Global Development

Background

On 27 November 2020, the UK Supreme Court handed down its hotly anticipated decision in the Halliburton v Chubb proceedings,¹ which had raised important issues about an arbitrator’s duty of impartiality and disclosure obligations.

The dispute arose out of the Deepwater Horizon oil and gas rig explosion in the Gulf of Mexico on 20 April 2010. Halliburton provided cementing and well-monitoring services on the rig, which was leased by BP and operated by Transocean. The U.S. government pursued each corporation for the environmental damage caused by the incident. Halliburton settled with the government for US$1.1 billion, and subsequently sought to recover that sum from its insurer, Chubb. Chubb refused to pay out under the insurance policy – a Bermuda Form policy² – on the basis that the settlement amount was unreasonable. Halliburton brought a claim under the policy’s dispute resolution clause, which provided for ad hoc arbitration seated in London. The parties failed to agree the chair of the tribunal and the High Court appointed Kenneth Rokison QC,³ whom Chubb had proposed.

Subsequently, in late 2015, Mr Rokison accepted a party appointment by Chubb in arbitration proceedings against Transocean, arising out of the same Deepwater Horizon incident (‘Reference 2’).⁴ Mr Rokison did not disclose this appointment to Halliburton. In November 2016, Halliburton found out about Mr Rokison’s appointment in Reference 2 and raised its concerns in correspondence. Mr Rokison replied that (i) he did not believe that he was required to disclose the Reference 2 appointment to Halliburton and (ii) the issues in Reference 2 differed significantly to those in the arbitration between Halliburton and Chubb. However, he accepted that it would have been ‘prudent’ to disclose the appointment to Halliburton, and ultimately offered to resign as chair if the parties could agree upon a suitable replacement.

Halliburton applied to the High Court, pursuant to s.24(1)(a) of the Arbitration Act 1996 (‘AA 1996’), for Mr Rokison’s removal on the basis that there were justifiable doubts as to his impartiality. The application was rejected both at first instance and by the Court of Appeal. Halliburton appealed to the Supreme Court. Five arbitral institutions intervened in the appeal, including the ICC and the London Court of International Arbitration (‘LCIA’), both of which raised concerns that the Court of Appeal’s decision was out of step with internationally accepted standards and practices.⁵

The Supreme Court’s decision

The questions before the Supreme Court were whether and to what extent an arbitrator:

• may accept appointments in multiple references that concern the same or overlapping subject matter where there is one common party (in this case, Chubb), without giving an appearance of bias; and
• must disclose such multiple references to the non-common party (in this case, Halliburton).

The ‘apparent bias’ standard in English-seated international arbitrations

The Court emphasised that an allegation of apparent bias under the AA 1996 requires an objective analysis (by reference to a ‘fair-minded and informed observer’), while having regard to the particular characteristics of international arbitration, which include the following:

• Arbitration is a private form of dispute resolution, which puts a ‘premium on frank disclosure’ by arbitrators.
• Arbitral proceedings are not subject to appeals on issues of fact and often not on issues of law—the opportunity to correct errors in arbitration proceedings and awards is therefore more limited than in litigation.
• Arbitrators derive a financial benefit from securing appointments.
• Arbitrators come from different jurisdictions and legal traditions, which may have varying views on ‘ethically acceptable conduct’.
• Where there are multiple arbitrations concerning the same or overlapping subject matter, the parties will have no means of informing themselves as to the conduct of the arbitrations to which they are not party.
• The duty to act independently and impartially applies equally to all arbitrators; however, parties may reasonably believe that tribunal chairs have a particularly heavy responsibility to be impartial—a point of particular significance in the present case because Mr Rokison served as tribunal chair.

The duty of impartiality encompasses a disclosure obligation

The Court confirmed that, absent an express or implied waiver from the parties, English law requires that arbitrators disclose relevant and material matters that might lead a fair-minded and informed observer to conclude that there is a real possibility of bias, noting that disclosure provides an important safeguard against successful challenges. The Court did not rule out the possibility that arbitrators may, in certain circumstances, be under a duty to make reasonable enquiries. Further, failure to make a disclosure could, in certain circumstances, itself demonstrate a lack of impartiality requiring the removal of the arbitrator.

The interrelationship between disclosure and consent

The existence of a legal duty to disclose gave rise to a further question for the Court: What is the relationship between this duty and an arbitrator’s obligation of privacy and confidentiality under English law? The Court held that where the information that must be disclosed is subject to an arbitrator’s duty of privacy and confidentiality, disclosure could only be made with the parties’ consent. Such consent could be express or inferred from the arbitration agreement in the context of the ‘custom and practice’ in the relevant field.

In reaching this decision, the Court recognised that ‘the law can and should recognise the realities of accepted commercial and arbitral practice’ where that practice operates in the public interest. The Court stated:

There is a public interest in upholding the integrity of arbitration as a system of alternative dispute resolution by ensuring that there is proper disclosure of an arbitrator’s involvement in related arbitrations in a field of arbitration in which repeated appointments occur but in which there is no common understanding that disclosure is not required.⁶

The Court held that an arbitrator in a Bermuda Form arbitration may disclose the existence of overlapping arbitrations and the identity of any common party without obtaining the express consent of the relevant parties (absent an agreement to the contrary). While the Court recognised from the submissions of the ICC, LCIA and CIArb that such ‘custom and practice’ extends beyond Bermuda Form arbitrations, it saved judgment on the extent to which its ruling could be applied by analogy to arbitrations in other contexts, which ‘will depend on their particular characteristics and circumstances and custom and practice in their field’. In a separate judgment,⁷ Lady Arden noted that she would extend the Court’s ruling to any arbitration – whether ad hoc or under institutional rules – absent a specific rule or agreement to the contrary.

Breach of disclosure duty does not necessarily result in apparent bias

The Court held that breach of the duty of disclosure should be assessed at the time when the arbitrator acquired knowledge of the relevant matters. It found that Mr Rokison had breached his duty to disclose his appointment in Reference 2 to Halliburton, as that appointment was ‘a circumstance which might reasonably give rise to the real possibility of bias’.

However, s.24(1)(a) AA 1996 allows a party to apply for an arbitrator’s removal if ‘circumstances exist that give rise to justifiable doubts’ as to the arbitrator’s impartiality. Crucially, the Court held that use of the present tense ‘exist’ means that the test must be applied at the time the application is heard, not at the time that the relevant circumstance arose.

Having regard to the circumstances known at the time of the hearing at first instance in January 2017, the Court concluded that the apparent bias test was not satisfied. By that point, Mr Rokison had explained that he did not believe that disclosure was required, and it was common ground that this explanation was genuine. In addition, the Court found that: (i) there had been a lack of clarity in English law as to whether a legal duty to disclose existed; (ii) Mr Rokison had derived no secret benefit as a result of the multiple appointments; (iii) ultimately Chubb gained no advantage from the overlap between the present case and Reference 2 (as it was decided on an unrelated preliminary issue); and (iv) there was no basis for inferring unconscious bias.

Comment

There can be no doubt that the Supreme Court’s decision provides welcome clarification to the existence and scope of arbitrators’ duty of disclosure under English law. The Court recognised that the existence of such a duty promotes transparency in arbitration and is consistent with best practice as reflected in institutional rules such as those of the ICC. The Court sought further to address the concerns expressed by the ICC and the other interveners by providing guidance that ‘an arbitrator should proceed on the basis that a proposal to take on a further appointment involving a common party and overlapping subject-matter (in that it arises out of the same event) is likely to require disclosure of a potential conflict of interest’.⁸

However, can it be said that the decision adequately addresses the concern that the ICC had raised in its intervention before the Supreme Court that the Court of Appeal’s decision was out of step with international norms? The authors believe that the Supreme Court did address the intervenor’s concerns, for three reasons.

First, the Supreme Court made clear that any investigation into allegations of bias or failure to disclose are informed by the ‘particular characteristics’ of international arbitration, as set out above. As such, the decision affirms the English Courts’ understanding of international arbitration’s special nature and their respect for the legal pluralism that underlies it. In this regard, Lord Hodge highlighted Section 1(c) of the AA 1996, which limits the English courts’ intervention in arbitral proceedings as a matter of principle, while noting their power to intervene to remove an arbitrator where there are doubts as to impartiality.

Second, while the Supreme Court found that the duty of impartiality had not been breached in this instance, it accepted that, in different circumstances:

• the fact of multiple overlapping appointments with only one or some common parties concerning the same or overlapping subject matter might give rise to reasonable doubts as to the arbitrator’s impartiality;⁹ and
• a failure to disclose multiple appointments by a common party in overlapping references might of itself give rise to reasonable doubts as to the arbitrator’s impartiality so as to justify his or her removal.¹⁰

Notably, one of the reasons why Mr Rokison was found not to have breached his duty of impartiality – the lack of clarity regarding the existence of a legal duty to disclose in the circumstances under English law – will be unavailable in future challenges, in light of the Court’s judgment.

Third, the Supreme Court made clear that each of the key tenets of its decision (the scope of the duty of impartiality; the scope of the duty to disclose; and the question whether the parties had expressly or impliedly consented to the relevant disclosure) is context-specific, and that all relevant circumstances must be taken into account. In other words, it appears that the Supreme Court has set a floor and not a ceiling. For example, the Court noted that institutional rules (including the ICC Rules) and the International Bar Association Guidelines on Conflicts of Interest in International Arbitration take a more demanding subjective approach to the duty of disclosure – approaching the matter from the perspective of the parties to the dispute – while English law adopts an objective approach. Where the parties agree to arbitrate – and where arbitrators accept appointments – pursuant to the ICC Rules, they each consent to the provisions in those rules regarding the arbitrator’s duties of impartiality and disclosure. Further, while the Supreme Court refused to extend its holding beyond the context of the Bermuda Form,¹¹ it seems likely that disclosure provisions such as those found in Article 11 of the ICC Rules will suffice to imply party consent to an arbitrator making the necessary disclosures in current and future arbitrations on a confidential basis without breaching his or her obligation of privacy and confidentiality. ¹²

---

---