The UK Supreme Court has provided welcome clarification on the English law position in relation to an arbitrator’s duties of impartiality and disclosure. The UKSC unanimously dismissed Halliburton’s appeal in its highly anticipated Halliburton v Chubb judgment holding that impartiality is paramount and confirming that arbitrators in English-seated arbitrations have a legal duty to disclose any circumstances that might reasonably give an objective observer doubts about their impartiality. The judgment also acts as a helpful reminder that parties can address these issues at the time of drafting the arbitration agreement.
Background to the Dispute
The dispute arose after the Deepwater Horizon oil spill in 2010, which caused extensive damage in the Gulf of Mexico. As Halliburton had provided cementing and well-monitoring services for the project, it was found partially liable for the damage caused by the spill. Having settled a claim for US$1.1billion with the US federal court, Halliburton sought to recover those sums from Chubb under a Bermuda Form liability policy. Chubb rejected the claim and so Halliburton invoked the arbitration clause contained within the policy and commenced arbitral proceedings against Chubb in January 2015 (seated in London). The parties each appointed an arbitrator but failed to agree on the appointment of the Chairman. As such, the High Court appointed Kenneth Rokison QC (who had been one of the candidates originally suggested by Chubb).
Subsequently, Mr Rokison accepted two appointments in arbitrations relating to the Deepwater Horizon spill (one of which involved Chubb). Upon discovering this, Halliburton applied to remove Mr Rokison as an arbitrator pursuant to section 24 of the Arbitration Act 1996 (the “Arbitration Act”) on the basis that circumstances existed that gave rise to justifiable doubts as to his impartiality. The High Court dismissed Halliburton’s application and the Court of Appeal dismissed Halliburton’s subsequent appeal. This resulted in a further appeal to the UKSC.
The principle issues considered by the UKSC were:
1. 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
2. whether and to what extent the arbitrator may do so without disclosure.
On the first issue, the UKSC held that in principle, accepting appointments in multiple arbitrations with overlapping subject matter with only one common party may give rise to justifiable doubts about the arbitrator’s impartiality depending on the relevant customs and practices in the relevant field.
On the second issue, the UKSC held that arbitrators have a legal duty to disclose matters which may give rise to justifiable doubts about their impartiality.
Test for “Apparent” Bias
Importantly, in relation to both issues, the UKSC confirmed that in addressing an allegation of apparent bias in an English-seated arbitration, the English courts will: (a) apply the objective test of a fair-minded and informed observer; and (b) have regard to the particular characteristics of international arbitration (which were explored by Lord Hodge at paragraphs 56 – 68 of the judgment).
With regard to the timing for that assessment:
- In assessing whether an arbitrator failed to make a disclosure, the objective observer must take into account the facts and circumstances as at and from the date when the duty arose; and
- In assessing whether an arbitrator is biased, the objective observer must take into account the facts and circumstances as at the date of the hearing to remove the arbitrator.
In upholding the decisions of the High Court and Court of Appeal (albeit for different reasons) the Supreme Court found that, as at the date of the hearing to remove Mr Rokison, the fair-minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts about his impartiality.
Further, Lord Hodge provided a helpful summary of the relevant legal principles under English law (see in particular paragraphs 151 to 157 of the judgment).
Duty of Impartiality
- The obligation of impartiality is a core principle and applies to all arbitrators, regardless of how they are appointed – this duty is enshrined in section 33 of the Arbitration Act.
- There is no difference between the test in section 24(1) of the Arbitration Act (relating to the existence of circumstances that give rise to justifiable doubts about an arbitrator’s impartiality) and the common law test of bias – the nuance lies in applying the test to arbitrators and the fact that it is necessary to bear in mind the differences in the nature and circumstances between judicial determination of disputes and arbitral determination of disputes. For example, and as explained by GAFTA and LMAA (who intervened in the case) multiple appointments are common (and accepted by parties) in the fields of agricultural commodities arbitration and maritime arbitration.
Duty of Disclosure
- The arbitrator is under a legal duty to disclose circumstances which might reasonably give rise to a conclusion by an objective observer of a real possibility of bias. In her concurring judgment, Lady Arden added that the duty of disclosure is a secondary obligation arising from the arbitrator’s primary duty to act fairly and impartially. Further, the UKSC noted views of various intervening institutions (including the ICC, LCIA and CIArb) who argued in favour of recognising this as a legal duty.
- As arbitrations are private, the duty of disclosure is subject to the duty of privacy and confidentiality – this means that an arbitrator can only make such disclosure with the consent of the parties to whom that duty is owed. Notably, that consent can either be express, or inferred from the arbitration agreement in the context of the customs and practices of a given field.
- The objective observer may take into account any failure of the arbitrator to make disclosure of relevant circumstances when assessing if there is a real possibility of bias.
This decision, although highly fact specific as it concerns a Bermuda Form arbitration, does clarify that a legal duty exists, promoting transparency in English arbitration proceedings while reaffirming the importance of privacy and confidentiality. Parties should feel more confident that they will be told of any circumstances which might reasonably give rise to justifiable doubts about the apparent impartiality of their arbitrators. This is particularly relevant in sectors like shipping and insurance, where it is more common for parties to appoint the same arbitrators to hear their cases.
The judgment reflects the English Court’s supportive approach towards arbitration and the importance of English law upholding rules which “support the integrity of international arbitration” (paragraph 63). Further, in reaching its decision, the UKSC noted the general importance of the case within the field of arbitration and therefore considered the submissions of various prominent institutions including the ICC and LCIA.
As Lord Hodge highlighted in the judgment, parties engage in arbitration to win. This can include making tactical objections or challenges in the hope that the dispute will be determined by a tribunal which may (without any question of bias) be more predisposed towards their view or simply to delay proceedings. It therefore remains to be seen whether, in practice, the judgment will lead to increased disclosure by arbitrators or increased challenges by parties.
The judgment is also a helpful reminder that parties can exert more control over the process by which a tribunal is formed by carefully considering the relevant provisions when drafting their arbitration agreements. In cases involving a three-person tribunal, parties could seek to agree procedures that provide more certainty as to how the third arbitrator will be appointed (for example, by including a ranking system or list and strike procedure). While this does not guarantee that issues relating to disclosure or impartiality will not arise, it will allow parties to lead the selection process – consequently, this may lead to decreased challenges in relation to those appointments on the basis of impartiality. This, coupled with the duty of disclosure clarified in Halliburton, should ensure that each party is more confident that the resulting panel is impartial and balanced.