06 June 2018
Challenges & Set Aside - Independence and Impartiality
English Court of Appeal considers grounds for removing an arbitrator
The English Court of Appeal in Halliburton Co v Chubb Bermuda Insurance Ltd (and others)  EWCA Civ 817 accepted that an arbitrator’s acceptance of multiple appointments concerning overlapping subject matter, without disclosure, did not provide grounds for his removal under s.24(1)(a) of the Arbitration Act 1996 (the “Act”).
S.24(1)(a) permits, in an arbitration with seat in England, an application to court to remove an arbitrator on the basis that “circumstances exist that give rise to justifiable doubts as to his impartiality”. In reaching its conclusion, the Court held that, while an arbitrator having “inside knowledge” from his or her role in overlapping arbitrations might be a legitimate concern, it would not give rise to the appearance of bias without “something more”. In addition, the Court held, the “something more” must be “something of substance”. Non-disclosure of matters which do not, on examination, give rise to “justifiable doubts” as to an arbitrator’s impartiality will not satisfy this requirement.
Halliburton is an oil field services company which, together with Transocean Holdings LLC, was engaged to assist with the drilling of a deep exploratory well in the BP-operated Macondo Prospect in the Gulf of Mexico. In April 2010 the well, which was in the process of being plugged, suffered a blow out, triggering an explosion on the Deepwater Horizon oil rig and the ensuing Deepwater Horizon oil spill. Both Halliburton and Transocean had purchased liability insurance from the first respondent, Chubb, and subsequently made claims under those policies in relation to the disaster. Chubb, however, declined to pay some of the claims brought.
The insurance contract between Halliburton and Chubb provided for disputes to be resolved through arbitration in London by a tribunal of three arbitrators, one appointed by each party and a third by the two arbitrators so chosen, with the High Court making the third appointment in the event of disagreement. Ultimately, the first two arbitrators were unable to agree the identity of the third and so an application was made to the High Court to select an appropriate individual. Prior to his appointment by the High Court, the third arbitrator disclosed that he had previously acted in arbitrations in which Chubb was a party, including appointments on behalf of Chubb. After his appointment in the instant dispute, however, the third arbitrator accepted an appointment in relation to a separate, but related, dispute between Transocean and Chubb. He also accepted an appointment as a substitute arbitrator in relation to another claim made by Transocean. These subsequent appointments were not disclosed to Halliburton.
In December 2016, Halliburton sought an order pursuant to s.24(1)(a) of the Act that the arbitrator be removed. Popplewell J rejected the contention that the arbitrator’s appointment in overlapping proceedings, was necessarily a cause for concern, noting that:
- it is “a regular feature of international arbitration in London that the same underlying subject matter [may give] rise to more than one claim and more than one arbitration”;
- “parties should be free to appoint their chosen arbitrator in accordance with the procedure agreed in the arbitration clause in fulfilment of the contractual bargain”;
- there is often a limited pool of arbitrators with expertise in certain fields, and it is “undesirable that parties should be unnecessarily constrained in their ability to draw on this pool if there are multiple arbitrations arising out of a single event or overlapping circumstances”;
- the principle of finality is served “if the tribunal is already familiar with the background to and uncontroversial aspects of the subject matter of the dispute”;
- in any event, “the duty to act independently and impartially involves arbitrators owing no allegiance to the party appointing them… once appointed they are entirely independent of their appointing party and bound to conduct and decide the case fairly and impartially” by reference to material available to both parties pursuant to s.33 of the Act; and
- accordingly, in view of the above and applying the common law test for apparent bias, the informed and fair-minded observer would not regard an arbitrator as unable to act impartially merely by virtue of the fact that he might be an arbitrator in overlapping proceedings.
Halliburton appealed to the Court of Appeal.
Court of Appeal decision
Can an arbitrator accept appointments in overlapping proceedings without thereby giving rise to an appearance of bias?
The Court of Appeal agreed with the findings of the Popplewell J, noting that s.24(1)(a) of the Act had previously been held to reflect the common law test for apparent bias and accordingly the judge had directed himself correctly as to the applicable law. The Court of Appeal stressed the objective nature of the test, referencing Leggatt J’s comments in Guidant LLC v Swiss Re International SE  EWHC 1201 that it is important to distinguish between (a) concern that might understandably be felt by a party to an arbitration (such as concern regarding an arbitrator in overlapping proceedings having potential inside knowledge) and (b) concern which might lead an informed and fair-minded observer to draw an inference of apparent bias.
The Court of Appeal referred to the decision of Dyson LJ in Capital Projects Ltd v Whitefriars City Estates Ltd.  1 WLR 723, where he stated that “the mere fact that the tribunal has previously decided the issue is not of itself sufficient to justify a conclusion of apparent bias. Something more is required. Judges are assumed to be trustworthy and to understand that they should approach every case with an open mind. The same applies to adjudicators, who are almost always professional persons… The mere fact that the tribunal has decided the issue before is therefore not enough for apparent bias. There needs to be something of substance to lead the fair-minded and informed observer to conclude that there is a real possibility that the tribunal will not bring an open mind and objective judgment to bear.”
When should an arbitrator disclose circumstances that may give rise to doubts as to his or her impartiality, and what are the consequences of failing to disclose them?
The Court of Appeal noted that, under English law, disclosure should be given of facts or circumstances which would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the arbitrator was biased. Disclosure should also be given where the position is borderline (although there is no need to disclose matters which there is no possibility of a fair-minded and informed person regarding as raising a possibility of bias).
If a disclosure that ought to have been made is not made, the Court of Appeal held, that will mean that the arbitrator will not have displayed the “badge of impartiality” which he should have done and this “must inevitably colour the thinking of the observer”. Non-disclosure is therefore a factor to be taken into account in considering the issue of apparent bias. Non-disclosure of a fact or circumstance which should have been disclosed, but does not, on examination, give rise to justifiable doubts as to the arbitrator’s impartiality, cannot, however, by itself justify an inference of apparent bias - something more is required.
Having considered the matter, the Court of Appeal concluded that the mere fact of an appointment in related proceedings with only one common party would not, in and of itself, justify an inference of apparent bias.
Did the arbitrator act appropriately in responding to Halliburton’s concerns?
When initially responding to Halliburton’s concerns, the arbitrator concerned offered to tender his resignation, provided that Chubb and Halliburton were both content to accept it. The court held that, “having reached the conclusion in good faith that Halliburton’s complaints did not require him to resign, in circumstances where Chubb wished him to remain in office, it was appropriate for him to continue to discharge his responsibilities until the parties agreed or the court ordered otherwise” and that in doing so “he did not align his interests with Chubb”.
The judgment provides helpful guidance as to the application of s.24(1)(a) of the Act and the extent to which an arbitrator may act in overlapping proceedings (with or without the same parties) without giving rise to concerns as to their impartiality. This is likely to be of particular relevance in circumstances where multiple overlapping arbitrations are ongoing in relation to a field where only a limited number arbitrators possess appropriate experience and expertise.