UK Supreme Court considering impartiality of arbitrators and their duty of disclosure
The UK Supreme Court (the “UKSC”) recently heard arguments in Halliburton Company v Chubb Bermuda Insurance Ltd to decide the issue of when an arbitrator should make disclosure of circumstances which may give rise to justifiable doubts as to his impartiality. The case has attracted significant interest in the arbitration community. Here, we take a look at the background and the issues at stake.
Background
Following the Deepwater Horizon oil spill in the Gulf of Mexico, certain disputes arose between Halliburton and Chubb under a liability insurance policy. The arbitration clause under the insurance policy provided for arbitration with seat in London and, under its provisions, Halliburton and Chubb each appointed an arbitrator. However, they were unable to agree as to a third arbitrator and M was appointed to the tribunal by the English High Court pursuant to section 18 of the Arbitration Act, 1996 (the “Arbitration Act”). Halliburton then discovered that, subsequent to M’s appointment in its arbitration against Chubb, M had also been appointed as an arbitrator in two other insurance related arbitrations concerning the spill, including, in one, as Chubb’s appointee. These appointments were not disclosed to Halliburton by M or Chubb.
Halliburton then made an application under section 24 of the Arbitration Act. In respect of an arbitration seated in England, this section provides the English court with power to remove an arbitrator where, amongst other things, “circumstances exist which give rise to justifiable doubts as to his impartiality.” Halliburton argued that the appointment of the M in the related arbitrations, and his failure to disclose them, met this threshold.
The decisions below
At first instance ([2017] EWHC 137), the Commercial Court dismissed the application. On appeal ([2018] EWCA Civ 817), the Court of Appeal framed the questions as follows:
- 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 he may do so without disclosure.
The Court of Appeal noted that the duty of impartiality reflected the common law position for apparent bias. It reiterated the “objective” nature of the apparent bias test being: “whether the fair-minded and informed observer, having considered the facts, could conclude that there was a real possibility that the tribunal was biased”.
How did this relate to the questions before the Court of Appeal? In answering the first question, it accepted that inside information and knowledge may be a legitimate concern for parties in related arbitrations with a common arbitrator and only one common party, but that the mere act of an arbitrator accepting appointments in multiple references concerning the same or overlapping subject matter with only one common party did not of itself justify an inference of apparent bias. Relying on Dyson LJ’s observations in AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [2005] 1 All ER 723, the Court of Appeal stated that “something more is required” and that must be “something of substance”.
Accordingly, the next question became the issue of whether an arbitrator could fairly do this without disclosure. In that regard the Court of Appeal held that the current position under English law was that disclosure should be given of facts or circumstances known to the arbitrator which would or might give rise to justifiable doubts as to his impartiality. What would be the consequence of not disclosing such a fact? That would depend on the significance of such a non-disclosure in the context of the case. It would be a factor in applying the apparent bias test as it would invariably colour the thinking of the fair-minded observer, but it could not, in and of itself justify an inference of apparent bias.
Applying these legal principles to the facts of the case the Court of Appeal held that disclosure of the appointments should have been made by M. This was based on the fact that best practice in international commercial arbitration would have required disclosure of the other appointments (the court noted, for example, that under the IBA Guidelines on Conflicts of Interest, the case would have fallen within paragraph 3.1.5. of its “Orange List”) taken together with the clear possibility that other factors (such as the nature of the connections between the cases), might combine to give the fair-minded observer a basis for a reasonable apprehension of lack of impartiality.
As to whether, in the circumstances, that non-disclosure would lead that observer to a conclusion that there was a “real possibility” that M was biased, the Court of Appeal held not. In that respect it paid particular regard to factors such as the omission having been accidental, the very limited degree of overlap between the issues in the cases, that a mere oversight in such circumstances would not give rise to justifiable doubts as to impartiality; and that M's subsequent conduct since the non-disclosure was challenged could not justifiably be criticised.
Comment
Hailed as by some as being potentially the most significant arbitration decision by the UKSC since Jivraj v Hashwani, the outcome of the case is eagerly anticipated by the arbitration community as it may have significant implications on challenges to, and the requirement of disclosure by, arbitrators in English seated arbitrations.
In short, the UKSC has a unique opportunity to definitively state the English law position on important matters, not least of all, whether there exists an obligation on an arbitrator to disclose facts and circumstances that may give rise to justifiable doubts as to his impartiality in cases of multiple appointments in related arbitrations and if so, what the implications are of non-compliance. In that respect the extent to which the UKSC will be guided by prevailing practices in international commercial arbitration (as evidenced by the IBA Guidelines and other institutional arbitration rules) remains to be seen, and the interface between the strict requirements of those rules and the legal standard of s.24 Arbitration Act is one further interesting aspect of this case.
Whichever way the UKSC decides the case on its facts, the decision will no doubt provide arbitrators with valuable guidelines to regulate their conduct, and also help parties make clear decisions in relation to challenging arbitral appointments. The case was heard by the UKSC on 12-13 November 2019, and those interested can review a recording of the hearing on its website here.
Rebecca James would like to thank Sagar Gupta for his contribution in preparing this article.
