Halliburton Company v Chubb Bermuda Insurance Ltd: Court of Appeal holds arbitrators may have duty to disclose circumstances that do not ultimately require their removal for apparent bias
The Court of Appeal’s judgment in Halliburton Company v Chubb Bermuda Insurance Ltd  EWCA 817 may become the seminal English case on arbitrators’ duty of disclosure. It also contributes to the law on arbitrators’ impartiality, specifically in the context of related arbitrations with overlapping, but not identical, parties.
An explosion and fire on the Deepwater Horizon oil rig killed 11 crewmen and caused extensive environmental damage along the US Gulf Coast. A group of plaintiffs sued, among others, Halliburton and the rig’s owner, Transocean. Both companies had purchased liability insurance from Chubb. Both reached settlements with the plaintiffs. Both made claims under the policies. Chubb rejected both claims on the basis that the settlements were unreasonable.
Halliburton commenced arbitration. The High Court appointed M to chair the tribunal. M had disclosed that he was then sitting in two (unrelated) cases to which Chubb was party.
Transocean later commenced an arbitration of its own. Chubb named M as its party-appointed arbitrator. M disclosed that he was already sitting in the Halliburton case, and Transocean did not object. M did not disclose to Halliburton that Chubb had appointed him in the Transocean case (he was also appointed in yet another Deepwater Horizon case Transocean brought against a different insurer, which he also did not disclose in the Halliburton case). He later accepted that it would have been prudent to have done so, and Halliburton accepted that the omission was an innocent oversight.
Halliburton applied to the Commercial Court under s. 24(1)(a) of the Arbitration Act 1996, which provides for the court to remove an arbitrator when “circumstances exist that give rise to justifiable doubts as to his impartiality”. Popplewell J declined to remove M. Halliburton appealed.
While the appeal was pending, the tribunal issued an award in Chubb’s favour. The arbitrators were unanimous as to the result, but one wrote that he could not join in the award because of his “profound disquiet about the arbitration’s fairness” in the light of the foregoing circumstances.
Appointments in related cases: ‘Something more’
Should M have been removed? Hamblen LJ, delivering the Court’s judgment, held that he should not. An arbitrator may accept appointments in two proceedings concerning the same subject matter in which there is only one common party. That alone does not give rise to an appearance of bias. “Something more is required” .
The Court accepted that “inside information” from one reference could affect the arbitrator’s assessment of the other reference. It may also be unfair that the party that is in both arbitrations has access to information that the other parties do not. But “the starting point is that an arbitrator should be trusted to decide the case solely on the evidence or other material adduced in the proceedings in question” . Arbitrators will be alert to the possibility of even unconscious bias arising from extraneous information. A party in Halliburton’s position may legitimately feel subjective concern, but that does not mean the arbitrator must step down.
Disclosure: ‘would or might’
For Popplewell J, the fact that the second appointment did not give rise to an appearance of bias meant that M had not had a duty to disclose it. The Court of Appeal held otherwise. In so doing, and apparently for the first time in this jurisdiction, it established that the threshold for an arbitrator’s legal duty of disclosure is lower than the threshold for his removal.
Absent waiver by all parties, an arbitrator cannot serve if circumstances would cause a fair-minded observer to conclude there is a real possibility of bias. The Court of Appeal held an arbitrator must disclose circumstances that would or might lead the observer to reach that conclusion.
The test is objective. The Court noted that in international arbitration, it may be good practice to import a subjective element, but it is not the law. Yet the Court seemed to place considerable weight on the fact that international best practice required M to make the disclosures he had failed to make. The IBA Guidelines on Conflicts of Interest in International Arbitration, as well as the rules of the ICC and LCIA, require disclosure of circumstances the might give rise to doubts about impartiality “in the eyes of the parties” (or, in the LCIA’s case, “in the mind of any party”). In Halliburton’s eyes, M’s appointments in the other Deepwater Horizon cases might have caused concern. The IBA Guidelines’ Orange List requires disclosure when an arbitrator sits in a different proceeding on a related issue involving one of the parties.
That disclosure was required as a matter of international best practice helped persuade the Court that disclosure was also required as a matter of law. International best practice, together with other aspects of the case, would lead a fair-minded observer to conclude that there might be a real possibility of bias.
Failure to disclose: ‘something more’ again
What is the consequence of M’s failure to disclose? Parties challenging arbitrators frequently argue that, if the underlying circumstance does not quite meet the test of apparent bias, the arbitrator’s failure to disclose it gets the applicant across the finishing line. The Halliburton case may encourage that line of argument.
The Court, quoting Lord Bingham, said the fact of non-disclosure “must inevitably colour the thinking of the observer”. It can be a factor in applying the test for apparent bias, and hence removal, under s. 24(1)(a). But if the non-disclosed circumstance does not itself require removal, non-disclosure alone cannot meet the test, either. Once again, the Court held, “something more is required”.
On the facts, the Court could not find the “something more”, so it dismissed Halliburton’s appeal.
Where does this leave us?
Halliburton is the first English case in the field of arbitration to grapple seriously with a duty of disclosure as a separate obligation, distinct from the duty to be impartial. Popplewell J’s approach was typical of how English courts have previously seen the issue: if the circumstances do not otherwise establish an appearance of bias, they need not have been disclosed, so non-disclosure adds nothing to the analysis. That was the path Flaux J took in A v B,  2 Lloyd’s Rep 591, for example. Now that the Court of Appeal has said that non-disclosure can be a factor in the test, and that the threshold for the duty to disclose is lower than for the appearance of bias, we can expect claims of non-disclosure to feature in more arbitrator challenges.
More generally, Halliburton will require courts to flesh out the new test in the context of varying fact patterns. The judgment is rich with dicta that might be explored in future cases. One example is that an arbitrator need disclose only what he knows, and he has no duty of inquiry; another is that an arbitrator’s inappropriate response to a suggestion of improper non-disclosure can also lead to a finding of apparent bias.
Halliburton is, or could be, the foundation of English law on arbitrators’ duty of disclosure. We must wait to see what edifice future courts will build on it.