Bias by Arbitrators: The UK Supreme Court Clarifies the Law

What should a party do when it discovers that an arbitrator determining its dispute has served or is serving on tribunals in a significant number of other disputes involving related issues and a common opposing party? Should the arbitrator have disclosed this in the interests of transparency? The UK Supreme Court has considered these issues in its recent judgment in Halliburton Company v Chubb Bermuda Insurance Ltd, and its conclusions may trouble those who use arbitration to resolve disputes.

The problem

Arbitrators, like judges, must not be biased or give the appearance of bias. However, unlike judges, in many instances an arbitrator is nominated by one or more of the parties to the arbitration. The frequency of nomination or appointment by a particular party could raise concerns of apparent bias or otherwise create doubts about a lack of impartiality.

While English court judgments are generally public, arbitrators’ awards are usually private. Consequently, little information is available for one party to understand the extent of an arbitrator’s prior appointments by another party. Given that lack of transparency, the onus is on an arbitrator to disclose to arbitral parties information that might suggest an appearance of bias. The UK Supreme Court’s recent judgment considers the basis and extent of an arbitrator’s duty of disclosure concerning similar appointments and what a failure to disclose means for his or her appointment.

Background

The judgment concerns an ad hoc arbitration arising from an insurance policy provided by Chubb to Halliburton. Each party appointed one arbitrator to the tribunal. Unable to agree on a third arbitrator, the parties sought an order from the High Court in London, which duly appointed Ken Rokison QC, Chubb’s preferred candidate. Later, Mr Rokison QC agreed to be appointed arbitrator in other arbitrations arising from the same facts and circumstances but involving other parties. He did not inform Halliburton of these appointments.

When Halliburton found out, it applied to the High Court to replace Mr Rokison QC but failed at first instance and on appeal. Halliburton obtained permission to appeal to the UK Supreme Court.

The decision

The judgment clarifies a number of related issues including that, in English law, an arbitrator’s duty of impartiality applies equally to all arbitrators regardless of who appoints them.

From this proposition, the Supreme Court considered situations where an arbitrator has appointments to multiple tribunals with similar facts and circumstances and at least one common party. It confirmed that arbitrators are under a legal duty to disclose such arbitral appointments in circumstances where those appointments might reasonably cause a hypothetical observer to conclude that there is a real possibility of bias. While that observer will have regard to the customs and practices of the particular industry that the arbitration concerns, the test is an objective one — rather than the subjective view of the party complaining.

However, and most important for the party not involved in the other proceedings, a failure to disclose will not in itself mean that there is a real possibility of bias. Rather, it is only one of the facts and circumstances to be taken into account when assessing whether there is a real possibility of bias.

What does this mean for your arbitrations?

Any party seeking to remove an arbitrator ought to give careful thought to what it seeks to achieve strategically by such a challenge. Although the Supreme Court was clear that Mr Rokison QC bore no ill will to Halliburton, the first instance judge described allegations made by Halliburton’s lawyers as “grossly offensive.” Not all arbitrators will accept allegations of impropriety with equanimity. Parties seeking to remove an arbitrator should weigh the risk of their challenge failing and consider the potential impact of a new, replacement arbitrator joining the tribunal.

If removal of an arbitrator is in a party’s interest, that party will want to move quickly before any award is rendered. This will often involve seeking relief from supervising courts, and on an urgent basis. Key to any challenge is ensuring that a party’s legal team has sufficient knowledge and experience in both arbitration matters and litigation before the courts where any challenge is to be made.

The Court’s observation that “there are differing understandings of the role and obligations of the party-appointed arbitrator” may facilitate more challenges based on parties seeking to show that an arbitrator appointed by the other side is predisposed to that party who appointed him or her.

Regardless of the basis for removal, the “objective” nature of the test means that the party seeking removal will need good evidence to establish that a hypothetical observer would conclude there is a real possibility of bias. That burden will be more challenging to meet than if a party simply had to demonstrate its own subjective view of apparent bias — one reason this judgment could be a concern to parties who frequently use arbitration to resolve their disputes.

Finally, many arbitral institutions and bodies require their members to adhere to a higher standard of conflicts management and transparency than that established by the Supreme Court. Parties before such bodies will need to approach the issues raised by this judgment differently than parties before ad hoc tribunals. Drawing on extensive experience with a wide range of institutional and ad hoc arbitration, Sidley is particularly well placed to deal with this situation wherever it arises.