Arbitrator duties – apparent bias and impartiality and RICS guidance

Halliburton Company v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48

On appeal from [2018] EWCA Civ 817

Introduction

On 27 November 2020, the UK Supreme Court delivered its judgment in the case of Halliburton Company v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48. This case concerned arbitrator apparent bias, and the duty of an arbitrator to disclose information that may lead to doubts relating to their impartiality, specifically where they were appointed in a number of arbitrations with the same or overlapping subject matters and only one common party.

Background

Halliburton (the Appellant) provided cementing and well-monitoring services for Deepwater Horizon, to BP Exploration and Production Inc. (BP). Halliburton held an insurance policy with Chubb Bermuda Insurance Ltd (Chubb). Transocean Ltd (Transocean) was the owner of the oil rig, and leased this to BP. Transocean was also insured with Chubb.

In 2010, the Deepwater Horizon incident occurred, resulting in Halliburton making an insurance claim against Chubb. Chubb refused to pay, and so Halliburton commenced an arbitration. Mr. Kenneth Roskin QC was appointed as the arbitrator.

Subsequently, the arbitrator was appointed in two further arbitrations:

1. a claim by Transocean against Chubb for settlement of its claims, in which the arbitrator was appointed as co-arbitrator; and
2. a claim by Transocean against a different insurer, in which the arbitrator was appointed as Chairman by agreement of the parties to that arbitration.

These two appointments were not disclosed to Halliburton. When Halliburton discovered this in November 2016, the arbitrator explained that his failure to disclose his two other appointments was merely an oversight, and that he would offer to resign from the arbitration between Halliburton and Chubb if a mutually acceptable replacement could be agreed upon.

Halliburton brought a case to the English High Court in December 2016 for the removal of the arbitrator on the basis of apparent bias. Mr. Justice Popplewell dismissed the case in January 2017, finding that there were no justifiable concerns as to the arbitrator’s impartiality, and accordingly there was nothing to be disclosed.

Halliburton’s case was also dismissed when heard by the Court of Appeal. The Court of Appeal found that although the arbitrator should have disclosed the appointments, the fact that he had accepted multiple appointments with an overlapping subject matter and only one common party did not of itself give rise to the appearance of bias.

Supreme Court Decision

The appeal was heard on 12 and 13 November 2019, and judgment handed down on 27 November 2020. The court addressed two main questions:

1. whether and to what extent an arbitrator may accept multiple appointments relating to the same or overlapping subject matter with only one common party; and
2. whether and to what extent an arbitrator may do so without disclosure.

The court ultimately found that:

In regard to the first question:

• Whether apparent bias exists is to be assessed according to whether an informed, fair-minded observer would consider that there is a real possibility of bias. This well-established test had previously been set out by the House of Lords in the case of Porter v Magill [2001].
• The court held that this objective test applies equally to judges and arbitrators, and that the duty of impartiality is a core principle of arbitration.
• When considering any appearance of bias, the “observer” should take into account the context, including the particular features of international arbitration and specifically the private nature of arbitration.

In regard to the second question:

• The duty of disclosure is a legal duty in English law, and so an arbitrator is subject to this duty in respect of facts and circumstances that might reasonably give rise to justifiable doubts as to their impartiality.
• However, disclosure could create tensions between the arbitrator’s privacy and confidentiality obligations. Where the two obligations arise, disclosure can be made only with the consent of the parties to whom these obligations are owed. Regard should also be had to the relevant custom and practice, to determine whether consent is capable of being inferred.
• A failure to disclose relevant matters is something that the fair-minded and informed observer should consider when assessing if there is a genuine possibility of bias. The observer should also take account of the facts and circumstances at the time the arbitrator’s duty arose.

In conclusion: it was found that the arbitrator had breached his legal duty of disclosure by failing to disclose his two subsequent appointments to Halliburton. Upon each appointment, he should have disclosed:

1. the identity of the common party seeking the appointment (Chubb);
2. the nature of the appointment; and
3. that the appointment arose from the same matter as the matter referred by Halliburton.

The court did not, however, hold that the arbitrator should be removed, finding that:

1. there was a lack of clarity in English case law at the time concerning the legal duty of disclosure and whether it was needed;
2. timing was relevant to why the arbitrator disclosed one reference to Transocean, but did not disclose the other to Halliburton (with arbitrations two and three following arbitration one);
3. it was likely that there would be no overlap between the references, and so no likely benefit to Chubb;
4. there was no question of any secret financial benefit to the arbitrator; and
5. there was in the circumstances no basis to infer unconscious bias.

Implications

This case offers some clarification as to discrete points of English law, including on disclosure, and the duty of impartiality for arbitrators. In this case, the court recognised the practical realities of international arbitration, and avoided drawing a firm ‘line in the sand’ in relation to whether accepting appointments in multiple arbitrations will give rise to the appearance of bias. Instead, a contextualised approach was emphasised by the court, recognising the need to take account of the custom and practice of specialist arbitrators and of the particular field of arbitration concerned.

In some specialised fields, the non-disclosure of multiple appointments or appointments arising from the same subject matter is fairly common. In these instances, arbitrators and parties could act on the Supreme Court’s suggestion that they specify within their arbitration agreements when disclosure of such circumstances is unnecessary.

It is also of importance to note that while the Supreme Court upheld the High Court’s decision not to remove the arbitrator in this instance, this was partly on the basis of the uncertainty of then existing English law as to an arbitrator’s disclosure obligations. With that uncertainty having now been resolved, it could be that the court would not reach the same decision in the future. This further highlights the importance of careful consideration of timely disclosure.

 Postscript – Recent RICS Guidance

The Royal Institute of Chartered Surveyors (RICS) has recently published guidance relating to conflicts of interest for those acting as dispute resolvers. This guidance is due to become effective from February 2021. It applies to members of RICS and to firms regulated by RICS. The guidance identifies when certain types of ‘involvement’ might develop into a conflict of interest, with an appendix of examples to assist in this assessment.

The guidance can be found here.

With additional reporting by Natasha Wyllie.