Introduction
On 27 November 2020, the UK Supreme Court handed down the long-awaited decision in Halliburton v Chubb (“Halliburton Judgement”) regarding Halliburton’s appeal to challenge an arbitrator’s appointment on grounds of bias.
In the Halliburton Judgement, the Supreme Court unanimously upheld the lower court’s decision and dismissed Halliburton’s appeal. Parties should now be aware that even if an arbitrator has breached their duty of disclosure (under the English common law, IBA Guidelines and/or arbitration institutional rules), that will not necessarily lead to a conclusion of actual or apparent arbitrator bias. An objective test must be applied to determine whether there is arbitrator bias and the circumstances of the particular arbitration must also be considered, including the custom and practice in the relevant field of arbitration.
Background
In 2010 Halliburton made a claim under its insurance policy with Chubb, following an explosion on the Deepwater Horizon drilling rig (“Deepwater Horizon Incident”).
In January 2015, Halliburton commenced arbitration proceedings against Chubb following Chubb’s refusal to cover the settlement payment that Halliburton made in relation to the Deepwater Horizon Incident (“Halliburton Arbitration”). and Mr Kenneth Rokison QC was appointed to be the presiding arbitrator by the High Court.[1]
Later that year, Mr Rokison, without disclosing to Halliburton, accepted appointment as arbitrator in two other arbitrations relating to the Deepwater Horizon Incident: one was an arbitration between the owner of the drilling rig, Transocean Holdings LLC and Chubb concerning a similar liability claim (“Transocean Arbitration 1”); and the other was an arbitration between Transocean and other insurers. (“Transocean Arbitration 2”) (collectively referred to as “Transocean Arbitrations”).
In 2016, Halliburton discovered Mr Rokison’s appointment in the Transocean Arbitrations and wrote to Mr Rokison through its lawyers regarding potential conflict of interest in his appointment. After several rounds of correspondence with Mr Rokison, Halliburton applied to the Court to challenge his appointment in the Halliburton Arbitration on grounds of apparent bias.
Key issues considered
In determining whether to remove Mr Rokison as arbitrator, the Court considered:
- Whether and to what extent an arbitrator may accept multiple appointments with the same or overlapping subject matter with only one common party, without giving rise to an appearance of bias; and
- The circumstances in which an arbitrator is required to disclose matters which may give rise to justifiable doubts about his or her impartiality.
Objective Test Applied by the Supreme Court
In determining whether there was apparent bias, the Supreme Court considered “whether a fair-minded and informed observer (that is neither complacent nor unduly sensitive or suspicious), having considered the facts, would conclude that there was a real possibility that the tribunal was biased”. In the context of arbitration, the observer must consider specific factors, including:
- limited public oversight – arbitration is generally conducted in private;
- limited powers of review – arbitration is usually not subject to appeals;
- financial interest of arbitrators – arbitrators are privately paid and may have a financial interest in obtaining further appointments from one or both of the parties; and
- circumstances of the particular arbitration – the custom and practice in the relevant field of arbitration must be considered.
Decision of the Supreme Court
The Supreme Court dismissed Halliburton’s appeal and held that although Mr Rokison had breached his legal duty to disclose his appointment in Transocean Arbitration 1, his oversight would not lead a fair minded and informed observer to infer that there was a real possibility of unconscious bias on Mr Rokison’s part, because:
- Mr Rokison’s legal obligation to disclose his involvement in Transocean Arbitration 1 was not clear at the time that he accepted the appointment;
- The Transocean Arbitrations were likely to be able to be resolved by way of preliminary issue, which meant there would in fact be no overlapping evidence or submissions with the Halliburton Arbitration;
- Mr Rokison had offered to consider resigning from Transocean Arbitrations if they were not resolved by way of preliminary issue, and the Court considered that it was therefore unlikely that the Respondent would benefit as a result of the overlapping arbitrations;
- Mr Rokison had not received any secret financial benefit; and
- Mr Rokison’s response to the challenge had been courteous, temperate and fair and there was no evidence that he bore any animus towards the Appellant.
Practical implications
An arbitrator accepting appointments in multiple arbitrations concerning the same or overlapping subject matter with only one common party may give rise to an apprehension of bias, as there may be an inequality of knowledge between the common party and the non-common party. In those circumstances, an arbitrator ought to disclose the appointments, unless:
- the parties otherwise waive their right to such disclosure; or
- the custom and practice of the arbitrations in question do not require such disclosure.
Parties are reminded that even if there is breach of the duty to disclose, that itself is only a factor to consider and does not automatically equate to arbitrator bias.
Given that the Supreme Court has now clarified the Objective Test and the legal duty of disclosure for arbitrators, a stricter approach is likely to be adopted by judges regarding future decisions as to potential arbitrator bias. Those who wish to make an application to challenge an arbitrator’s appointment should do so with caution, and with regard to: the high threshold that must be satisfied; the circumstances of the particular arbitration; and the consequences should the application fail.
Parties may also wish to revisit their arbitration agreements and consider whether provisions that allow for related arbitrator appointments will best serve their interests.
[1] In the Halliburton Arbitration, Halliburton nominated Professor William W. Park as arbitrator, Chubb nominated Mr. John D. Dole as arbitrator. However, because the party-appointed arbitrators were not able to agree on the presiding arbitrator, the High Court ultimately appointed Mr Rokison, one of Chubb’s candidates as the presiding arbitrator.