The UK Supreme Court this morning handed down a much anticipated decision concerning the appearance of bias in international arbitration. There were two core questions for the court.
- Whether an arbitrator’s acceptance of multiple appointments in arbitrations involving a common party and the same or related subject matter gives rise to an appearance of bias.
- Whether and to what extent an arbitrator can accept such appointments without disclosing them.
The dispute arose from a series of three overlapping insurance arbitrations which dealt with the fallout of the Deepwater Horizon oil rig disaster in 2010.
In the first arbitration, between Halliburton and its insurer, Chubb, the parties were unable to agree the Chairman of the tribunal, and so applied to the court to make the appointment. The court appointed an arbitrator who had initially been proposed by Chubb (and who had been involved in multiple previous and ongoing arbitrations involving Chubb), but opposed by Halliburton.
This arbitrator subsequently accepted appointments in two related arbitrations – one between Chubb and another insured, and another between that insured and another insurer. The arbitrator did not disclose these further appointments to Halliburton.
When Halliburton learned of this, it applied to the court to remove the arbitrator on the basis that the arbitrator’s failure to disclose his involvement in the other arbitrations gave rise to justifiable doubts as to his impartiality.
The High Court dismissed Halliburton’s application to remove the arbitrator. The Court of Appeal dismissed the appeal, and now the Supreme Court has also, unanimously, dismissed Halliburton’s appeal.
On the first question, the Supreme Court held that there may be circumstances where accepting multiple appointments in overlapping references could, in itself, give rise to an appearance of bias. But regard must be had to the particular circumstances of international arbitration – in some fields of arbitration, an arbitrator’s involvement in multiple references may give rise to no concern.
On the second question, the court held that an arbitrator is under a legal duty to disclose circumstances which may give rise to justifiable doubts as to their impartiality, and this is an implied term in the arbitrator’s contract. An arbitrator’s failure to disclose such circumstances is itself a relevant consideration when the court asks itself if the fair-minded and informed observer would conclude there is an appearance of bias.
On the facts of this case, the arbitrator was under a legal duty to disclose the subsequent appointments, and failed to do so. However, this was an oversight at a time when it was not clear if there was a legal duty of disclosure under English law. By the time of the hearing of the application to remove the arbitrator, the fair-minded and informed observer would not conclude there was a real possibility of bias – there was no question of the arbitrator having received a financial benefit, and Chubb was unlikely to benefit from the arbitrator’s involvement in the subsequent references.
We will publish fuller analysis of the decision and its implications for arbitrators and parties in due course.