Supreme Court clarifies arbitrators' disclosure duties

The duty of disclosure on an arbitrator has been clarified by the UK Supreme Court, in a decision which held that although there had been a breach of the duty, a fair minded observer would not have inferred that there was a real possibility of bias as a result.

Five Justices unanimously refused an appeal by Halliburton Co in its application to remove a Mr Rokison as arbitrator in a dispute with Chubb Bermuda Insurance Ltd relating to liability following the explosion and fire on the Deepwater Horizon Drilling Rig in the Gulf of Mexico in 2010.

Mr Rokison, who was Chubb's nominee, was appointed to chair a three person arbitration panel following a contested High Court hearing.  from the disaster. The first appointment was by Chubb in claim against Chubb; the second was a joint nomination in a separate claim against another insurer. Halliburton then applied to the court under s 24 of the Arbitration Act 1996 for Mr Rokison's removal. That application was refused by the High Court, and by the Court of Appeal which found that, while the further appointments should have been disclosed, an objective observer would not in the circumstances conclude there was a real possibility Mr Rokison was biased. 

The Supreme Court dismissed the appeal, for reasons which differed in part from the courts below. 

Lord Hodge, with whom Lord Reed, Lady Black and Lord Lloyd-Jones agreed, said the duty of impartiality was a core principle of arbitration law, and a legal duty under English law. In considering an allegation of apparent bias against an arbitrator, the test was whether the fair minded and informed observer would conclude there was a real possibility of bias.

disclosed was subject to a duty of confidentiality, disclosure could only be made with parties' consent, express or inferred from the arbitration agreement itself in the context of custom and practice in the relevant field. 

The duty was to disclose matters which might reasonably give rise to justifiable doubts as to the arbitrator's impartiality. Failure to disclose was a factor for the fair minded and informed observer to take into account in assessing whether there was a real possibility of bias, who would assess failure having regard to the facts and circumstances as at and from the time the duty arose, but assess whether there was a real possibility of bias having regard to the facts and circumstances known at the time of the hearing to remove the arbitrator. 

Regarding the present appeal, the acceptance of multiple appointments involving a common party and overlapping subject matter might give rise to an appearance of bias; whether it did so would depend on the facts and in particular the customs and practice in the relevant field of arbitration. In this arbitration, where the circumstances might reasonably give rise to a conclusion that there was a real possibility of bias, the arbitrator was under a legal duty to disclose the further appointments unless the parties to arbitration had agreed otherwise, and Mr Rokison had breached his duty of disclosure.

However, having regard to the circumstances known at the date of the hearing at first instance, it could not be said that the fair minded and informed observer would infer from this failure to make disclosure that there was a real possibility of bias. At the time, it had not been clear that there was a legal duty of disclosure. The further arbitrations had commenced several months be resolved by a preliminary issue (as they in fact were) and that, if they were not, he would consider resigning from the Transocean arbitrations. There was therefore no likelihood of Chubb gaining any advantage by reason of overlapping references. There was also no question of his having received any secret financial benefit, and no basis for inferring any unconscious ill will on his part. 

Lady Arden, concurring, added that unless the arbitration was one where there was an accepted practice of dispensing with the nentment involving a common party and overlapping subject matter was likely to require disclosure of a possible conflict of interest. Confidentiality was an important and freestanding implied term, but in general, high-level disclosure about a proposed appointment in a further arbitration could be made without any breach of confidentiality by naming only the common party (who might be taken to have consented to disclosure) but not the other parties to the arbitration.

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