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

Overview

The UK Supreme Court (the UKSC) considered the circumstances in which an arbitrator in an international arbitration may appear to be biased, specifically in the context of appointment in multiple references concerning the same overlapping subject matter with only one common party.  

The UKSC, upholding the decision from the High Court and Court of Appeal: (i) expressly recognised that impartiality is a cardinal duty of an arbitrator; (ii) confirmed that the relevant test under English law to establish bias, of the "fair-minded and informed observer", is objective and applies equally to judges and arbitrators; and (iii) held that arbitrators have a legal duty to make disclosure of facts and circumstances which would or might reasonably give rise to the appearance of bias.   

The context

The case arose from the 2010 explosion and fire on the Deepwater Horizon oil rig in the Gulf of Mexico. BP was the lessee of the rig. Transocean was the owner of the rig and provided crew and drilling teams to BP. Halliburton Company (Halliburton) provided cementing and well monitoring services to BP.  Both Halliburton and Transocean had Bermuda Form liability insurance policies with Chubb Bermuda Insurance Ltd (Chubb), which provided for disputes to be resolved by ad hoc arbitration.  

Numerous claims were made against BP, Halliburton and Transocean in connection with the incident. Halliburton concluded a settlement of the claims against it, and then claimed on its liability insurance against Chubb. However, Chubb refused to pay Halliburton's claim.  Transocean made a similar claim against Chubb, which was also contested.  

Halliburton then commenced an arbitration against Chubb. Both parties selected their own arbitrator but were unable to agree on the appointment of a third arbitrator as chairman. This led to a contested hearing at which the court appointed Mr Rokison (R), who had been proposed by Chubb.  Subsequently and without Halliburton's knowledge, R accepted an arbitrator appointment in two separate references also arising from the Deepwater Horizon incident.  The first appointment was made by Chubb and related to Transocean's claim against Chubb. The second was a joint nomination by the parties involved in a claim by Transocean against another insurer.  

On discovering R's appointment in the later references, Halliburton applied to the court under section 24 of the Arbitration Act 1996 (the 1996 Act) to remove R as an arbitrator. That application was refused. The Court of Appeal dismissed the subsequent appeal, holding that, whilst R ought to have disclosed his proposed appointment in the subsequent references, an objective observer would not in the circumstances conclude that there was a real possibility R was biased. Halliburton then appealed to the UKSC.  

Judgment 

The UKSC was asked to consider: (i) whether and to what extent 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 (ii) whether and to what extent the arbitrator may do so without disclosure. 

In reaching its decision, the UKSC examined the scope of the duties of impartiality and disclosure in the context of international arbitration, and the test for apparent bias.  Ultimately, the UKSC dismissed Halliburton's appeal, finding that, as at the date of the hearing to remove R, the "fair-minded and informed observer" would not have concluded that circumstances existed that gave rise to justifiable doubts about R's impartiality.  

The duty of impartiality and the test for apparent bias

The UKSC observed that impartiality, as enshrined within section 33 of the 1996 Act, is a cardinal duty of both judges and arbitrators.  

It then held, considering the facts of this case, that there may be circumstances in which the acceptance of appointments in multiple overlapping claims with only one common party “might reasonably cause the objective observer to conclude that there is a real possibility of bias”. 

Turning to the relevant test, the UKSC noted that the objective common law test of the fair-minded and informed observer applies equally to judges and all arbitrators. There is no difference between the test in section 24(1)(a) of the 1996 Act, which speaks of the existence of circumstances "that give rise to justifiable doubts as to [the arbitrator's] impartiality" and the common law test.  

That said, the UKSC did highlight certain characteristics of arbitration which the English courts should have regard to when addressing an allegation of apparent bias in an English-seated arbitration. In particular, the features flowing from the private and confidential nature of international arbitration, which leads to less visibility for the parties on arbitrator appointments and to a higher onus being placed on frank disclosure. 

The duty of disclosure 

The UKSC clarified that under English law, disclosure is not merely good arbitral practice, but a legal duty, and a component of the arbitrator’s statutory obligations of fairness and impartiality.  This clarification represents an important development of English arbitration law.  An arbitrator must disclose facts and circumstances which would or might reasonably give rise to justifiable doubts as to his or her impartiality. A failure to disclose relevant matters is a factor for the fair minded and informed observer to take into account when assessing whether there is a real possibility of bias.  However, a failure to disclose is not in itself sufficient to lead to the removal of an arbitrator. 

As regards the tension between this duty and the confidentiality of arbitrations, the UKSC recognised that disclosure can only be made if the parties who are owed confidentiality obligations provide their consent. Such consent can be inferred from the parties' contract having regard to the customs and practices of arbitration in their field.  

On this basis, the UKSC held that: 

  • R was under a legal duty to disclose his subsequent appointments to Halliburton because the existence of potentially overlapping arbitration proceedings with only one common party was a circumstance which might reasonably give rise to the real possibility of bias.  R breached this duty by failing to make the relevant disclosure. 
  • However, this was not sufficient to lead to the removal of R as arbitrator.  The UKSC gave several fact-specific reasons for this, including the fact that there appeared to have been a lack of clarity in English case law as to whether there was a legal duty of disclosure and whether disclosure was needed; the time sequence of the three references; R's measured response to Halliburton's challenge; and there being “no question” of R having received any "secret financial benefit".  

Commentary 

This much awaited decision was handed down by the UKSC a year after it was heard. Whilst it provides a useful overview and clarification on the principles relating to apparent bias (and, in particular, confirms the existence of a legal duty to disclose), practitioners and parties to arbitrations are likely to be disappointed by the lack of clear practical guidance - particularly where the outcome is so fact-specific.  

In addition, some may wonder whether the decision will have any real impact on arbitrator practice in relation to bias and disclosure, because a breach of the legal duty to disclose was not met with a removal, or indeed any, substantive repercussions.   

Parties requiring additional certainty in relation to this question, may choose to turn instead to arbitrations under the auspices of arbitral institutions whose rules focus on the perceptions of the parties and expressly require arbitrators to disclose any facts or circumstances which might in the 'eyes' or 'mind' of the parties call into question the arbitrator's impartiality (such as the ICC rules (article 11) or the LCIA rules (article 5.4)).  Such provisions potentially lead to a stricter view on the interpretation of the arbitrator's obligation to disclose prior appointments, and therefore wider scope for challenging an arbitrator who breaches such an obligation.  

Key Contacts

Canelle Goldstein

Canelle Goldstein

Managing Associate, Commercial Disputes
London

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Tom Walmsley

Tom Walmsley

Associate, Litigation
London

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