Executive Summary

When should an arbitrator be removed pursuant to section 24 of the Arbitration Act 1996 as a result of overlapping appointments? Should an inference of apparent bias be drawn in cases where arbitrators fail to disclose multiple appointments? In this article we explore these questions and ask whether recent case law indicates that the arbitrators’ profession should be regulated.

When should an arbitrator be removed pursuant to section 24 of the Arbitration Act 1996 as a result of overlapping appointments? In particular, should an inference of apparent bias be drawn in cases where arbitrators fail to disclose multiple appointments? Is the ruling in Halliburton v Chubb [2018] EWCA Civ 817 inconsistent with earlier cases, such as Beumer Group UK Ltd v Vinci Construction UK Ltd [2016] EWHC 2283 (TCC), and do these kinds of cases show that the profession should be regulated?

Section 24 of the Arbitration Act 1996 (the “AA 1996”) provides that the Court has power to remove an arbitrator on selected grounds. These grounds include circumstances that “give rise to justifiable doubts as to his impartiality…” (section 24(1)(a)). This test is not dissimilar to the common law test for apparent bias (R v Gough [1993] AC 646 (HL)), being whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the arbitrator was biased.

Issues relating to the potential bias of arbitrators have manifested in the context of arbitrators accepting multiple appointments from one common party without the knowledge or consent of the other party. Although a situation can occur in court proceedings where a judge is involved in cases with a common party or which raise overlapping issues, the fact that arbitration is confidential and arbitrators rely on parties to appoint them creates a more nuanced problem in arbitral proceedings. Apparent bias could arise, for example, from the fact that an arbitrator might be seeking multiple appointments from one party or from asymmetry of information between the parties (i.e. one party being aware of certain evidence and/or how an arbitrator has previously decided similar issues, and being afforded a tactical advantage as a result).

This leads to the question of whether an arbitrator should disclose such appointments. Some institutional rules include provisions requiring disclosure of facts giving rise to justifiable doubts about an arbitrator’s impartiality, such as Article 11 of the ICC Rules of Arbitration and Rule 5.4 of the LCIA Arbitration Rules, and these disclosure obligations are ongoing throughout the course of proceedings under both sets of rules. However, the AA 1996 does not set out any legal requirements in respect of disclosure and individual arbitrators are largely unregulated and immune from public or press scrutiny.

The Court of Appeal recently addressed this issue in Halliburton Company v Chubb Bermuda Insurance Ltd and others [2018] EWCA Civ 817. In the absence of agreement between the parties, in June 2015, an arbitrator (“M”) was appointed by the High Court as the third arbitrator in proceedings relating to a claim made by Halliburton under its liability insurance policy with Chubb after the explosion of the Deepwater Horizon oil rig. M had been Chubb’s preferred candidate, but Halliburton had objected on the basis that M was an English lawyer and the contract was governed by New York law.

Before accepting the appointment, M disclosed that he had previously acted as arbitrator in a number of arbitrations in which Chubb was a party, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved. However, M did not subsequently disclose the fact that he later accepted two further appointments at the request of Chubb in arbitration proceedings concerning overlapping subject matter, but with a different claimant. When Halliburton discovered these appointments, M sought to explain that he had not made disclosure to Halliburton because it did not occur to him that he was under any obligation to do so and, in his view, the issues in the proceedings were unrelated. However, he accepted that, with the benefit of hindsight, it would have been prudent for him to do so and agreed to resign if Chubb consented (which it did not). Halliburton subsequently applied for M’s removal under section 24(1)(a) of the AA 1996 on the basis that his acceptance of the appointments, failure to disclose those appointments and response to Halliburton’s challenges all gave rise to an appearance of bias.

The application was dismissed by the Commercial Court and Halliburton appealed, partly on the basis that the Judge had erred in giving no or insufficient weight to M’s failure to disclose.

The Court of Appeal held that the starting point is the assumption that arbitrators are trustworthy and will decide a case solely on the evidence or other material in the reference in question, and that was equally so where there was a common party. In order to give rise to an appearance of bias, something more than overlapping subject matter with only one common party was required, and that something had to be “of substance” (paragraph 77).

The Court of Appeal held that arbitrators “should” disclose facts and circumstances, known to the arbitrator, which “would or might” provide the basis for a reasonable apprehension of lack of impartiality. This is therefore wider than the circumstances that could result in disqualification (only those that “would” give rise to justifiable doubts as to impartiality). In determining whether disqualification should take place, non-disclosure is just one factor to be taken into account. Therefore, although arbitrators should disclose facts which might objectively lead to doubts regarding apparent bias, a non-disclosure of facts or circumstances which do not, on examination, give rise to justifiable doubts as to impartiality, could not, in and of itself, justify an inference of apparent bias.

In this case, the Court of Appeal unanimously held that whilst M ought to have made a disclosure, both as a matter of good practice and, in the circumstances, as a matter of law, the fair-minded and informed observer would not conclude in this case that there was a real possibility that he was biased due to the accidental nature of the omission to disclose and the limited degree of overlap between the proceedings.

The Court of Appeal therefore implicitly overturned the ruling in Beumer Group UK Ltd v Vinci Construction UK Ltd [2016] EWHC 2283 (TCC). This case concerned two disputes commenced by the claimant (Beumer), who was a subcontractor on a project, against the main contractor (Vinci) and its own sub-subcontractor regarding the same project. Both disputes related to delays to the project and were referred to separate adjudications at the same time with the same adjudicator. Beumer gave contradicting facts in these two sets of proceedings. The High Court held that the same rules apply in relation to disclosure as if the adjudicator were an arbitrator (paragraph 29) and that, as the adjudicator had not disclosed his involvement in both sets of proceedings and given Vinci the opportunity to comment, an appearance of bias was raised, as would be the case if the adjudicator had held a unilateral telephone conversation with one party (paragraph 31).

Whilst the Court of Appeal in Halliburton held that an arbitrator “should” disclose, a breach of this obligation would, however, hold no legal consequences. The starting point should be that any failure to disclose multiple appointments shows that an arbitrator is biased. The presumption can then be rebutted if there are exceptional grounds that prove otherwise. This position is consistent with the IBA Guidelines on Conflicts of Interest in International Arbitration 2014 (the “IBA Guidelines”) which note that disclosure does not imply that an arbitrator is biased, as otherwise the arbitrator would have declined the nomination or resigned (General Standard 3(c)). A lack of disclosure must hold greater weight.

A second cause of confusion is that, when citing the IBA Guidelines, the Court of Appeal stated that, pursuant to the explanation to General Standard (3) at (d), there is no duty of inquiry on the arbitrator (paragraph 69). However, the duty of inquiry is actually dealt with (and imposed) under General Standard 7(d).

The Supreme Court gave permission to hear an appeal of the Halliburton case on 29 November 2018. It is hoped that a final ruling on the matter will help prospective arbitrators by providing clearer guidance regarding the information which they must disclose, whether they have a duty to make inquiries, and the consequences of failing to do so.

One solution could be to adopt clearer guidance based on the IBA Guidelines, which currently only apply where the parties have so agreed or the tribunal has adopted them. These provide a non-exhaustive list of circumstances in which appointments should be declined or disclosures made in order to protect against bias, and are arranged based on a “traffic light” system based on their significance. The “orange” list states that arbitrators should disclose if they have been “appointed as arbitrator on two or more occasions by one of the parties, or an affiliate of one of the parties” (unless the arbitration is so niche such that the pool of arbitrators is small and parties are familiar with the custom, for example, maritime or sports arbitration). Adopting such an approach would impose a duty of disclosure and the parties would be deemed to accept the arbitrator if no timely objection is made.

Regardless of the outcome, it is clear that repeat appointments are far from obsolete. There are a small pool of arbitrators, and even fewer that are experts in particular areas of law or hold certain specialisms. Until such time as the Supreme Court provides clearer guidance on the issue or the pool of arbitrators widens and diversifies, it will be necessary to either rely on self-regulation of arbitrators (which necessarily means different things to different arbitrators, depending on their own background) or the parties themselves must take control. For example, by incorporating soft law instruments into their arbitration agreements (such as the IBA Guidelines) or adopting a default appointment rule (such as that provided for in the LCIA Rules). Without a disciplinary body for arbitrators to regulate the profession, removing uncertainty in relation to apparent bias would go some way to stemming any doubts regarding the integrity of the arbitral process.