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In this post, Neil Newing and Olivia Flasch who both practice at Signature Litigation, comment upon the decision handed down by the UK Supreme Court in the matter of  Halliburton Company v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48.  They ask: is the decision a missed opportunity?

By now, few practitioners in the field of international arbitration will have missed the UK Supreme Court’s recent ruling in Halliburton Company v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48, in which it addressed an arbitrator’s duty to disclose matters which may give rise to doubts as to their impartiality.

The dispute arose out of the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. The appellant, Halliburton Company, was one of BP’s service providers. Following the oil spill, thousands of claims were brought against BP and some of its service providers, including the appellant. The appellant tried to claim part of the damages that had been agreed between the parties from its insurer, the respondent. When the respondent declined, the appellant commenced arbitration proceedings.

In 2016, it was discovered that the appointed Chairman of the arbitration, Kenneth Rokison QC, who had been the respondent’s first-choice candidate, had, without the appellant’s knowledge, accepted two subsequent appointments in arbitrations arising out of the same dispute; one of which involved the same respondent as in the first proceedings.

In December 2016, the appellant applied to the court to remove Mr Rokison as arbitrator for lack of impartiality. The appellant was unsuccessful both at first instance and before the Court of Appeal, and so appealed to the Supreme Court. On 27 November 2020, the Supreme Court unanimously dismissed the appeal, holding that the fair-minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts about Mr Rokison’s impartiality.

The Supreme Court’s decision offers some much-needed clarity as to the duty of disclosure under English law. First, it held that the duty of disclosure is a legal duty, forming part of an arbitrator’s statutory obligations of fairness and impartiality. A failure to disclose is therefore a breach of law. Second, it held that the legal duty of disclosure does not override the legal duty of privacy and confidentiality. Thus, where information that is confidential to the parties in one arbitration needs to be disclosed to the parties in a prospective arbitration, disclosure can only be made if the parties to whom confidentiality is owed give their consent. A lack of consent means that the arbitrator must refuse to act in the prospective arbitration.

What the Supreme Court did not do, however, was to apply that same level of clarity to the consequences of breaching the legal duty of disclosure. Instead, it created a distinction between the duty of disclosure and the appearance of bias and held that, when assessing whether an arbitrator has failed to disclose, one must look at the circumstances at the time the duty arose, but, when assessing whether there is a real possibility of bias as a result of that failure, one must look at the circumstances at the time of the hearing to remove the arbitrator.

Applying this reasoning, the Supreme Court found that Mr Rokison was under a legal duty to disclose his subsequent appointments to the appellant and did breach that legal duty. However, since at the time of the hearing to remove him, the law surrounding the duty of disclosure had not been clear, he had provided reasons as to why he had not done so, and it was not possible as a result to infer any ill-will or financial benefit Mr Rokison may have obtained from his subsequent appointments, there was no objective possibility of bias on Mr Rokison’s part.

The result of the Supreme Court’s decision is that there can now be no excuse for an arbitrator failing to disclose matters that might reasonably give rise to justifiable doubts as to their impartiality.  However, in drawing a distinction between the duty of disclosure and impartiality, the court has paved the way for more disputes as to whether, in any particular case, a failure to disclose creates an appearance of bias. This is all the more so given the court’s indication that a failure to disclose may be permitted in some circumstances, where for example multiple appointments may be customary in a particular industry.

Despite its potential, the outcome of Halliburton v Chubb constitutes a missed opportunity to bring the English court in line with international standards, which rarely allow for multiple appointments of arbitrators by one party or in relation to the same subject matter (absent the express consent of the parties).

In fact, certain aspects of the judgment, such as the focus on the objective observer, directly contradict the position of other international arbitration bodies such as the LCIA, which determines impartiality from a subjective point of view. In particular, whether there are any circumstances which are likely to give rise in the mind of any party to any justifiable doubts as to an arbitrator’s impartiality (art 5.4 of the LCIA Rules).

Clearly, in reaching its decision, the Supreme Court had to bear in mind the myriad different types of arbitration that take place in England and Wales, only a fraction of which are those that take place within the auspices of international institutions such as the LCIA. However, arguably, the Supreme Court could have done so, while still recognising international best practice, by suggesting that more industry-focused institutions (such as the LMAA or GAFTA, who both intervened in support of the respondent, Chubb), where such a practice is more commonly accepted, include express provision in their rules to allow subsequent appointments of arbitrators that parties could then choose to accept. Absent such rules, the parties would otherwise be protected.

Instead, the court has left it to the parties (or more often than not, the one party that is not familiar with the custom or practice) to figure out if, when and under what circumstances subsequent appointments will be allowed. The lack of clarity arguably goes against the expectations of such parties, Halliburton being a prime example, who are not familiar with what may be customary in certain fields of arbitration such as shipping, commodities or insurance, and therefore expect the court to uphold what they have actually agreed to.