In a recent judgment, the UK Supreme Court has provided useful guidance on the law relating to allegations of arbitral bias and an arbitrator’s duty to disclose multiple appointments.
Several issues were raised:
- 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 thereby giving rise to an appearance of bias, and
- whether and to what extent the arbitrator may do so without disclosure. The second issue regarding the duty to disclose is particularly relevant because it raises concerns about an arbitrator’s impartiality and compliance with their obligation to act fairly.
Because this case involved matters of general importance the court permitted submissions from the International Court of Arbitration of the International Chamber of Commerce (“ICC”), the London Court of International Arbitration (“LCIA”), the Chartered Institute of Arbitrators (“CIArb”), the London Maritime Arbitrators Association (“LMAA”) and the Grain and Feed Trade Association (“GAFTA”) as Intervenors.
This case arose out of the Deepwater Horizon disaster in 2010. Transocean Holdings LLC (“Transocean”) leased the drilling rig Deepwater Horizon to BP Exploration and Production Inc., (“BP”) and contracted to provide crew and drilling teams. Halliburton Company (“Halliburton “) provided cementing and well monitoring services to BP.
In 2010 there was an explosion and fire on board the Deepwater Horizon that led to extensive damage and loss of life. As a result there were substantial claims leading to liability on the part of BP, Transocean and Halliburton. Halliburton claimed on its insurer Chubb Bermuda Insurance Ltd (“Chubb”) who resisted the claim. Transocean also claimed on its insurers who included Chubb.
Both Halliburton and Transocean had purchased insurance from Chubb on the Bermuda Form. This provided for the policy to be governed by New York law and for arbitration in London before a tribunal of three arbitrators, one appointed by each party and the third by the two arbitrators so chosen.
Halliburton initiated arbitration proceedings against Chubb (“Reference 1”) and each party appointed its own arbitrator. In the absence of agreement as to a third arbitrator application was made to the High Court in London which appointed Mr R.
Subsequently Mr R accepted appointment as arbitrator in another separate arbitration between Transocean and Chubb (“Reference 2”). In doing so he disclosed to Transocean his appointment in Reference 1 but did not make any disclosure to Halliburton of his proposed appointment in Reference 2, raising concerns about his compliance with the duty to disclose.
Halliburton later discovered the appointment of Mr R in Reference 2 and raised objections. Subsequently they issued proceedings in the High Court seeking an order that Mr R be removed as arbitrator. This application was pursuant to Section 24(1) of the 1996 Arbitration Act which provides:
“A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds:
(a) that circumstances exist that give rise to justifiable doubts as to his impartiality;”
This application was unsuccessful at first instance and also before the Court of Appeal. Following appeal this matter came before the UK Supreme Court.
The law – points arising
Regarding the law, the Supreme Court commented on various points relevant that have a wider relevance for future arbitrations.
(i) Duty of impartiality
The Court emphasised that impartiality is a core principle of arbitration law. The legal duty of impartiality is now enshrined within section 33 of the 1996 Arbitration Act. The court confirmed that the relevant test was:
“…whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”
In this the fair-minded and informed observer is “neither complacent nor unduly sensitive or suspicious”.
When considering an allegation of apparent bias the court was not concerned to prove actual bias but only how things appear objectively. In effect justice must not only be done but must be seen to be done.
In the context of the present case it was emphasised that there was no suggestion of actual bias on the part of Mr R and therefore no duty to disclose any bias.
So far no surprises but this led on to the question of how this might apply to party appointed arbitrators.
(ii) Role of the party appointed arbitrator
The court confirmed that under English law the duty of impartiality applies equally to party-appointed arbitrators and arbitrators appointed by the agreement of party-appointed arbitrators, by an arbitral institution, or by the court. The Court quoted with approval the statement on this subject made in the first instance judgment in this case:
“[T]he duty to act independently and impartially involves arbitrators owing no allegiance to the party appointing them. Once appointed they are entirely independent of their appointing party and bound to conduct and decide the case fairly and impartially. They are not in any sense … a representative of the appointing party or in some way responsible for protecting or promoting that party’s interests.”
Under English law the duties of all arbitrators are the same. This may be contrasted with the situation in other jurisdictions or arbitral systems where a party appointed arbitrator may be considered as having some continuing allegiance to the party appointing them.
In passing it is worth noting that the court characterised the acceptance of appointment of an arbitrator as giving rise to a contract between that arbitrator and with all the parties to the arbitration and not merely with the party making the appointment. Accordingly an arbitrator on accepting appointment comes under a duty to all the parties to the arbitration (and not merely the party making the appointment) to observe any duty to disclose throughout his or her appointment.
(iii) Assessment of bias.
The assessment of the fair-minded and informed observer of the possibility of bias is an objective assessment. The acceptance of appointment in multiple references concerning the same subject matter may lead to a conclusion that there is a real possibility of bias but not necessarily so. This may depend on the facts and the customs and practice of the relevant field of arbitration.
The Court recognised that it is an accepted feature of arbitrations in some fields e.g. under the rules of GAFTA and LMAA, that arbitrators may act in multiple arbitrations arising out of the same events. Parties that refer their disputes to such arbitrations are taken to accede to this practice and to accept that such involvement by their arbitrators does not call into question their fairness or impartiality.
(iv) Legal obligation to disclose
The court confirmed that an arbitrator was under a legal obligation to disclose circumstances (such as other arbitral appointments) that might reasonably give rise to a conclusion by the objective observer that there was a real possibility of bias. This legal duty of disclosure was a component of the arbitrator’s statutory duty to act fairly and impartially. Disclosure was a legal duty and not merely good arbitral practice.
(v) The relationship between disclosure and the duty of privacy and confidentiality
The legal duty to disclose does not override the arbitrator’s duty of privacy and confidentiality in English law. In general disclosure is subject to the consent of the party to whom the duty of confidentiality is owed. Such consent may be express or may be inferred from the arbitration agreement itself in the context of the custom and practice in the relevant field.
In arbitrations governed by institutional rules (e.g. ICC, LCIA and CIArb) that require disclosure to the institution or to the parties of matters which may include information about other arbitrations the incorporation of such rules into an arbitration provides a basis for the inferred consent of the parties to that arbitration to disclosure.
It is an accepted feature in some forms of arbitration (e.g. GAFTA and LMAA arbitrations as referred to above and also, possibly, in some other fields such as reinsurance) that arbitrators may act in multiple arbitrations and thus disclosure is not called for.
The court also observed that the duty of confidentiality was not understood to prohibit all forms of disclosure of the existence of a related arbitration in the absence of express consent. It noted the evidence of the ICC, LCIA and CIArb that there was a widespread practice in English seated arbitrations of making a confidential disclosure of involvement in an arbitration involving a common party without obtaining the express consent of the parties. The court took the view that the law should recognise the realities of accepted commercial and arbitral practice in some areas. However just how far this could be applied in the future would depend on the particular characteristics and customs of the arbitration field concerned.
(vi) Non disclosure to be taken into account when considering bias.
The failure of an arbitrator to make disclosure of relevant circumstances is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias. In cases in which disclosure is called for, the acceptance of appointments in multiple references and the failure by the arbitrator to disclose such appointments taken in combination might well give rise to the appearance of bias.
(vii) The time of the assessment of the need for disclosure
The fair-minded and informed observer in assessing whether an arbitrator has failed in a duty to make disclosure must have regard to the facts and circumstances as at and from the date when the duty arose and during the period in which the duty subsisted.
(viii) The time of assessment of the possibility of bias
The fair-minded and informed observer assesses whether there is a real possibility that an arbitrator is biased by reference to the facts and circumstances known at the date of the hearing to remove the arbitrator. Note that this date is different from the date when the disclosure duty might arise.
The court held whilst there was a duty to disclose the fair minded and informed observer, looking at the facts and circumstances which would be known to him or her at the date of the hearing in January 2017, would not conclude that there was a real possibility of bias in this case. Accordingly the appeal was dismissed and the application to remove Mr R as arbitrator failed.
 Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) (Respondent)  UKSC 48
 para 151
 per Lord Hope of Craighead in Porter v Magill  UKHL 67;  2 AC 357, para 103
 paras 49 and 63
 para 167
 paras 76- 81, 132-136