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UK Supreme Court rules on arbitrators' duties of impartiality and disclosure
UK Supreme Court rules on arbitrators' duties of impartiality and disclosure
2 December 2020
Series
Blogs
2 December 2020
The UK Supreme Court’s (“UKSC”) recent judgment in Halliburton v Chubb [2020] UKSC 48 decided important issues relating to an arbitrator’s duty of impartiality, apparent bias and disclosure in English seated arbitrations.
Issues before the court
The case, in particular, dealt with issues about whether, and to what extent, an arbitrator may accept:
• Appointments in multiple references involving overlapping subject matter with one common party (“Multiple References”) without giving rise to an appearance of bias; and
• Multiple References without making disclosure to the party who is not the common party.
In dealing with these issues, however, the UKSC thoroughly examined the content, in English seated arbitrations, of the following matters summarised below.
Impartiality, apparent bias and disclosure
Impartiality and apparent bias
The UKSC’s starting point was that impartiality was the cardinal duty of an arbitrator and enshrined in the Arbitration Act 1996 (the "Act") [49]. That included the ability of the court to remove an arbitrator under s.24(1) of the Act where “…circumstances exist which give rise to justifiable doubts as to his impartiality." Accordingly, that engaged the common law test of apparent bias [50, 55].
In addressing an allegation of apparent bias, English courts will (i) apply an objective test in terms of whether a fair minded and informed observer (an “Observer”) would conclude there was a real possibility of bias; but will (ii) have regard to particular characteristics of international arbitration, such as its private nature and concept of party-appointed arbitrators [55-69].
Duty of disclosure
One way of avoiding an appearance of bias was through appropriate disclosure. In this regard, the UKSC held that an arbitrator is under a legal duty to disclose to an unaware party those matters which might reasonably give rise to justifiable doubts as to his or her impartiality (generally, this would only extend to things known to the arbitrator). This is important to allow that party to consider the disclosed circumstances, obtain necessary advice and decide whether to object or to act to resolve the problem [76-81,107-116].
An arbitrator was, however, equally subject to a duty of confidentiality, which could only be complied with if the relevant parties consented. That consent could be express or inferred from the arbitration agreement itself in the context of the custom and practice in the relevant field of arbitration. Examples of the latter included the use of institutional rules requiring disclosure [90], or the limited information that was disclosed in the present case where such a disclosure is custom and practice in a particular field [96-105].
Where an arbitrator failed to disclose information to which the duty of disclosure applied then that would be a factor in the Observer’s assessment as to whether the test of apparent bias was met.
Finally, whether there was a breach of the duty to disclose was to be measured at the time the duty arose, whilst whether a failure to do so gave rise a real possibility of bias is measured at the time of the removal hearing [117-123].
Circumstances warranting disclosure?
The UKSC then turned to consider: (i) whether Multiple References could lead the Observer to conclude there was an appearance of bias; (ii) whether there was a duty to disclose information about Multiple References; and (iii) whether, if that duty had been breached, there was a real possibility of bias.
As to Multiple References, the UKSC held that whether they gave rise to an appearance of bias depended on customs and practice in the relevant arbitration field. In specific fields, such as maritime, sports and commodities, multiple appointments are a part of the process, accepted by the participants. In such circumstances the appearance of bias may not arise. And, consequently, no duty of disclosure would follow.
By contrast, where disclosure is required in relation to Multiple References, the acceptance of appointments and a failure by the arbitrator to disclose the appointments taken in combination will be a factor for the Observer to take into account in assessing whether there was a real possibility of bias. [125-136]
Application to the facts
Based on the facts of the case, the UKSC held that the arbitrator was under a legal duty to disclose details of the Multiple References; the context of the case (Bermuda Form arbitrations) not being one where it could be said that Multiple References were established conduct. However, on the facts, the UKSC held that an Observer (at the time of the removal hearing) would nevertheless not have concluded that there was a real possibility of bias. This was for a number of reasons set out at [149]. Consequently, the UKSC dismissed the appeal to remove the arbitrator.
Comment and conclusion
The decision has largely been received positively by the UK arbitration community. It clarifies an arbitrator’s duty of disclosure and finds an adequate middle-ground for differing practices, in particular, in sectoral specific arbitrations. The case’s general importance to the eco-system of English arbitration was evidenced by the participation of the LCIA, ICC and CIAarb as interveners. Of course, where institutional rules have been chosen, their provisions as to standards for removal will often be first port of call (s.24(2) of the Act) but their interest was generally motivated by a desire to help English arbitration law continue to develop in line with international standards. In securing a somewhat stricter, and more nuanced, approach than that of the Court of Appeal, the decision helps to do that.
Click here for a copy of the judgment