Arbitrator’s Duty of Disclosure and Apparent Bias - “Justice must be seen to be done”

In its much awaited judgment in Halliburton v Chubb¹, the English Supreme Court has considered issues which go to the core of the perceived fairness and integrity of international arbitration proceedings. The issues are of such importance that five different entities intervened in the proceedings, including the LCIA, ICC and the Chartered Institute of Arbitrators.

The Supreme Court emphasised that an arbitrator “who is not in fact subject to any bias, must also not give the appearance of bias: justice must be seen to be done”. Accordingly, it is not just best practice for arbitrators to disclose circumstances that may give rise to an appearance of bias, but rather arbitrators have a legal duty under English law to do so. In this case, failure of the tribunal Chairman to disclose multiple appointments involving only one common party and overlapping subject matter was a breach of the arbitrator’s legal duty of disclosure. However, this failure did not give rise to an inference of apparent bias on the particular facts, and accordingly Halliburton’s appeal was dismissed.

The Supreme Court’s judgment provides important guidance on the scope of an arbitrator’s duty of disclosure, and the circumstances in which there may be an inference of apparent bias.

Background to the dispute

The dispute arose between Halliburton and Chubb (the "Parties") following the Deepwater Horizon catastrophe where an explosion had occurred at an oil rig in the Gulf of Mexico. Halliburton commenced an arbitration against Chubb (Arbitration 1), in which the High Court appointed the Chairman of the tribunal (the “Chairman”). The Chairman had disclosed, prior to his appointment, that he had previously been appointed in two other arbitrations involving Chubb and was involved in two pending references to which Chubb was a party.

Subsequently, the Chairman accepted a nomination by Chubb in an arbitration involving Transocean Holdings LLC (Transocean) (Arbitration 2) and an appointment in a third reference between Transocean and another insurer (Arbitration 3), but these subsequent appointments were not disclosed to Halliburton. These disputes, like Arbitration 1, dealt with coverage issues and liability claims arising from the Deepwater Horizon disaster.

When Halliburton learned about the Chairman’s subsequent appointments, it raised objections in relation to them. The Chairman accepted in correspondence that, with the benefit of hindsight, it would have been prudent to have disclosed to Halliburton the subsequent appointments. He also indicated that he was willing to resign, but only if both parties agreed, bearing in mind his duty to both parties to serve as arbitrator until the case was concluded.

As both parties did not agree to the Chairman’s resignation, Halliburton sought to remove the Chairman under section 24(1) of the Arbitration Act 1996 (the "Act"), which allows removal of an arbitrator in circumstances which "give rise to justifiable doubts as to his impartiality". Halliburton argued that the Chairman’s appointment in Arbitration 2 gave Chubb an unfair advantage of being able to make submissions to the Chairman in Arbitration 2, and consider his responses to those submissions, without Halliburton’s knowledge, and that the Chairman’s failure to disclose his appointment in Arbitration 2 to Halliburton gave rise to an inference of apparent bias.

High Court and Court of Appeal decisions

Halliburton's application was rejected both at first instance and in the Court of Appeal. The Court of Appeal confirmed that the test for apparent bias is an objective test, and requires an assessment of whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. While a failure to disclose related appointments was a relevant factor in applying the tests for apparent bias, it did not, in and of itself, give rise to an inference of apparent bias. In this case, the Court of Appeal found that the Chairman had breached his duty of disclosure under English law, but in the circumstances, particularly bearing in mind the inadvertent nature of the non-disclosure, there was no apparent bias.

The Supreme Court Decision

In a unanimous judgment, the Supreme Court also dismissed Halliburton’s appeal, and made some important findings regarding the test for apparent bias and an arbitrator’s duty of disclosure.

Multiple appointments and Apparent Bias

The Supreme Court endorsed impartiality as the “cardinal duty” of both judges and arbitrators, as reflected in s.1 of the Arbitration Act 1996. The Court further affirmed the objective test for apparent bias set out by the Court of Appeal, being whether a “fair-minded and informed observer” would conclude that there is a “real possibility of bias”.

The Court emphasised the importance of closely examining the custom and practice in arbitrations in the relevant field when assessing whether an objective observer would view multiple appointments as giving rise to an appearance of bias. In particular, the Court had regard to the submissions of arbitral institutions who intervened in the proceedings, including submissions that in certain types of arbitrations (such as ICC arbitrations) multiple appointments are relatively rare, and would more readily give rise to an appearance of bias, whereas in other types of specialist arbitrations multiple appointments are common. Accordingly, the Supreme Court concluded that the question of whether an inference of bias arises from the acceptance of multiple appointments will depend upon the circumstances of the particular arbitration.

The Duty of Disclosure

The Supreme Court found that where there are circumstances which might reasonably give rise to a conclusion by an objective observer that there was a real possibility of bias, the arbitrator is under a legal duty to disclose those circumstances. Accordingly, the duty of disclosure does not only arise where there are matters which would lead to such a conclusion.

The failure of an arbitrator to disclose such relevant facts is itself a factor which should be taken into account when assessing apparent bias. Depending upon the customs and practices of the arbitration in question, multiple appointments in overlapping arbitrations with only one common party may need to be disclosed to avoid an appearance of bias.

In finding that there is a legal duty of disclosure, rather than this simply reflecting best practice, the Supreme Court reasoned that as arbitrations are conducted privately, and usually under obligations of confidentiality, unless there is disclosure the parties may often be unaware of matters which could give rise to justifiable doubts about an arbitrator’s impartiality. This may deprive them of their entitlement to seek removal of an arbitrator by the Court under section 24 of the Arbitration Act.

This duty of disclosure will not however over-ride an arbitrator’s separate obligations under English law obligations of privacy and confidentiality in arbitrations. Accordingly, where the information which needs to be disclosed is subject to a duty of confidentiality, disclosure can only be made if the parties owed confidentiality obligations give their consent. Without consent, the arbitrator will have to decline the subsequent appointments. Such consent may be express, or may be inferred from the arbitration agreement. Importantly, the Supreme Court found that consent can be inferred from a party’s agreement to arbitrate under institutional rules which require disclosure by an arbitrator to the institution or the parties of information relating to other arbitrations.

While the Supreme Court, like the Court of Appeal, found that the Chairman had breached his duty to disclose the subsequent appointments, it did not consider that, in the particular circumstances of this case, such non-disclosure gave rise to an inference by a fair-minded and informed observer that there was a real possibility of bias.

Discussion

The Supreme Court’s judgment provides authoritative guidance on a number of key issues, including the test for apparent bias, and the extent to which arbitrators are required to disclose multiple references involving overlapping subject matter and only one common party.

A notable feature of the Supreme Court proceedings was that certain of the arbitral institutions who intervened in the proceedings, including the LCIA, the Chartered Institute of Arbitrators and the ICC Court, expressed concern that the Court of Appeal’s approach to the test for apparent bias was not sufficiently strict, and advocated for a requirement that arbitrators disclose multiple appointments by a common party in overlapping references on the basis that these circumstances could give rise to justifiable doubts as to an arbitrator’s impartiality.

In contrast, the London Maritime Arbitrators Association (LMAA) and Grain and Feed Trade Association (GAFTA), specialist arbitral associations in the fields of shipping and agricultural commodities respectively, noted that multiple appointments are common under their procedures where arbitrations arise out of the same incident or chain of contracts, and that disclosure of multiple appointments should not necessarily be required.

The Supreme Court’s emphasis on having due regard to arbitral practice when applying the objective test for apparent bias appears to allow for different standards to apply in relation to disclosure of multiple appointments, depending upon the field of arbitration in question. This creates a degree of uncertainty as to the duty of disclosure in any particular context, and will likely lead to further litigation of these issues. Notably, the Supreme Court commented that, rather than facing arguments as to proof of custom and practice of a duty of disclosure of multiple appointments in particular fields of arbitration, arbitral institutions could put the matter beyond doubt by an express statement in their institutional rules or guidance. It remains to be seen whether those institutions wishing to develop a more stringent duty of disclosure (potentially, for instance, with greater scope for an inference of bias where the duty is breached) may seek to clarify requirements by incorporating them into their institutional rules.

In any event, the Supreme Court’s judgment will undoubtedly lead arbitrators carefully to consider their duties of disclosure prior to accepting appointments in multiple references. They will also need to balance their duties of confidentiality to the parties in multiple references against their duty of disclosure, and assess whether they are at liberty to disclose multiple appointments or are instead compelled to decline subsequent appointments.

This important decision reinforces the English courts’ commitment to protecting the integrity and reputation of London-seated arbitrations, and confirms that arbitrators sitting in such proceedings will be held to a high standard of impartiality and a robust legal duty of disclosure.

¹Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) (Respondent) [2020] UKSC 48