Arbitrators: Impartiality and the duty to disclose overlapping appointments

The case concerned allegations of apparent bias made against Ken Rokison QC², the chairman of an English-seated arbitration tribunal. Under section 24(1)(a) of the Arbitration Act 1996 (the "1996 Act"), a party may apply to the Court to remove an arbitrator on the grounds that circumstances exist that give rise to justifiable doubts as to their impartiality. In this case no allegation of actual bias was made against Mr Rokison, a very experienced and well-respected arbitrator; however, Halliburton (one of the parties to the arbitration) did consider that the circumstances, namely Mr Rokison's appointment as an arbitrator in other disputes concerning the same underlying facts involving the same defendant insurer (Chubb), did give rise to an appearance of bias, contrary to the general principle of English law that justice should not only be done but be seen to be done. Accordingly, Halliburton applied to the Court to have Mr Rokison removed as Chairman of the tribunal in its arbitration with Chubb.

Although the appeal arose in the context of an ad hoc Bermuda Form arbitration³, as the issues raised by the appeal have implications for the conduct of arbitrations more generally, particularly where market issues give rise to multiple arbitrations frequently involving common parties and arbitrators, various arbitral bodies⁴ were permitted to intervene in the appeal to the Supreme Court. The principal issues raised in the appeal were:

(i) whether and to what extent an arbitrator may accept appointments in multiple arbitrations concerning the same or overlapping subject matter with only one common party without giving rise to an appearance of bias; and

(ii) whether and to what extent the arbitrator may do so without disclosing those other appointments.

The appeal concerned Mr Rokison's appointment as an arbitrator in three arbitrations arising out of the insurers' denial of liability under three Bermuda Form excess liability policies for losses claimed by the insureds (Halliburton and Transocean) as a result of payments made to settle claims against them in the US. The underlying claims arose out of the explosion and fire which occurred on the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010, while it was being plugged as part of an operation to abandon the well. Transocean, the owner of the rig, had leased it to BP; Halliburton had provided cementing and well-monitoring services to BP.

The US Government claimed civil penalties against Transocean, BP and Halliburton. The companies also faced private damages claims structured through a Plaintiffs' Steering Committee (the "PSC"). In September 2014, a Federal Judge apportioned blame for the disaster: Transocean (30%); BP (67%); Halliburton (3%). However, Halliburton had settled its PSC claims before judgment for USD 1.1 billion. Following the judgment, Transocean settled its PSC claims for USD 212 million and also paid civil penalties to the US Government of USD 1 billion.

Both Transocean and Halliburton made claims for these payments under their excess liability policies with Chubb⁵. Chubb denied liability for the claims on the grounds that the PSC settlements were not reasonable and that it had acted reasonably in not consenting to the settlements. Further, in relation to Transocean's civil penalties payment, Chubb asserted that this fell outside the terms of its cover.

The Halliburton Arbitration

The first of the three arbitrations underlying the appeal was commenced by Halliburton against Chubb in January 2015. As the two party-appointed arbitrators were unable to agree on the tribunal chair, an application was made to the English High Court, further to which Mr Rokison was appointed by the Court to chair the tribunal. Prior to his appointment, Mr Rokison (one of the people proposed to the Court by Chubb) had disclosed to the parties and to the Court that he had been appointed as an arbitrator previously in a number of arbitrations involving Chubb (including as Chubb's nominated arbitrator), and that he was currently appointed as an arbitrator in two arbitrations involving Chubb. Whilst Halliburton made submissions opposing Mr Rokison's appointment at the hearing, it did not appeal the Court's order to appoint Mr Rokison as chair of the tribunal. Halliburton served its Statement of Claim in September 2015; Chubb served its Defence in December 2015.

The First Transocean Arbitration

Transocean commenced a separate arbitration against Chubb. In December 2015, Chubb, acting through the same claims manager and solicitors as the Halliburton Arbitration, appointed Ken Rokison as its party-appointed arbitrator. Prior to his appointment, Mr Rokison gave the same disclosure to Transocean as he had given to Halliburton of his previous involvement in arbitrations involving Chubb, and also disclosed his appointment as chair of the Halliburton Arbitration tribunal. Transocean did not object to Mr Rokison's appointment. However, Mr Rokison did not (and this was key to Halliburton's appeal to the Supreme Court), advise Halliburton of his Transocean appointment.

The Second Transocean Arbitration

Transocean also started a second arbitration against a different insurer on the same excess layer as Chubb who had also declined Transocean's claim on similar grounds. In August 2016, Mr Rokison agreed to be appointed by the parties as a substitute arbitrator in the Second Transocean Arbitration. Mr Rokison did not disclose this further appointment to Halliburton.

Conduct of the Arbitrations

Before any substantive hearing took place in the Halliburton Arbitration, the tribunals in the two Transocean Arbitrations were asked to determine, as a preliminary issue, whether Transocean's civil penalties payment should be taken into account in calculating the exhaustion of the underlying layers of insurance and Transocean's self-insured retention. If this issue was determined in favour of the insurers, it would potentially dispose of Transocean's claim on the excess layer. The hearings on this issue in the two Transocean Arbitrations took place in November 2016.

On 10 November 2016, Halliburton discovered Mr Rokison's appointment in the two Transocean Arbitrations. Relying on the IBA Guidelines on Conflicts of Interest in International Arbitration (the "IBA Guidelines") which impose a continuing duty of disclosure of potential conflicts on an arbitrator, Halliburton contacted Mr Rokison seeking confirmation of his Transocean Arbitration appointments and asking for an explanation of his failure to disclose these appointments to Halliburton. Mr Rokison responded, giving an explanation of how he had come to be appointed in both arbitrations, and that at the time of each appointment, he had not considered that he was under an obligation under the IBA Guidelines to disclose the appointment to Halliburton. He noted that with the benefit of hindsight, it would have been prudent for him to have informed Halliburton and he apologised for not having done so. He stated his commitment to remain independent and impartial in his conduct of the Halliburton Arbitration and that he believed that no damage had been done; however, he indicated that he would be willing to resign his appointments in the Transocean Arbitrations should they not effectively come to an end as a result of the tribunals' findings on the preliminary issue.

Halliburton continued to express concern about Mr Rokison's impartiality and said that he should resign; however, this was strongly opposed by Chubb who said it would result in delay and wasted costs. Mr Rokison indicated that he owed duties to both parties to complete his task as chair of the tribunal and that he would be in breach of these duties if he resigned in the face of strong opposition from one of the parties; therefore, he would continue in his role unless the parties could agree on a mutually acceptable replacement chair or he was removed by the Court. Halliburton accordingly made an application to the High Court under section 24(1)(a) of the 1996 Act to remove Mr Rokison as chair of the tribunal.

In the meantime, in January/February 2017, the substantive hearing in the Halliburton Arbitration took place. In March 2017, the Transocean tribunals issued their awards on the preliminary issue in favour of the insurers, effectively bringing to an end the two Transocean Arbitrations. In December 2017, an award in favour of Chubb was issued in the Halliburton Arbitration.  However, Halliburton's appointed arbitrator qualified his signature to the award, citing his "profound disquiet about the arbitration's fairness" based on Mr Rokison's failure to disclose his Transocean Arbitration appointments.

Halliburton's application to remove Mr Rokison as chair of the tribunal was dismissed by the High Court on 3 February 2017, during the course of the substantive arbitration hearing. Mr Justice Popplewell (as he then was) found that the circumstances did not give rise to any justifiable concerns about Mr Rokison's impartiality, and that there was nothing that he should have disclosed to Halliburton. Halliburton appealed.

The Court of Appeal found that Mr Rokison was under a legal duty to disclose his involvement in the Transocean Arbitrations to Halliburton; however, on the facts, it considered that a fair-minded and informed observer (the test to be applied for the purposes of section 24(1)(a)) would not conclude that there was a real possibility that Mr Rokison was biased. Halliburton appealed to the Supreme Court.

The Supreme Court rejected Halliburton's appeal, with Lord Hodge providing the lead judgment. In doing so, the Supreme Court clarified certain aspects of the Court of Appeal's decision and provided a detailed judgment on the following issues.

Issue 1: Whether and to what extent an arbitrator may accept appointments in multiple arbitrations concerning the same or overlapping subject matter with only one common party without giving rise to an appearance of bias.

The foundation for the determination of this issue was Lord Hodge's assessment of an arbitrator's duty of impartiality. He recognised that the duty of impartiality (enshrined in section 33 of the 1996 Act) is a core principle of arbitrations and that, for the purposes of English-seated arbitrations, that obligation applies equally to party-appointed arbitrators and arbitrators appointed by agreement of the parties, the relevant arbitral institution, or by the Court. As for the relevant test to apply under section 24(1)(a) of the 1996 Act where a party makes an application to remove an arbitrator on grounds of impartiality, the parties agreed that the test is "whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased". The test is therefore objective, rather than subjective.

When applying that test to the fact of an arbitrator's overlapping appointments involving one common party, Lord Hodge held that the fair-minded and informed observer "will have regard to the terms of the contract or contracts giving rise to the arbitration and the factual matrix". In particular, he noted that the fair-minded observer would consider the differing practices across different types of arbitration. In some contexts, there may be an expectation that arbitrators are involved in overlapping arbitrations, owing to the premium placed on the subject matter expertise they bring. If that is the case, there may be an expectation that overlapping appointments involving a common party are disclosed in some arbitrations, but that in other situations (and as is more typical in GAFTA and LMAA arbitrations) they are not disclosed (whether or not there is a legal duty of disclosure is discussed in the context of Issue 2, below).  In other contexts, the expectation may be that the arbitrator is not to have prior knowledge of the subject matter of the dispute or to have had any prior dealings with the parties by virtue of previous appointments.

The Supreme Court's answer to Issue 1 was therefore whether an arbitrator's appointment in overlapping arbitrations involving only one common party will or will not give rise to an appearance of bias will depend on the relevant custom and practice of the arbitration in question.

Issue 2: Whether and to what extent the arbitrator may accept appointments in multiple arbitrations concerning the same or overlapping subject matter with only one common party without disclosing those other appointments.

The reasoning behind Lord Hodge's answer to Issue 2 can be broken down into several components.

Is there a general duty to disclose matters relevant to potential impartiality?

Lord Hodge noted that impartiality on the part of an arbitrator can be unconscious, and therefore unknown to the arbitrator (and difficult for a party to arbitration to prove). He recognised that one way in which an arbitrator can avoid the appearance of bias is by giving disclosure of matters which could arguably be said to give rise to a possibility of bias. Indeed, this is codified in the rules of various arbitral institutions.⁶

However, one issue the Supreme Court had to consider was whether, absent any requirements for such disclosure in the arbitration agreement or any arbitral rules adopted by incorporation, as a matter of English law there is a duty to disclose "facts and circumstances known to the arbitrator which, in the language of section 24 of the [1996 Act], would or might give rise to justifiable doubts as to his impartiality" (as the Court of Appeal so found).

This was highly relevant to this appeal, given that the arbitration at hand was an ad hoc Bermuda Form arbitration with no express provisions applicable relating to disclosure. It was also a question on which Mr Justice Popplewell at first instance and the Court of Appeal reached different answers. The Supreme Court agreed with the Court of Appeal on the implication of such a duty (unless, in a particular case, the parties have expressly or implicitly waived their right to disclosure). If no such term is capable of being implied, then section 33 (requiring an arbitrator to act fairly and impartially) and section 24 (allowing the parties to apply for an arbitrator to be removed on the grounds of impartiality) of the 1996 Act would be undermined.

Therefore, if the answer to Issue 1 in any given case is that an arbitrator's acceptance of appointments in overlapping arbitrations and involving only one common party might reasonably give rise to a conclusion by the objective observer that there was a real possibility of bias, the arbitrator is under an obligation to disclose the fact of the overlap to parties unaware of it, unless the relevant parties have agreed otherwise. The Supreme Court confirmed that, where disclosure is required, that is a continuing duty.

Is the consent of the parties required to give disclosure about matters relating to their arbitration?

Given its decision on the obligation of disclosure, the Supreme Court had to assess what impact this might have on an arbitrator's obligations of confidence towards the parties of an arbitration about which disclosure is being given.

Lord Hodge did not frame this question in terms of whether the obligation of disclosure constitutes an exception to the duty of confidence, but rather whether, on the facts of the case at hand, the parties have expressly or implicitly consented to disclosure about their arbitrations to third parties. That analysis will depend on the rules and practices of the arbitration about which disclosure needs to be given. For example, if the arbitral rules applicable to arbitration X provide for disclosure of information about other arbitrations to the parties of arbitration X, it can be inferred that the parties to arbitration X consent to disclosure of that information about their own arbitration to the parties of a future arbitration Y subject to the same rules. Even if no such express rules apply (e.g. in ad hoc arbitrations), there may be a custom or practice in a particular field of arbitration whereby limited information about an arbitration (including the identity of the common party, who appointed the arbitrator and – at a high-level – the overlapping subject matter) can be provided to the parties of another arbitration without seeking express consent. However if no such consent to disclosure by the relevant parties can be inferred, and express consent is not provided, then a situation may arise where an arbitrator may have to decline their appointment to a subsequent arbitration (involving a common party) for which rules and practices dictate that disclosure of their involvement in the earlier arbitration is required.

What are the implications of a failure to comply with the disclosure obligation?

Unsurprisingly, the Supreme Court held that an arbitrator's failure to make such disclosure to the relevant parties (and to continue acting in the other overlapping arbitration) may deprive those parties of the opportunity to properly address the matters that ought to have been disclosed. As such, the failure to disclose in itself may demonstrate a lack of regard to the interests of those parties and may amount to apparent bias. Any determination as to whether an arbitrator has failed to comply with their duties of disclosure is to be made "by reference to the circumstances at the time the duty arose and during the period in which the duty subsisted".

The disclosure obligation

Having determined those legal questions, Lord Hodge then considered whether, in the context of Bermuda Form arbitrations, disclosure of multiple appointments was required.

The parties agreed that it was not uncommon, in Bermuda Form arbitrations, for arbitrators to accept multiple appointments in arbitrations arising out of the same subject matter and involving a common party. The appointment of Mr Rokison to the Halliburton Arbitration and Transocean Arbitrations, with Chubb as a common party, would therefore not itself necessarily cause the fair-minded and informed person to conclude that there was a real possibility of bias.

However, the Supreme Court found that there was no established custom or practice to suggest that this meant that parties to such arbitrations consent to such overlapping appointments without disclosure of that fact being given to parties unaware of the overlap. Had Halliburton been aware of the overlapping appointments, it might have wished to raise concerns about any unfairness that that may cause (e.g. owing to the additional contact that Chubb would have with Mr Rokison on matters relating to the Deepwater Horizon incident in the Transocean Arbitrations which might also be relevant to the Halliburton Arbitration). It was held that those circumstances might reasonably give rise to the possibility of bias, and therefore Mr Rokison was under a disclosure obligation to Halliburton in this case. That obligation consisted of identifying that his subsequent appointments related to arbitrations arising out of the Deepwater Horizon Incident, that Chubb was a party to those arbitrations and whether Chubb seeking Mr Rokison's appointment in those arbitrations was a party-appointment or a nomination for appointment by a Court or a third party. Mr Rokison did not need to seek the express consent of the parties to the Transocean Arbitrations to disclose that information; those parties' consent for him to do so could be inferred from the customs and practices associated with arbitrators disclosing overlapping appointments in the context of Bermuda Form arbitrations.

The assessment of potential bias

The Supreme Court then had to assess whether the fair-minded and informed observer would infer from Mr Rokison's failure to make the requisite disclosure that there was a real possibility of unconscious bias on the part of Mr Rokison, such that he should be removed from Halliburton Arbitration. The Supreme Court had to assess that question by reference to the circumstances as they existed at the date of the hearing of the application to remove Mr Rokison.

The Supreme Court's answer to that question was 'no'. The reasons given in support of that conclusion included:

• The lack of certainty in English law as to whether Mr Rokison was required to disclose the overlapping appointments to Halliburton.
• The apparent unlikelihood of there being overlapping evidence or legal submissions in the Halliburton Arbitration on the one hand and the Transocean Arbitrations on the other.
• The absence of any secret financial benefit being received by Mr Rokison as a result of his appointment by Chubb in one of the Transocean Arbitrations.
• The lack of basis for "inferring unconscious bias in the form of subconscious ill-will" on Mr Rokison's part, in view of the "courteous, temperate and fair way" in which he responded to Halliburton's challenge.

In a lengthy and nuanced judgment, the Supreme Court has established a common law duty on the part of arbitrators to disclose overlapping appointments to parties to arbitrations, should the circumstances surrounding those appointments give rise to a conclusion, objectively assessed, that there is a real possibility of bias on the part of the arbitrator. Whether a duty of disclosure will arise in any given case will therefore require a highly case-specific and objective analysis on the part of the arbitrator. The difficulties associated with that may well push them to err on the side of disclosure, although in doing so arbitrators must remain alive to their obligations of confidence towards parties.

The extent to which this decision will impact upon the codification of rules relating to disclosure by arbitral institutions remains to be seen. As the application of the common law rule largely depends on the practices and customs of the type of arbitration in question, arbitrators may be assisted by codification if express rules are not already in place (as noted above, some institutional rules already provide for disclosure). However, the common law obligation will only apply to English-seated arbitrations; arbitral institutions may not wish to prescribe rules which sit less comfortably with the expectations of parties who do not choose England as the seat of the arbitration.

What is also notable about the Supreme Court's decision is that it is firmly rooted in the consensual and contractual basis for arbitration. The English Courts must of course uphold the requirement for arbitrator impartiality prescribed by section 33 of the 1996 Act. But the Supreme Court was at pains to do so in such a way which did not create a carve out to the obligations of confidence owed to parties by their arbitrators, instead inferring from the customs and practices of the chosen arbitral forum whether the parties have implicitly consented to the disclosure of limited information about their arbitrations in order to ensure arbitrator impartiality. The Supreme Court has expressly stated that it will always remain open to parties to agree in their arbitration agreements that such disclosure should not be given about their disputes. Indeed, parties to ad hoc arbitrations, where no institutional rules apply, may now wish to think more carefully about drafting express provisions relating to disclosure, particularly where multiple contracts are being put in place in relation to the same subject matter. The flexibility of English-seated arbitration as a dispute resolution mechanism therefore remains.