Halliburton v Chubb: Clarifying Arbitrators’ Duty of Disclosure

On 27 November 2020, the U.K. Supreme Court rendered a seminal decision on arbitrator conflicts in Halliburton Company v. Chubb Bermuda Insurance Ltd [2020] UKSC 48, refining the law on apparent bias and arbitrators’ duty to disclose in the context of arbitration.

BACKGROUND

Halliburton Company v. Chubb stems from multiple arbitrations that started from an explosion in the Deepwater Horizon drilling rig in the Gulf of Mexico (“Deepwater Horizon Incident”). Transocean Holdings LLC (“Transocean”) owned the drilling rig and Halliburton provided cementing and well-monitoring services. In 1992 Halliburton had entered into a liability policy with ACE Bermuda Insurance Ltd, now called Chubb Bermuda Insurance Ltd (“Chubb”). The Deepwater Horizon Incident resulted in numerous legal claims against Halliburton and Transocean.

Halliburton brought an arbitration against Chubb in January 2015 when Chubb refused to pay Halliburton’s insurance claim (“Halliburton Arbitration”). In June 2015, Mr Kenneth Rokison QC was appointed as the third arbitrator to chair the tribunal after a contested hearing in the High Court. Mr Rokison disclosed that he had previously acted as an arbitrator in several arbitrations which involved Chubb. The High Court did not see that as an impediment, and Halliburton did not appeal the appointment.

In December 2015, Mr Rokison was appointed as an arbitrator by Chubb in a separate arbitration filed by Transocean. Mr Rokison disclosed his appointments in arbitrations involving Chubb. Transocean accepted Mr Rokison’s appointment without objection. In August 2016, Mr Rokison was appointed as a substitute arbitrator in another arbitration relating to the Deepwater Horizon Incident, involving Transocean and a different insurer. Mr Rokison did not disclose these subsequent appointments to Halliburton.

In November 2016, Halliburton discovered Mr Rokison’s subsequent arbitral appointments and asked him to resign. Mr Rokison accepted that he had failed to disclose to Halliburton his subsequent appointments in the arbitrations involving Transocean and Chubb and offered to resign if the parties agreed. However, Chubb objected to Mr Rokison’s resignation. In December 2016, Halliburton made an application to the High Court to replace Mr Rokison, which was heard in January 2017 and dismissed. Halliburton appealed, but the Court of Appeals upheld the High Court’s decision. The case came before the Supreme Court in November 2019.

Supreme Court Decision

Applying the “objective test of the fair-minded and informed observer”, the Supreme Court held that an arbitrator’s appointment in multiple arbitrations concerning the same or overlapping subject matter may give rise to an appearance of bias, depending on the custom and practice in the field of arbitration.

The Supreme Court further held that arbitrators have a legal duty to disclose facts and circumstances which would or might reasonably give rise to the appearance of bias. The Supreme Court affirmed the Court of Appeal’s finding that under English common law, “disclosure … is a matter of legal obligation.” The Supreme Court explained that an arbitrator is subject to the statutory duties set out in the 1996 Arbitration Act to act fairly and impartially. To maintain the “badge of impartiality” arbitrators must promptly disclose possible conflicts. The Supreme Court emphasised the arbitrators’ cardinal duty of impartiality and the importance of disclosure, highlighting the characteristics of international arbitration, such as its private nature, remuneration of arbitrators by the parties, diverse backgrounds of arbitrators, and limited powers to review an arbitral decision.

Ultimately, after reviewing the facts of the case, the Supreme Court unanimously dismissed Halliburton’s appeal finding that there was no real possibility of bias. While recognising that Mr Rokison had breached his legal duty to disclose, the Supreme Court held that a fair-minded and informed observer would not infer a real possibility of bias on Mr Rokison because:

  1. was uncertain whether there was a legal duty of disclosure under English law at the date of the removal hearing in January 2017;
  2. the subsequent arbitrations commenced several months after the Halliburton Arbitration;
  3. Halliburton lawyers did not challenge Mr Rokison’s statement that there was no material overlap between the cases;
  4. Mr Rokison did not receive any secret financial benefit; and
  5. Mr Rokison’s conduct in response to Halliburton’s challenge was “courteous, temperate and fair” showing no basis for inferring unconscious bias.

COMMENTARY

The Supreme Court decision in Halliburton Company v. Chubb established that arbitrators have a legal duty of disclosure under English law deriving from the 1996 Arbitration Act. It prompts arbitrators to err on the side of caution when making any disclosures about multiple appointments.

The Supreme Court recognised that such information may be subject to an arbitrator’s duty of privacy and confidentiality. In such cases, the Supreme Court suggests that disclosure can be made only if the parties give consent. If parties do not give consent to disclose, the arbitrator will have to decline the second appointment. Nevertheless, the Supreme Court also acknowledged that in certain arbitration fields, such as specialist trade arbitrations where there is a limited pool of arbitrators that parties tend to appoint, acceptance of multiple appointments may not raise issues of impartiality and fairness. The Supreme Court decision leaves further questions as to how custom and practice of different fields of arbitration may affect the duty of disclosure and apparent bias.

Jurisdictions: 

Associate, Quinn Emanuel & HK45