Halliburton v Chubb – unconscious bias, impartiality, disclosure and confidentiality in London arbitration
In Halliburton v Chubb,1 the UK Supreme Court has handed down a keenly awaited judgment, clarifying the circumstances where an arbitrator must disclose their appointment in separate arbitrations involving overlapping subject matter and a common party.
In considering the allegation of unconscious bias against the chair of a London arbitration tribunal, the Supreme Court considered wide ranging submissions regarding the closely connected issues of impartiality, disclosure and confidentiality, made by a number of renowned arbitration bodies.
The Court was asked two specific questions, whether and to what extent: (1) an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without giving rise to an appearance of bias; and (2) an arbitrator may accept the multiple references described in the first question without making disclosure to the party who is not the common party.
The case itself involved a claim by Halliburton to be indemnified by their insurers, Chubb, for Halliburton’s losses incurred by settling claims arising from the Deepwater Horizon incident. The policy was on the Bermuda Form, providing for New York Law, arbitration in London.
Each party nominated an arbitrator but failed to agree on the appointment of the Chair. The appointment was referred to the English High Court, which chose a well-known arbitrator, Ken Rokison QC. Mr Rokison declared that he had been appointed in previous arbitrations in the past by Chubb, and Halliburton voiced no objection.
Subsequently, the owner of the rig, Transocean, brought an independent arbitration against Chubb, as insurer for the claims they had settled arising from the same incident. Chubb appointed Mr Rokison as their party-appointed arbitrator.
Mr Rokison informed Transocean of earlier appointments for Chubb, and his role as Chair of the Halliburton dispute; and Transocean also voiced no objection. But crucially, Mr Rokison omitted to inform Halliburton of the later appointment for Chubb in the Transocean matter. Incidentally, there was also a second later appointment of Mr Rokison in a similar way, but submissions centred on the Transocean appointment.
When Halliburton later discovered Mr Rokison’s subsequent appointment, they demanded that he stand down as Chair, arguing that his failure to disclose the later appointment gave the appearance of unconscious bias. Mr Rokison denied any wrongdoing, specifically that there was a duty of disclosure on him, but initially offered to resign from the later, Transocean appointment. Eventually he also offered to resign the Halliburton reference, but Chubb refused to accept his resignation.
When Halliburton applied to the English High Court to rule that the arbitrator should step down, both the first instance judge, and Court of Appeal refused the application, even though it was held that he should have disclosed the later appointment in the earlier arbitration.
The latter decision generated a huge amount of critical academic comment, particularly among the international arbitration community, which felt that the Court of Appeal decision reflected badly on London’s reputation as an impartial arbitration centre.
Accordingly, three international arbitration bodies intervened in the Supreme Court Appeal, in support of Halliburton. These were the International Court of Arbitration of the ICC, the London Court of International Arbitration, and the Chartered Institute of Arbitrators. Two further bodies, the LMAA and GAFTA, also intervened, as they became concerned that the Court might hand down a wide-reaching judgment affecting their own field of arbitration,
In the event, the Supreme Court accepted that the arbitrator should have given disclosure, but also concluded that on an objective view the arbitrator could not be said to have been biased. In particular, the Court said that English law had been unclear, and that the arbitrator’s mistake was understandable.
In reaching its decision, the Supreme Court established very clear guidelines in the case of multiple appointments in cases of overlapping circumstances. Crucially, however, the Court was very clear in its refusal to impose a ‘one-size-fits-all’ universal application to all fields of arbitration practice.
The Court accepted the supporting submission by the ICC, LCIA and CIArb that failure by an arbitrator to disclose acceptance of appointment in more than one arbitration with a common party and overlapping subject matter could, in itself, amount to a finding of unconscious bias.
The Court however refused to make this a universal rule. The Court accepted the submissions of the LMAA and GAFTA that multiple appointments in these situations in their fields were extremely common, and were on many occasions actively requested by the parties (for example in back-to-back charters) to the extent that it was possible to imply consent to the practice, and therefore an implied waiver of the need to disclose. Sports arbitration bodies were quoted as another example.
The Court ruled that at the time of appointment, the arbitrator was obliged to disclose all facts known to him which would or might lead an informed and fair-minded observer to a finding of bias.
The Court, however, was obliged to assess the known facts at the time of the hearing before it. Again, the test was of the informed and fair-minded observer.
The Supreme Court also made two further important rulings, of universal application to English arbitration.
The first relates to the fundamental principle of impartiality. Halliburton submitted that Mr Rokison, as the chair, somehow had a higher duty of impartiality than the party-appointed arbitrators, and therefore a higher standard should apply to him when assessing unconscious bias. This submission was roundly rejected, with the Court emphasising that the duty of impartiality was owed by all arbitrators, party-appointed or not.
The second related to the question of perception of bias. The Court accepted that justice should be seen to be done, but was clear that as a matter of English law, this was an objective test, as seen through the eyes of the informed and fair minded observer. Halliburton and the three international arbitration bodies placed strong emphasis on the IBA conflict guidelines, for example, which speak of a perception of bias or conflict ‘in the eyes of a party’. This submission was also firmly rejected, and the English law test differentiated, although it was accepted that if institutional rules are incorporated into the arbitration agreement, then they must be followed.
The final area of importance, which the courts addressed, was the question of confidentiality. The Court concluded that the duty of disclosure did not override the duty of confidentiality. If an arbitrator wished to accept a later appointment, he was obliged to disclose at the least the name of the common party, the circumstances of the overlap and whether the arbitrator was appointed by a party or by a particular law firm. Given the common party was usually the one seeking to make the further appointment, there should be no problem in them waiving their right to confidentiality. If, however, more information was needed, the arbitrator would have to obtain specific clearance from the second set of parties. If that could not be obtained, the arbitrator would have to refuse the second appointment.
In summary, although the Supreme Court decision might appear surprising at first sight, in that the arbitrator did breach his duty to disclose, the case was very fact specific. Given the clear guidelines laid down by the Court, if similar facts were to happen again, the challenge would very likely succeed. The decision gives welcome reaffirmation that all arbitrators are expected to act impartially at all times, and that the test of bias is an objective one. Furthermore, if parties wish to apply specific rules of any international arbitration institutions they are free to do so; and the Court has recognised that the practices in certain fields, such as maritime, may have an impact on the scope of the duty to disclose.
One thing for certain however, is that we are likely to see a greater degree of disclosure by arbitrators in all fields than may have been the practice to date.