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The UK Supreme Court has ruled in significant litigation concerning the impartiality of arbitrators, and their duties of disclosure and confidentiality, with Chubb’s lead lawyer, Clyde & Co chairman Michael Payton QC, calling the result “a great victory for common sense”.
The case concerned an arbitrator appointment made to resolve a Bermuda Form liability insurance dispute arising from the Deepwater Horizon disaster in 2010.
Chubb opposed Halliburton’s challenge to the proposed chairman, Ken Rokison QC, who had inadvertently failed to disclose his appointments as an arbitrator in various cases connected to Deepwater.
Halliburton said this raised issues of bias; Chubb disagreed. Following two losses at trial and on appeal, Halliburton, represented by K&L Gates, asked the Supreme Court to decide the matter.
At stake was the issue of whether an arbitrator who accepts appointments in multiple cases with overlapping similar issues can appear to be biased. If so, were they under a legal obligation to disclose circumstances that might give rise to justifiable doubts as to impartiality?
In his judgment, Lord Hodge, writing for the court, said: “There appears to have been a lack of clarity in English case law as to whether there was a legal duty of disclosure and whether disclosure was needed.”
Such a duty, the court confirmed, would exist if any facts or circumstances arose that might reasonably give rise to allegations of bias, subject to party agreement. The duty to disclose would depend on the facts; while any agreement to disclose would be either express or implied.
The Supreme Court held that under s24 of the Arbitration Act, a common law test applied, namely, that the existence of bias would depend, objectively, on the specific facts of an individual case.
That, said Emma Ager, of Clyde & Co, who acted for Chubb, meant London arbitration was in step with international norms.
She added: “The court has preserved the integrity of English arbitration and the twin pillars of confidentiality and fairness with a thoughtful analysis of the issues that maintains the central importance of impartiality in English arbitrations, whilst remaining alive to the practical issues arising in particular circumstances and on particular facts.”
Chubb v Halliburton matters because, across the shipping, insurance, and commodities sectors, parties from both sides often appoint the same arbitrators to hear cases regularly; their trade bodies intervened with the London Maritime Arbitration Association (LMAA) and the Grain and Feed Trade Association (GAFTA) being represented by HFW and Gately respectively.
Leading arbitration institutions also intervened, including the London Court of International Arbitration (instructing Freshfields Bruckhaus Deringer), the International Chamber of Commerce (instructing boutique firm Three Crowns) and the Chartered Institute of Arbitration (instructing Louis Flannery QC of Mishcon de Reya and Duncan Bagshaw of Howard Kennedy).
In a briefing, Flannery described the ruling as ‘to say the least, disappointing’ as, despite propounding a duty of disclosure, it 'denuded that duty of any teeth" in failing establishing a principle that there should be a presumption of apparent bias, once that duty was established'.
He added: ‘It was open to the court to set a bright line example and make clear that once the breach of the duty to disclose was established, there should be a presumption of apparent bias, [with the] onus passing to the arbitrator to demonstrate otherwise.’
However, Agar said the court had “taken a common-sense approach… that rejects any idea of a bright line rule,” adding the court supported the trade bodies’ case; the duty did not, of itself, give rise to a need to disclose, which specifically included GAFTA, LMAA and reinsurance arbitrations.