations, an objective observer would not in the circumstances conclude there was a real possibility that they were biased. 

The Supreme Court decided that as at the date of the hearing to remove the arbitrator, the fair-minded and informed observer would not have concluded that circumstances existed that gave rise to justifiable doubts about the arbitrator’s impartiality. 

Lord Hodge said that when considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. This was an objective test, having regard to the particular characteristics of international arbitration, including the private nature of most arbitrations. This duty of disclosure was a legal duty in English law. However, that duty was a secondary obligation arising from the arbitrator’s core duty to act fairly and impartially.

The arbitrator’s duty of disclosure is to disclose matters which might reasonably give rise to justifiable doubts as to their impartiality, and a failure to disclose relevant matters is a factor for the fair-minded and informed observer to take into account in assessing whether there was a real possibility of bias. In assessing whether there has been a failure in the duty to make disclosure, the fair-minded and informed observer will have regard to the facts and circumstances as at and from the time the duty arose.  This is different to the timing of any assessment about whether there was a real possibility that an arbitrator was biased. The relevant time for that was the time of the hearing to remove the arbitrator and not the time of the arbitrator’s acceptance of the second arbitration. 

Here, Lord Kerr accepted that there may be circumstances where the acceptance of multiple appointments involving a common party and the same or overlapping subject matter would give rise to an appearance of bias. It all depends on the facts and the customs and practice in the relevant field of arbitration. Here, in the context of a Bermuda Form arbitration, the arbitrator was under a legal duty to disclose such appointments unless the parties to arbitration had agreed otherwise.

So the arbitrator was under a legal duty to disclose the appointment in the subsequent reference involving Chubb. At the time of his appointment, the existence of potentially overlapping arbitrations with only one common party, Chubb, might reasonably have given rise to a real possibility of bias. The mere fact that an arbitrator accepted appointments in multiple reference concerning the same or overlapping subject matter with only one common party did not of itself give rise to an appearance of bias. Something more, of substance, was required.

However, at the time of the hearing to remove the arbitrator, and having regard to the circumstances known at the date of the hearing at first instance, it could not be said that the fair-minded and informed observer would infer from the arbitrator’s failure to make disclosure that there was a real possibility of bias. After Halliburton found out about the second appointment, they had questioned the arbitrator who had explained that there had been an oversight and that they believed that there would not be material overlap between the two different sets of proceedings.  Halliburton accepted this explanation as being truthful. 

Lady Arden noted that the duty of disclosure was a secondary obligation arising from the arbitrator’s primary duty to act fairly and impartially. An arbitrator should proceed on the basis that a proposed further appointment involving a common party and overlapping subject matter was likely to require disclosure of a possible conflict of interest. The duty of disclosure was rooted in the duty of impartiality but was also an implied (if not express) term of the arbitrator’s appointment. Disclosure was only an option if the conflict was one which would not prevent the arbitrator from acting impartially.

If there is a concern about confidentiality, in general, high-level disclosure about a proposed appointment in a further arbitration can be made without any breach of confidentiality by naming only the common party (who may be taken to have consented to disclosure) but not the other parties to the arbitration. Lady Arden said that: 

“the implied term as to confidentiality is independent of the implied term that the arbitrator should comply with his impartiality duty. It is truly a self-standing term.”  

However, if further information that is confidential is reasonably required by a party to make that assessment and that consent is not forthcoming, then the arbitrator would have to decline the proposed appointment. That said, in ICC and LCIA matters, parties are taken to impliedly consent to the disclosure of limited information regarding their arbitrations.

At the time, it had not been clear that there was a legal duty of disclosure. The Supreme Court noted that there was therefore no likelihood of Chubb gaining any advantage by reason of overlapping references. There was also no question of the arbitrator having received any secret financial benefit or basis for inferring any unconscious ill will on his part. This meant that Halliburton’s appeal failed.

Whilst non-disclosure is potentially serious, it is only a factor to be taken into account in considering the issue of apparent bias. By itself, non-disclosure of a fact or circumstance which should have been disclosed but does not on examination give rise to justifiable doubts as to the arbitrator’s impartiality will not of itself justify an inference of apparent bias. Something more is required.

Further, the Supreme Court also made it clear that they saw no material difference in the application of the duty of disclosure here, under English common law, and the similar obligations to be found in the IBA Guidelines or other major institutional rules.

Finally, Lord Kerr quoted with approval the words of the judge at first instance, Mr Justice Popplewell, that a party-appointed arbitrator in English law is expected to come up to precisely the same high standards of fairness and impartiality as the person chairing the tribunal:

“[T]he duty to act independently and impartially involves arbitrators owing no allegiance to the party appointing them. Once appointed they are entirely independent of their appointing party and bound to conduct and decide the case fairly and impartially. They are not in any sense … a representative of the appointing party or in some way responsible for protecting or promoting that party’s interests.”

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