Halliburton v Chubb: Supreme Court rules on arbitrator bias

Out-Law News | 30 Nov 2020 | 4:38 pm | 2 min. read

Arbitrators risk being seen as biased and having their appointment to arbitral tribunals revoked by courts in England and Wales if they fail to notify businesses involved in arbitral proceedings of their appointment to other tribunals tasked with considering related subject matter and involving a common party, according to the UK Supreme Court.

However, in an eagerly anticipated ruling in the case of Halliburton v Chubb, the court confirmed that arbitrators are not automatically obliged, under English law, to make a disclosure in such cases. They must factor in their equal legal duties to privacy and confidentiality in the context of the specific facts and circumstances of each case to determine the right course of action, it said.

The Supreme Court considered the issues of arbitrator appointments and apparent bias after oil giant Halliburton Company challenged whether an arbitrator appointed as chair to an arbitral tribunal in proceedings involving it and insurer Chubb Bermuda Insurance could act impartially in the case.

Parties to arbitration have a legal right, under the Arbitration Act 1996, to request that a court remove an arbitrator from an arbitral tribunal sitting in England and Wales if "circumstances exist that give rise to justifiable doubts as to his impartiality".

Dickman Richard

Richard Dickman

Legal Director

The judgment provides clarity on the English law position on the duty of disclosure, whether and when disclosure is needed and emphasises that the test under section 24 of the Arbitration Act is a common law test of bias that is inevitably fact specific

Halliburton raised the challenge after the arbitrator failed to inform it that he had accepted appointment to another arbitral tribunal in a related case in which Chubb, but not it, was a party. Both tribunals were tasked with considering claims brought against Chubb in light of liabilities arising out of the explosion of the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010.

The Supreme Court, upholding the decisions of both the Court of Appeal and the High Court, held that, on the facts of the case, there was no apparent bias, and therefore no grounds for removing the chair as an arbitrator. It reached that view despite finding that the chair appointed to the Halliburton v Chubb arbitral tribunal had breached his legal duty of disclosure.

In its ruling the court clarified the legal test that applies to the duty of disclosure. It confirmed that even if a real possibility of bias is not established on the facts of a case, the duty to make the disclosure nonetheless arises if it might "reasonably" give rise to such doubt.

The Supreme Court explained that the legal test, and the assessment of the possibility of bias following disclosure, should be applied through the eyes of a "fair minded and informed observer", and account given to "the realities of international arbitration" and the "custom and practice in the relevant field of arbitration".

The failure to make a disclosure is a fact that the observer can take into account when assessing whether there is a real possibility of bias, the court said. This assessment should be made at the date of the hearing to remove the arbitrator, and not at the date of the arbitrator's acceptance of the subsequent appointment, it said.

International arbitration expert Richard Dickman of Pinsent Masons, the law firm behind Out-Law, said: "Although a real possibility of bias was not found against the chair, the Supreme Court expressly recognised that impartiality was a cardinal duty of an arbitrator. The court clarified that the legal duty of disclosure does not override the arbitrator's duty of privacy and confidentiality in English law. Unless the parties to the arbitration have expressly or implicitly waived their right to disclosure, an arbitrator sitting in multiple related arbitrations must make disclosure of the existence of the arbitration and the identity of the common party. This disclosure is not just a question of best practice but is a matter of legal obligation. It is encompassed in the statutory duties under section 33 of the Arbitration Act 1996."

"The judgment provides clarity on the English law position on the duty of disclosure, whether and when disclosure is needed and emphasises that the test under section 24 of the Arbitration Act is a common law test of bias that is inevitably fact specific. It reiterates that an arbitrator is under a duty to make disclosures of matters that might reasonably give rise to justifiable doubts as to their impartiality. In arriving at its decision the Supreme Court carried out a thoughtful analysis of the issues arising out of the central pillars of impartiality and confidentiality in English arbitrations," he said.