After over a year of waiting, the Supreme Court finally handed-down judgment in Halliburton Company v Chubb Bermuda Insurance Ltd on 27 November 2020.
I wrote about the Court of Appeal’s judgment back in May 2018, and had forgotten that we were still awaiting the Supreme Court’s judgment until I saw various excited posts on LinkedIn. In the hours and days following the judgment there were posts of a different variety, namely legal updates on the judgment.
One of the advantages of waiting a couple of weeks before writing this blog is that I can read those posts and the thoughts of their esteemed authors, and overall my impression is that there is some disappointment among the international arbitration community that the Supreme Court has not gone far enough.
I want to talk briefly about some of the key issues, before going on to consider whether the case has any implications for UK adjudication.
Although the facts are quite complex, the key background points are:
- The arbitrator in question, who the Supreme Court revealed was Mr Kenneth Rokison QC, was appointed in the Halliburton and Chubb arbitration as chair, and the dispute involved an insurance claim arising out of the Deepwater Horizon oil spill disaster in 2010.
- A few months later Mr Rokison was appointed as arbitrator in two other arbitrations also arising out of the oil spill and considering similar issues and, in particular, the reasonableness of settlements made following the disaster:
- the first further arbitration involved a claim by the owner of the oil rig, Transocean, against Chubb (and Mr Rokison was appointed by Chubb); and
- the second involved a claim by Transocean against another insurer (Mr Rokison was appointed chair by agreement of the parties).
- Mr Rokison failed to disclose these two further appointments to Halliburton.
When Halliburton learned of the second and third appointments, it raised the issue with Mr Rokison, who explained that he had not disclosed the fact to Halliburton because it did not occur to him that he was under any obligation to do so under the IBA Guidelines. He also suggested:
“… with the benefit of hindsight, that it would have been prudent for me to have informed your clients through your firm, and I apologise for not having done so.”
However, he continued that while the three arbitrations were concerned with the Deepwater Horizon accident, they did not “raise the same or even similar issues”.
Halliburton was not satisfied with Mr Rokison’s explanation and applied for his removal under section 24 of the Arbitration Act 1996, arguing that the failure to disclose the appointments and the subsequent response to the challenge gave rise to an appearance of bias. At first instance, the court dismissed the application (something Matt discussed at the time). Ultimately, so did the Court of Appeal:
“… having carefully considered both individually and collectively all the arguments advanced by Halliburton (orally and in writing), we agree with the judge’s overall conclusion that the fair-minded and informed observer, having considered the facts, would not conclude that there was a real possibility that [the arbitrator] was biased.”
Halliburton therefore appealed to the Supreme Court.
The Supreme Court set out the relevant law, and then addressed the two principal issues in the appeal, with the leading judgment being given by Lord Hodge:
- Whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias.
- Whether and to what extent an arbitrator may accept the multiple references described in the first issue without making disclosure to the party who is not the common party.
On the first ground, the Supreme Court held that there may be circumstances in which the acceptance of appointments in multiple references concerning the same or overlapping subject matter with only one common party might reasonably cause the objective observer to conclude that there is a real possibility of bias, but it was fact dependent.
On the second ground, the Supreme Court held that arbitrators have a legal duty to make disclosure of facts and circumstances that would or might reasonably give rise to the appearance of bias. The fact that an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with only one common party is a matter that may have to be disclosed.
Applying the law to the facts, the Supreme Court dismissed Halliburton’s appeal, finding that, although Mr Rokison had breached his duty of disclosure, at the date of the hearing to remove him, the fair-minded and informed observer would not conclude that circumstances existed that gave rise to justifiable doubts about Mr Rokison’s impartiality.
As I said above, some have expressed disappointment with the judgment, none more so than Karel Daele and Louis Flannery QC (the latter represented the CIArb, one of the interveners in the case) who concluded their legal update by saying:
“It was open to the Court to set a bright line example, and make clear that once the breach of the duty to disclose was established, there should be a presumption of apparent bias, which should mean the onus passing to the arbitrator to demonstrate otherwise. It is the only way that those with something to hide will know that they are at risk immediately of being removed if later discovered (as should have happened to Rokison).”
Are there implications for adjudication?
I acknowledge that when it comes to adjudication, if the Scheme for Construction Contracts 1998 applied then, pursuant to paragraph 8(2), an adjudicator could only act at the same time on related disputes under different contracts with the consent of all of the parties to those disputes. Therefore, this would mean that the position Mr Rokison found himself in may well not have arisen if he had been the adjudicator, rather than the arbitrator.
However, a number of the Supreme Court’s findings and comments could still be relevant to adjudication.
The test for apparent bias
The Supreme Court reiterated the test for apparent bias from Porter v Magill, namely:
“The question 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 Court confirmed that this test applies equally to arbitrators and judges, but stressed that there were a number of differences between judicial and arbitral appointments.
For example, judges resolve civil disputes in public, whereas arbitration is conducted in private such that a person who is not a party to the arbitration may know nothing about it. The Court said this “puts a premium on frank disclosure” in arbitration. Furthermore, unlike judges, arbitrators are paid by the parties and therefore receive a financial benefit.
We know from the wealth of adjudication case law that the test for apparent bias also applies to adjudicators, and the features which distinguish arbitration from litigation also apply to adjudication. Therefore, in my view, these should also be accounted for when considering whether apparent bias exists where an adjudicator has failed to disclose an involvement that could give rise to doubts about their impartiality.
The Supreme Court agreed with the Court of Appeal that disclosure is a legal duty in English law, rather than merely good arbitral practice:
“An arbitrator is under the statutory duties, in section 33 of the 1996 Act, to act fairly and impartially in conducting arbitral proceedings, in decisions on matters of procedure and evidence and in the exercise of all powers conferred on him or her (para 49 above). Those statutory duties give rise to an implied term in the contract between the arbitrator and the parties that the arbitrator will so act. The arbitrator would not comply with that term if the arbitrator at and from the date of his or her appointment had such knowledge of undisclosed circumstances as would, unless the parties waived the obligation, render him or her liable to be removed under section 24 of the 1996 Act.”
Adjudicators also have a duty of impartiality by virtue of section 108(2)(e) of the Construction Act 1996, and it would therefore logically follow that adjudicators are also under a legal obligation of disclosure.
Would this legal duty make much of a difference to adjudication practice though? Probably not when adjudicators are appointed by an ANB because they are usually required to make various declarations concerning possible conflicts, for example the RICS asks potential adjudicators to confirm, amongst other things:
“Have you made appropriate enquiries, and are satisfied that you have no current involvements that would give rise to a real or perceived conflict of interest?”
If the adjudicator is being appointed directly by the parties then the legal duty might be a reminder of the importance of disclosure, but many professionals are under such an obligation anyway. For example, RICS adjudicators are required to follow the guidance set out in the RICS Guidance note, Conflicts of interest for members acting as dispute resolvers, the 2nd edition of which has just been published (and comes into effect next year).
Returning to the RICS question above that requires potential adjudicators to have made “appropriate enquires”, interestingly the Supreme Court found that an arbitrator is, as a generality, “not required to search for facts or circumstances to disclose”, albeit they did not rule out that there would be circumstances in which an arbitrator would be under a duty to make reasonable enquiries.
I was quite surprised by the Supreme Court’s finding, as I would have thought that an arbitrator is always under a duty to undertake a reasonable search to check for matters that might lead the fair-minded and informed observer to conclude that there was a real possibility of bias. I consider that adjudicators are under such an obligation to make reasonable enquiries by undertaking a conflict check – the process and the size of the task might differ depending on whether the adjudicator is a sole practitioner or works for a large multinational law firm, but it exists all the same.
Relationship between disclosure and privacy and confidentiality
The Supreme Court considered the implied term of confidentiality in arbitration agreements and the resulting obligations on arbitrators to uphold privacy and confidentiality, and it acknowledged that there is a tension with the duty of disclosure. The Court made it clear that where information that must be disclosed is subject to an arbitrator’s duty of privacy and confidentiality, disclosure can be made only if the parties to whom the obligations are owed give their consent. The Court went as far to state:
“In such a circumstance, if a person seeking appointment as an arbitrator in a later arbitration does not obtain the consent of the parties to a prior related arbitration to make a necessary disclosure about it, or the parties to the later arbitration do not consent to the arbitrator’s disclosure of confidential matters relating to that prospective appointment to the parties to the earlier arbitration, the arbitrator will have to decline the second appointment.”
So does the same principle apply in adjudication? Arguably not, because there is no duty of confidentiality under the Construction Act 1996 and nor is there any implied duty in a similar vein to arbitration. However, confidentiality is nevertheless an important feature of adjudication, as I have written about previously.
So what should an adjudicator do if faced with the situation outlined above? Does the adjudicator need to obtain the consent of the parties to an earlier related adjudication, and is this really practical given the fast pace of adjudication?
I think that Lady Arden provided clarity on this point in her concurring judgment where she pointed out that disclosure of a previous appointment will not breach an arbitrator’s obligation of confidentiality where they only name the common party who may be taken to have consented, and not the other party. Lady Arden’s point makes perfect sense, and it’s a practice I have adopted before prior to being appointed in related adjudications.
Challenges against adjudicators
Chubb argued in the Supreme Court that a legal duty of disclosure might give rise to an increase in the number of challenges to awards and to personal claims against arbitrators, and the Court rejected those claims:
“I respectfully question whether there is a basis in English law for a claim for damages relating to disclosure or nondisclosure, in the absence of bad faith, where the legal duty is a component of the statutory duties of fairness and impartiality which do not support such claims. In any event, section 29 of the 1996 Act will protect arbitrators against personal claims for non-disclosure in most circumstances so long as the arbitrator has not acted in bad faith.”
The same immunity applies to adjudicators under section 108(4) of the Construction Act 1996, and so any legal duty of disclosure in adjudication is also unlikely to give rise to more personal claims against adjudicators. Whether parties could use such a breach of duty to try and avoid paying an adjudicators fees though is another matter.
In conclusion, while some of the Supreme Court’s findings are relevant to adjudication, on balance I don’t consider that much is likely to change in adjudication practice. I say this for two reasons:
- Firstly, most adjudicators are already under an obligation to disclose every matter they consider could potentially lead a fair minded and informed observer to conclude that there was a real possibility that they are biased.
- Secondly, in my view, most adjudicators know that if they accept appointments in multiple references concerning the same or overlapping subject matter with only one common party it is a matter that should be disclosed. Indeed, at the TeCSA Adjudication Conference earlier this week Mrs Justice O’Farrell stressed the importance of adjudicators making such disclosures in her excellent key note speech.