• Avinder Laroya

Case review Halliburton Company v Chubb Bermuda Insurance – Supreme Court Rules on Arbitrator Bias

Updated: Nov 15, 2021

The UK Supreme Court on 27th November 2020 delivered a decision on the case of Halliburton Company v Chubb Bermuda Insurance which has been a critical case on addressing key arbitrator duties of impartiality and disclosure. The case highlights the key factors that are to be taken into consideration when assessing arbitrator bias.

This article will discuss the following:

· Brief background about the case

· What was discussed in the Supreme Court

· Issues discussed and highlighted about Arbitrator bias

· Duty of disclosure under the Arbitration Act

· Why was the arbitrator challenge rejected

· What parties should look out for when appointing an arbitrator

· The outcomes as a consequence of the case

· Summary

1. Background

The arbitration appeal was a result of damage caused on the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010 by an explosion and fire during the plugging of a well.

BP Exploration and Production Inc (“BP”) was the lessee of the Deepwater Horizon drilling rig. Transocean Holdings LLC (“Transocean”) owned the rig and had contracted with BP to provide crew and drilling teams. Halliburton provided cementing and well-monitoring services to BP in relation to the temporary abandonment and the plugging of the well.

The damage caused by the blow out of the rig led to several legal claims against BP, Halliburton and Transocean by the US Government and corporate and individual claimants. By way of indemnity, Halliburton and Transocean sought damages and losses incurred during the claims against their insurer who rejected their claims. ACE Bermuda Insurance Ltd aka Chubb (the respondent) sold a Bermuda Form liability policy to Halliburton (the appellants) in 1992. The Policy was renewable on an annual basis.

The Policy contained an arbitration clause which provided for arbitration in London by a tribunal of three arbitrators, one appointed by each party and the third by the two arbitrators so chosen. Halliburton and Chubb appointed an arbitrator each ie Professor William W Park and Mr John D Cole respectively. The two arbitrators failed to agree on the third arbitrator following which Mr Rokison, Chubb’s nominee, was appointed by the High Court as the third arbitrator.

Although Mr Rokison disclosed to Halliburton and the court he had previously acted as an arbitrator in several arbitrations in which Chubb was a party, including as a party-appointed arbitrator nominated by Chubb, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved (reference 1), he did not disclose his later appointment as an arbitrator by Chubb in relation to an excess liability claim by Transocean arising out of the same incident (reference 2). Mr Rokison got a third appointment in an arbitration arising out of the Deepwater Horizon incident as a substitute arbitrator on the joint nomination of the parties in a claim made by Transocean against a different insurer (reference 3). Mr Rokison still did not disclose this to Halliburton. Mr Rokison’s omission to disclose his appointment in ref 2 and 3 led to the issue of a conflict of interest argument which is the centre of this appeal following the High Court and the Court of Appeal rejection of Halliburton’s removal application.

2. What was discussed in the Supreme Court

The specific issues for the appeal were;

1. whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias; and

2. whether and to what extent the arbitrator may do so without disclosure

During the appeal, particular emphasis was given to the principles of impartiality and confidentiality in arbitration. In this context, Lord Hodge addressed the arbitrators’ duty of impartiality, whether and to what extent their duty of disclosure would interfere with their obligation to protect the parties’ privacy and confidentiality and whether failure to fully exercise their duty of disclosure in such instances would indicate lack of impartiality. The times at which duty of disclosure and possibility of bias falls were also discussed.

3. Issues discussed and highlighted about Arbitrator bias

An arbitrator’s failure to disclose their involvement in other references could give rise to justifiable doubts as to his or her impartiality. This failure deprives the other party who is not the common party to the references of the opportunity to discuss matters which should have been disclosed. This shows the neglect of the other party’s interests and this in certain instances may amount to apparent bias.

The determination of time of the need of this disclosure is dependent on the circumstances at the time the duty arose and during the period which the duty subsisted. The time of assessment of the possibility of bias is at the time of the application to remove the arbitrator in question. The court will judge the material circumstances as they appear at the time of the hearing with particular reference to the objective observer.

Lord Hodge in his judgement disagreed with the Court of appeal’s insinuation that appointment in multiple arbitrations can never be enough to give rise to the appearance of bias. Instead, he held that the appearance of bias is circumstantial depending on industry practice and customs.

In assessing whether and to what extent an arbitrator may accept the multiple references described in the first issue without making disclosure to the party who is not the common party, it was concluded that English law places a legal duty on arbitrators to disclose facts and circumstances which would reasonably give rise to the appearance of bias.

In deciding the allegation of apparent bias against Mr Rokison as a result of his appointment as arbitrator in all the 3 inferences, the relevant test used by the court was an objective one. The question posed under this test 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.’

4. Duty of disclosure under the Arbitration Act 1996

The Supreme court agreed with the Court of Appeal’s view that an arbitrator’s duty of disclosure is a legal one. Section 33 of the Arbitration Act 1996 imposes a statutory duty on arbitrators to act fairly and impartially when making decisions on procedural and evidential matters and in exercising all other powers conferred on them. By not disclosing information/circumstances such as a close financial relationship with a party to the arbitration at the time of appointment, an arbitrator would be in breach of that statutory duty, therefore, rendering him liable to be removed from the arbitral tribunal as per section 24 of the Arbitration Act. The only exception to this is if the parties have waived any such obligation.

5. Why was the arbitrator challenge rejected

It was held that the existence of possibly overlapping arbitration with only one common party would not necessarily cause the fair minded and informed arbitrator to conclude that there was a real possibility of bias at the date which Mr Rokison was appointed to reference 2.

It was acknowledged however that had Halliburton known of the Mr Rokison’s appointment in reference 2, it is possible that this might have led him to worry about the fairness of the arbitration process given the inequality of knowledge and opportunities to discuss his concerns about the disclosed information with the arbitrator. The objective observer ‘might reasonably’ therefore conclude that there is a real possibility of bias.

6. What parties should look out for when appointing an arbitrator

When appointing an arbitrator, there are key factors that one should seek to avoid or limit delays and subsequent issues as an effect of neglecting such factors.

Firstly, as highlighted in this case, it is important to appoint independent arbitrators that will observe the high standard of impartiality within the English legal system to avoid the appearance of bias.

Relevant industry experience and expertise should be considered when appointing an arbitrator. Familiarity with industry terms, industrial processes, and specialist knowledge will ensure effectiveness throughout the process including the collaboration of arbitrators in appointing the 3rd arbitrator and delivering decisions.

Another factor to consider is to keep in mind an arbitrator’s opinions and views on certain issues. This is not to breed bias but rather to ensure that the arbitrator is one that understands your case and is committed to efficiently advance your arguments to other arbitrators.

The role of the arbitrator is to maintain impartiality and independence, to ensure confidentiality and appropriate the process and decision making.

7. The outcomes as a consequence of the case

The case of Halliburton is now the leading English case on arbitrator conflict of interest. It provides a detailed guide on how future cases should be decided with strong emphasis on impartiality and disclosure being some of the key arbitrator legal duties. The Supreme Court upheld the Court of Appeal’s decision stating that disclosure is not just a matter of good practice. Arbitrators are obliged to disclose any information that may rise the possibility of doubt on their impartiality.