What is the relationship of previous appointments to arbitrate similar disputes, disclosure of those appointments and apparent bias? The Court of Appeal has recently discussed the issue, highly relevant to commercial arbitration and construction adjudication alike.
The case concerned the Deepwater Horizon explosion in the Gulf of Mexico. Halliburton had provided cementing and well-monitoring to BP in relation to the temporary abandonment of an oil well. In the process of plugging and abandonment, the well blew out and caused an oil spill of a scale and magnitude that attracted worldwide attention.
The issue in the case was apparent bias and disclosure in arbitration appointments. Specifically, the court set out to determine whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter, and whether he may do so without disclosure. Both Halliburton and Transocean, the owner of the rig, had purchased liability insurance from Chubb on the same terms. The terms provided for arbitration in London by three arbitrators, one chosen by each party and the third chosen by the arbitrators, or failing agreement, the High Court.
Halliburton made a claim on its liability insurance, which Chubb disputed. N and P were appointed as arbitrators on behalf of Halliburton and Chubb respectively. M, the third arbitrator, was appointed by the High Court. M was Chubb’s preferred candidate. Prior to expressing a willingness to be appointed, M had disclosed that he had acted, and was currently acting, as an arbitrator in multiple arbitrations involving Chubb, including times when he had been appointed by Chubb.
He later became the arbitrator in another dispute involving Chubb, this time against Transocean. M disclosed the previous arbitrations to Transocean, but not the Transocean arbitration to Halliburton. He also did not disclose another arbitration with Transocean against a different insurer on the same layer of insurance.
Halliburton learned of M’s undisclosed appointments, and asked for clarification and eventually that M resign. In his responses, M accepted that disclosure would have been ‘prudent’, but assured there was no actual bias and that he had not learned anything in the undisclosed arbitrations that was not public knowledge. He also pointed out that he owed duties to both parties, and would not resign unless the parties agreed on a replacement. M also later (after proceedings for his removal had been issued) clarified that he was ‘unaware that there were any common issues’.
Halliburton issued a claim form seeking that M be removed as an arbitrator, and obtained the pleadings from the other arbitration Chubb was a party to. The pleadings made it clear that Chubb was relying on the same or substantially similar arguments in both arbitrations. Halliburton’s application to remove M was dismissed by Mr Justice Popplewell.
Later, Chubb won the other arbitration on preliminary issues, which meant the substantial arguments did not require consideration. Chubb then also won the arbitration against Halliburton, but one of the arbitrators issued ‘Separate Observations’ criticising the fairness of the arbitration and lack of disclosure. The judgment of Popplewell J was then appealed to the Court of Appeal.
Lord Justice Hamblen first pointed out that the Arbitration Act 1996 deliberately does not include ‘lack of independence’ as a separate ground for removal, though lack of ‘impartiality’ is sufficient under s.24(1)(a) of the Act and lack of independence may well lead to a finding of bias (paras 35 to 38). The test is the same as in common law generally, namely whether ‘a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility’ of bias (para 39).
Hamblen LJ then analysed cases such as Guidant LLC v Swiss Re International SE  EWHC 1201 and Beumer Group UP Ltd v Vinci Construction UK Ltd  EWHC 2283, to conclude that ‘inside information and knowledge may be a legitimate concern’ in overlapping arbitrations, but that it does not in itself justify an inference of apparent bias (paras 43 to 49). Arbitrators are assumed to be trustworthy and to decide the case only on the material before them. ‘Something more is required’ to prove apparent bias than just undisclosed other arbitrations, and it has to be ‘something of substance’ (para 53, citing Dyson LJ in AMEC Capital Projects Ltd v Whitefriars City Estates Ltd  1 WLR 723).
The test is therefore whether, at the time of the hearing to remove, the non-disclosure taken together with any other relevant factors would have led a fair-minded observer to conclude a ‘real possibility of bias’ (para 95).
Hamblen LJ also discussed the requirements of disclosure. Under the common law, judges should disclose facts or circumstances which would or might provide the basis for a reasonable apprehension of lack of impartiality. Digesting the judgments in Davidson v Scottish Ministers (No 2)  1 SC 7, Locabail (UK) Ltd v Bayfield Properties Ltd  QB 451 and Taylor v Lawrence  QB 528, Hamblen LJ noted that non-disclosure does not itself mean apparent bias is found. That is because sometimes disclosure itself ‘unnecessarily raises an implication that it could affect the judgment’ (quoting Taylor v Lawrence, para 64).
The important principle is then that ‘in borderline cases disclosure should be given – disclosure should be given of circumstances which would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility’ of bias (para 65). This also applies to arbitral tribunals (para 66 and para 71). Again, ‘something more [of substance]’ is required to make non-disclosure into apparent bias (paras 76 and 77).
On the facts of the case, the mere overlap between various arbitrations did not alone justify a finding of apparent bias, and in any event the overlap was very limited as the other arbitration never reached the stage of substantive arguments (which were similar). Financial benefit to M from the further Chubb appointment was also not of significance, as the argument would encompass all remuneration to all arbitrators (para 82).
Hamblen LJ did conclude that as a matter of law, disclosure should have been made (para 91). Best practice in international commercial arbitration would have required it, and taken together with other factors such as the overlap and ‘nature of other connections’, this might have been argued to combine ‘to give the fair-minded and informed observer a basis for a reasonable apprehension of lack of impartiality’ (para 91).
Overall, however, the Court of Appeal found against apparent bias. That is because the non-disclosure was accidental rather than deliberate, the degree of overlap was so slight as to not give rise to any significant concerns, and that the fair-minded observer would therefore not consider that a mere oversight in such circumstances would give rise to justifiable doubts as to impartiality (para 96). Halliburton’s concerns had been fully explained and expressed before any substantive consideration of the case had taken place (para 99), which made unconscious bias unlikely. The appeal was therefore dismissed.
It is not entirely clear why the Hamblen LJ found that disclosure should, as a matter of law, have been given but that there was nonetheless no apparent bias. This suggests that disclosure and apparent bias are, at least to some degree, independent and may force us to rethink cases like Beumer v Vinci. It seems that where non-disclosure is not deliberate and the substantive arguments were not tried twice (even if included in both arbitrations), no apparent bias is found. This is in some contrast to Beumer v Vinci where it was made clear that even telephone conversations between the adjudicator and one party, if undisclosed, are strongly suggestive of apparent bias. Halliburton adds that intentions and actual overlap matters.