The fact that an arbitrator has accepted appointments from the same party in multiple references concerning the same or overlapping subject matter does not, without more, give rise to an appearance of bias. However, as a matter of law and good practice in international arbitration, an arbitrator should disclose such appointments on an on-going basis – ie both before or after any new appointments by the same party: Halliburton v Chubb [2018] EWCA Civ 817, 19 April 2018.
In the aftermath of the 2010 explosion on the Deepwater Horizon oil rig, Halliburton (who had been providing services to the lessee of the rig) claimed under its liability insurance. Chubb, its insurer, refused to pay and Halliburton commenced arbitration. Halliburton and Chubb each appointed arbitrators (N and P, respectively) but couldn’t agree on the identity of the third arbitrator. Chubb’s preferred candidate, M, disclosed that he was currently appointed as arbitrator in two pending references involving Chubb and that he had previously acted as arbitrator in a number of arbitrations to which Chubb was a party, including appointments on behalf of Chubb.
Following a contested application to the English High Court, M was appointed as the third arbitrator. M then went on to accept two further appointments (one by Chubb) in references concerning the Deepwater Horizon incident. Neither appointment was disclosed to Halliburton, who sought an order, under s24(1)(a) Arbitration Act 1996 (Act), that M be removed as an arbitrator, arguing that there were justifiable doubts as to his impartiality.
Halliburton’s application was dismissed by Popplewell J. On appeal, Halliburton argued that Popplewell J had failed to properly consider the procedural unfairness which could arise where an arbitrator accepts appointments in overlapping references with only one common party. That common party could, Halliburton argued, acquire information and knowledge which would enable it to make submissions and adduce evidence which may influence the common arbitrator. The common party may also have the opportunity to assess the views of the common arbitrator in one arbitration and to tailor its submissions and evidence accordingly in the other. Given the confidential nature of arbitration, the fact that the common party possessed any such “inside information” would likely be unknown to the other party.
Duty of impartiality
The Court of Appeal stated that the starting point is that an arbitrator should be trusted to decide the case solely on the evidence and argument before him or her in the relevant reference. The fact that an arbitrator has previously decided the same or similar issues, or has been appointed in overlapping references (including those with only one common party) cannot – in isolation – justify a conclusion of apparent bias.
Although a lack of independence could give rise to justifiable doubts of impartiality, the court pointed out that this had not been included as a separate ground for removal under the Act as “there may well be situations in which parties desire their arbitrators to have familiarity with a specific field, rather than being entirely independent”.
Test for disclosure
Noting that the Act contains no disclosure requirements, the court concluded that an arbitrator should disclose facts or circumstances known to him or her which “would or might” give rise to justifiable doubts as to his or her impartiality, ie those which would or might lead a fair-minded and informed observer to conclude there was a real possibility of bias.
The court noted that many arbitration institutional rules, including the IBA Guidelines, the ICC Rules and the LCIA Rules, impose a stricter (subjective) test of disclosure “which may reflect good practice in international commercial arbitration”. However, the court found the authorities were clear that disclosure under English law required a “detached” approach, which should not be confused with the approach of the complainant party, based on the “more certain standards of an objective observer”.
The crucial point is that the arbitrator should consider what he or she should disclose based on prevailing circumstances at the relevant time. Although M had been at pains to point out that he had not learned any factual information that would not have been known to his coarbitrators in the Halliburton reference, and it did in fact transpire that there was little overlap between the cases, the court agreed with Halliburton that disclosure should not be decided with the benefit of hindsight: “[T]he question at the time that disclosure ought to have been contemplated is not whether the fact would have provided the basis for a reasonable apprehension of lack of impartiality, but whether it might have provided such a basis”.
What circumstances might give rise to justifiable doubts?
The court cautioned that an arbitrator should take care not to pre-emptively give disclosure where none is warranted. The court considered the House of Lords decision of Davidson v Scottish Ministers (No 2) [2005] 1 SC 7 in which their Lordships noted that disclosure of ‘apparent bias’ could cause difficulties as judges will generally disclose previous activities or associations irrespective of whether they could in fact form the basis of any reasonable apprehension of lack of impartiality. The court went on to examine Taylor v Lawrence [2003] QB 528, in which Lord Woolf similarly observed that unnecessary disclosure can undermine the litigant’s confidence in the judge, and Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, in which Lord Bingham said that a judge would be “as wrong to yield to a tenuous or frivolous objection as he would to ignore an objection of substance”.
Consequences of non-disclosure
Hamblen LJ, who gave the leading judgment, noted that if an arbitrator has failed to make disclosure in circumstances where he or she ought to have done, this will inevitably “colour the thinking of the observer” (citing the dicta of Lord Bingham in Davidson), and is therefore relevant when considering apparent bias.
However if, on examination, the fact or circumstance which ought to have been disclosed does not give rise to justifiable doubts as to the arbitrator’s impartiality then that non-disclosure cannot, in and of itself, justify an inference of apparent bias. Although disclosure would have been desirable (and would no doubt have alleviated Halliburton’s concerns over M’s acceptance of a closely related appointment also involving Chubb), there was no apparent bias in the absence of a substantive contributing factor.
Should have disclosed, but no bias
Although M ought (as a matter of law, and of good practice in international arbitration) to have disclosed his appointments in the later overlapping references, Sir Geoffrey Vos (Chancellor of the High Court), Lord Justice Simon and Lord Justice Hamblen held him blameless for his “innocent” oversight and unanimously dismissed Halliburton’s appeal, upholding Popplewell J’s finding that an informed and fair-minded observer would not conclude that there was a real possibility that M was biased.
Comment
The Halliburton decision will no doubt come as something of a relief to arbitrators and those who appoint them alike. As noted by the court, the pool of suitably qualified and experienced arbitrators from which a party may select its nominated arbitrator is often small, and if arbitrators are unnecessarily precluded from accepting overlapping appointments this could have the unintended consequence of preventing a party from nominating its desired arbitrator if multiple arbitrations had arisen out of an event, or overlapping circumstances. In the absence of “something more”, arbitrators (and judges) should be presumed to be independent and capable of determining each reference on the facts and evidence before them.
It is worth noting that the court’s decision was influenced by the fact that Halliburton’s concerns had been fully ventilated before any substantive arbitration commenced. Contrary to Halliburton’s suggestion that he might have been unconsciously influenced by his later appointments, the judges felt it likely that M would have been actively conscious to take steps to ensure nothing in those references influenced his approach in the arbitration brought by Halliburton against Chubb.
