Halliburton v Chubb: The final say on an arbitrator’s duty of disclosure

An arbitrator’s independence and impartiality are among the foundations of arbitration. The recent Supreme Court case of Halliburton v Chubb clarifies the English law position on:

• the arbitrator’s duty to disclose their appointments and involvement in other arbitrations;
• whether and when disclosure is needed; and
• whether the test under section 24 of the UK Arbitration Act (application to remove an arbitrator due to doubts as to impartiality) is the same as the common law test of bias.

The case is of significance for the wider international arbitration community and a significant number of arbitral institutions, namely the LCIA, ICC, CIArb, LMAA and GAFTA, were given permission by the Court to intervene given the importance of the issue.

Background

This case concerned an arbitration under a Bermuda Form liability policy which arose out of the damage caused by the explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010. That disaster gave rise to several arbitrations between insured parties and insurers.

The Bermuda Form policy contained a standard arbitration clause which provided for arbitration in London by a tribunal of three arbitrators, one appointed by each party and the third appointed by the two arbitrators. If the party-appointed arbitrators could not agree on the appointment of the third arbitrator, the High Court in London was to make the appointment.

Halliburton and Chubb each appointed one arbitrator. The appointed arbitrators could not agree on the appointment of the third arbitrator as chairman. As a result, the High Court appointed Mr Rokison, who was one of the arbitrators whom Chubb had proposed to the court, as the third arbitrator. Halliburton did not appeal against that order.

Before Mr Rokison’s appointment, he disclosed to Halliburton and the court that he had previously acted as an arbitrator in several arbitrations in which Chubb was a party, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved.

However, following his appointment as chair, Mr Rokison accepted two further appointments as an arbitrator in relation to claims arising out of the Deepwater Horizon disaster. In one of those arbitrations Mr Rokison was appointed by Chubb.  In the other arbitration, to which neither Chubb nor Halliburton were parties, Mr Rokison was appointed as a substitute arbitrator.

Mr Rokison did not disclose either of these appointments to Halliburton.  When Halliburton discovered these appointments, it brought a claim under section 24(1) Arbitration Act 1996, requesting that the court remove Mr Rokison due to justifiable doubts as to his impartiality and apparent bias.  The omission of these disclosures was central to Halliburton’s claim.

The Supreme Court upheld the decisions of both the High Court and Court of Appeal finding there was no apparent bias and therefore no grounds for removing the arbitrator. However, it also found that Mr Rokison had breached his legal duty of disclosure.

We consider some of the key points made in the judgment and the guidance provided by the Supreme Court below.

Duty of impartiality

Impartiality is a “cardinal duty” of an arbitrator.  The Supreme Court reaffirmed the common law test for apparent bias as “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased” (Porter v Magill [2001]). This was the same test under section 24 of the Arbitration Act i.e. where there is an application to remove an adjudicator in circumstances which give rise to justifiable doubts as to impartiality.

The Supreme Court held that the test should also have regard to the characteristics of international arbitration which highlights the importance of proper disclosure and transparency of arbitrations as a means of maintaining the integrity of international arbitration. 

Duty of Disclosure

The Supreme Court held that there is a legal duty of disclosure in English law arising as part of an arbitrator’s duty to act fairly and impartially under section 33 of the Arbitration Act. This is an objective test and an arbitrator is under a duty to disclose facts and circumstances which would or might reasonably give rise to the appearance of bias.

Although there is a seeming tension between an arbitrator’s duty to disclose and their obligation of privacy and confidentiality, the Supreme Court considered that as a general rule, the duty of privacy and confidentiality would not preclude disclosure of the existence of a related arbitration in the absence of express consent. However, the duty does not give an arbitrator “carte blanche” to disclose whatever he thinks is necessary to parties not a party to the arbitration.

If an arbitrator needs to disclose additional details, other than the name of the common party or that the arbitration relates to the same facts, the arbitrator must obtain the consent of the parties to the arbitration about which he or she is making a disclosure.

Does a failure to make a disclosure demonstrate a lack of impartiality?

The Supreme Court held that failure to disclose multiple references in the same subject matter or appointments by the same party is capable of demonstrating “a lack of regard to the interests of the non-common party” and may in certain circumstances constitute apparent bias.

The time of the assessment of the need for disclosure

A duty of disclosure is a continuing duty. When assessing whether there should have been a disclosure, a court must have regard to the circumstances at the time when the arbitrator acquired the relevant knowledge of those circumstances. The Court said when determining whether there was a need for disclosure, the question should not be “answered retrospectively by reference to matters known to the fair-minded and informed observer only at a later date.”   

The time of assessment of the possibility of bias

The Supreme Court confirmed that the correct time to apply the test for apparent bias was by asking whether, at the time of the hearing for an application to remove an arbitrator, " the circumstances would have led the fair-minded and informed observer to conclude that there was in fact a real possibility of bias.”

This article was written by Sara Cunningham. For more information, please contact Sara on +44(0)207427 6612 or at sara.cunningham@crsblaw.com.