The Hon’ble English Supreme Court, in the case of Halliburton Co. vs Chubb Bermuda Insurance Ltd, had addressed a very crucial question of law regarding the test laid down to understand apparent biasedness by an arbitrator. The Hon’ble Supreme Court also laid down the framework to resolve the issues of disclosure and removal of an arbitrator. While the judgement passed in this case is said to have brought a clarity regarding certain factors and criteria that need to be looked by the parties while appointing an arbitrator to resolve their disputes but there are certain voids which are yet to be answered. It is worth noting, that submissions were also taken from several important arbitral institutions that are based in United Kingdom (“UK”) like Chartered Institute of Arbitrators (“CIArb”), London Court of Arbitration(“LCIA”) and the Court of Arbitration of the International Chamber of Commerce (“ICC”) because of the importance of the issue as it affects the entire arbitration community in England. In this article we shall be highlighting the important grounds laid down by the Hon’ble Supreme Court and shall also be elaborating on the implications of this judgement on commercial arbitration practice in general.
BRIEF OF THE CASE
In this case a dispute arose between the two parties regarding the covering of liabilities of Halliburton Company which had arisen due to oil spill in Deep Water Horizon. The dispute was decided to be resolved via arbitration by both the parties for which Mr. Kenneth Rokinson QC was appointed as the chair of the arbitral tribunal by the High Court in accordance to the Bermuda Form arbitration (considered as common practice in the industry). Though the appointed arbitrator had disclosed all the information in relation to the previous appointments in Deep Water Horizon arbitrations, but he failed to state that he was an arbitrator in which one of the parties was Chubb Bermuda Insurance Ltd.
After Halliburton Company discovered regarding this appointment, it moved the High Court and later the Court of Appeal, for removal of the Mr. Kenneth Rokinson QC as the chair of the panel arbitral tribunal, but the application was rejected. The matter then reached the Supreme Court wherein following two important issues were addressed:
· 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.
· Whether and to what extent an arbitrator may accept the multiple references described in the first issue without making disclosure to the party who is not the common party.
In the end, even the Hon’ble Supreme Court dismissed the application of Halliburton Company. It was observed during hearing of the case, that even though the arbitrator had breached in his duty of disclosure, but from the viewpoint of an informed and a fair-minded observer it could not be concluded that these circumstances would create justifiable doubts over the partiality aspect of the arbitrator. The tests that have been laid down by the Hon’ble Supreme Court with regard to disclosures shall be analyzed in the next part.
GROUNDS TO DETERMINE ARBITRATOR’S APPARENT BIAS
The Hon’ble Supreme Court bench in this case had laid down certain legal principles that need to be looked into while determining whether an arbitrator was biased or not. We will discuss this in detail.
· Impartiality on the part of Arbitrator
It was highlighted that under section 33 of the English Arbitration Act it has been stated that a constituted arbitral tribunal must “act fairly and impartially as between the parties.” So, the principle of impartiality is derived from the act itself. Further, section 24 of the English Arbitration Act talks about “circumstances exist that give rise to justifiable doubts as to his [or her] impartiality.” In a way, section 24 discusses about the common law test for apparent bias. It was stated in the case of Porter v Magill, that “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility”. It was also observed that there are several factors that need to be looked into while assessing the aspect of apparent bias like a) privacy and confidentiality of arbitration; b) arbitrator’s decision is subject only to very limited powers of review; c) the financial benefit received by arbitrators as a result of nomination; d) the broad range of backgrounds of arbitrators; e) references concerning the same or overlapping subject matter, the non-common party has no means of informing itself of the evidence led before and legal submissions made to the tribunal; and, f) different understandings of the role and obligations of the party-appointed arbitrator.
· Arbitrator’s duty of disclosure
It was observed that the English Arbitration Act did not provide any guideline regarding information that needs to be disclosed by the arbitrator. So, the position was not clear whether the disclosure requirements are considered as good arbitral practice or a legal duty. The Hon’ble Supreme Court stated that statutory duties that have been provided for the arbitrator under section 33 of the Arbitration Act, impliedly provided for a contract between the arbitrator and the parties, wherein the arbitrator promises to act impartially. The English law of arbitration provides that arbitrators disclose facts and circumstances which might give rise to justifiable doubts to his or her impartiality, while looking from the perspective of objective observer. Therefore, unless and until the parties have waived their right to disclosure impliedly or explicitly, the requirement for disclosure is not a good practice but a legal obligation. The Court also emphasized on the International Bar Association (IBA) guidelines which provide for the best practices of transparency during arbitration proceedings and the approach that should be taken by an arbitrator. The Hon’ble court stated that “IBA Guidelines assist the court in identifying what is an unacceptable conflict of interest and what matters may require disclosure”, but it was clarified that these guidelines are non-binding on the parties.
· Contents that need to be disclosed during overlapping jurisdictions
Regarding this matter, it was emphasized by the Hon’ble Supreme Court that before challenging any disclosure requirements by the arbitrator, it is important to prove that question involved is material and relevant for assessing whether the arbitrator was impartial or not which might affect the arbitration proceedings in toto. If these matters are left unexplained, then this will lead to doubts which are justifiable regarding the arbitrator’s impartiality. Now for disclosure regarding the appointments in multiple references wherein the arbitrator has appeared in matter where there was a common party, it totally depends upon practice and customs that are followed under the type of arbitration that is being questioned.
· Understanding the relationship between the duty of disclosure, confidentiality, and privacy
There is uncertainty regarding the clash between duty of disclosure by the arbitrator and maintaining the privacy and confidentiality of the previous proceedings by the arbitrator, which are essential ingredients of international arbitration. So, when a new arbitrator is appointed, the disclosures can be made by the him or her only when the parties to whom he or she previously owed duty have given their consent. As discussed earlier, consent regarding the disclosure is also subject to custom or practice in the field of arbitration. It has been highlighted that “In such a circumstance, if a person seeking appointment as an arbitrator in a later arbitration does not obtain the consent of the parties to a prior related arbitration to make a necessary disclosure about it, or the parties to the later arbitration do not consent to the arbitrator’s disclosure of confidential matters relating to that prospective appointment to the parties to the earlier arbitration, the arbitrator will have to decline the second appointment.”
· Consequences of non-disclosure by Arbitrator
The court felt that while assessing the requirement for disclosure, the situation needs to be looked into whether it is possible for the arbitrator to have the requisite knowledge during the particular circumstances. However, it was also put forth that the changes in circumstances may result in mitigating or aggravating the seriousness of the non-disclosure. Therefore, a non-common party to a case who did not have any knowledge about the arbitrator’s prior involvement due to non-disclosure, might create apprehension of apparent bias in the mind of the non-common party.
· When can the bias be assessed
By giving reference to section 24 of the English Arbitration Act, it was ruled by the court that assessment regarding the apparent bias must be made at the time of hearing of the application. It was stated that the court has power to remove the arbitrator by asking: “whether the fair-minded and informed observer, having considered the facts then available to him or her, would conclude that there is a possibility that the arbitrator is biased.”
This judgement has made certain important observations regarding the arbitrator’s duty of disclosure and how such disclosures can remove the apprehension of apparent bias on his or her part. This case is of international importance as it affects the choice of parties to choose London as a seat for arbitration in the future. This case has not only affected the parties but also several imminent arbitration institutions in England, who might need to relook into their rules for disclosure before appointing an arbitrator. Even though in this judgment, the arbitrator was not removed, but this cannot be declared as a precedent for all the cases in the future as the aspect of what is to be disclosed and what shall not be amounting to bias depends of the facts and circumstances of each case.
The Hon’ble Supreme Court in this case laid down legal principles regarding disclosures which need to be looked into by both the parties as well as arbitrators before the arbitration proceedings take place. The court has taken into consideration two factors and has also tried to strike a balance between them i.e. (i) importance of disclosure and (ii) custom and practice in particular fields of arbitration. Even though this judgement is welcomed, but by emphasizing on different practices in different arbitration fields, there are a lot of questions which are left unanswered and left space for development in law. One more question regarding subsequent appointments of arbitrators in overlapping cases with common parties is whether this can be permitted in the future. If such circumstances are not disclosed by an arbitrator, it might be a cause of concern for non-common party, thus defeating the objective of impartiality of arbitrator. But overall, it is believed that this judgment provides a proper framework and addresses the issues of arbitrator’s disclosure and removal.