by Andrew Flake
As the use of international arbitration expands, so does the need for consistency in its rules and practices, and confidence in its ability to ensure absolute impartiality. That is so for both advocates and arbitrators. So I read with high interest the opinion of the UK’s Supreme Court in Halliburton Co. v. Chubb, which discusses in depth the issue of arbitrator disclosure under English law.
Since England-seated arbitrations are so common in international commercial transactions, the opinion would be important enough to merit attention. But its importance ranges beyond English law: the Court authored the opinion with a wider international arbitration audience in mind, both drawing on and intending to shape international norms. It received briefing and oral argument on international disclosure from intervenors including the ICC, the LCIA, the Chartered Institute, and others. In case you don’t have time to review the full opinion, which I’d encourage you to do, I’ll share the highlights here.
By way of background, the case involves one arbitrator serving on three panels, all of them related to insurance claims, all of them involving the Deepwater Horizon spill, and all of them involving the same global insurer, Chubb, using the same form of policy (the Bermuda Form). Chubb provided spill-related insurance in all three arbitrations, which concerned coverage issues, was provided by Chubb.
The first reference to arbitration involved Chubb and Halliburton. After Halliburon selected one arbitrator, and Chubb selected Rokison as the other, the two party-selected arbitrators were unable to agree on a chair. That left the decision to England’s trial-level court of record for commercial matters, the High Court.
The second reference to arbitration involved Chubb and Transocean. In the Chubb-Transocean arbitration, while the Chubb-Halliburon arbitration was also pending, Chubb again appointed Rokison.
Here’s the nub of what became a major dispute over disclosure: Although Rokison disclosed to Transocean his service in the Halliburton arbitration, he did not disclose to Halliburton his proposed nomination, or eventual service, in the Transocean arbitration.
Then, in a third arbitration, Rokison accepted appointment in another Deepwater Horizon dispute between Transocean and another insurer; while the insurer was different, this third-arbitration involved the Bermuda form and the same layer of insurance as in the second reference. Rokison did not disclose this appointment to Halliburton either, meaning that no disclosure alerted Halliburton to the fact Rokison would be concurrently serving in two other related Deepwater Horizon proceedings.
When Halliburton discovered the prior two appointments,, independently of the disclosures, it was understandably concerned and wanted to know more. Its counsel wrote to Rokison requesting additional information about the other two Transocean appointments and suggesting that, under the IBA Guidelines on Conflicts of Interest in International Arbitration, he should have disclosed both of them.
In doing so, counsel referred to the Orange List, covering circumstances that may, in the eyes of the parties, “give rise to doubts as to the arbitrator’s impartiality or independence.” Orange List cases must be disclosed, but after disclosure, if there is no objection, the arbitrator can serve.
It is worth pausing here to consider that disclosure is an independent duty, whether or not the arbitrator is fully impartial. The decision about continued service is one for the parties to make, and the Halliburton opinion expands on that distinction, and the circumstances — even without actual bias, which was never a contentions or anything the facts suggested existed on Rokison’s part — in which those disclosures need to be made.
Halliburton eventually applied to the High Court to replace Rokison as an arbitrator. While that application was pending, the second two tribunals released awards, both in favor of Chubb. The first tribunal (the subject of Halliburton’s challenge) then released its award, with one of the arbitrators, Professor Park, signing but including a statement that he was “disquieted” by the circumstances of the challenge, which he considered inconsistent with the parties’ expectation of “impartiality and evenhandedness.”
The Court of Appeals reversed, finding a duty of disclosure existed, and the matter moved to the Supreme Court.
After reviewing the perspectives of the intervenors, which differed depending on whether they were from arbitral institutions or industry-focused groups (more used to multiple appointments and a smaller pool of experienced observers), the Supreme Court set out its view of English law. It repeated the already-established test: “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”
In arguing why a fair-minded observer would have concerns, Halliburton focused on unconscious bias. It summarized why it believed unconscious bias could exist, and thus why disclosure was necessary, by focusing on the similarity of arguments Rokison would be hearing across the three proceedings:
(i) he accepted the benefit of a paid appointment on Chubb’s nomination when he was sitting on an arbitral
tribunal in reference 1; (ii) in so doing, he gave Chubb the unfair advantage of being
a common party to two related arbitrations with a joint arbitrator while Halliburton
was ignorant of the proceedings in reference 2 and thus unaware whether and to
what extent he would be influenced in reference 1 by the arguments and evidence in
reference 2; (iii) Chubb would be able to communicate with him in reference 2, for
example by its submissions and the evidence it led, on matters which might be
relevant to reference 1 and would know of his responses to those communications
while Halliburton would not even know that they had occurred; (iv) he failed to
disclose his appointment to Halliburton and thereby prevented it from forming its
own view as to whether it might lead to unfairness and from either making
submissions to the tribunal in reference 1 or otherwise proposing or taking practical
steps to mitigate the unfairness; and (v) he did not pay proper regard to Halliburton’s
interest in the fairness of the procedure.
What do you think? Despite his assurances that he would continue to be fair and impartial, and the absence of any evidence or suggestion of actual bias, should Rokison have made supplemental disclosures in the Halliburton-Chubb proceeding? (Spoiler alert — Although I want to unpack the discussion and analysis more in a later blog, the answer is…)
The Supreme Court agreed with Halliburton. Carefully considering the purposes disclosure serves, including letting the parties make decisions about issues of potential unconscious bias, the Court held “there is a legal duty of disclosure in English law which is encompassed within the statutory duties of an arbitrator under section 33 of the 1996 Act and which underpins the integrity of English-seated arbitrations.” It found the two other Transocean-arbitrations triggered that duty, and that Rokison should have provided disclosure to Halliburton.
Because of the opinion’s quality and depth, we’ll spend some time in a later post looking at just how the Supreme Court got there.