In this vein, several arbitral institutions’ rules impose what is known as the “gold standard”, requiring arbitrators to disclose interests which might lead not only to actual bias, but also to the appearance of bias. However, in the recent case of Halliburton v Chubb, the English Supreme Court has emphasised the need to balance disclosure and confidentiality, and has recognised the variety of custom and practice in relation to disclosure among various industries’ arbitral bodies.
The background
In one of the most well-known oil disasters in recent history, the Deepwater Horizon, a drilling rig in the Gulf of Mexico, exploded on 20 April 2010. BP leased the rig, while Halliburton provided cementing and well-monitoring services to BP. After the spill, Halliburton settled various claims for damages and then claimed on its insurance policy, held by Chubb. Chubb refused to pay out on the basis that Halliburton’s settlements were unreasonable, and Halliburton began an arbitration against Chubb in London. After various interlocutory disputes, the English Commercial Court appointed Mr Rokison QC (Chubb’s preferred chairperson) as chairperson of the arbitral tribunal.
Before he was appointed, Mr Rokison disclosed to both parties that he had previously acted, and currently was acting, in a number of arbitrations involving Chubb. He was also subsequently appointed as an arbitrator in two disputes arising out of the Deepwater Horizon spill, including one in which he was appointed by Chubb. Halliburton discovered this eighteen months later, and challenged Mr Rokison’s impartiality on the basis that he accepted the subsequent appointments, failed to disclose them, and failed to resign from the first arbitration, thereby creating the appearance of bias. But this argument was dismissed in both the High Court and the Court of Appeal.
The Supreme Court considered two points: whether 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 he or she is required to disclose this.
The test for apparent bias
The court confirmed the test for apparent bias as follows: whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. This test is similar to the test of ‘justifiable doubts’ adopted in the UNCITRAL Model Law and the IBA Guidelines on Conflicts of Interest in International Arbitration, although the court did not decide whether the tests were the same.
The requisite standard of disclosure
Halliburton argued in favour of English law applying a “gold standard” to the disclosure given by arbitrators. This “gold standard” is the presumption that an arbitrator should never accept appointments in multiple references involving overlapping issues and a common party without disclosing this. Interveners, such as the LCIA and ICC, supported the requirement for more robust disclosure.
Chubb, however, argued that the power to remove an arbitrator under the Arbitration Act (England) applies if there are justifiable doubts as to impartiality, but that the Act does not mention independence. Chubb argued that this was deliberate and recognises the requirement for arbitrators in specialist fields to have specific expertise. Arbitrators in insurance, maritime and commodity disputes regularly sit in multiple arbitrations and repeat appointments are seen as positive.
The court considered that as the latter two arbitrations were decided on preliminary issues, and the issues between the arbitrations were legally and factually distinct, the degree of overlap was very limited.
The court confirmed that the appearance of bias can be best avoided by promptly disclosing matters that arguably could be said to give rise to a real possibility of bias. Whether an arbitrator must disclose appointment to multiple references will depend on the customs and practices of the arbitrations in question.
The court held that there is a common law duty to disclose to the parties any issue which might lead a fair-minded and informed observer to conclude that there was a real possibility that the arbitrator was biased. However, it found no evidence that the parties had agreed to a general practice of non-disclosure. On the face of it, therefore, Mr Rokison should have disclosed his appointment in the later arbitrations to Halliburton, and his failure to do so had the potential to create unfairness, which Halliburton had no opportunity to address. This caused a breach of a legal duty which meant that a fair-minded and informed observer may well have concluded that there was a real possibility of bias.
However, the court then considered the circumstances known to the court at the date of the first instance hearing:
English case law lacked clarity as to whether there was a legal duty of disclosure;
The timing of the two sets of arbitrations may explain why Mr Rokison saw the need to disclose his appointment in the first arbitration to parties in the second, but did not see the need to tell Halliburton, in the first, about the second arbitrations;
His measured response to Halliburton’s challenge disclosed that it was likely that the second arbitrations would be resolved on preliminary issues and that there would not be any overlap in evidence or legal submissions with the first arbitration; and
There was no question of Mr Rokison having gained any secret financial benefit in this case.
Ultimately, however, it held that a fair-minded and informed observer would not conclude that there were circumstances which would give rise to justifiable doubts about Mr Rokison’s impartiality, finding in favour of Chubb and rejecting the universal application of the “gold standard” approach to disclosure.
What about confidentiality?
However, the legal duty to disclose does not override the other legal duty of privacy and confidentiality. This duty is of great importance to the parties, and the court acknowledged submissions by the London Maritime Arbitrators’ Association (LMAA) which noted that “any new general rule of English law requiring disclosure of confidential information against parties’ wishes runs a serious risk of undermining the attractiveness of London as the preeminent seat for maritime arbitration”. Thus the parties to a previous arbitration must give their consent for the arbitrator to disclose their appointment to parties in a later arbitration, and vice versa. If the consent of the party which has the benefit of the arbitrator’s obligation of confidentiality cannot be obtained, the arbitrator may need to decline the subsequent appointment.
Our comments
This judgment provides new guidance both on arbitrators’ duty to disclose any circumstances which could give rise to the appearance of bias, and on arbitrators’ duty of confidentiality. Both duties are important. However, the court’s decision not to impose a universal “gold standard” of disclosure enables a degree of realism about arbitrators’ duty to disclose where particular industries have a custom and practice to appoint arbitrators (often from a limited pool) to multiple, overlapping arbitrations. Such industries often include arbitrations under GAFTA (Grain and Feed Trade Association), LMAA, and ARIAS (UK) (Insurance and Reinsurance Arbitration Society) rules.
However, for greater clarity, arbitral institutions should incorporate into their rules the court’s guidance on the arbitrator’s duty of disclosure.
Notably, the Arbitration Act 1996 (New Zealand) provides under section 12 that potential arbitrators are required to disclose circumstances ‘likely to give rise to justifiable doubts as to [their] impartiality or independence”. That obligation continues from the time of appointment and throughout the arbitral proceedings. While this does not explicitly incorporate the “gold standard” test proposed by Halliburton, it imposes a more onerous duty of disclosure on arbitrators than that proposed by Chubb, which requires arbitrators to disclose in relation to their impartiality, but not their independence. It is therefore likely that Chubb’s argument would fail if made in reference to the Arbitration Act (New Zealand). If parties wish to exclude arbitrators’ duty under the Arbitration Act (New Zealand) to disclose in relation to their independence, this should be provided for in the arbitral agreement.
In the wake of this judgment, parties should consider amending the terms of their arbitration agreements to provide for:
Explicit consent to disclose to each party to the agreement all appointments related to that arbitration agreement;
A requirement to disclose related arbitrator appointments (at any stage of the proceedings);
Liability for costs incurred as a consequence of the arbitrator’s failure to disclose information which ought to have been disclosed; and
A prohibition on subsequent appointments in overlapping cases with a common party without the consent of all parties to the arbitration agreement.
By Hesketh Henry - Simon Cartwright and Lydia Sharpe