Home Marine InsuranceArbitration Optics and Context in Arbitral Appointments: A Review of the UK Supreme Court Judgment in Halliburton Company v Chubb Bermuda Insurance Ltd November 2020

Optics and Context in Arbitral Appointments: A Review of the UK Supreme Court Judgment in Halliburton Company v Chubb Bermuda Insurance Ltd November 2020

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Optics and Context in Arbitral Appointments: A Review of the UK Supreme Court Judgment in Halliburton Company v Chubb Bermuda Insurance Ltd November 2020

In its landmark decision today the UK Supreme Court has confirmed and clarified the obligation on arbitrators to make disclosures in overlapping multiple appointment situations to avoid doubts as to their impartiality while highlighting and distinguishing the unique characteristics of sector-focussed arbitration such as those conducted under the auspices of the LMAA.

In what has been one of the most eagerly anticipated judgments of 2020, the UK Supreme Court has finally handed down its decision in Halliburton Company v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48.The proceedings raised questions of law of general importance relating to the integrity and reputation of English-seated international arbitration, including arbitrations conducted in trade specific sectors. As such, these court proceedings arising from the challenge to an arbitrator appointment (and progressing all the way from the High Court through the Court of Appeal to the Supreme Court) have attracted the attention of various international arbitration bodies which appeared as interveners in the proceedings and filed submissions as to the wider issues raised by the appeal.

HFW’s team which successfully represented the London Maritime Arbitrators Association as an intervening party in the Supreme Court proceedings heard in November 2019 consisted of partner George Eddings, who has since retired from the firm to become an arbitrator, associate Cecilie Rezutka and trainee Eleanor Duprez, with partners Craig Neame and Jonathan Webb supervising after George’s retirement. The firm instructed Nick Vineall QC and Andrew Stevens at 4 Pump Court.

The case concerned a dispute arising out of Halliburton’s discovery that following the appointment of Mr Rokison QC (who was formerly known as “M”) as chair in an initial reference, the arbitrator had subsequently accepted arbitral appointments in two other references, both of which also arose out of the Deepwater Horizon oil spill incident.

In a long and carefully reasoned decision, the five Supreme Court Justices hearing the matter have unanimously dismissed the appeal brought by Halliburton and have held that the arbitrator is not to be removed. The main part of this Judgment was delivered by Lord Hodge (with whom Lord Reed, Lady Black, and Lord Lloyd-Jones concurred) while Lady Arden reached the same conclusion, developing her own reasoning on some points.

The Supreme Court answered positively in relation to the first question on appeal, confirming that the arbitrators can accept multiple appointments in overlapping arbitrations where the same party is common to the proceedings without giving rise to an appearance of bias, but noting that the decision will depend on the relevant circumstances and the forum of the particular arbitration. The Court accepted that this situation can, in some circumstances, potentially give rise to an appearance of bias because it could be seen to confer unfair advantage to the common party in other references.

As regards the second question, whether an arbitrator can accept multiple appointments with an overlap without giving disclosure of the appointments, Lord Hodge emphasised the fact that arbitrator impartiality (both in face and appearance) is axiomatic to our system, and confirmed the position previously advanced by the Court of Appeal to the effect that arbitrators are under a legal duty of disclosure in such situations. The Supreme Court followed the test previously applied by the Court of Appeal: Would or might the matter reasonably cause an objective observer to conclude that there was a real possibility that the arbitrator was biased?

On this basis, the Court found that Mr Rokison was under a legal duty to disclose, and should have disclosed, but that on the facts, it was not a sufficiently serious breach to warrant his removal as an arbitrator. They concluded that a fair-minded and informed observer would not infer from Mr Rokison’s oversight in all of the circumstances that there was a real possibility of unconscious bias.

The Supreme Court has, however, also gone to considerable lengths to emphasise that different contexts and fields of arbitration matter greatly to the questions raised by this case. It stated that the objective observer is taken to be informed of the facts and circumstances of the dispute and inherent traditions/practices of the particular type of arbitration in question. In this regard, the Court has taken into acount the LMAA’s pleaded position and has recognised that some industries and trade sectors, such as the maritime community with LMAA and the commodities sector with GAFTA, will follow practices where disclosure would be unusual and it is not needed.

Lady Arden suggests that (unless there is an accepted practice of dispensing with any need to obtain the parties’ consent to further appointments) an arbitrator should generally proceed on the basis that a further appointment involving a common party and overlapping subject matter is likely to require disclosure of a potential conflict of interest.

While it remains to be seen how the law governing disclosure obligations in the context of arbitrator appointments develops, it seems unlikely that the Supreme Court’s decision in the Halliburton, with its fact specific findings and extensive references to special circumstances applying in sector related arbitrations, will be the final word on the mater.

A full analysis and comment on the Halliburton Judgment is here.

Please contact one of us or your usual HFW contact.

 Jonathan Webb
Email Craig Neame
Email Cecilie Rezutka
Email Damian Honey

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