Appointing the same arbitrator in different arbitral references is a common practice in certain industries or under the rules/practices of certain institutional arbitral bodies. In some industries (such as shipping and agricultural commodities trading) a commonality of arbitrators in separate references is considered the norm. It is accepted as a way of managing the risk of inconsistent findings in multiple arbitrations which arise out of the same events and/or which involve interconnected relationships through contractual strings or similar arrangements. However, such appointments are not the norm in arbitrations under other international arbitral bodies such as the London Court of International Arbitration (LCIA) and the International Court of Arbitration of the International Chamber of Commerce (ICC).
Thus, Halliburton v. Chubb has proven to be of significant interest as a result of the English Courts’ treatment of an application to remove an arbitrator who was appointed in three overlapping arbitrations with common parties.
On November 27, 2020, the UK Supreme Court brought a final determination of the application on appeal. It handed down a unanimous judgment on a number of important issues.1 The judgment (totalling 61 pages) helps to clarify arbitrators’ duties of disclosure, generally as well as in the common situation of multiple appointments in arbitrations arising out of the same or overlapping facts or subject matter.
Unusually, and given the significance of the issues in international arbitration, the Supreme Court permitted and considered written and oral submissions from five intervening parties: the LCIA, the ICC, the Chartered Institute of Arbitrators (CIArb), the Grain and Feed Trade Association (GAFTA), and the London Maritime Arbitrators Association (LMAA) (the Interveners).
What happened between Halliburton and Chubb and why did one of the arbitrators become subject to an application for his removal?
The dispute has its origins in the explosion and fire on the Deepwater Horizon drilling rig in April 2010 in the Gulf of Mexico. The rig was owned by Transocean Holdings LLC (Transocean), with BP Exploration and Production Inc (BP) as lessee. Halliburton was a sub-contractor engaged by BP. The incident gave rise to numerous claims against Transocean, BP, and Halliburton.
Halliburton settled the claims against it for approximately US$1.1 billion and claimed against Chubb Bermuda Insurance Ltd (Chubb) under a Bermuda Form liability policy. Chubb rejected Halliburton’s insurance claims on the basis that Halliburton’s settlement was not reasonable. Transocean also settled claims brought against it and Chubb likewise rejected Transocean’s claims under a Bermuda Form liability policy.
The Bermuda Form liability policy is a standard contract which contains an arbitration clause providing for disputes to be resolved by arbitration in London on an ad hoc basis by a tribunal of three arbitrators. One arbitrator is to be chosen and appointed by each party and a third arbitrator must be selected and appointed by the two arbitrators so chosen. The arbitration clause provides that the High Court in London will appoint the third arbitrator if the two party-appointed arbitrators are unable to reach an agreement on the choice of the third arbitrator.
In January 2015, Halliburton commenced arbitration against Chubb under the relevant insurance policy (the Halliburton Reference). Each party chose and appointed a first and second arbitrator. However the two party-appointed arbitrators were unable to agree on the third arbitrator. The English High Court was therefore called upon to appoint a third arbitrator and ultimately appointed Mr Kenneth Rokison QC (a name that had been proposed by Chubb) as the third arbitrator in June 2015. Prior to his appointment, Mr Rokison QC disclosed to Halliburton and to the High Court that he was acting as arbitrator in two pending references involving Chubb and had previously acted as an arbitrator in several arbitrations in which Chubb was a party.
Later the same year (in December 2015), Mr Rokison QC accepted an arbitral appointment by Chubb in an arbitration commenced by Transocean in respect of Chubb’s rejection of Transocean’s claim (the Second Reference). The following year (in August 2016), Mr Rokison QC accepted a further appointment in a claim by Transocean against a different insurer (the Third Reference). The claim in the Third Reference also arose out of the Deepwater Horizon incident.
Mr Rokison QC did not disclose his appointments in the Second Reference and the Third Reference to Halliburton, having already made disclosure of previous appointments to Halliburton and the High Court. In November 2016, Halliburton discovered Mr Rokison QC’s appointments in the Second Reference and the Third Reference and called for him to resign his appointment as the third arbitrator in the Halliburton Reference. Chubb disagreed, arguing that Mr Rokison QC’s resignation would result in wasted costs and delay. Halliburton therefore applied to the High Court for an order under section 24(1)(a) of the Arbitration Act 1996 (the Arbitration Act) that Mr Rokison QC be removed as an arbitrator from the tribunal in the Halliburton Reference.
The High Court (Mr Justice Popplewell) dismissed Halliburton’s application at first instance. Subsequently, the Court of Appeal upheld the decision of the High Court and likewise dismissed the application. The Court of Appeal held that Mr Rokison QC had been under a legal duty to disclose his appointments in the Second and Third References to Halliburton. However, it concluded that his failure to do so did not give rise to reasonable doubts as to his impartiality, such as to justify his removal.
Halliburton applied for and was granted permission to appeal to the Supreme Court.
Why did the Interveners intervene before the Supreme Court?
Halliburton’s appeal raised legal questions of wide and general importance in the context of English-seated arbitrations. The Supreme Court therefore allowed and received representations from the LCIA, the ICC, CIArb, GAFTA, and the LMAA.
The ICC, LCIA, and CIArb expressed concerns that the Court of Appeal’s decision was inconsistent with international arbitration norms such as the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines). In summary, their view was that arbitral appointments in multiple references concerning the same or overlapping facts or subject matter with only one common party can give rise to an appearance of bias. A failure to disclose such appointments may of itself also give rise to such an appearance of bias. The Supreme Court highlighted that while the IBA Guidelines set out good arbitral practice which is recognized internationally, the IBA Guidelines do not of themselves give rise to legal obligations or override national law or the arbitral rules chosen by the parties. In other words, they are not binding.
The LMAA and GAFTA adopted a different position. These two associations both argued that multiple appointments in arbitrations which feature common facts and/or subject matter is a very common feature in the fields of business they represent. Parties who choose to arbitrate in these fields (e.g., shipping and agricultural commodities trading) consider the appointment of the same arbitrator in overlapping references or “strings” to be normal. Such parties do not expect arbitrators to disclose the multiple appointments. The LMAA and GAFTA emphasized that the Court should respect party autonomy and that there was no need to impose an obligation of disclosure in their fields of operation.
What did the Supreme Court decide and why?
After hearing the parties, the Supreme Court dismissed Halliburton’s appeal and declined to order the removal of Mr Rokison QC. Although on the facts the Supreme Court held that Mr Rokison QC did have a duty to disclose all of his appointments (including those made in the Second Reference and the Third Reference), the Supreme Court concluded that as at the date of the hearing to remove Mr Rokison QC as arbitrator in the Halliburton Reference, the fair-minded and informed observer would not conclude that circumstances existed which gave rise to justifiable doubts as to Mr Rokison QC’s impartiality.
The legal principles applied and relied on by the Supreme Court are of wide significance. We touch upon them below.
Duty of impartiality: arbitrators must act fairly and impartially
The Supreme Court emphasized that the duty of impartiality is derived from and enshrined in section 33 of the Arbitration Act which requires a tribunal to “act fairly and impartially as between the parties.” This is and always has been a “cardinal duty” of an arbitrator. Under English law, the same high standards of fairness and impartiality apply to party-appointed arbitrators as to independently appointed arbitrators.
In considering an allegation of apparent bias in an English-seated arbitration, the Court will apply the objective test of whether a fair-minded and informed observer, having regard to the particular characteristics of international arbitration, would conclude that there was a real possibility that the tribunal was biased. Considerations in the application of this objective (rather than subjective) test include the private nature of arbitration, an arbitrator’s financial interest in obtaining further appointments (and thereby their remuneration) as arbitrator, and the fact that unlike a first instance court decision, an arbitrator is not subject to appeals on issues of fact and rarely on issues of law.
Duty of disclosure: this is a legal duty, not just best practice
The Supreme Court agreed with the Court of Appeal (and the submissions made by the ICC, LCIA, and CIArb) and confirmed that the duty of disclosure is a legal duty under English law rather than simply good practice. This duty underpins the integrity of English-seated arbitrations and arises from both an arbitrator’s statutory duty to act fairly and impartially under section 33 of the Arbitration Act and an implied term in the contract between the arbitrator and the parties that the arbitrator will so act. The duty of disclosure therefore requires an arbitrator to disclose matters which might reasonably give rise to justifiable doubts as to their impartiality.
The Supreme Court reiterated that an arbitrator’s obligation of impartiality continues throughout the arbitration. However, unlike the rules of many arbitral institutions, an arbitrator’s legal obligation of disclosure under English law is to be judged by reference to an objective (and not a subjective) test. In assessing whether an arbitrator has failed their duty to make disclosure, the fair-minded and informed observer will have regard to the facts and circumstances as at, and from, the time the duty to make disclosure arose. In contrast, when assessing whether there is a real possibility that an arbitrator is biased, the fair-minded and informed observer will have regard to the facts and circumstances known at the time of the hearing to remove the arbitrator in question. Importantly, an arbitrator’s failure to disclose relevant matters is a factor for the fair-minded and informed observer to take into consideration in assessing whether there is a real possibility of bias.
Whilst the legal duty of disclosure applies equally to English-seated arbitrations, including GAFTA and LMAA arbitrations, the Supreme Court’s decision suggests that it would not typically be necessary for arbitrators in such arbitrations to disclose common or overlapping appointments because the arbitral practices of GAFTA and the LMAA are such that multiple appointments are not generally perceived as matters raising doubts about an arbitrator’s impartiality.
The relationship between the duty of disclosure and the duty of privacy and confidentiality
The Supreme Court emphasized that an arbitrator’s duty of disclosure does not override their separate duty of privacy and confidentiality. Where information that needs to be disclosed is subject to a duty of privacy and confidentiality, an arbitrator can only make such disclosure with consent from the parties to whom the duty of confidentiality is owed. Such consent may be express or inferred from the arbitration agreement in the context of the custom and practice in the relevant field of arbitration.
Having considered submissions from the parties and the Interveners, the Supreme Court recognized that there was a variety of different practices in relation to the disclosure of multiple appointments. Importantly, the Supreme Court recognized that what is appropriate for arbitrations under institutional rules such as those of the ICC and LCIA, differed from the practice in GAFTA and LMAA arbitrations and their relevant industries.
The ICC, LCIA, and CIArb agreed that as a general rule, parties are taken to implicitly consent to the disclosure of limited information regarding their arbitrations. Unless the parties to an arbitration have agreed to prohibit disclosure, an arbitrator may therefore, without express consent, disclose information such as the existence of a current or a past arbitration involving a common party, the identity of the common party, whether the proposed appointment in the other reference was to be party-appointed or a nomination for appointment by a court or a third party, and the fact that the other reference arises from the same incident.
In contrast, and as explained above, parties to GAFTA and LMAA arbitrations are taken to accept that the involvement of arbitrators in multiple arbitrations does not call into question an arbitrator’s impartiality. In the absence of a requirement to disclose multiple appointments, the question of the relationship between the duty of disclosure and the duty of privacy and confidentiality does not arise.
Will an arbitrator’s acceptance of multiple appointments involving a common party and the same or overlapping facts or subject matter give rise to the appearance of bias?
In departing from the reasoning of the Court of Appeal, the Supreme Court confirmed that where an arbitrator accepts appointments in multiple references concerning the same or overlapping facts or subject matter with only one common party, this may, depending on the custom and practice in the relevant field of arbitration, give rise to an appearance of bias. This too is an objective (rather than a subjective) assessment. The fair-minded and informed observer will appreciate that there are differences between arbitrations (such as ICC and LCIA arbitrations) where there is an established expectation of disclosure of other relevant appointments and arbitrations (such as GAFTA and LMAA arbitrations) where, as a result of custom and practice in the industry, those expectations would not normally arise.
Can an arbitrator accept appointments in multiple arbitrations involving a common party and overlapping facts or subject matter without disclosure to the party who is not the common party?
The Supreme Court confirmed that whether an arbitrator must disclose their acceptance of appointments in multiple references concerning the same or overlapping facts or subject matter with one common party will depend on the custom and practice in the relevant field. If disclosure is required, the acceptance of the appointments and failure to disclose the appointments taken in combination may well give rise to the appearance of bias.
For Bermuda Form arbitrations, the Supreme Court considered that unlike in GAFTA and LMAA arbitrations, there is no established custom or practice by which parties accept that an arbitrator may take on multiple appointments without making disclosure. Such multiple appointments must therefore be disclosed in the context of Bermuda Form arbitrations, in the absence of agreement to the contrary between the parties to whom such disclosure would otherwise be made. In her concurring judgment, Lady Arden found it difficult to limit this principle to Bermuda Form arbitrations. She considered that this principle would extend to other ad hoc arbitrations or arbitrations held under institutional rules which do not have any relevant provisions.
Is this decision relevant to you?
The decision clearly affects you if you act as an arbitrator or if you are involved in arbitrations.
The decision is helpful in outlining the general legal principles and clarifies that an arbitrator has a legal duty to disclose matters which might reasonably give rise to justifiable doubts as to their impartiality. It is, however, also clear that there is no single test or formula to be applied in determining the precise scope and effect of the duty of disclosure. Thus for English-seated arbitrations, the approach and the requirements can and will require careful consideration of the custom and practice in the relevant field and industry, with any corresponding differences in the approach to be taken. What may work for shipping and commodities trading disputes may not apply with respect to construction and/or insurance disputes (and vice versa). It will certainly not apply where institutional rules impose (by agreement) different standards and requirements for disclosure to be made.
It remains to be seen how private parties and institutions seek to address the effects of the Supreme Court’s decision by enhancing and amending agreements and rules to stipulate with specificity what is required in terms of disclosure by arbitrators and to put any potential grey areas arising between practices in different fields and industries beyond doubt. In light of the Supreme Court recognizing the differences of the extent and scope of the right to disclose information which is subject to confidentiality, it is reasonable to expect modifications to the rules of some arbitral institutions and associations to clarify the extent of the matters which an arbitrator must and is permitted to disclose, while simultaneously discharging their duties of impartiality, privacy, and confidentiality.
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- Halliburton Company v. Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd)  UKSC 48.
Client Alert 2020-607