Arbitrators should disclose subsequent appointments to related arbitration proceedings, particularly if cases materially overlap.

In the Halliburton v Chubb ruling, the Court of Appeal held that an arbitrator who did not disclose subsequent appointments to related arbitration proceedings should have disclosed those subsequent appointments both as a matter of good practice and as a matter of law. The lack of disclosure did not however constitute sufficient grounds for the removal of the arbitrator under section 24(1)(a) of the Arbitration Act 1996 for justifiable doubts as to his impartiality.

Background

The explosion on the Deepwater Horizon oil rig spawned a number of related arbitration proceedings involving various parties. Transocean was the owner of the rig, BP was the lessee of the rig, and Halliburton provided cementing and well-monitoring services to BP. Both Transocean and Halliburton obtained insurance from Chubb.

In arbitration proceedings between Halliburton and Chubb, both parties each appointed an arbitrator and Flaux J in the High Court appointed the third arbitrator, M. M was a candidate put forward by Chubb in the High Court, and M had — prior to being appointed — disclosed that he had previously acted in arbitration proceedings in which Chubb was a party, including being appointed by Chubb in previous proceedings.

Subsequent to being appointed as arbitrator for the arbitration between Halliburton and Chubb, M accepted an appointment from Chubb as arbitrator in related arbitration proceedings against Transocean. M also subsequently accepted an appointment as substitute arbitrator on a different arbitration between Transocean and another insurer on the same layer as Chubb. M did not disclose these two subsequent appointments to Halliburton.

Halliburton wrote to M on discovering these appointments, suggesting that M resign from the arbitration between Halliburton and Chubb. M made an offer to resign conditional on the consent of Chubb, which was not forthcoming. M therefore did not resign, and Halliburton applied to the High Court to remove M pursuant to section 24(1)(a) of the Arbitration Act 1996. Halliburton’s claim failed at first instance before Popplewell J.

Subsequently, the arbitration between Halliburton and Chubb was decided in Chubb’s favour, and the arbitrator appointed by Halliburton issued “Separate Observations” criticizing M’s lack of disclosure of his subsequent related appointments. Halliburton thus appealed the first instance decision before Popplewell J to the Court of Appeal.

Judgment

In the Court of Appeal, Hamblen LJ held that both as a matter of good practice and as a matter of law, M should have disclosed his subsequent appointments to Halliburton, since the lack of disclosure, together with other factors such as the degree of overlap between the related appointments, might have given a “fair-minded and informed observer a basis for a reasonable apprehension of lack of impartiality”.

Hamblen LJ held however that M need not be removed as arbitrator because:

  • The non-disclosure itself does not justify an inference of apparent bias
  • The omission of disclosure was accidental rather than deliberate
  • The related cases contained a very limited degree of overlap
  • A fair-minded and informed observer would not consider such mere oversight as giving rise to justifiable doubts as to M’s impartiality
  • M’s conduct after Halliburton wrote to M with respect to the non-disclosure was appropriate

Halliburton’s appeal was therefore dismissed.

Hamblen LJ did however opine that if the related arbitration proceedings had contained substantial material overlap, the lack of disclosure would be cause for legitimate concern. This is because disclosure would allow Halliburton to play a role in policing the arbitrator’s duty of impartiality, and to propose practical measures preventing any potential disadvantage arising.

What does this ruling mean for arbitrators?

Arbitrators should be conscious of the fact that the duty to disclose other appointments to related arbitration proceedings does not cease once an arbitrator has been appointed. The duty is ongoing, and arbitrators should be scrupulous about disclosing subsequent appointments to related arbitration proceedings, particularly if the related arbitration proceedings materially overlap with the existing arbitration proceedings.

This post was prepared with the assistance of Benjamin Xie in the London office of Latham & Watkins