The recent judgment from the Supreme Court of the United Kingdom on Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48, raised important questions about the requirement that there can not only be no actual bias, but also no apparent bias on the part of arbitrators in favour of or against any party in arbitration and also about the obligation of arbitrators in international arbitrations to make disclosure of multiple appointments concerning the same or overlapping subject matter with one common party. The court allowed a number of arbitral institutions to intervene and make submissions in the proceedings, including, for example, the ICC and CIArb, which indicates the significance of this judgment in the arbitration field, in particular, arbitrations seated in England.

Background 

The appeal concerned an arbitration under a Bermuda Form liability policy arising out of damage caused by an explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010. The disaster gave rise to several arbitrations between insured parties and insurers. The Bermuda Form policy was governed by New York law and provided for London-seated ad hoc arbitration.

In January 2015, Halliburton commenced arbitration proceedings against Chubb (Reference 1). They agreed the appointment of two arbitrators, but being unable to agree on the third arbitrator, the High Court appointed Kenneth Rokison QC in June 2015, who had been proposed by Chubb, but objected to by Halliburton on the grounds that he was an English lawyer, whereas the relevant policy was governed by New York law. Prior to his appointment, Mr Rokison had disclosed that he had previously acted as an arbitrator in a number of arbitrations involving Chubb, including some appointments on behalf of Chubb, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved.

In December 2015 Mr Rokison accepted the appointment as an arbitrator by Chubb in relation to an excess liability claim by Transocean, arising out of the same incident (Reference 2). The appointment was made on behalf of Chubb by Clyde & Co, who were also Chubb’s solicitors in Reference 1. Within Chubb, the same manager was responsible for monitoring the claims made by both Halliburton and Transocean and took the decision to refuse the claims in each case. Before accepting appointment by Chubb in Reference 2, Mr Rokison disclosed to Transocean his appointment in Reference 1 and in the other Chubb arbitrations which he had disclosed to Halliburton. Transocean did not object. However, Mr Rokison did not disclose to Halliburton his proposed appointment by Chubb in Reference 2.

In August 2016 Mr Rokison accepted appointment (Reference 3) in another arbitration, arising out of the same incident, as a substitute arbitrator on the joint nomination of the parties in a claim made by Transocean against a different insurer on the same layer of insurance as the claim in Reference 2. Nobody disclosed this proposed appointment to Halliburton.

Halliburton became aware of the December 2015 and August 2016 appointments of Mr Rokison in November 2016 and asked him to resign. Mr Rokison refused because, in his view, the issues under consideration were neither the same nor similar and he had been independent and impartial throughout and that would continue to be the case. Halliburton made an application to the English High Court for his removal. The application was unsuccessful, as was Halliburton’s appeal to the Court of Appeal.

Halliburton’s Case

Halliburton did not suggest that Mr Rokison was guilty of any deliberate wrongdoing or actual bias. Its case was one of apparent unconscious bias, founded on the following:

• Mr Rokison accepted the benefit of a paid appointment on Chubb’s nomination when he was sitting on an arbitral tribunal in Reference 1.

• In so doing, he gave Chubb the unfair advantage of being a common party to two related arbitrations with a joint arbitrator, while Halliburton was ignorant of the proceedings in Reference 2 and thus unaware whether and to what extent he would be influenced in Reference 1 by the arguments and evidence in Reference 2.

• Chubb would be able to communicate with him in Reference 2, e.g. by its submissions and the evidence it led, on matters which might be relevant to Reference 1 and would know of his responses to those communications, while Halliburton would not even know that they had occurred.

• Mr Rokison failed to disclose his appointment to Halliburton and thereby prevented it from forming its own view as to whether it might lead to unfairness and from either making submissions to the tribunal in Reference 1 or otherwise proposing or taking practical steps to mitigate the unfairness.

• Mr Rokison did not pay proper regard to Halliburton’s interest in the fairness of the procedure. Mr Rokison had regard only to what he and Chubb both wanted, which was his appointment to sit as arbitrator in Reference 2.

• The fair-minded and informed observer would see such conduct as giving rise to justifiable doubts as to the arbitrator’s impartiality.

Issues before the Supreme Court and its findings

There were two main issues raised in the appeal, which the Supreme Court answered as follows:

Where an arbitrator accepts appointments in multiple references concerning the same or overlapping subject matter with only one common party, this may, depending on the relevant custom and practice, give rise to an appearance of bias.

(ii) whether and to what extent the arbitrator may do so without disclosure

Unless the parties to the arbitration agree otherwise, arbitrators have a legal duty to make disclosure of facts and circumstances which would or might reasonably give rise to the appearance of bias. The fact that an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with only one common party is a matter which may have to be disclosed, depending upon the customs and practice in the relevant field. In cases in which disclosure is called for, the acceptance of those appointments and the failure by the arbitrator to disclose the appointments taken in combination might well give rise to the appearance of bias.

The reasons for coming to the above conclusions are detailed below.

Test for apparent bias

The Supreme Court emphasised the importance of the obligation of impartiality in arbitrations and that impartiality has always been a “cardinal duty” of arbitrators. It confirmed that the English courts in addressing an allegation of apparent bias in an English-seated arbitration will (i) apply an objective test, namely “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”; and (ii) have regard to the particular characteristics of international arbitration, which highlight the importance of proper disclosure as a means of maintaining the integrity of international arbitration. These characteristics include, for example, the private nature of arbitration, the fact that an arbitrator has a financial interest in being nominated, that arbitrators in international arbitration come from many jurisdictions and legal traditions and may have divergent views on what constitutes ethically acceptable conduct and that in the field of international arbitration there are differing understandings of the role and obligations of the party-appointed arbitrator (some legal systems accept the proposition that a party-appointed arbitrator has a special role in relation to his/her appointing party).

In relation to the time of assessment of the possibility of bias, the Supreme Court confirmed that the test to apply was to ask whether “at the time of the hearing to remove” the circumstances would have led the fair-minded and informed observer to conclude that there was in fact a real possibility of bias.

Legal duty to disclose

The Supreme Court confirmed that the arbitrator’s duty of disclosure is a legal duty under English law and not simply good arbitral practice. It is a component of the arbitrator’s statutory obligations of fairness and impartiality.

The Supreme Court said that an arbitrator, like a judge, must always be alive to the possibility of apparent bias and of actual but unconscious bias. One way in which an arbitrator can avoid the appearance of bias, the Court said, is by disclosing matters which could arguably be said to give rise to a real possibility of bias. When, on being asked to accept an appointment, an arbitrator knows of a matter which ought to be disclosed to the parties to the reference, prompt disclosure to those parties of that matter provides the safeguard, as the quality of impartiality is shown to have been there from the beginning. But the obligation of impartiality continues throughout the reference and the emergence during the currency of the reference of matters which ought to be disclosed means that an arbitrator’s prompt disclosure of those matters can enable him or her to maintain the “badge of impartiality”.

The Court said that an arbitrator’s failure to make disclosure is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias. Such assessment will have regard to facts and circumstances as at and from the date the duty arose and will be made as at the date of the hearing to remove the arbitrator.

Practice in relation to disclosure

Since the legal duty of disclosure does not override an arbitrator’s duty of privacy and confidentiality in English law, the Supreme Court also considered how in practice an arbitrator was to make disclosure and what matters he could disclose. The court sought guidance from the parties and interveners on the practice in relation to disclosure of facts concerning a related arbitration or arbitrations without obtaining the express permission of the parties to the arbitration about which information was being disclosed. That guidance made it clear that there were a variety of arbitral practices in relation to the acceptance of appointments in multiple references concerning the same or overlapping subject matter with only one common party. What is appropriate for arbitration in which the parties have submitted to institutional rules, such as those of ICC and LCIA, differs from the practice in GAFTA and LMAA arbitrations. There are practices in maritime, sports and commodities arbitrations, as the IBA Guidelines recognise, in which engagement in multiple overlapping arbitrations does not need to be disclosed because it is not generally perceived as calling into question an arbitrator’s impartiality or giving rise to unfairness. The Court said:

• Where the information which must be disclosed is subject to an arbitrator’s duty of privacy and confidentiality, disclosure can be made only if the parties to whom the obligations are owed give their consent. If a person seeking appointment as an arbitrator in a later arbitration does not obtain the consent of the parties to a prior related arbitration to make a necessary disclosure about it, or the parties to the later arbitration do not consent to the arbitrator’s disclosure of confidential matters relating to that prospective appointment to the parties to the earlier arbitration, the arbitrator will have to decline the second appointment. Such consent may be express or inferred from the arbitration agreement itself in the context of the custom and practice in the relevant field.

• In arbitrations governed by institutional rules which require disclosure to the institution or parties of matters which may include information about other arbitrations (such as the ICC Arbitration Rules), the incorporation of such rules into an arbitration (arbitration 1) provides a basis for the inference that the parties to that arbitration consent to disclosure of such information about that arbitration to the parties to a prospective arbitration (arbitration 2) under such rules. Similarly, one can readily infer from the submission of the parties in arbitration 2 to such rules that they have consented to such disclosure to the parties to arbitration 1.

• Where parties submit to an ad hoc arbitration, practice as to privacy, confidentiality and disclosure may differ. Such arbitrations may include those in which the parties maintain the confidentiality of the existence of the arbitration itself by prohibiting any disclosure whatsoever. In such case, consent of both parties to the arbitration would be required to enable an arbitrator to disclose its existence to the parties to another arbitration. Whether an arbitrator can make disclosure of an existing or prospective arbitration without first obtaining the express consent of all parties to the arbitration about which disclosure requires to be made will depend on the relevant arbitration agreement and the custom and practice in the relevant field.

• The duty of privacy and confidentiality is not absolute. The parties to an arbitration can determine as a matter of contract the extent to which they wish matters to be treated as confidential.

• The Court of Appeal’s formulation of disclosure (that disclosure should be given of facts and circumstances known to the arbitrator which would or might give rise to justifiable doubts as to his impartiality) was correct, subject to one qualification concerning the words “known to the arbitrator”. An arbitrator can disclose only what he or she knows and is, as a generality, not required to search for facts or circumstances to disclose. But 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 was not ruled out.

Did the arbitrator in this case have to disclose his multiple appointments?

It was accepted that it was not uncommon for arbitrators in Bermuda Form arbitrations to disclose their involvement in prior or current arbitrations involving a common party without disclosing the identity of the other party or details concerning the arbitration, but the parties disagreed as to the practice of disclosure. The Court said that under English law multiple appointments must be disclosed in the context of Bermuda Form arbitrations in the absence of an agreement to the contrary between the parties to whom disclosure would otherwise be made. It had not been shown that there was an established custom or practice in Bermuda Form arbitrations by which parties have accepted that an arbitrator may take on such multiple appointments without disclosure.

The Court said that on appointment as arbitrator in Reference 1, Mr Rokison became subject to the statutory duties to act fairly and impartially in conducting arbitral proceedings, in decisions on matters of procedure and evidence and in the exercise of all powers conferred on him. Those duties were owed to both Halliburton and Chubb. Relevant information and the opportunity for communication with the common arbitrator were available to Chubb in Reference 2 which were not available to Halliburton. Being unaware of the appointment in Reference 2, Halliburton was not able to assess whether and to what extent this involved unfairness and how to respond to that appointment. The appointment in Reference 2 had the potential to give rise to unfairness, which Halliburton had no opportunity to address. The failure to give a party to an arbitration that opportunity, might amount to apparent bias.

However, having regard to the circumstances known to the court at the date of the hearing at first instance, the Court was not persuaded that the fair-minded and informed observer would infer from the oversight that there was a real possibility of unconscious bias on Mr Rokison’s part because:

• at the relevant time, there appeared to have been a lack of clarity in English case law as to whether there was a legal duty of disclosure and whether disclosure was needed;

• the time sequence of the three references may explain why Mr Rokison saw the need to disclose Reference 1 to Transocean but did not identify the need to tell Halliburton about Reference 2.

• Mr Rokison had explained that it was likely that References 2 and 3 would be resolved by a preliminary issue and that there would not be any overlap in evidence or legal submissions between them and Reference 1. If that had not been the outcome of the preliminary issues, he had also offered to consider resigning from his appointments in References 2 and 3.

• there was no question of Mr Rokison having received any secret financial benefit;

• there was no basis for inferring unconscious bias in the form of subconscious ill-will in response to Halliburton’s challenge to his appointment.

The Supreme Court was therefore satisfied that the Court of First Instance and Court of Appeal were correct to hold that the fair-minded and informed observer, looking at the facts and circumstances which would be known to him or her at the date of the hearing in January 2017, would not conclude that there was a real possibility of bias or, in the words of s.24(1)(a) of the 1996 Arbitration Act, that circumstances existed that gave rise to justifiable doubts about Mr Rokison’s impartiality. The appeal therefore failed.

Comment

This important judgment clarifies the nature of an arbitrator’s duty to make disclosures of facts and circumstances that may give rise to doubts about the arbitrator’s independence and impartiality and also how in practice disclosure is to be made, given an arbitrator’s duty of privacy and confidentiality. This confirms that 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 and 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.

If an arbitrator is in doubt as to whether certain facts or circumstances have to be disclosed to the parties, he should disclose them to err on the side of caution. Arbitrators may refer to the IBA Guidelines on Conflicts of Interest in International Arbitration which sets out various situations which may or may not warrant disclosure to the parties to the arbitration.