English Court Of Appeal Lowers The Bar For Arbitrator Disclosure

In a recent important decision for arbitrations seated in England, the English Court of Appeal has, for the first time, considered the scope of arbitrators' duty of disclosure. The court in Halliburton v. Chubb found that the duty extends not only to circumstances that a fair-minded and informed observer would conclude give rise to a real possibility of bias, but also to circumstances that merely might give rise to such a conclusion. In a borderline case, where there is uncertainty as to whether facts would give rise to such a possibility, the court found that disclosure should be given. This sets the bar relatively low and puts the test for arbitrators onto a similar footing as applies to English judges. This is especially important because a failure to make appropriate disclosure may itself increase the likelihood of an appearance of bias.

Challenges to arbitrators on grounds of apparent bias are not uncommon, and this decision may make challenges more likely. Arbitrators in English proceedings should be careful to adopt an inclusive approach to disclosure.

Factual Background

The dispute in Halliburton v. Chubb involved a claim by Halliburton relating to indemnification under a Bermuda form of insurance in respect of settlements following the Deepwater Horizon explosion. The insurance policies were governed by New York law, but provided for arbitration with a London seat. Halliburton made an application under Section 24(1)(a) of the U.K. Arbitration Act 1996 to remove one of the three arbitrators on the basis that there were “justifiable doubts as to his impartiality”. The two grounds for the application were that (a) he had been appointed as an arbitrator in two other disputes also arising out of the Deepwater Horizon explosion (one of which involved Chubb, but not Halliburton, as a party); and (b) he had not disclosed the fact of those overlapping appointments.

English Law on Apparent Bias and Disclosure

A challenge under Section 24(1)(a) of the Arbitration Act 1996 requires a party to show that circumstances exist that give rise to justifiable doubts as to an arbitrator's impartiality. The court confirmed the established position under English law that this corresponds to the common law test for apparent bias. This is an objective test and requires a party to show that a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility of bias.

However, the Arbitration Act 1996 is silent...