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UK Case law: Halliburton Co v Chubb Bermuda Insurance Ltd.  UKSC 48
News & Insights 8 February 2021
Arbitration – Removal of arbitrator – Potential bias – Test for potential bias – Whether arbitrator should have disclosed other later appointments – Arbitration Act 1996, sections 24 and 33
This case clarifies issues in respect of an arbitrator’s duty of impartiality, the duty to give disclosure of other appointments and the extent to which an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party.
In this case, Ken Rokison QC (“KR”) was appointed by the English Commercial Court as the arbitrator. KR was actually Chubb’s preferred choice; he had previously acted in other arbitrations to which Chubb was a party and, after the disputed appointment, also accepted appointment in two further references involving claims against insurers also in connection with the Deepwater Horizon.
Halliburton applied to the court under section 24(1)(a) of the Arbitration Act to remove KR as arbitrator. Both the Commercial Court and the Court of Appeal dismissed Halliburton’s application.
In the Supreme Court, Halliburton argued in favour of a presumption that an arbitrator should never accept appointments in multiple references involving overlapping issues and only one common party without giving disclosure of these facts.
Chubb, in defence, argued that the relevant test to remove an arbitrator is whether there are justifiable doubts as to the arbitrator’s impartiality, not independence. Chubb argued that it is common in fields which require specific expertise, like shipping and commodities disputes, that arbitrators are appointed in multiple references.
The Supreme Court agreed with Chubb and dismissed Halliburton’s appeal. It was held that, while an arbitrator is under a legal duty to disclose such appointments and the expectations on disclosure are high, the correct test for apparent bias is whether “at the time of the hearing to remove” the circumstances would have led the fair-minded and informed observer to conclude that there was in fact a real possibility of bias.
In reaching its decision, the Supreme Court recognised that in certain specialist fields, as a result of relevant custom and practice, the expectation to disclose all earlier relevant appointments will not normally arise. Moreover, while a failure to disclose is a relevant factor, it is not sufficient to justify the removal of an arbitrator, especially when such failure was inadvertent.
Comment: Questions are asked on whether the Supreme Court’s decision might result in some arbitrators showing less concern for their duty to make disclosures of relevant information in English-seated arbitrations in future. The Supreme Court however explained that failure to comply with the duty of disclosure is not without sanction, in that such failure would amount to a breach of a strict legal obligation with the usual consequences associated with such a breach, e.g. an order to meet some or all of the costs of the unsuccessful challenger or bear the costs of his or her own defence – though it would have no bearing on the situation obtaining at the date of a removal hearing and the assessment to be carried out then.
Based on the normal practice in the shipping industry and under LMAA rules, it was accepted that overlapping appointments are common and this does not, in itself, give rise to any doubts about an arbitrator’s impartiality or create the need for an LMAA arbitrator to disclose similar appointments. There is, of course, nothing to stop an arbitrator erring on the side of caution and doing so anyway, while observing the duty of confidentiality.
Read the full commentary here.
Read the article on the Standard Club website here.