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HALLIBURTON COMPANY -v- CHUBB BERMUDA INSURANCE LTD: IMPLICATIONS FOR ARBITRAL BIAS, PART II

The unanimous judgement of the UK Supreme Court in Halliburton Company -v- Chubb Bermuda Insurance Ltd (2020) UKSC 48 has attracted overwhelming attention in international arbitration circles and far beyond, since its publication on 27th November 2020.

The case clarifies and consolidates the crucial feature of arbitrator fairness and impartiality in English law. It also shows the English courts’ willingness to intervene in cases where apparent arbitral bias has been suggested. It provides invaluable guidance to all those considering choosing London as their preferred forum for dispute resolution. But above all, it will reassure those who seek to rely on the high ethical standing for which London arbitration is known.   

Part I of this series assessed the background facts and the actions in the High Court and the Court of Appeal. Part II will now cover the Supreme Court proceedings that gave rise to the 27th November 2020 judgment.

Legal Issues

The issues to be decided by the Supreme Court were: (i) 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 (ii) whether and to what extent the arbitrator might accept such appointments without disclosure.

Duty of Impartiality and Fairness

The primary duty of impartiality and fairness is a core principle of arbitration law. It is not only good practice but also a duty in English statute law. Section 33 of the 1996 Arbitration Act provides:

“(1) The tribunal shall –

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, …..”

This duty exists for party-appointed arbitrators, for arbitrators jointly appointed by the parties and for arbitrators either appointed by arbitral institutions or by the court. They owe no allegiance to the parties appointing them.

To assess whether an arbitrator or arbitral tribunal act fairly or impartially, the objective test is whether the ‘fair-minded and informed’ observer would conclude there is a real possibility of bias “having regard to the particular characteristics of international arbitration, including the private nature of most arbitrations”.

Duty of Disclosure

The duty of disclosure of matters which might reasonably give rise to justifiable doubts as to his or her impartiality is not one of good practice only but also one of English law (Section 24 of the Arbitration Act 1996). It derives from the statutory duty of the arbitrator.

The legal duty of disclosure does not in principle override the arbitrator’s duty of confidentiality: “Where the information to be disclosed is subject to the arbitrators’s duty of privacy and confidentiality, disclosure can be made only if the parties to whom the obligations are owed give their consent”. If such consent is witheld by either of the parties to the first or the second arbitration, then the arbitrator will have to decline the second appointment. Referring specifically to the views expressed by the interveners, “such consent may be express or inferred from the arbitration agreement itself in the context of the custom and practice in the relevant fields of arbitration”.

The Supreme Court noted that in assessing whether an arbitrator had failed in this duty to make proper disclosure, the fair-minded and informed observer would have regard to the facts and circumstances as at and from the time the duty arose, “the question is to be considered prospectively”. By contrast, in assessing whether there was a real possibility that he was biased, the fair-minded and informed observer would have regard to the facts and circumstances known at the time of the hearing to remove the arbitrator. This would have been at the time of the High Court hearing in January 2017 when Halliburton’s lawyers had already received Mr. Rokison’s explanation and apology. 

Judgment

After a careful examination of the different practices in the interveners’ respective areas of arbitration and a through review of the preceding caselaw, the Supreme Court concluded that in the context of the Bermuda Form arbitration and examing the different practices the circumstances might reasonably give rise to a conclusion that there was a possibility of bias and that the arbitrator in this case was under a duty to disclose the appointments unless the parties had agreed otherwise. In this set of circumstances, Mr. Rokison had breached his duty of disclosure owed to Halliburton.

Yet, the Court dismissed Halliburton’s appeal. It held that “at the date of the Hearing to remove Mr. Rokison” the fair minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts about Mr. Rokison’s impartiality. How did it arrive at this conclusion?

  • At the time of the Hearing in First Instance to remove Mr. Rokison, the law as regards the duty of disclosure had not been fully clear and decided, i.e. whether there existed a legal duty of disclosure and whether disclosure was needed.
  • There was a considerable time lapse between the Halliburton appointment and the two subsequent appointments.
  • Mr. Rokison’s response had been measured and temperate. He had offered to resign if the subsequent references were not settled.
  • He had not received any secret financial benefit as Halliburton had hinted at, and there was no basis for any unconscious ill will vis a vis Halliburton on his part.

The unanimous and highly pragmatic judgement was followed by a concurring judgement by Lady Arden, who added by way of practical advice that high-level disclosure about a proposed appointment in a further arbitration can be made without any breach of confidentiality by naming only the common party (who may be taken to have consented to disclosure) but not the other parties to the arbitration.

This case provides a salutary lesson for each prospective arbitrator to inform him or herself of his or her duty of well-timed disclosure prior to accepting an appointment. On the other hand, the certainty afforded by the Supreme Court judgment and the English courts’ evident and vigorous protectiveness of arbitration in the face of any ill-founded objections, should be a comfort to all users of London arbitration as a pre-eminent means of dispute resolution.

About the Author

Reina Maria van Pallandt is a senior disputes resolution lawyer with dual British and Dutch nationality. After obtaining an LLB Honors degree in Dutch Law and Public International Law at the University of Amsterdam (UvA), Reina Maria studied International Law of the Sea at London School of Economics (LSE). She was admitted as a Solicitor of the Senior Courts of England & Wales in 1979 and of the Law Society of Ireland in 2019. Reina Maria originally practised as a solicitor at Holman, Fenwick & Willan in London and Paris and thereafter at Clifford Chance where she specialised in marine and general commercial arbitration and litigation representing shipowners, P&I Clubs, shipbuilders, repair yards and charterers such as oil and gas companies and commodity traders.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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HALLIBURTON COMPANY -v- CHUBB BERMUDA INSURANCE LTD: IMPLICATIONS FOR ARBITRAL BIAS, PART I

The unanimous judgement of the UK Supreme Court in Halliburton Company -v- Chubb Bermuda Insurance Ltd (2020) UKSC 48 has attracted overwhelming attention in international arbitration circles and far beyond, since its publication on 27th November 2020.

The case clarifies and consolidates the crucial feature of arbitrator fairness and impartiality in English law. It also shows the English courts’ willingness to intervene in cases where apparent arbitral bias has been suggested. It provides invaluable guidance to all those considering choosing London as their preferred forum for dispute resolution. But above all, it will reassure those who seek to rely on the high ethical standing for which London arbitration is known.   

Part I of this series assesses the background facts and the actions in the High Court and the Court of Appeal. Part II will cover the Supreme Court proceedings that gave rise to the 27th November 2020 judgment.

Judgments

In the lead judgement, Lord Justice Hodge has stated that “there appears to have been a lack of clarity in English case law as to whether there was a legal duty of disclosure and whether disclosure was needed”.  In an extensive analysis of the facts and the law, Lord Hodge considered the circumstances in which an arbitrator in an international arbitration may appear to be biased, concluding that there was a legal obligation on arbitrators to disclose circumstances giving rise to justifiable doubts about their impartiality. He tempered that conclusion nevertheless by accepting that the factual matrix in individual cases might moderate the obligation.

The Factual Background

The factual background to this case contains a cautionary tale for every arbitrator considering accepting 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.  

In April 2010 the semi-submersible rig ‘Deepwater Horizon’, drilling in the Gulf of Mexico, suffered a blow out, caught fire, exploded and sank. Her Owners, ‘Transocean Holdings LLC’ (‘Transocean’), had provided crew and drilling teams to the rig’s lessees, ‘BP Exploration and Production Inc’ (‘BP’), whilst the oilfield services company, ‘Halliburton Company’ (‘Halliburton’), had supplied BP with cementing and well-monitoring services.

The calamity gave rise to many claims in respect of loss of life, injury, coastal damage and pollution against all three parties. In the US court proceedings which ensued, the US Federal Judge for the Eastern District of Louisiana apportioned 67 % blame for the disaster to BP, 30 % to Transocean and 3 % to Halliburton.

Refusal of Claims by Chubb

Halliburton settled the claims against it and then claimed under its Bermuda Form liability policy against its insurers, Chubb Bermuda Insurance Ltd (‘Chubb’).

Chubb declined cover on the basis that the settlement reached was not reasonable. Transocean, also insured with Chubb against similar losses, were equally refused cover.

The Bermuda Form policies provided for a New York law clause with London arbitration, conducted by two arbitrators and a third arbitrator as chairman.

Commencement of Arbitration proceedings against Chubb

In January 2015 Halliburton, having been refused cover under the Bermuda Form policy, commenced arbitration proceedings against Chubb. Both parties appointed their own arbitrator but were not able to agree on the third arbitrator. Mr.K. Rokison QC, a renowned arbitrator of international standing, was proposed by Chubb but Halliburton’s lawyers argued that the Bermuda Form liability policy provided for New York law and that Mr. Rokison was an English law specialist.

Appointments of Mr. Rokison

In June 2015 the parties went to the High Court in London for a determination of the issue. After a contested hearing Mr.Rokison was duly appointed by Court Order to chair the Tribunal. Halliburton did not object to that Order. Before this appointment Mr. Rokison disclosed that he had been and was still acting in a number of arbitrations involving Chubb.

In December 2015, Mr. Rokison accepted the appointment as arbitrator on behalf of Chubb relating to Transocean’s claim against Chubb under its liability cover.

In August 2016, Mr. Rokison was  appointed by Transocean jointly with others in a reference between Transocean against another insurer relating also to its liability cover.

Mr Rokison disclosed neither appointment to Halliburton.

In November 2016, Halliburton found out about these two subsequent appointments. Ample correspondence between Mr. Rokison and Halliburton ensued. Mr. Rokison explained that his non-disclosure was due to an oversight and apologised but argued that he had not learned anything in the two later arbitrations which was not in the public domain, adding that he would tender his resignation, conditional upon the consent of Chubb, in those arbitrations if they would not through preliminary determinations on construction which were to follow shortly, come to be concluded in any event.

Furthermore, Mr. Rokison offered to resign from the Halliburton arbitration if the parties,  could agree, this time around, on a mutually acceptable chairman before the main hearing of the arbitration fixed for January 2017.

High Court Proceedings

In December 2016, Halliburton nevertheless applied to the High Court seeking the removal of Mr. Rokison and the appointment of a substitute chairman. Halliburton prayed in aid Section 24 (1) (a) of the Arbitration Act 1996 which provides for the:

Power of the court to remove arbitrator.

(I)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……,

In February 2017, the High Court dismissed Halliburton’s application on the grounds that the mere fact that an arbitrator accepts appointments in multiple references concerning the same or overlapping subject matter with only one common party does not itself give rise to an appearance of bias and that in the underlying case (1) the circumstances did not give rise to any ‘justifiable’ doubts about Mr. Rokison’s impartiality and (2) there was accordingly no need for disclosure. Halliburton appealed to the Court of Appeal.

Court of Appeal

In April 2018, the Court of Appeal refined but did not disagree with the High Court’s judgement, drawing extensively on a number of Court of Appeal and Privy Council cases stating that the approach it was taking applied to arbitral tribunals for the same reasons as had been given in the judicial authorities it had referred to.

The Court of Appeal summarised the position under English law to be “that disclosure ought to be given of facts or circumstances which would or might lead the ‘fair minded and informed observer’, having considered the facts, to conclude that there was a real possibility that the arbitrator was biased.” The ‘fair-minded and informed observer’ description and definition were in fact taken from 2000, 2001 and 2008 House of Lords cases. Citing also an earlier Court of Appeal judgement it concluded that for apparent bias to be established “something more is required” and  “that must be something of substance”. The Court in its reasoning also referred to the practice of a number of foremost arbitration institutions such as the ICC and the LCIA as well as the IBA Guidelines.

The Court of Appeal dismissed Halliburton’s appeal, ruling that as a matter of law and good practice disclosure ought to have been made at the time of the last two appointments, but that non-disclosure in itself did not justify a finding of apparent bias on the part of Mr. Rokison since such was not proven by the evidence before it.  And in so far as the “arbitrator’s duty of confidentiality” was concerned, “the duty of disclosure must be regarded as being an exception to that duty”.

The Supreme Court

Halliburton renewed its challenge before the Supreme Court.

The case was heard on 12th and 13th November 2019. Judgement was given on 27th November 2020. The Supreme Court allowed five prominent arbitral insitutions as interveners to make representations about the practices in their domain of arbitration: ICC, LCIA, CIArb.,LMAA and GAFTA.

Part II

Part II of this series will address Halburton’s pleaded case in the Supreme Court, the issues on which the Supreme Court had to decide and the Judgment it arrived at. There will be coverage of the duty of impartiality and fairness and how this may be assessed, as well as analysis of the disclosure and confidentiality duties that apply to Arbitrators.

About the Author

Reina Maria van Pallandt is a senior disputes resolution lawyer with dual British and Dutch nationality. After obtaining an LLB Honors degree in Dutch Law and Public International Law at the University of Amsterdam (UvA), Reina Maria studied International Law of the Sea at London School of Economics (LSE). She was admitted as a Solicitor of the Senior Courts of England & Wales in 1979 and of the Law Society of Ireland in 2019. Reina Maria originally practised as a solicitor at Holman, Fenwick & Willan in London and Paris and thereafter at Clifford Chance where she specialised in marine and general commercial arbitration and litigation representing shipowners, P&I Clubs, shipbuilders, repair yards and charterers such as oil and gas companies and commodity traders.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.