On Friday 27 November 2020, the UK Supreme Court handed down its long-awaited decision in Halliburton Company v. Chubb Bermuda Insurance Ltd [2020] UKSC 48, in which it confirmed that there is a duty under English law for arbitrators to disclose the acceptance of appointments in overlapping proceedings under certain circumstances. The decision was seen by many as critical to London's reputation as one of the key centres for international arbitration. The Supreme Court considered the duty of impartiality enshrined in the English Arbitration Act 1996 (the Act) and the test for apparent bias under English common law. Given the importance of the decision for the field of arbitration, the Supreme Court also heard submissions from interveners, including the arbitral institutions of the London Court of International Arbitration (the LCIA) and the International Court of Arbitration of the International Chamber of Commerce (the ICC).

Background

The Supreme Court proceedings related to three arbitral references concerning insurance disputes arising out of the 2010 Deepwater Horizon disaster in the Gulf of Mexico. That disaster led to numerous legal proceedings being commenced by the US government, corporates and individuals against BP Exploration and Production Inc. (the lessee of the rig), Transocean Holdings LLC (Transocean) (the owner of the rig), and Halliburton, a cementing and well-monitoring services company. Halliburton and Transocean reached a settlement regarding the claims brought by private parties. However, when Halliburton attempted to recover under its Bermuda Form insurance policy with Chubb, Chubb contended that the settlement was not a reasonable one and refused to consent to it, arguing this was a reasonable position for Chubb to take. Halliburton then initiated arbitration proceedings against Chubb, and Mr Kenneth Rokison QC was appointed as chair of the tribunal (by the English High Court as appointing authority).

Mr Rokison QC subsequently accepted appointments in two further references involving claims by Transocean (one against Chubb and one against a different insurer), again arising out of the Deepwater Horizon incident. Mr Rokison QC had disclosed his appointment in the Halliburton proceedings to Transocean, but did not disclose his appointments in the two Transocean references to Halliburton. Halliburton discovered the subsequent appointments in the Transocean references and raised its concerns. In response, Mr Rokison QC explained that he did not consider that the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines) obliged him to disclose the Transocean appointments to Halliburton, but accepted that it would have been prudent to do so and offered to resign as chair. Chubb, having listed Mr Rokison QC as their preferred candidate for chair, refused to agree to the resignation, resulting in Halliburton commencing proceedings under section 24(1)(a) of the Act to remove Mr Rokison QC as arbitrator.

The Supreme Court decision

Halliburton appealed to the Supreme Court following the rejection of its section 24 application by the High Court and the dismissal of its subsequent appeal by the Court of Appeal. It argued there was apparent unconscious bias on the part of Mr Rokison QC, also reflecting the concerns of some of the interveners that the Court of Appeal's judgment was out of step with internationally accepted standards and practices. The Supreme Court dismissed the appeal. It held Mr Rokison QC was under a legal duty to disclose his appointment in the Transocean proceedings to Halliburton, as the circumstances might reasonably have given rise to a real possibility of bias, and by not disclosing the appointment he had breached this duty. However, the court held that, at the time of the removal hearing, a fair-minded and informed observer would not have inferred from this failure to disclose that there was a real possibility of unconscious bias.

Lord Hodge's judgment (with which Lords Reed and Lloyd-Jones and Lady Black agreed) sets out a summary of the law on the issues of impartiality and apparent bias as it now stands. Section 33 of the Act sets out the duty of an arbitrator to act fairly and impartially, a duty that applies equally to arbitrators no matter the circumstances of their appointment (i.e. party-appointed, chair/sole arbitrator, appointed by agreement, institution- or court-appointed). The test for apparent bias was established in Porter v. Magill [2001] UKHL 67: objectively assessed, and having regard to the customs and practices of the relevant field of arbitration, would a fair-minded and informed observer conclude there is a real possibility of bias? The court considered an objective observer may well reach the conclusion that there is a real possibility of bias where an arbitrator accepts multiple appointments in overlapping arbitral proceedings with a common party. Where this is the case, the arbitrator in question has a legal duty to disclose those appointments, unless the parties to the arbitration have agreed otherwise.

If an arbitrator fails to make such a disclosure, the fair-minded and informed observer will consider this when assessing if there is a real possibility of bias. In doing so, the observer must consider the facts and circumstances as at and from the date when the duty to disclose arose. Notably, the Supreme Court also held that the fair-minded and informed observer must assess the real possibility of bias by reference to the facts and circumstances known at the date of the hearing to remove the arbitrator, not at the date of acceptance of the appointment. In the instant case, this meant that the court was able to consider the fact that Mr Rokison QC had made representations to Halliburton in correspondence prior to the removal hearing, explaining that his failure to disclose had been an oversight and that the counterparties and evidence to be heard in the overlapping references were sufficiently dissimilar so as to enable him to comply with his duties. This contributed to the Supreme Court's conclusion that the fair-minded and informed observer would not have inferred a real possibility of bias on Mr Rokison QC's part.

Practical implications

Firstly, it is now abundantly clear that arbitrators must give due consideration to their duty to disclose in a situation where they have been appointed in multiple overlapping references, perhaps with a common party. This is subject to the important caveat that, in some specialist fields of arbitration, such as commodities, shipping, trade and treaty reinsurance arbitrations, there are a limited number of arbitrators with the requisite experience to determine disputes and this will give rise to overlap in their appointments. If in doubt (and subject to any contrary agreement between the parties), the presumption should be to disclose, lest the fair-minded and informed observer conclude that these overlapping appointments give rise to a real possibility of bias. Parties involved in multiple related arbitral proceedings should therefore be wary about making repeat appointments, which could be subject to challenge. In particular, parties arbitrating under LCIA or ICC Rules would do well to consider the submissions made by those institutions – that appointing an arbitrator in multiple overlapping references with only one common party can, in and of itself, give rise to the appearance of bias or reasonable doubts as to impartiality.

Secondly, Halliburton v. Chubb also serves as a reminder to parties that there are inherent risks in leaving appointments up to the relevant appointing authority. Mr Rokison QC had originally been appointed in High Court proceedings in 2015 after the party-nominated arbitrators failed to agree on the appointment of the chair. Halliburton had opposed the appointment of all of Chubb's candidates, including Mr Rokison QC, yet the High Court still chose to appoint Mr Rokison QC against Halliburton's wishes. Once the appointment process is escalated to the level of the appointing authority, parties cannot guarantee that the outcome will be in their favour.

Thirdly, given the Supreme Court's decision that the time for assessing the existence of bias is at the time of the challenge hearing (not the date of acceptance of the appointment), it is worth bearing in mind the way in which an arbitrator responds to any challenge or objection. An arbitrator's conduct in the lead-up to a potential challenge hearing will be key to the decision of the court and may make any subsequent application for removal futile.

Finally, this case concerned a Bermuda Form arbitration, a form of ad hoc arbitration that is not subject to institutional rules such as those of the LCIA or the ICC. However, it is worth noting that the Supreme Court considered its confirmation of the existence of a legal duty of disclosure as consistent with best practice set out in the IBA Guidelines, the ICC and LCIA Rules. Such consistency is to be welcomed by international arbitrators, as it will reduce the risk of unwittingly breaching obligations set out in one set of rules, while striving to comply with parallel