In my last blog post I discussed a Ninth Circuit case on repeat appointments by arbitrators and the issue of evident partiality. In this blog post I briefly discuss an English Supreme Court judgment on multiple appointments of an arbitrator, the duty to disclose and the rules of bias under English law.
In Halliburton Co. v. Chubb Bermuda Insurance Ltd., No. [2020] UKSC 48 (Nov. 27, 2020), the Supreme Court of the United Kingdom allowed the appointment of an arbitrator to stand, finding that at the time of the hearing to remove the arbitrator, a fair-minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts about the arbitrator’s impartiality. The court, however, found that the arbitrator should have disclosed his subsequent appointment, which overlapped with the first appointment and included one of the same parties arising out of the same underlying disaster.
The judgment is long, as many English judgments are, but it is worth reading the judgment or at least the summary of the judgment, because it points out some of the differences and similarities between UK and US arbitrations. The ultimate decision upholding the arbitrator’s appointment likely was the right result given the circumstances and likely would have been the result had the case been in the US courts (a challenge to a US arbitrator is nearly impossible until the final award is issued).
The stark contrast is between UK arbitration law, which by statute requires impartiality, and US arbitration law, which is governed by common law precedents, where a party-appointed arbitrator need not be impartial. This is especially true in reinsurance arbitrations, where case law has upheld the appointment of party-appointed arbitrators with predispositions toward the appointing party.
Both arbitration systems, however, require disclosure. In this case, the arbitrator failed to disclose the appointment in a subsequent arbitration where the same insurer was present and where the underlying loss was the same. The judgment made it clear that the case “raises important
questions about the requirement that there be no apparent bias and the obligation of
arbitrators in international arbitrations to make disclosure.”
On the issue of bias, the Supreme Court concluded as follows
Summarising the position so far, the English courts in addressing an allegation of apparent bias in an English-seated arbitration will (i) apply the objective test of the fair-minded and informed observer and (ii) have regard to the particular characteristics of international arbitration which I have discussed in paras 56 to 68. Those characteristics highlight the importance of proper disclosure as a
means of maintaining the integrity of international arbitration, a topic to which I now turn.
On the disclosure issue, the court held that there was a legal duty of disclosure under English law and held that
the arbitrator’s legal obligation of disclosure imposes an objective test. This differs from the rules of many arbitral institutions which look to the perceptions of the parties to the particular arbitration and ask whether they might have justifiable doubts as to the arbitrator’s impartiality. The legal obligation can arise when the matters to be disclosed fall short of matters which would cause the informed observer to conclude that there was a real possibility of a lack of impartiality. It is sufficient that the matters are such that they are relevant and material to such an assessment of the arbitrator’s impartiality and could reasonably lead to such an adverse conclusion. Whether and to what extent an arbitrator may disclose the existence of a related arbitration without obtaining the express consent
of the parties to that arbitration depends upon whether the information to be disclosed is within the arbitrator’s obligation of privacy and confidentiality and, if it is, whether the consent of the relevant party or parties can be inferred from their contract having regard to the customs and practices of arbitration in their field.
The court gave some guidance for Bermuda Form arbitrations:
in Bermuda Form arbitrations an arbitrator may, in the absence of agreement to the contrary by the parties to the relevant arbitration, make disclosure of the existence of that arbitration and the
identity of the common party in accordance with the practice which I have described without obtaining the express consent of the relevant parties.
On the main issues on appeal, the court reached the following conclusions:
where an arbitrator accepts appointments in multiple references concerning the same or overlapping
subject matter with only one common party, this may, depending on the relevant custom and practice, give rise to an appearance of bias.
unless the parties to the arbitration otherwise agree, arbitrators have a legal duty to make disclosure of facts and circumstances which would or might reasonably give rise to the appearance of bias. The fact that an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with only one common party is a matter which may have to be disclosed, depending upon the customs and practice in the relevant field. In cases in which disclosure is called for, the acceptance of those appointments and the failure by the arbitrator to disclose the appointments taken in combination might well give rise to the appearance of bias.
The court found that the arbitrator should have disclosed the subsequent appointments, but ruled that a fair minded observer would not have concluded on the date of the removal hearing that there was a real possibility of bias.
This is an important international arbitration decision, especially for Bermuda Form arbitrations, but which also has ramifications for other insurance and reinsurance arbitrations under English law. As many in ARIAS US have said, arbitrators should always err on the side of disclosure. Subsequent appointments, especially when they involve similar parties and the same underlying loss, should be disclosed to avoid any impression of bias.
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