In a long-awaited decision, the Supreme Court has recently handed down a judgment of critical importance addressing an arbitrator’s duty of impartiality and obligation to make disclosure.
The case relates to the Deepwater Horizon incident and claims made by two insureds, Halliburton and Transocean, on their Bermuda Form policies with Chubb. An experienced commercial arbitrator, Kenneth Rokison QC, was appointed as third arbitrator by the Commercial Court in an arbitration commenced by Halliburton under its policy, seeking payment of its claim. Mr. Rokison subsequently accepted an appointment as arbitrator in an arbitration commenced by Transocean under its policy. Although he informed Transocean of the Halliburton appointment prior to acceptance, on accepting the appointment in the Transocean arbitration, Mr. Rokison did not disclose his appointment to Halliburton. When Halliburton discovered the Transocean appointment, it applied to the Court to seek to remove Mr. Rokinson as arbitrator in the Halliburton arbitration on the basis of apparent bias. The application was refused by the Commercial Court and by the Court of Appeal, which decided that, although Mr. Rokison should have disclosed the appointment in the Transocean arbitration to Halliburton, an objective observer would not have concluded on the facts that there was a real possibility that Mr. Rokison was biased.
The Supreme Court noted that the duty of impartiality was a core principle of arbitration, which was expressly stated in the Arbitration Act 1996. The Court went on to make a number of observations concerning this principle in its judgment. An allegation of apparent bias would be judged by reference to whether an objective observer would conclude there was a real possibility of bias. There might be circumstances in which the acceptance of appointments in multiple arbitrations concerning linked subject matter with only one common party might reasonably cause the objective observer to conclude that there was such a possibility of bias – depending on the facts and the custom and practice in the relevant field of arbitration.
Where, in a Bermuda Form arbitration, the circumstances might reasonably lead to a conclusion by the objective observer that there was a real possibility of bias, the arbitrator was under a legal duty to disclose such appointments, unless the parties to the arbitration had agreed otherwise.
The duty of disclosure was a legal duty in English law, which was a part of the arbitrator’s obligations of fairness and impartiality under the Arbitration Act 1996. The duty of disclosure was, however, subject to obligations of confidentiality arising from the very nature of arbitration.
In Bermuda Form arbitrations, an arbitrator may, in fulfilling their duty of disclosure, in the absence of agreement to the contrary by the parties to the relevant arbitration, make disclosure in a subsequent arbitration of the existence of an earlier arbitration, and the identity of the party common to both, without obtaining the express consent of the relevant parties. The consent of the common party could be inferred from its action in seeking to appoint the arbitrator again. The consent of the other party was not required for such limited disclosure.
The extent of the duty of disclosure was to be judged objectively. An arbitrator should disclose all matters relevant and material to an assessment of the arbitrator’s impartiality and which could reasonably lead to an adverse conclusion on impartiality. A failure to disclose such matters was a relevant consideration to the objective observer and might, in certain circumstances, amount to apparent bias.
A determination as to whether an arbitrator had failed to exercise their duty to disclose could only be made on the facts at the time the duty arose. However, a determination as to whether there was a real possibility of bias was to be made at the time of the hearing to remove the arbitrator.
Applying the principles set out by the Supreme Court, Mr. Rokison was under a legal duty to disclose his appointment in the subsequent arbitration between Chubb and Transocean. At the time of his appointment, the existence of potentially overlapping arbitrations with only one common party, Chubb, might objectively have given rise to a real possibility of bias. Although Mr. Rokison should have disclosed the second appointment to Halliburton, in light of the factual circumstances at the date of the Commercial Court hearing, it could not be said that the objective observer would infer that there was a real possibility of bias.