Court of Appeal clarifies English law on arbitrators' duty to disclose multiple appointments

The Facts

The case arose from the Deepwater Horizon disaster in the Gulf of Mexico, considered to be the largest marine oil spill in history. Halliburton, an oilfield services provider, found itself embroiled in a series of lawsuits following the disaster, having provided the cement intended to seal the oil well in the event of such a disaster to BP. 

A dispute arose between Halliburton and its insurer, Chubb Bermuda ("Chubb"), regarding coverage for Halliburton's liabilities arising from the spill. Each party appointed an arbitrator of its choice but a dispute ensued regarding the third arbitrator. Ultimately, a third arbitrator – "M" – was appointed by the High Court.

Subsequently, M accepted nominations in two other disputes arising from the Deepwater Horizon disaster, in one case having been nominated by Chubb. When Halliburton learned of these subsequent appointments it objected, leading to an application to remove M under section 24(1)(a) of the Arbitration Act 1996 (the "1996 Act") on the basis that his appointment in the multiple arbitrations gave rise to justifiable doubts as to his impartiality. 

Halliburton's application was initially rejected by Mr Justice Popplewell and Halliburton appealed to the Court of Appeal.

The judgment

The test to be applied under section 24 is the common law test of bias: whether a fair-minded and informed observer, having considered the relevant facts, would conclude that there existed a real possibility of bias. Applying this test, the Court of Appeal also rejected the application.

Whilst acknowledging that the acceptance of multiple appointments concerning the same or similar subject matter could give rise to concerns regarding inside information and knowledge, the court concluded that this itself did not justify an inference of apparent bias. Hamblen LJ said:

"Judges are assumed to be trustworthy and to understand that they should approach every case with an open mind. The same applies to adjudicators, who are almost always professional persons."

Interestingly, he went on to note:

"That is not to say that, if it is asked to redetermine an issue and the evidence and arguments are merely a repeat of what went before, the tribunal will not be likely to reach the same conclusion as before".

The Court of Appeal also considered whether M was under any duty to disclose the other appointments to Halliburton - non-disclosure itself being a factor to be taken into account in considering the question of apparent bias. Hamblen LJ took the view that, in the particular circumstances of the case, M ought to have disclosed his involvement in the other arbitrations because it might have led a fair-minded observer to consider that there was a real possibility of bias. This conclusion was motivated in part by the fact that "best practice in international commercial arbitration would have required disclosure of the other appointments"; a reference to the IBA Guidelines on Conflicts of Interest in International Arbitration, which include within their "Orange List" of circumstances which ought to be disclosed by an arbitrator that:

"The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties, or an affiliate of one of the parties."

Nevertheless, the Court of Appeal concluded that a fair minded and informed observer would not consider that there was a real possibility that M was biased.

Comment

The judgment clarifies that there might be circumstances in which an arbitrator is required to disclose his/her involvement in other proceedings where such involvement would nevertheless be insufficient to justify his/her removal as arbitrator. In other words, the test for disclosure appears to be "might the circumstances give rise to doubts?" whereas the test for removal under section 24 remains "would the circumstances give rise to doubts?" The clear message to arbitrators is: if in doubt, disclose.

The judgment is unlikely to ease the concerns of some parties regarding the repeat appointment of arbitrators in similar claims; a criticism often aimed at insurers, but which is relevant to other sectors as well. In insurance disputes, such concerns arise from the theory that, where a dispute concerns a particular policy wording (in the present case the highly specialised Bermuda Form policy) or where multiple disputes arise from the same set of underlying facts (as was the case with the Deepwater Horizon disaster), an arbitrator who has decided the same question in previous proceedings, can be expected (and perhaps therefore relied upon) to reach the same conclusion in a subsequent, separate claim.

Whilst the Court of Appeal took the view that arbitrators should be afforded the same degree of trust as judges, arguably the two roles are different in some very important respects. Arbitrators are, unlike judges, paid by and often appointed by parties, they are not regulated and their decisions are largely protected from public scrutiny by confidentiality and from judicial scrutiny by limited rights of appeal. Given this, questions are likely to remain surrounding the appropriateness of repeat appointments in similar cases.

For more information please contract Garbhan Shanks, Partner and Head of International Arbitration on garbhan.shanks@michelmores.com or +44 (0)207 659 4636 or  Harriet Chopra, Associate at harriet.chopra@michelmores.com or on +44 (0)207 659 4626.