Supreme Court clarifies arbitrator bias test and arbitrators' duty of disclosure

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Supreme Court clarifies arbitrator bias test and arbitrators' duty of disclosure

Published 8 February 2021

On 27 November 2020, the Supreme Court handed down its judgment in Halliburton Company v Chubb Bermuda Insurance Ltd. This is a very significant decision in the field of English and international arbitration, and provides an important clarification of the courts’ approach to arbitrator conflicts.

The Supreme Court clarified the test for arbitrators’ apparent bias and an arbitrator’s duty of disclosure, confirming that arbitrators are under a duty to disclose appointments in references concerning the same or overlapping subject matter with a common party.

Comment

Halliburton arose in the context of a Bermuda Form policy.  As with the Bermuda Form, disputes in relation to other lines of risk may rely on a relatively limited/specialist pool of arbitrator expertise, often referred to as “frequent flyers”.  Insurers may well be involved in numerous overlapping, and multi-party, disputes in relation to the same facts (this case concerned Deepwater Horizon).  It is a concern of some insureds that they are at a disadvantage where insurer defendants regularly litigate disputes in front of the same arbitrators (often on the same similar issues of policy coverage).  Claims handlers therefore need to have their eyes open to the issues of arbitrator bias and disclosure in such cases, in order to avoid costly satellite litigation such as this. 

More generally, the case provides important guidance in relation to arbitrators’ duties of disclosure and the approach that must be taken where questions of apparent bias arise. The Supreme Court’s decision also highlights the English courts’ typical pro-arbitration stance, and wariness about intervening in arbitration. Such an approach is key to London’s continuing status as a leading arbitration centre.

Facts

In 2010, an explosion and fire occurred on the Deepwater Horizon drilling rig in the Gulf of Mexico, where Halliburton provided services.

Halliburton commenced arbitration proceedings against Chubb in 2015 after Chubb declined Halliburton’s claim under its Bermuda Form excess liability policy (Reference 1). Following a failure by both parties to agree on the third, presiding arbitrator, the High Court made an order to appoint Mr Rokison QC.

In December 2015 and August 2016, Mr Rokison accepted two further appointments in relation to the Deepwater Horizon explosion and fire: Chubb appointed Mr Rokison in a claim brought by the rig owner, Transocean Holdings LLC (Transocean) (Reference 2), and Mr Rokison was also jointly nominated by parties in a claim by Transocean against another insurer (Reference 3). Mr Rokison did not disclose to Halliburton his appointment in References 2 and 3.

Halliburton learned of Mr Rokison’s further appointments in November 2016 and wrote to Mr Rokison, who admitted that “with the benefit of hindsight, it would have been prudent for me to have made disclosure to avoid any sense of lack of transparency on my part”.  In December 2016 Halliburton applied to the English court under section 24 of the Act for Mr Rokison’s removal as an arbitrator. The High Court, and then the Court of Appeal, rejected the application. Halliburton applied to the Supreme Court.

The decision 

The main issues raised before the Supreme Court were whether and to what extent:

  1. an arbitrator may accept appointments in multiple cases 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 do so without disclosing it to the other parties in all other appointments.

Duty of disclosure

The Supreme Court noted that there may be circumstances where the appointment of the same specialised arbitrators is regular practice. However, multiple appointments must be disclosed in the context of Bermuda Form arbitration under English law (as well as in other English seated arbitrations), unless the relevant parties agree otherwise. If consent cannot be obtained, the arbitrator must decline the second appointment. 

The Supreme Court held that an arbitrator is under a duty to disclose facts and circumstances which might reasonably give rise to the appearance of bias, and the Mr Rokison had breached his duty of disclosure. 

Impartiality

The Supreme Court held that the objective test, when considering an allegation of apparent bias against an arbitrator, is whether the fair-minded and informed observer would conclude there is a real possibility of bias. Failure to disclose will be one factor which the fair-minded and informed observer may take into account in considering whether there was a real possibility of bias, but the mere fact of the arbitrator’s involvement in overlapping appointments was not, in itself, enough to give rise to an appearance of bias.

Here, the Court held that a fair-minded and informed observer would not have concluded that the oversight in disclosing References 2 and 3 to Halliburton would have given rise to justifiable doubts about Mr Rokison’s impartiality.

When considering whether removal under section 24(1) of the Act was justifiable, the Court considered a number of factors including:

  • a lack of clarity in English law at the time as to the legal duty of disclosure and whether disclosure was necessary,
  • that there was no overlap between all of the references,
  • that there was no secret financial benefit for Mr Rokison, and
  • the timing of the references.

Conclusion

Taking into account all of the above, the Supreme Court rejected Halliburton’s challenge to Mr Rokison’s appointment, notwithstanding the breach of his duty of disclosure.  However, given that the position under English law as to the legal duty of disclosure has now been clarified in the context of multiple arbitral appointments in relation to the same subject matter, arbitrators will need to be mindful of potential bias (or the appearance of it) , and are likely to be scrutinised more strictly where such disputes arise in English seated arbitrations. 

This article was first published in Insurance Day.

Authors

Lucy Dyson

Lucy Dyson

London - Walbrook

+44 (0)20 7894 6039

Laura Berry

Laura Berry

London - Walbrook

+44 (0) 20 7894 6343

Julian Bubb Humfryes

Julian Bubb Humfryes

London - Walbrook

+44(0)20 7894 6137

Imogen Jones

Imogen Jones

London - Walbrook

+44 20 7894 6030

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