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Alleged Apparent Bias of an Arbitrator in Multiple Appointments: Appeal Dismissed

  • Legal Development 27 November 2020 27 November 2020
  • UK & Europe

Alleged Apparent Bias of an Arbitrator in Multiple Appointments: Appeal Dismissed

The Supreme Court has handed down a judgment today in favour of Chubb Bermuda ("Chubb")who opposed a challenge brought by Halliburton Company ("Halliburton") seeking to remove a third arbitrator on the basis of an alleged appearance of impartiality, by reason of his having accepted appointments in multiple related references.  Chubb was represented by Clyde & Co’s Bermuda Form insurance team led by Michael Payton QC (Hon)Emma Ager and Rosehana Amin.

In Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48, the Supreme Court has clarified the issue of whether the conduct of an arbitrator who accepts appointments in multiple references concerning the same or overlapping subject matter gives rise to the appearance of bias and, further, whether disclosure to the parties is required in those circumstances.  Halliburton, appealed the judgment of Mr Justice Popplewell at First Instance in H v L & Ors [2017] EWHC 137 (Comm) and the Court of Appeal judgment in Halliburton Company v Chubb Bermuda Insurance Ltd & Others [2018] EWCA Civ 817.

The Supreme Court unanimously dismissed the appeal. The arbitrator whose decision was challenged was Kenneth Rokison QC and the Court noted his long-established reputation for integrity and impartiality.  It was also common ground between the parties that the failure to disclose was innocent and inadvertent.  The Court found that the fair-minded and informed observer would not infer from Mr Rokison's failure to disclose his appointments in subsequent related references that there was a real possibility of apparent unconscious bias, particularly given the circumstances of the case and the fact that the extent of the overlap between the references was limited.  In doing so, the Court restated that the test under s.24 of the Arbitration Act 1996 ("the Arbitration Act") is the common law test of apparent bias, which falls to be determined on the specific facts of an individual case. However, the Court did establish that arbitrators have a legal duty to disclose facts or circumstances that might reasonably give rise to the appearance of bias, unless otherwise agreed between the parties.  The Court was keen to emphasise that the analysis is fact specific and that the agreement between the parties can be either express or implied.  The Court made specific reference to practices or customs within certain markets which do not require disclosure of acceptance of multiple appointments, for example GAFTA and LMAA.

Facts

The arbitration between Halliburton and Chubb commenced in January 2015 and concerned a claim under a liability insurance policy arising from the explosion and fire on the Deepwater Horizon oil rig in the Gulf of Mexico on 20 April 2010 ("Reference 1").   

Mr Rokison later accepted two further appointments in relation to the Deepwater Horizon incident in December 2015 and August 2016.  Chubb was the Respondent in one of these subsequent arbitrations (“Reference 2”) while a different insurer on the same layer of insurance as Chubb was the Respondent in the other (“Reference 3”). 

Mr Rokison did not disclose to Halliburton his appointments in References 2 and 3 but he did disclose his involvement in reference 1 to the claimant in References 2 and 3.  References 2 and 3 were disposed of by way of preliminary issue hearings both held in November 2016.

Halliburton learned of Mr Rokison's appointment in References 2 and 3 in November 2016 and wrote to him raising its concerns.  Halliburton then commenced proceedings in the High Court seeking an order under section 24(1)(a) of the Arbitration Act  that Mr Rokison QC be removed as an arbitrator.

Mr Justice Popplewell, at first instance, concluded that the claimant could not rely on the IBA Guidelines on Conflicts of Interest in International Arbitration, since they do not represent the English law of apparent bias. Mr Justice Popplewell held that even if disclosure ought to have been made, the failure to do so did not give rise to a real possibility of apparent bias against Halliburton.

The Court of Appeal agreed with Mr Justice Popplewell that the fair-minded and informed observer, having considered the facts, would not conclude that there was a real possibility that Mr Rokison was biased.  The Court of Appeal held that the test for apparent bias is an objective test.  In deciding whether unfairness arises, it was held that, while inside information and knowledge may be a legitimate concern for the parties in overlapping arbitrations involving a common arbitrator but only one common party, it does not of itself justify an inference of apparent bias.  Something more is required and that must be something of substance.

On the specific facts of the case, the Court of Appeal found that:

  • non-disclosure does not in itself justify an inference of apparent bias;
  • Mr Rokison should have disclosed References 2 and 3 to Halliburton when accepting the appointments but the omission was accidental rather than deliberate;
  • the degree of overlap between Reference 1 and References 2 and 3 was very limited;
  • the fair-minded and informed observer would not consider that mere oversight in such circumstances gave rise to justifiable doubts as to impartiality;
  • a remuneration benefit which an arbitrator receives from an appointing party is not a matter of significance and arguing otherwise goes too far as it would mean that such remuneration is a disqualifying benefit for all party-appointed arbitrators; and
  • Halliburton's criticisms of Mr Rokison'ss conduct after the non-disclosure were not justified as he had dealt with its concerns appropriately. 

Halliburton appealed to the Supreme Court.  Various interveners also made submissions to the Court.  The LCIA and ICC expressed concern that the test set by the Court of Appeal was not sufficiently strict compared with international norms.  They argued that, depending on the facts of a particular arbitration, multiple references concerning the same or overlapping subject matter with only one common party could give rise to the appearance of bias.  In contrast, GAFTA and LMAA noted it was common in their area for the same arbitrator to be appointed in multiple disputes involving common issues of law or fact.

Supreme Court decision

On 27 November 2020, the Supreme Court ruled that, having regard to the circumstances known to the Court at the date of the hearing at first instance (January 2017), which it held was the relevant point in time, it was not persuaded that the fair-minded and informed observer would infer that the oversight in disclosing References 2 and 3 to Halliburton would have given rise to a real possibility of apparent bias.  The Court thereby agreed with the Court of Appeal and first instance decisions, but provided different reasoning.

The Supreme Court found that, where an arbitrator accepts appointments in multiple references relating to the same or overlapping subject matter where there is only one common party, this may, depending on the custom and practice for that field of arbitration, give rise to an appearance of bias.  Further, they found that an arbitrator may only accept multiple references without making disclosure to the non-common party where this is not required in a particular field of arbitration.  Otherwise, disclosure is necessary and must identify the common party without requiring the express consent of the parties, absent agreement to the contrary.

The key principles arising from the Supreme Court’s decision are that:

  • The obligation of impartiality applies equally to party-appointed arbitrators and arbitrators appointed by the court, arbitral institutions or by the agreement of the party-appointed arbitrators.
  • Arbitrators have a legal duty of disclosure, which is enshrined within the duty of fairness under section 33 of the Act, and it is not merely good arbitral practice;
  • The obligation of disclosure can arise where the relevant matters would result in an informed observer concluding that there is a real possibility of a lack of impartiality.
  • The legal duty of disclosure does not override the arbitrator’s duty of privacy and confidentiality but the arbitrator may disclose basic details regarding the existence of the other arbitration.
  • In making such a disclosure, regard must be had to the relevant custom and practice to ascertain whether consent to the disclosure can be inferred, or whether the consent of both parties to the arbitration would be required to enable an arbitrator to disclose the existence of one arbitration to the parties to another arbitration.
  • Unless parties agree to the contrary, arbitrators have a legal duty to make disclosure of facts or circumstances that might reasonably give rise to the appearance of bias.
  • When assessing whether an arbitrator should have made a disclosure, regard will be had to the facts and circumstances prevailing at the time when the arbitrator acquired the requisite knowledge of those circumstances.  A determination as to whether an arbitrator has failed to carry out a duty to disclose can only be made by reference to the circumstances at the time the duty arose and during the period in which the duty subsisted, and not decided retrospectively.
  • Generally arbitrators are only required to disclose what they know, but the Court did not rule out the possibility of circumstances occurring in which an arbitrator would be under a duty to make reasonable enquiries in order to comply with the duty of disclosure.
  • A court will determine whether there is a real possibility of bias based upon the circumstances that exist at the date of a hearing of an application to remove that arbitrator.
  • Although there is a legal duty to disclose, there may be no remedy for such a breach.

Comment

This decision confirms that, in order to establish apparent bias under s.24 of the Act, the test is considered objectively and the IBA Guidelines (which can be more onerous) do not form part of English law.  The Supreme Court's decision has brought greater clarity to the law in terms of addressing the "something more required" set out by the Court of Appeal.  The courts will also adopt a pragmatic approach where there is likely to be only a narrow field of suitable arbitrators to choose from, having drawn distinctions between different types of arbitrations where multiple appointments are more common, a distintion that is likely to satisfy different interest groups. 

The decision reinforces the recent trend in the English courts that it is difficult to argue bias absent cogent evidence.  The Supreme Court also maintains the court's flexibility in terms of identifying the sorts of circumstances that may satisfy the appearance of bias.  However, to avoid justifiable doubts as to impartiality, arbitrators should always give disclosure of appointments in related and overlapping arbitrations.  

The Supreme Court has also developed the English law of arbitration by confirming that disclosure is not only a matter of good practice but is an actual legal duty. In recognising this legal duty, the Court acknowledged that the ICC, LCIA and CIArb, who all intervened in the proceedings, argued in favour of the recognition of such a legal duty. The finding of such a duty is linked to the duty to be impartial bringing greater certainty and guidance to arbitrators and the legal community more widely.

In recognising the duty, the Court contemplated the risk of challenges to the appointment of arbitrators and awards and the possibility that it could give rise to personal claims against arbitrators. However, it found that such challenges rarely succeed and in any event section 29 of the Act will protect arbitrators against personal claims for non-disclosure in most circumstances, so long as the arbitrator has not acted in bad faith. It remains to be seen whether parties will adapt their contracts or rules to confer a wider immunity against personal claims in the light of this ruling.

The Court confirmed that there is no distinction between party-appointed arbitrators and the chair in terms of the duty to be impartial.  This is a welcome clarification given the different standards internationally on this issue.  Clyde & Co notes that having regard to the custom and practices of arbitration in the insurance industry, it is common for both insurers and, in particular, insureds alike to appoint the same arbitrator across the insurance tower.  This was highlighted in the particular facts of this case where Professor Park, Halliburton's party-appointed arbitrator, was appointed by Halliburton in multiple arbitrations with its insurers.

The Court has preserved the integrity of English arbitration and the twin pillars of confidentiality and fairness with a thoughtful analysis of the issues that maintains the central importance of impartiality in English arbitrations, whilst remaining alive to the practical issues arising in particular circumstances and on particular facts.

End

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