INSIGHTS

Halliburton V. Chubb: Arbitrators’ Duty of Disclosure and Appearance of Bias

February 24, 2021

By: Ahmed Durrani, Associate

The U.K. Supreme Court’s decision in Halliburton Company v. Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48 was one of the most anticipated rulings of last year. Although the arbitral and court proceedings were subject to English law, the Supreme Court ruled on an important issue relevant to general international arbitration practice: an arbitrator’s duty to disclose appointments in multiple arbitrations with the same or overlapping subject matter with only one common party, and whether the failure to do so gives rise to an appearance of bias.

In this article, the author examines the Supreme Court’s judgment and its implications on arbitrators’ appointments in international commercial arbitrations.

Brief background

This case relates to an arbitration arising out of the Deepwater Horizon drilling rig accident (“the Deepwater Horizon Accident”). The underlying arbitration between Halliburton Company (“Halliburton”) and Chubb Bermuda Insurance Ltd (“Chubb”) concerned Chubb’s rejection of Halliburton’s insurance claims under a Bermuda Form liability policy (“the Halliburton Arbitration”). Mr Kenneth Rokison QC, the arbitrator at the centre of the appeal before the Supreme Court, was appointed by the English High Court as the third arbitrator in the Halliburton Arbitration.

Mr Rokison QC accepted further appointments in arbitrations related to the Deepwater Horizon Accident, which were not disclosed to Halliburton:

    • First, as a co-arbitrator (Chubb’s nominee) in an arbitration between Transocean Holdings LLC (“Transocean”) and Chubb (“the First Transocean Arbitration”). This appointment formed the gravamen of Halliburton’s challenge to Mr Rokison QC’s appointment.
    • Second, in an arbitration between Transocean and a different insurer (not Chubb) (“the Second Transocean Arbitration”). The First Transocean Arbitration and the Second Transocean Arbitration are hereinafter collectively referred to as “the Transocean Arbitrations”.

 

After Mr. Rokison QC’s appointment in the Transocean Arbitrations was discovered by Halliburton, it raised concerns as to Mr Rokison QC’s impartiality, and alluded to his continuing duty to disclose potential conflicts of interest further to the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (“the IBA Guidelines”). Although in his communications with Halliburton, Mr Rokison QC denied any breach of the IBA Guidelines, he volunteered to tender his resignation if both parties so agreed. Chubb, however, did not agree to the same. Halliburton consequently challenged Mr Rokison QC’s appointment in the English High Court, and sought his removal as an arbitrator in the Halliburton Arbitration, further to Section 24(1)(a) of the Arbitration Act 1996 (“the 1996 Act”). That application was refused, which resulted in an appeal by Halliburton to the Court of Appeal. That appeal was also dismissed, following which the matter ended up before the Supreme Court for final adjudication.

Given the implications that the Supreme Court’s decision was likely to have on English-seated arbitrations (and more generally on international arbitration), the Supreme Court permitted the following leading arbitral institutions and bodies to submit representations as interveners: the International Chamber of Commerce (“the ICC”); the London Court of International Arbitration (“the LCIA”); the Chartered Institute of Arbitrators (“the CIArb”); the Grain and Feed Trade Association (“the GAFTA”); and the London Maritime Arbitrators Association (“the LMAA”).

However, the interveners were divided in their respective positions. On the one hand, the ICC, the LCIA and the CIArb were of the view that multiple appointments in arbitrations relating to the same or overlapping subject matter with only one common party may give rise to an appearance of bias. In contrast, the LMAA and GAFTA averred that it was commonplace for arbitrators in their respective commercial sectors to accept multiple appointments in overlapping matters, without the expectation to disclose the same.

The Judgement

The Supreme Court dismissed the appeal, and elucidated upon the law surrounding bias and disclosure in the context of arbitrators’ appointment. The following are the key takeaways from the judgement.

First, the Supreme Court emphasised that the obligation to act impartially is a “cardinal duty” further to Section 33 of the 1996 Act. Notably, the Supreme Court held that this duty applies to an arbitrator irrespective of whether they have been appointed by a party, the party-appointed arbitrators, an arbitral institution, or the court. In other words, the Supreme Court held that English law imposes the same duty on all arbitrators without regard to the route of their appointment. 

As to the test to determine an arbitrator’s bias, the Supreme Court adopted the objective test set out in Porter v Magill [2001] UKHL 67: “The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”.

Likewise, following Helow v Secretary of State for the Home Department [2008] UKHL 62, the Supreme Court explained that a fair-minded observer “does not reach a judgment on any point before acquiring a full understanding of both sides of the argument”, and that the “real possibility test ensures the exercise of a detached judgment”. In addition, the Supreme Court elucidated that the fair-minded observer will also have regard to the arbitrator’s reputation, their role as a party-appointed arbitrator and any tactical reasons for a challenge to an arbitrator’s appointment.

As to whether or not multiple appointments of an arbitrator in arbitrations relating to the same or overlapping subject matter with one common party gives rise to an appearance of bias, the Supreme Court concluded that it may do so, subject to “the relevant custom and practice”. In particular, the Supreme Court held as follows: “There may be circumstances in which the acceptance of appointments in multiple references concerning the same or overlapping subject matter with only one common party might reasonably cause the objective observer to conclude that there is a real possibility of bias. Whether the objective observer would reach that conclusion will depend on the facts of the particular case and especially upon the custom and practice in the relevant field of arbitration.

However, in the instant case, the court concluded that a fair-minded and informed observer would not have concluded from the oversight (which was the reason given by Mr Rokison QC for the failure to disclose to Halliburton his appointments in the Transocean Arbitrations) “that there was a real possibility of unconscious bias on Mr Rokison’s part”. (The reasons for this finding are set out in paragraph 149 of the judgement.)

The Supreme Court also held that an arbitrator’s duty of disclosure, which forms a concomitant part of the duty to act impartially, “does not override the arbitrator’s duty of privacy and confidentiality in English law”. However, this statement is qualified: disclosure may be made without the parties’ consent if the same can be inferred from the arbitration agreement in the context of the practice in the relevant field.

Finally, the Supreme Court prescribed the appropriate time/period that a fair-minded and informed observer must consider when evaluating the facts and circumstances of a case to determine whether the arbitrator had a duty of disclosure, and whether there is a real possibility that an arbitrator is biased. As to the former, the facts and circumstances “as at and from the date when the duty arose” must be considered. For the latter, reference must be had to the facts and circumstances “known at the date of the hearing to remove the arbitrator”.

Comment

Regardless of which side of the fence one is on as to the Supreme Court’s findings, it cannot be denied that this is an important decision, not only in the context of English-seated arbitrations but also international arbitration more generally. This judgement will shape the direction that other common law jurisdictions take when assessing the issue of arbitrator bias and duty of disclosure.

The Supreme Court has provided clarity on an arbitrator’s duty to disclose matters which would give rise to justifiable doubts as to their impartiality. More significantly, the Supreme Court lays down guidance for the courts when assessing allegations of bias arising out of multiple appointments in arbitrations related to the same or overlapping subject matter with one common party.

The Supreme Court’s decision is pragmatic and takes into account the commercial realities of international trade. In particular, the Supreme Court appreciated the fact that, in certain specialised industries (such as shipping and commodity trading), multiple appointments for arbitrators are indeed commonplace. It is clear that the Supreme Court was assisted by the intervener’s representations. They facilitated the Supreme Court’s understanding that, subject to the custom and practice in a relevant industry, there may be circumstances in which multiple appointments in arbitrations involving the same or overlapping subject matter with only one common party may (or may not) cause the fair-minded and objective observer to conclude that there is a real possibility of bias. However, it remains to be seen how the courts in the future are going to interpret “custom and practice”, and whether standard arbitration clauses in commercial contracts will be updated in keeping with the Supreme Court’s decision.

It can also be expected that particularised disclosure rules might be introduced by leading arbitral institutions (whether as standalone guidelines or by way of amendments to their existing arbitral rules) to address the arbitrators’ duty of disclosure. It might make practical sense for institutions, which are not accustomed to multiple appointments of arbitrators in cases relating to the same or overlapping subject matter with one common party, to prescribe disclosure of such multiple appointments in all circumstances. In all other cases, as the Supreme Court underlined, the parties’ consent for disclosure may be express or implied (whether through institutional rules or the arbitration agreement).

To conclude, going forward, it would be advisable for arbitrators, lawyers and commercial parties to carefully consider multiple appointments in related matters, particularly in non-specialised industries, so as to prevent any potential challenges and delays to the arbitral process.  

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