When parties agree in a contract that any disputes arising from that contract will be referred to arbitration, they hope that any tribunal appointed will be free of bias and approach the matter fairly. One of the long-running debates, particularly in specialist fields (eg, the London Maritime Arbitrator's Association (LMAA – for maritime disputes) and The Grain and Feed Trade Association (GAFTA – for commodity disputes)), where there has traditionally been a limited pool of arbitrators, is to what extent arbitrators must disclose previous relationships with the parties to an arbitration or their lawyers.
In a recent Supreme Court judgment, the court examined the requirement that an arbitrator must disclose related or linked appointments.(1) This decision is likely to fundamentally change the way in which shipowners, charterers and traders approach the appointment of arbitrators in the future.
For parties participating in London-seated arbitrations (of any format) going forward, the judgment will likely lead to increased disclosure by arbitrators and greater transparency of their relationships with the parties and their lawyers. Although how this will translate to LMAA and GAFTA arbitrations is unclear.
This is a (largely) welcome development and continues to build on the existing strength of London-seated arbitration.
The 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.
The appellants (Halliburton) entered into a Bermuda Form liability policy with ACE Bermuda Insurance Ltd, which is now called Chubb Bermuda Insurance Ltd, in 1992 and the policy was renewed annually. Following extensive litigation in the United States, Halliburton settled various claims, paying approximately $1.1 billion.
Halliburton claimed against Chubb under the policy but Chubb refused to pay Halliburton's claim. Halliburton invoked the policy arbitration clause and each party nominated an arbitrator. The nominated arbitrators were unable to agree on the third arbitrator as chair so in accordance with the arbitration clause the court appointed Mr Rokison QC (proposed by Chubb) as the third arbitrator (the first reference).
Following Rokison's appointment in the first reference, he went on to accept a further two appointments (further references) closely connected (involving Chubb and on similar issues) with the first reference. Halliburton discovered these appointments in November 2016 and, during the course of correspondence with Halliburton's lawyers, Rokison (while reiterating his impartiality) pragmatically offered to resign if both parties could agree on a replacement chair, but in the absence of such an agreement he would continue as appointed so as to avoid breaching his other statutory duties (as arbitrator) to the parties. The parties could not agree to a replacement chair and in December 2016 Halliburton sought an order from the High Court under the Arbitration Act 1996 that Rokison be removed as an arbitrator.
That application was dismissed and Halliburton appealed to the Court of Appeal.
The Court of Appeal decided that while the existence of appointments in such related arbitrations could cause the party which was not involved in the related arbitrations to be concerned, the appointment of a common arbitrator did not on its own justify the inference of apparent bias; something of more substance was required.
The second issue which the Court of Appeal addressed was to identify the circumstances in which an arbitrator should make disclosure of matters which may give rise to justifiable doubts as to their impartiality.
The Court of Appeal held that Rokison should (as a matter of law) have made a disclosure to Halliburton at the time of his appointments in the further references. Nonetheless, the court agreed that a fair-minded and informed observer, having considered the facts, would not conclude that there was a real possibility that Rokison was biased. Halliburton appealed the decision to the Supreme Court.
The principal issues raised in the appeal were:
- 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 Supreme Court unanimously dismissed Halliburton's appeal and held that:
- in relation to the first issue, if an arbitrator accepts appointments in several references concerning similar or overlapping subject matter with only one common party, this may give rise to an appearance of bias;
- as to the second issue, unless the parties to the arbitration otherwise agree, arbitrators have a legal duty to make disclosure of facts and circumstances which would, or might reasonably, give rise to the appearance of bias, although such a duty of disclosure is dependent on the customs and practice in the relevant field;
- as a matter of English law (and recognising the differences in arbitration formats), and in the absence of an agreement to the contrary between the parties, multiple (related) appointments should be disclosed; and
- therefore, a fair-minded and informed observer (the relevant objective test) would not have inferred that there was a real possibility of unconscious bias on Rokison's failure to disclose the further appointments as:
- the position on arbitrator disclosure under English law was unclear at the relevant times;
- the time sequences of the three references may have explained why Rokison had disclosed the first reference in the further references but not the other way around; and
- the further references would likely have been resolved by a preliminary issue hearing such that there would be no overlap in evidence or legal submissions with the first reference.
The Supreme Court decision seeks to balance the need to set an appropriate threshold of disclosure to protect against arbitrator bias (or the appearance of bias), without encouraging unnecessary intervention in arbitral processes. While this decision clarifies the legal position, questions remain regarding how the law will be applied in practice going forward.
In particular, it remains to be seen how the clarification of the law will be addressed in the context of repeat appointment forums such as the LMAA and GAFTA, which often draw on a relatively small pool of arbitrators and where it is common for the same arbitrators to be repeatedly appointed by the same company or group of companies.
All parties to future arbitrations should consider their approaches to requesting arbitrator disclosure prior to appointment, to avoid issues such as here. Hopefully, following this decision, all arbitration formats and arbitrators will take active steps to both:
- record appointments; and
- use that data to make appropriate disclosures.
Ultimately, and despite some continuing concerns about the manner in which arbitrator disclosure should be sought and provided, this judgment should further strengthen international confidence in London-seated arbitrations by:
- restating the core principles of arbitrator impartiality;
- recognising the importance of confidentiality in arbitration proceedings, but also how this can be balanced with arbitrator disclosure obligations; and
- reiterating that parties should have confidence in the ability to seek appropriate High Court intervention in appropriate circumstances.
Endnotes
(1) Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48.
