Halliburton v. Chubb Bermuda Insurance Ltd.: Arbitrator’s failure to disclose appointments in overlapping arbitrations to the non-common party may amount to apparent bias
In November 2020, the Supreme Court handed down a seminal judgement which brought into focus some of the cardinal features of English arbitration practice. In Halliburton Company v. Chubb Bermuda Insurance Ltd  UKSC 48, the Supreme Court emphasised that “Impartiality has always been a cardinal duty of a judge and an arbitrator” and decided that an arbitrator was under a legal duty to disclose his appointments in other arbitrations to the non-common party “because at the time of that appointment the existence of potentially overlapping arbitrations with only one common party was a circumstance which might reasonably give rise to the real possibility of bias” (see paragraph 145 of the judgement).
The issue is of immense significance because parties may choose to appoint familiar arbitrators whose relationship with the appointing party may not be known to the other party in the arbitration. At times, there can be multiple appointments of an arbitrator by one common party in several overlapping arbitrations with several other parties, all arising from a single major incident. On those occasions the uncommon party involved in an arbitration may be deliberating under a handicap. He or she will have lesser opportunities to be able to communicate with the arbitrator and a lesser likelihood of being able to see the arbitrator’s responses and decisions on pertinent issues. Familiarity from previous appointments is likely to generate a sense of good will also for the common party. The Supreme Court have now decided that excepting certain sectors of arbitrations where it is the custom and practice to place disputes for arbitrations before common arbitrators (like before the LMAA or Gafta), an arbitrator has a legal duty to disclose that he or she has accepted multiple appointments concerning the same subject matter with one common party.
In this case, Halliburton’s application to remove the arbitrator under s 24(1)(a) of the Arbitration Act 1996 failed. The Supreme Court decided that the use of the present tense (‘that circumstances exist that give rise to justifiable doubts as to his impartiality’) in S24(1)(a) directs the court to assess the circumstances as they exist as at the date of the hearing of the application for removal. In this case, by the date of the hearing of the application in January 2017, the arbitrator’s explanation for his failure to disclose was accepted as genuine by Halliburton. A fair-minded and informed observer, the Supreme Court decided, would not infer from these facts that there was a real possibility of unconscious bias on the arbitrator’s part (see paragraph 149 of the judgement). The facts of this case however provide a good example of the circumstances in which an arbitrator comes under a duty to make a disclosure and how choosing the proper timing of any application for removal may be of critical importance for its success.
The facts behind the dispute
BP leased Deepwater Horizon, an ultra-deepwater offshore drilling rig from its owner Transocean to drill oil and gas wells. In April 2010, while the drilling rig was operating in Macondo prospect, off the southeast coast of Louisiana, in the Gulf of Mexico, a massive blow out caused an explosion killing eleven crewmen and perhaps the biggest marine oil spillage in history. Halliburton provided cementing and well-monitoring services to BP in relation to temporary abandonment and plugging of the oil wells. On 4th September 2014, the Federal Court of Eastern District of Louisiana apportioned the blame for the giant mishap as follows: BP - 67%, Transocean - 30% and Halliburton - 3%. Both Halliburton and Transocean had insured their risks on liability under separate Chubb Bermuda Form liability policies. Both Halliburton and Transocean made separate claims under the insurance policies and these claims were refused by Chubb. Haliburton invoked the arbitration clause in the policy and commenced arbitration against Chubb by appointing its arbitrator on 27 January 2015. Chubb appointed its arbitrator but the two nominated arbitrators failed to agree on the appointment of the third arbitrator. This was later achieved when the High Court appointed Mr. Rokison as the third arbitrator on 12 June 2015. Mr. Rokison had been previously proposed for the appointment by Chubb. Before accepting the appointment, Mr. Rokison disclosed to Halliburton that he had previously acted as an arbitrator in several arbitrations in which Chubb was a party and had also been appointed as an arbitrator by Chubb. He also advised that he was at the time appointed as arbitrator in two other arbitrations in which Chubb was involved.
In December 2015, Mr. Rokison accepted appointment as an arbitrator by Chubb in another arbitration commenced by Transocean, arising out of the same incident. The appointment was made by the same firm of solicitors who were acting for Chubb in both of these arbitrations. Mr. Rokison did not inform Haliburton about accepting this appointment from Chubb, either before or after accepting this appointment. This non-disclosure became the prime reason for Halliburton’s eventual application to remove Mr. Rokison as an arbitrator for objective appearance of bias.
Halliburton learnt about Mr. Rokison’s appointment by Chubb as an arbitrator in the Transocean-Chubb arbitration in November 2016. Its solicitors wrote to Mr. Rokison asking for an explanation of the non-disclosure. Mr. Rokison responded on 5 December 2016 that he did not disclose this appointment to Haliburton because at the date of that appointment he did not think that he was under an obligation to disclose the appointment under the IBA Guidelines. Both parties accepted that this was a truthful explanation. Haliburton however asked Mr. Rokison to resign whilst Chubb would not agree to his resignation. Mr. Rokison stated in reply that if he could decide the subject matter in accordance with his own self- interest, he would resign. He then refused to resign as he said he owed duties to both parties to complete the task. Thereafter, Haliburton issued its application to remove him as an arbitrator on 21 December 2016, under s 24(1)(a) of the Arbitration Act 1996.
In its application Haliburton did not allege that Mr. Rokison was guilty of any deliberate wrongdoing or actual bias. It alleged apparent unconscious bias. The court therefore did not have to ‘ “make windows into men’s souls” in search of an animus against a party or any other actual bias, whether conscious or unconscious.’ (see paragraph 52 of the judgement). The test to follow, the court said, was well known. “The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased” (Lord Hope in Porter v. Magill  UKHL 67, para 103).
The fair-minded and informed observer is an objective observer and is “neither complacent nor unduly sensitive or suspicious” (see paragraph 53 of the judgement). Having said that one way in which an arbitrator can avoid the appearance of bias is by disclosing matters which could arguably be said to give rise to a real possibility of bias, the Supreme Court held that “There is a legal duty of disclosure in English law which is encompassed within the statutory duties of an arbitrator under Section 33 of the 1996 Act and which underpins the integrity of English seated arbitrations” (see paragraph 81 of the judgement).
In English law, multiple appointments must be disclosed in the absence of contrary agreement (see paragraph 95 of the judgement). The court then held as follows in paragraph 118 of its judgement:
“Where an arbitrator has accepted an appointment in such multiple references in circumstances which might give rise to justifiable doubts as to his or her impartiality, or is aware of other matters which might reasonably give rise to those doubts, a failure in his or her duty to disclose those matters to the party who is not a common party to the references deprives that party of the opportunity to address and perhaps resolve the matters which should have been disclosed. The failure to disclose may demonstrate a lack of regard to the interests of the non-common party and may in certain circumstances amount to apparent bias.”
On the facts in issue, Lord Hodge found as follows: “Being unaware of the appointment in reference 2, Halliburton was not able to assess whether and to what extent this involved unfairness and how to respond to that appointment. The appointment in reference 2 had the potential to give rise to unfairness, which Haliburton had no opportunity to address. The failure to give a party to an arbitration that opportunity, Halliburton argues, might amount to apparent bias. I agree….” (see paragraph 138 of the judgement).
The court decided that having been under a legal duty to disclose his appointment in the Transocean – Chubb arbitration to Halliburton, Mr. Rokison’s failure to make the disclosure was a breach of his legal duty of disclosure. Fair-minded and informed observer may well have concluded that there was a real possibility of bias. However, the court held that by the date of the hearing for removal in January 2017, Mr. Rokison had given an explanation of his failure to disclose which Halliburton’s lawyers accepted was a genuine explanation. Having regard to the circumstances known to the court at the date of the hearing at first instance, the fair-minded and informed observer would not infer from the oversight that there was a real possibility of unconscious bias on Mr. Rokison’s part. The application to remove was therefore refused.
This case is a salutary lesson for prospective arbitrators to make proper disclosures both pursuant to applicable institutional rules and in accordance with this decision from the Supreme Court. The application in this case failed primarily because, as Lord Hodge said in paragraph 70 of the judgement, allegations involving apparent unconscious bias is difficult to establish and refute. In this case, Mr. Rokison’s responses to challenges made to his continuing to act as an arbitrator were genuinely even handed and courteous. That made Halliburton’s job of proving unconscious bias even more difficult. Nevertheless, the case underpins the arbitrators’ duty to remain impartial by imposing a duty on them to make relevant disclosures of facts and circumstances which would or might give rise to an appearance of bias.
Saunders Law would be delighted to assist businesses and individuals in handling international and commercial arbitrations. Our partner Subir Karmakar is a Fellow of the Chartered Institute of Arbitrators, London, and have dealt with complex international arbitrations for three decades and under ICC, LCIA, LMAA, Gafta, FOSFA, LME and other institutional rules and ad hoc proceedings held under UNCITRAL arbitration rules. If we can be of assistance, please call our new client enquiry team on +44(0)20 7632 4300 or use the Make an Enquiry form and we will contact you.