Co-Authored by Aonkan Ghosh
On 27 November 2020, the Supreme Court delivered its highly-anticipated decision in Halliburton v. Chubb1 – the case which is now the leading English law precedent for several critical issues relating to the legal basis and extent of an arbitrator's duty to disclose material circumstances and the assessment of appearance of bias in arbitrations under the Arbitration Act, 1996 (AA 1996).
Given London's status as one of the principal global hubs for arbitration, its frequent selection as a seat of arbitration in commercial contracts (irrespective of whether they are governed by English law or not) and the extensive intervening submissions made to the court by some of the principal global arbitral institutions, it is to be expected that the Supreme Court's decision will have repercussions for how these issues will fall to be examined in arbitrations all around the world.
In this briefing, we analyse the Supreme Court's decision, set out what is now the authoritative English law position on these issues, and provide a practitioner's critique of the decision.
The case is one of the many pieces of satellite litigation commenced by insureds against their insurers that followed on from the many very sizeable claims brought against the companies involved in the Deepwater Horizon disaster in 2010.
Deepwater Horizon was an offshore rig in the Gulf of Mexico leased by BP Exploration and Production Inc (BP) and managed and operated by Transocean Holdings LLC (Transocean). Halliburton Company (Halliburton) provided certain cementing and monitoring services on the rig. On 20 April 2010, a major explosion occurred, which resulted in number of human casualties, oil spills, other environmental damage and, eventually, the sinking of the rig itself.
The United States Government brought proceedings against each of Transocean, BP and Halliburton in relation to damage caused by the incident before the Federal Court of the Eastern District of Louisiana. On 4 September 2014, judgment was rendered against all three companies, apportioning liability between them.
Halliburton subsequently settled certain claims against it by way of a settlement in the amount of USD 1.1 billion. However, its liability insurer Chubb Bermuda Insurance Ltd (Chubb), with whom Halliburton had a Bermuda Form insurance contract, questioned the reasonableness of this settlement and denied coverage under the policy.
As required by many Bermuda Form policies, Halliburton then commenced a London-seated arbitration against Chubb. Halliburton and Chubb appointed Professor William Park and Mr John Cole as their respective party appointed arbitrators. The party-appointed arbitrators failed to agree on a presiding arbitrator. Subsequently, on 12 July 2015, the High Court appointed Mr Rokison QC.
This was not to be Mr Rokison's only appointment in proceedings arising out of Deepwater Horizon:
- Mr Rokison subsequently accepted appointments in two further disputes in December 2015 and August 2016 - one between Chubb and Transocean (in which he was Chubb's party-appointed arbitrator) and another between Transocean and another insurer (in which he was appointed jointly by the parties). The dispute between Chubb and Transocean also related to essentially the same issue as had arisen in the dispute between Halliburton and Chubb — denial of policy coverage as a result of an allegedly unreasonable settlement.
- Mr Rokison did not disclose the fact of his subsequent appointment to Halliburton but disclosed his prior appointment in the dispute involving Halliburton to Transocean. In November 2016, over a year after initiating its arbitration, Halliburton became aware of Mr Rokison's subsequent appointments. It raised concerns about the failure to disclose and, eventually, called on him to resign. Mr Rokison explained the circumstances of his appointment and acknowledged that it would indeed have been prudent to disclose his subsequent appointments to Halliburton; but took the view that he would resign if the parties mutually agreed on his resignation and his replacement. Absent agreement between Halliburton and Chubb on this point, he did not resign.
- In November 2016, Halliburton filed an application under section 24(1)(a) AA 1996 to remove him on grounds of perceived bias.2 This application was dismissed by the High Court. Halliburton's appeal against the decision was also dismissed on 19 April 2018. Given the importance of the issues at stake (albeit far-removed from the underlying substance of the dispute), Halliburton was granted leave to appeal to the Supreme Court.
- In the meantime, the tribunals in the three proceedings in which Mr Rokison sat rendered awards - Chubb prevailed in both its cases, and the other insurer did so in its dispute with Transocean.
- The hearing in the Supreme Court concluded on 18 November 2019. In a decision rendered a year later, the Supreme Court found that while Mr Rokison was in breach of his obligation to disclose his appointment in the other references, but this did not render him liable to be removed under section 24(1)(a) AA 1996.
Summary of the Supreme Court's reasoning
There were two issues which the Supreme Court had to decide – (i) whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter but 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.3
- Duty to disclose
Deciding on the duty to disclose, the Supreme Court agreed with the intervening submissions of the ICC, LCIA and CIArb and confirmed that the Court of Appeal was correct to develop the English law of arbitration by finding that there is a legal duty of disclosure at English law4 – regardless of the requirements under the arbitral rules to which an arbitration may be subject.5
The Supreme Court also made the following observations:
- English law imposes a continuous duty of disclosure. In order to fall to be disclosed, a fact does not need to be one which would cause the informed observer to conclude there was a real possibility of bias; to be disclosable, it is enough that such fact is "relevant and material to such an assessment of the arbitrator's impartiality and could reasonably lead to such an adverse conclusion".6 Which facts are liable to be disclosed is to be determined based on an objective test; and assessed "in the eyes of the parties". 7
- On the specific question of whether disclosure was required when an arbitrator has accepted, or is considering, multiple appointments (i.e. multiple appointments by a common party in relation to a same or overlapping subject matter) – the Supreme Court concluded that disclosure would be required, as multiple appointments of this kind would have the potential to confer an unfair advantage on the common party – and the arbitrator should be aware of this.8 Disclosure in these circumstances would, however, depend on the circumstances of the particular arbitration – in particular those being conducted pursuant to industry-specific rules such as GAFTA and LMAA where there is an accepted practice of arbitrators accepting multiple appointment without disclosure.9
- However, since English law imposes a duty of confidentiality in relation to arbitrations (to which arbitrators are also subject), such disclosure as must be made would have to be limited to: (i) the identity of the common party, (ii) whether the arbitrator was nominated by the party or by another or by the institution, (iii) second reference arose out of the "same incident")". 10 Lord Hodge (who gave the leading judgment) noted that, while this would impinge on the privacy of the other arbitration strictly construed, one could infer consent for such limited disclosure on the part of the common party based on their wish to appoint the same arbitrator in multiple proceedings.11 Of course, where the other arbitration was subject to binding rules or express restrictions such disclosure could not be made.12 As a general rule, whether and to what extent the arbitrator can make a disclosure depends on whether a consent could be inferred, having regard to the customs and practices of arbitration in their field.13
Whilst Lady Arden agreed with Lord Hodge's conclusion, she did so on a slightly different basis — namely that no duty of confidentiality is breached when the other parties (who have not waived this confidentiality) are not named. But she cautioned that this principle only applied "in general",14 and that in exceptional cases where the parties other than the appointing party could be identified without being named, even a high-level disclosure would breach confidentiality.
Critically, she understood the majority's decision regarding high-level disclosure not as implying that such a disclosure was enough to discharge the duty of disclosure, but rather that, if further information were required to be disclosed, then the consent of the parties in the other arbitration would be required – and if that consent were not forthcoming, then the arbitrator would be compelled to decline the appointment which had required disclosure to be made.15
On the facts before it, the Supreme Court held that, in a Bermuda Form arbitration (i.e. ad-hoc arbitration applying New York law but with its seat in London), Mr Rokison should have made a high-level disclosure.
- Consequences of breach of obligation to disclose
Despite finding that Mr Rokison had breached the obligation to disclose, the Supreme Court found that the thresholds that must be met to remove an arbitrator pursuant to section 24 AA 1996 were not met.
Of central importance to its finding in this respect was the point in time at which any enquiry pursuant to s. 24 AA 1996 should take place.
The Supreme Court determined that – whilst Mr Rokison should have made a disclosure at the time he was approached about multiple appointments – when a court was asked to assess whether or not there was bias (real or apparent) pursuant to s. 24 AA 1996, it must take into account all circumstances known to it as at the date of the first instance hearing.16
When making its assessment, the Supreme Court therefore found that, in light of several events that took place between Mr Rokison's appointment and the initiation of challenge pursuant to s. 24 AA 1996, a fair-minded observer would not have concluded that there was a real possibility of bias.
A practitioner's view
Given its importance for both the English and the wider global arbitration community, Halliburton v. Chubb will no doubt fuel debate for the foreseeable future.
Whilst the English law position on an arbitrator's legal duty to disclose is now well-settled, there are several notable aspects of the judgment that are worth highlighting.
First: much of the Supreme Court's judgment will be relevant only to ad-hoc arbitrations that are not being conducted pursuant to institutional rules that make their own express provision as regards the extent of the duty to make disclosures (and which the parties have therefore contracted into).
Second: the Supreme Court re-affirmed that, as a matter of law, arbitrations in England & Wales are confidential. Whilst the oft-repeated mantra "when in doubt: disclose" therefore still remains generally applicable, the Supreme Court's judgment has highlighted the extra care that arbitrators must take when considering what information they can disclose about other arbitrations they are involved in, whether specific consent must be sought to be able to disclose and – if consent is required but is not forthcoming – whether they must then decline an appointment.
Third: the Supreme Court limited its findings to the specific situation that was before it (namely multiple appointments by a common party and the existence of same or overlapping facts in the proceedings concerned). Such a fact-pattern with which it was presented is not common in commercial arbitration circles, such that the judgment will only rarely be directly applicable.17 It is arguable that the Supreme Court could have used this opportunity to turn its mind to some of the more frequently-occurring issues such as the serial appointment of the same individual by a party in unconnected arbitrations (the so-called "frequent flyer" arbitrators) or the concerns that might arise when an arbitrator is appointed in several arbitrations relating to the same or similar events, even if there is no communality of parties.
Fourth: the Supreme Court's judgment acknowledges the long-standing concern (particularly amongst those not qualified to practise in England & Wales) that the English Arbitration Act does not codify all of English law relating to arbitration, which has in large part been left (quite consciously) to develop on a case-by-case basis. Several important facets such as confidentiality and duty to disclosure find no mention in legislation.18 For international users of arbitration, this adds a layer of opacity in terms of their expectations of the law governing arbitrations in England.
Fifth: following on from the above, it is clear that, in determining what the correct course of action is as regards any disclosures that need to be made, an arbitrator will need to make several judgement calls – is the previous arbitration confidential? Is disclosure in a given case dispensed on account of the industry involved? Was there implicit consent to disclosure of certain information? What are the consequences of not disclosing? Is there an obligation to disclose more than just the high-level summary? The risk of erring in the application of a standard that is so fluid in the face of different and rapidly changing customs and practices is real. This inherent uncertainty may be of particular concern to international practitioners considering whether or not to accept appointments in arbitrations seated in England & Wales.
Sixth: there is a sense that English law on arbitration deviates from international standards, and especially so in the area of impartiality and independence. To the extent IBA Guidelines are recognised good practice, this the second instance where an English Court has reached a conclusion that is inconsistent with them.19 There are several jurisdictions that have a more exacting threshold of impartiality than that is demanded by the English courts; and courts in those jurisdictions may infer apparent bias in situations that are otherwise permissible under English law. For instance, the IBA Guidelines have been statutorily recognised in India. It is therefore doubtful whether an award arising out of an England seated arbitration which falls foul of the IBA Guidelines would even be enforceable in India. Similar concerns may exist in relation to other jurisdictions too. Last year, the Austrian Supreme Court made specific reference to the IBA Guidelines to terminate the mandate of an arbitrator.20 In 2015, the French Cour de Cassation set aside an award on account of an arbitrator's failure to disclose his firm's representation of an affiliate of one of the parties in the dispute21 – a result in line with the IBA Guidelines. However, only a year later, the English High Court dismissed a similar objection in a near-identical case before it.22 Such inconsistent approaches on the international stage raises the theoretical possibility of the enforcement overseas being refused of what the English courts would consider an otherwise valid and binding Award.
Whilst the Supreme Court's judgment stops a considerable way short of providing an authoritative set of rules (or even guidelines) to which arbitrators can refer and take comfort from when considering whether or not to make disclosures, what the entire history of Halliburton v Chubb does show is that the continued prevalence and success of arbitration as an effective means of dispute resolution is predicated on its end-users having continued confidence in the integrity of the arbitration process.
Best practice to help maintain that integrity is for arbitrators to disclose any facts as may potentially be relevant to the greatest extent permissible whilst respecting confidentiality. However, if any doubts remain, or if an arbitrator is not able to give the disclosure that is properly required, they would be well-advised to follow Lady Arden's advice and simply "decline the proposed appointment".23
1. Halliburton Company v. Chubb Bermuda Insurance Limited  UKSC 48.
2. Section 24(1)(a) AA 1996 provides as follows: "A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds— (a)that circumstances exist that give rise to justifiable doubts as to his impartiality" (emphasis added).
3. Id., ¶2.
4. Id., ¶¶ 75 & 76. This duty is encompassed within the general duty of the Tribunal set out at s. 33 AA 1996. The full text of s. 33 AA 1996 reads as follows:
"(1)The tribunal shall—
(a)act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b)adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
(2)The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it".
9. Id.¶¶91, 182.
15. Id., ¶188.
17. See generally, Id.,¶128.
19. The first was the case of W Ltd v. M SDN BHD  EWHC 422 (Comm) where the Commercial Court found that the 2014 IBA Guidelines with respect to a situation where an arbitrator's firm regularly advises an affiliate of one of the parties thereby deriving substantial financial income from advising the affiliate.
20. Supreme Court of Austria, Decision ONC 1/19w, 15 May 2019.
21. Cour de Cassation, Civ. 1, 16 December 2015, N°D14-26.279.
22. W Ltd v. M SDN BHD  EWHC 422 (Comm).
23. Halliburton Company v. Chubb Bermuda Insurance Limited  UKSC 48, ¶188.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.