Clarity from the English Supreme Court on arbitral appointments in Halliburton v Chubb

Halliburton Company v Chubb Bermuda Insurance Ltd [27.11.2020]

After a year in the making, the English Supreme Court has unanimously dismissed Halliburton’s appeal holding that, as at the date of the hearing to remove the arbitrator, the fair-minded and informed observer would not have concluded that circumstances existed that gave rise to justifiable doubts as to the arbitrator’s impartiality. We look at the decision and its implications for the arbitral community.

Background

Full details on the case background and the decisions of the High Court and Court of Appeal can be found in our earlier article: 'Frequent flyers' and full disclosure: Awaiting the Supreme Court decision in Halliburton v Chubb.

The Supreme Court

The issues

The principal issues in the appeal included:

Issue 1: Whether and to what extent 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

Issue 2: Whether and to what extent an arbitrator may do so without disclosure.

The decision

The unanimous findings of five judges (Lord Hodge, Lord Reid, Lady Black, Lord Lloyd-Jones and Lady Arden) of the Supreme Court are summarised as follows:

  1. It is now clear that, absent contrary agreement, there is a legal duty of disclosure in English law, which is encompassed within the statutory duties of an arbitrator under section 33 of the Arbitration Act 1996 to act fairly and impartially. The duty arises from the outset and continues throughout the reference. English law recognises no distinction in the obligation of disclosure between a party-appointed arbitrator and a chair or umpire.
  2. The content of the duty is to disclose facts and circumstances known to the arbitrator (which may include a duty to make reasonable enquiries) that would or might give rise to justifiable doubts as to impartiality. This means facts or circumstances which would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility of bias. The test for impartiality is objective. In assessing whether an arbitrator has failed in a duty to make disclosure regard is had to the facts and circumstances as at and from the date when the duty arose, whereas the assessment as to whether there is a real possibility of bias is by reference to the facts and circumstances known at the date of the hearing to remove the arbitrator. A failure to make a relevant disclosure is a factor to take into account when assessing whether there is a real possibility of bias.
  3. The duty of disclosure does not override the duty of privacy and confidentiality of arbitrations in English law. Whether and to what extent an arbitrator may disclose the existence of a related arbitration without the express consent of the parties to that arbitration depends upon whether the information to be disclosed is subject the arbitrator’s obligation of privacy and confidentiality and, if so, whether the consent of the relevant party or parties can be inferred from their arbitration agreement having regard to the customs and practices of arbitration in their field. In the context of the Bermuda Form arbitration in question, it was acceptable in the absence of agreement to the contrary for an arbitrator to make disclosure of the existence of the arbitration, the identity of the common party, the nature of the subsequent appointment and that the subsequent appointment relates to the same incident, without obtaining the express consent of the relevant parties.
  4. Issue 1: Accepting the LCIA’s submissions, the Court agreed that 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. The judgment specifically noted the differences between the practices of the ICC and LCIA, as against GAFTA and LMAA arbitrations; the latter accepting that arbitrators will act in multiple appointments often arising out of the same events. The court also noted that there was evidence of a similar practice in re-insurance arbitrations.
  5. Issue 2: Where an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with one common party, this may need to be disclosed depending upon the customs and practices in the relevant field. Where disclosure is required and is not given, in combination this may give rise to an appearance of bias. In the context of Bermuda Form arbitrations, there was no custom or practice permitting an arbitrator to accept multiple appointments without making disclosure. Such custom or practice does appear to arise in GAFTA and LMAA arbitrations.

In light of the above findings, it was held that the arbitrator’s failure to disclose his appointment in the second reference was in breach of his legal duty of disclosure. However, having regard to the circumstances known at the date of the hearing for his removal, the fair-minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts as to the arbitrator’s impartiality. The relevant circumstances in this case included (i) the lack of clarity in English case law as to there being a legal duty of disclosure, (ii) the time sequence of the three references, (iii) the measured response of the arbitrator, (vi) there being no secret financial benefit and (v) there being no basis for inferring unconscious bias in the form of subconscious ill-will against Halliburton.

Whilst a unanimous decision, Lady Arden noted some qualifications, which included that:

  • Unless the arbitration is one where there is an accepted practice of dispensing with the need to obtain parties’ consent to further appointments, an arbitrator should proceed on the basis that a proposal to take on a further appointment involving a common party and overlapping subject matter is likely to require disclosure of a potential conflict of interest.
  • It was difficult to limit the commentary at Issue 2 on Bermuda Form arbitrations to such arbitrations and she considered that it should apply generally to other ad hoc arbitrations or arbitrations held under institutional rules that contain no relevant provisions.
  • In general, high-level disclosure about a proposed appointment in a further arbitration can be made without any breach of confidentiality by naming the common party (who can be assumed to have consented). There may be exceptional cases where the other parties can be identified without being named and in those circumstances their consent will be required to the making even of the high-level disclosure.

Commentary

The arbitral community has waited a full year for the Supreme Court’s decision, which provides careful analysis and clarity on the English legal duties of impartiality and disclosure balanced against the requirements of confidentiality and privacy in English arbitrations in the context of multiple appointments of the same arbitrator in different arbitrations involving the same or overlapping facts or subject matter.

As might have been expected, the decision is very much specific to the facts of the case. This is because the English court encourages a flexible approach to conflicts that takes into account the realities of international arbitration and the custom and practice in the relevant field of arbitration. One size does not fit all and what may be an appropriate approach to conflicts in re-insurance arbitrations, may not be an appropriate approach in shipping or other contexts.

What you might see going forward is a revision in arbitrator terms and conditions, and arbitration and other agreements, to ensure that there is clarity as to the disclosures that can be made and might be expected to be received.