The Court of Appeal held in Halliburton Company v Chubb Bermuda Insurance Ltd that an arbitrator may have a legal duty to disclose circumstances relating to impartiality, even if they do not meet the test for apparent bias under section 24(1)(a) of the English Arbitration Act 1996 (AA 1996). In other words, even if the circumstances do not require, or, indeed, permit, the arbitrator to step down, they may have to be disclosed. Indeed, the arbitrator’s failure to disclose them can be a factor in deciding whether the arbitrator must be removed.
Halliburton breaks new ground in English law. It is the first case to establish a test for an arbitrator’s duty of disclosure, distinct from the test for apparent bias. One can expect it to be the first in a line of authorities on the subject, as future courts apply the test to various fact patterns. At least in international cases, Halliburton suggests that the International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration will influence the courts’ assessment of when a duty of disclosure arises.
The case is rich with points of interest. To mention just one more of them, Halliburton also holds that a party to one arbitration may appoint a member of the tribunal as its party-appointed arbitrator in a second arbitration, arising from the same incident but against a different opponent.
Halliburton and another company, Transocean, were involved in the Deepwater Horizon disaster on an offshore oil rig. A group of claimants sued Halliburton and Transocean. Both companies had purchased liability insurance from Chubb. Both reached settlements with the claimants. Both made claims under the policies. Chubb rejected both claims.
Halliburton commenced arbitration against Chubb. The High Court appointed M to chair the tribunal. Transocean later commenced its own arbitration against Chubb. Chubb named M as its party-appointed arbitrator. M disclosed to Transocean that he was sitting in the Halliburton case; Transocean did not object. M did not disclose to Halliburton that Chubb had appointed him in the Transocean case.
Halliburton found out about M’s appointment in the Transocean case (and another Deepwater Horizon case not involving Chubb) and applied to remove M. Halliburton invoked section 24(1)(a), which provides for the court to remove an arbitrator when “circumstances exist that give rise to justifiable doubts as to his impartiality”.
The Court of Appeal held that M need not have been removed. An arbitrator may accept appointments in two proceedings concerning the same subject matter in which there is only one common party. Arbitrators can be trusted to decide each case on the evidence adduced in that case, even if they have access to additional information from their service in a related case.
As important as that holding is, the case may prove to be even more significant for its discussion of an arbitrator’s duty of disclosure. Previously, some English authorities had suggested that, if circumstances did not meet the test for apparent bias, an arbitrator could have no legal obligation to disclose them. It is now clear that that is not the law.
The new test is a variation on the apparent bias test. The test for apparent bias, which can be traced to Porter v Magill, is whether a fair-minded observer would conclude there is a real possibility of bias. For disclosure, the Court of Appeal held that an arbitrator must disclose circumstances that might lead the observer to reach that conclusion.
M’s appointment in a related arbitration was on the IBA Guidelines’ orange list. Applying those Guidelines, he should have disclosed it. The Court of Appeal noted that the Guidelines are not English law, but it found persuasive the fact that disclosure would have been best practice in international arbitration. The court held that English law also required M to disclose that Chubb had appointed him in the Transocean case.
The next question was whether M’s failure to disclose should have had any practical consequences. The court held that non-disclosure could be a factor when applying the test for apparent bias. But if the non-disclosed circumstance does not itself require removal, non-disclosure alone cannot meet the test either. Something more is required.
The “would or might” test is objective, but it is inherently vague. The lesson for arbitrators is: “when in doubt, disclose”. Indeed, it might have been wise for Chubb itself either to make the disclosure or suggest to M that he do so. Meanwhile, parties challenging arbitrators will continue to add non-disclosure, when applicable, to the grounds for alleging apparent bias. The case will also have implications for arbitral institutions that administer cases with an English seat.
It is hard to escape the feeling that the Court of Appeal’s judgment is only the beginning.
