Out-Law News | 24 Apr 2018 | 12:35 pm | 3 min. read
The court dismissed an appeal by oil and gas giant Halliburton against the appointment of an arbitrator, ‘M’, in a dispute with insurance company Chubb in a matter related to the 2010 Deepwater Horizon oil rig explosion.
The issues under debate in the CoA concerned whether and to what extent an arbitrator may accept appointments in multiple cases concerning the same or overlapping subject matter with only one common party, without giving rise to an appearance of bias.
The court also asked whether and to what extent an arbitrator can accept appointments in multiple, overlapping cases without disclosure; when an arbitrator should disclose circumstances which could give rise to justifiable doubts as to his impartiality; and the consequences of failing to make disclosure.
International arbitration expert Richard Dickman of Pinsent Masons, the law firm behind Out-Law.com, said the case demonstrated the potential tension between two of the fundamental principles of international arbitration: party autonomy and arbitrator impartiality.
“By choosing a private dispute resolution process, the parties give themselves the right to choose their own arbitrators – typically, one appointed by each party, and the third by the chosen arbitrators or by agreement between the parties,” Dickman said.
“However, despite being appointed by one of the parties, a party-appointed arbitrator must be impartial. Even the appearance of bias can be enough to justify a challenge against an arbitrator under the relevant institutional rules or in court. A key element of avoiding the appearance of bias is the duty imposed on arbitrators under institutional rules to disclose facts or circumstances giving rise to doubts about their impartiality,” Dickman said.
Dickman said there had been a number of challenges in the courts in recent years to apparent arbitrator bias. Cases had been both speculative and tactical, but there had also been cases with a real risk of bias.
“Arbitrators are, ultimately, in the business of obtaining appointments. They may, therefore, have a natural reluctance to compromise their ability to take the appointment,” Dickman said. “Arbitrators must, nevertheless, be scrupulous in disclosing relevant facts and circumstances potentially affecting their impartiality, as any failure to do so could lead to unwelcome and costly satellite litigation.”
In this most recent case, M was appointed by court order to serve as an arbitrator in the dispute between Halliburton and Chubb. He was Chubb’s preferred candidate and before confirming he was willing to be appointed, he disclosed to Halliburton that he had previously acted in a number of arbitrations involving Chubb.
Following this appointment, M was appointed as arbitrator in two separate arbitrations involving Deepwater Horizon owner Transocean. For one of these he was appointed by Chubb, and the other case concerned a separate insurance company. He did not disclose these appointments to Halliburton.
When Halliburton learned of the Transocean-related appointments it raised concerns about conflicts of interest with M. He replied to say he had not thought that International Bar Association guidelines required him to make disclosure as the cases did not raise similar issues. He said he was confident that he would be able to remain impartial in the arbitration between Halliburton and Chubb.
He remained as chairman of the tribunal, which issued an award in Chubb’s favour. However the arbitrator appointed by Halliburton said he could not join in the award as a result of his "profound disquiet about the arbitration's fairness".
The CoA broadly agreed with the High Court in its decisions on the issues under dispute.
It said: “We […] agree with the judge 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 of itself give rise to an appearance of bias.”
It said “something of substance” was required to show that there was actual bias in such cases.
The CoA said whether or not disclosure should be made depended on the prevailing circumstances at the time. While non-disclosure was a factor that should be taken into account when considering apparent bias, it could not “in and of itself justify an inference of apparent bias”.
The court said M should have “as a matter of good practice and, in the circumstances of this case, as a matter of law” disclosed the fact of his appointments in the Transocean arbitrations to Halliburton. However this did not mean he was biased, and the fact that Halliburton’s concerns had been fully expressed before substantive consideration of the case meant he would not have been unconsciously biased. As a result, the CoA dismissed Halliburton’s appeal.