Alay Raje[i]
The United Kingdom Supreme Court (“UKSC/the Court”) recently passed its judgment in Halliburton Company v Chubb Bermuda Insurance Ltd (“Judgement”). The judgement settles the English law on the crucial point of an arbitrator’s duty of disclosure and its interaction with the duty of privacy and confidentiality. The judgement asserts that an arbitrator has to perform his task keeping in mind the duty of promoting and maintaining fairness, good conscience and impartiality, just as a judge of a court. For the same, it is utmost necessary to abide by the principle of nemo judex in causa sua, and in its pursuance, an arbitrator shall disclose information of circumstances that may give rise to justifiable doubts regarding his/her impartiality. Additionally, the Court deemed it necessary to balance this duty with that of privacy and confidentiality, and in cases where there are appointments in multiple references, the consent of the party must be undertaken before disclosing information pertaining to their affairs.
This Article aims at undertaking a critical analysis of the English law on arbitrator’s duty of disclosure, with reference to this judgement. The author believes that this Judgement would have a huge impact not only on the English jurisprudence but arbitration regimes of Indian jurisprudence too.
The factual background of the Judgement
The parties involved in the judgement were Halliburton Company (“Halliburton”) as the appellants, and ACE Bermuda Insurance Ltd (“Chubb”), as the defendants. The matter related to an earlier matter where a drilling rig in the Mexican Gulf named Deepwater Horizon had exploded (“Deepwater Horizon disaster”). The explosion had caused huge loss to life and property and as a result, claims were brought. In furtherance of settling the pending dispute, Halliburton initiated an arbitration proceeding to bring a claim regarding its settlement under the liability policy that they had agreed upon. For the appointment of the third arbitrator, the parties approached the English Commercial Court, which in pursuance of this request had appointed Mr Rokison. Subsequent to this appointment, Mr Rokison accepted two additional arbitral appointments related to matters in connection with the Deepwater Horizon disaster. These appointments included an appointment made on behalf of Chubb, which Mr Rokison failed to disclose to Halliburton. Because of this failure, Halliburton initiated judicial proceedings for Mr. Rokison’s removal as an arbitrator. This is a case of overlapping appointments, also known as appointments in multiple references.
Prologue: The stance of the English Courts before Halliburton
The English Arbitration Act, 1996 (“the Act”), namely Section 33(1)(a), casts a duty on the arbitrator to act fairly and impartially while conducting the arbitral proceedings. While Section 24(1)(a) of the Act, empowers the parties to challenge the arbitrator if justifiable doubts regarding his/her impartiality arises.
In a plethora of cases, one such being Sierra Fishing Company v. Farran, it was held that the Act necessitates the arbitrators to act independent of their appointing party, not promote interests of or owe allegiance to any party(s), and decide the cases impartially and fairly.
Additionally, the objective observer test introduced in Porter v Magill, has been reiterated in all the major case laws including in Halliburton, which indicates that the test is essential and unassailable in these issues. However, whether this duty to disclose information or circumstances that may create apparent bias, was a mandatory statutory obligation or not, was not established by the Courts or legislation.
Before Halliburton, in cases such as Davidson v Scottish Ministers, the duty of disclosure under English law was described merely, as an important and bonafide practice of the arbitral proceedings. Thus, in many cases, the party(s) to whom the bias was detrimental would not get the opportunity to assess and object the arbitrator’s appointment. The present judgement comes as a relief as it settles the law of duty of disclosure.
Moreover, the duty of confidentiality and privacy is considered of having prime importance in arbitral proceedings. In Emmot v.Michael Wilson & Partners Ltd., it was stated that privacy and confidentiality form the core of these proceedings and that it is an essential rule of law for the purpose of the arbitration. Privacy and confidentiality are fundamental to the very agreement of arbitration, and that all the parties including the arbitrators themselves have to strictly abide by it.
However, clarity on evaluating the duty of disclosure with regards to the duty of privacy and confidentiality, lacked. The English law was unclear whether in a tussle between both these duties, one shall abide by which. Effectively, certain necessary disclosure did not come to light, in the guise of confidentiality. Lastly, the appropriate time for disclosure and evaluation of bias when there is failure to disclose was ambiguously laid down, which is now settled in this judgement.
Halliburton v. Chubb – Understanding the Judgement
The UKSC majorly sheds light on three concepts in the matter of Halliburton v. Chubb. The Court explained the test of a fair-minded and informed observer, who prudently considers the entire factual background, analyses it with relevant laws and customary practices and then having considered the big-picture decides whether the circumstance present give rise to apparent bias. It was highlighted that arbitrators have a legal duty to disclose any information or probable conflicts of interests, that may create an apprehension of bias in the minds of the party(s). Additionally, the Court explained the relation between the arbitrator’s duty of disclosure and the duty of privacy and confidentiality. Lastly, the emphasis was laid on the appropriate time for assessing the circumstances that may create justifiable doubts on arbitrator’s impartiality.
1. The Duty of Disclosure And The Test For Apparent Bias
The UKSC in the Judgement relied upon Helow v Secretary of State for the Home Department, held that the assessment of bias of an arbitrator shall be undertaken through the objective test of the fair-minded and informed observer (“objective observer/fair-minded observer”). This test entailed that only a prudent observer who considers the complete context of the case (with reference to the factual matrix and acquires reasonable information of the dispute), has to conclude whether bias exists or not keeping in mind the very nature of an arbitration proceeding. The objective observer is such, who is neither complacent nor overly suspicious. The Court held that, to act independently and impartially is the cardinal duty of the arbitrator(s) and it requires the arbitrator(s) to owe no allegiance to any of the parties involved in the proceedings. It is a duty arising out of the right to natural justice of the parties. Once appointed, the arbitrator has to act in light of justice, equity, fairness and good conscience, and to decide the matters at hand impartially.
The UKSC in its judgement read sections 33(1)(a) and 24(1)(a) harmoniously and held that, there exists an implied statutory duty of disclosure encompassed within the duty of impartiality and fairness, laid down in section 33. Non-compliance with the same shall result in his/her removal under section 24. This statutory obligation makes the parties aware of circumstances that would form justifiable doubts on the arbitrator’s impartiality, and the breach of this duty amounts to apprehension of bias.
2. Duty of Disclosure vis-à-vis Duty of Privacy & Confidentiality
The UKSC stated that the principle of privacy and confidentiality is fundamental to the very nature of the arbitration. All the parties, which also include the arbitrator(s), have to uphold confidentiality and privacy. The Court using the Emmott case reiterated that the information bound by privacy and confidentiality can only be revealed when there is the consent of the parties, or an order of Court, or circumstances wherein the interests of the parties require disclosure or disclosure in benefit of justice and/or public interest. In cases where the information that is disclosed is subject to arbitrator’s duty of privacy and confidentiality, then such disclosure can be made only after obtaining the consent of the parties whose related information is disclosed. And in situations, as were in this particular case, wherein an arbitrator is appointed in subsequent proceedings, that involve either of the existing parties and the subject matter of the arbitration is also same, unless the parties to that arbitration have agreed to preclude such disclosure, the arbitrator may reveal the existence of a current or past arbitration involving a common party and the identity of the common party.
The Court held that when an arbitrator accepts overlapping appointments, this gives rise to apparent bias depending upon the relevant customary practices of the particular subject matter, i.e., the field of the arbitration. The Court explained that the obligation of disclosure and the extent of disclosure that an arbitrator may make of the overlapping arbitration without obtaining the express consent of the parties, depends upon whether the information comes under the ambit of the arbitrator’s obligation of privacy and confidentiality and, if it does, then can an implied consent of the relevant party(s) be inferred from their agreement with respect to the customary practices of arbitration in their particular subject matter. Thus, the arbitrator’s duty of privacy and confidentiality would not prevent such disclosure because a fair-minded observer can generally infer consent for such limited disclosure.
However, in this case, the Court held that even though the Mr. Rokison had the duty to disclose to the parties, about the subsequent appointments, at the first hearing for the Arbitrator’s removal there was no need was disclosure. This is because the fair-minded observer must consider the time-period where the duty arises, and in this case, during the time of first hearing the duty to disclose did not arise.
3. When to Disclose?
This duty to disclose, extends to disclosing any circumstances at and from the date of the arbitrator’s appointment, which he/she had the knowledge of and that would, unless the parties waived off, result in an impression of bias on the part of the arbitrator. Moreover, the duty of disclosure is a continuing duty meaning that with every change in circumstances before the disclosure, the situation may either aggravate or deteriorate in an assessment of justifiable doubts of impartiality. Additionally, the Court held that section 24(1)(a) of the Act, uses the word (“exist”) which implies that while ascertaining existence of bias, the facts must be undertaken as they exist at the date of the hearing of the application for the removal of the arbitrator. Thus, the evaluation of arbitrator’s failure to disclose, shall be done by the objective w.r.t the time when the duty of disclosure arose and the time period throughout which the duty subsisted. However, the assessment of whether or not the factual circumstances results in apprehension bias, shall be done at the time of the hearing of the challenge against the arbitrator. So, only with reference to the circumstances and the time period, the fair-minded observer shall determine whether an arbitrator has failed to perform the duty to disclose. And that the assessment of bias in cases of overlapping appointments shall be done at the date of the hearing to remove the arbitrator, and not at the date of the arbitrator's acceptance of the subsequent appointment.
The Author’s Analysis
It can be so understood that the duty of disclosing is a legal obligation rather than a mere bonafide practice, and the arbitrator has to disclose information that would or might reasonably cause the appearance of bias, unless there exists an agreement between the parties to the contrary. Additionally, one cannot require disclosure of trivial matters just because the arbitrator has a duty to disclose, because this would result in unnecessary concerns and suspicions, which would in return hamper the entire process of arbitration and give rise to appeals of multiple disputes in the Courts. It is settled through the judgement that, neither does the duty of privacy and confidentiality supersede that of disclosure, nor does the duty of disclosure provide the arbitrator absolute right to disclose all the information that the parties demand for justifying their doubt over his/her impartiality. It is a question of fact and circumstances. Furthermore, one shall factor in the relevant customs and practices of the particular field, and the difference between arbitrations, wherein there are settled customary practices that make disclosure of overlapping appointments compulsory and arbitration, wherein either the customary practices demand disclosure subject to the parties’ agreements and discretion or do not demand disclosure at all. For example, in maritime, sports and commodities etc. arbitrations, disclosure is not mandatory. The reason is that arbitrators in such fields are chosen from a small pool of available arbitrators. Lastly, the requirement for disclosure arises when the fair-minded and informed observer might reasonably conclude that possibility of bias exists, at the time when the decision whether to disclose is to be made or should have been made.
Conclusion
The Indian Arbitration and Conciliation Act, 1996 (“Indian Act”), did not recognize, a situation which may give rise to justifiable doubt of the arbitrator’s impartiality, until the 2015 amendment. The amendment inserts Schedule V and VII, while the former lays down situations for providing guidance as to what would constitute apparent bias, the latter list circumstances under which the arbitrator would be termed ineligible. Moreover, it inserts a legal duty of the arbitrator to disclose under Section 12, such circumstance that may create an apprehension of bias or fall under Schedule V or VII. In Voestalpine Schienen GmBH case, the Supreme Court of India held that impartiality and fairness are the fundamental pillars of arbitration, and that duty of disclosure is a part of it. Through the 2019 amendment, section 42-A was added in the Indian Act. Being a non-derogable provision having only one exception, it imposes a strict duty of maintaining confidentiality on all the parties. Section 42-A, does not recognise the need for disclosure unless it is for seeking implementation or enforcement of an award. Thus, it overshadows situations wherein for the interest of parties, the arbitrator may have to disclose information to prove his/her impartiality, especially in situations as in Halliburton case, wherein there are appointments in multiple references. It does not even consider a situation wherein through the consent of the parties, information is disclosed. Thus, Halliburton may be helpful in future disputes where the question arises on the contradictory positions of confidentiality versus disclosure in the Indian law.
Fairness, independence and impartiality of the arbitrator is essential for an arbitral proceeding. The principles of natural justice demand such impartiality and fairness, and are the centre of gravity of the entire arbitration process. To assure that this is maintained it is utmost necessary that the arbitrator appointed shall not pledge his/her allegiance to any of the parties, and this has to be specifically guaranteed because of the private and confidential nature of the proceedings as well as the final and binding nature of the decision.
[[i]] Alay Raje is a Second-year law student at Institute of Law, Nirma University. His interests lie in Arbitration Law and Antitrust Laws. For any discussion related to the article, he can be contacted via mail alay.raje09@gmail.com
Preferred Citation – Alay Raje, “Disclose or Not to Disclose: The English Supreme Court on Arbitrator Bias (Halliburton v. Chubb)”, Arbitration & Corporate Law Review, Published on 6th January, 2021.
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