The Deepwater Horizon liability insurance case. The arbitrator’s duty of disclosure and removal under s.24 of the Arbitration Act 1996.

Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) (Respondent)  [2020] UKSC 48 was a dispute relating to the appointment of Mr Ken Rokison QC as sole arbitrator under a liability insurance policy which arose out of damage caused by an explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico. The relevant parties were BP Exploration and Production Inc. (“BP”) the the lessee of the Deepwater Horizon rig, Transocean Holdings LLC (“Transocean”) the owner of the rig and provider of crew and drilling teams to BP, and, Halliburton Company (“Halliburton”)who provided cementing and well-monitoring services to BP.

Halliburton and Transocean both entered into a Bermuda Form liability policy with the respondent, Chubb Bermuda Insurance Ltd (“Chubb”). A  US judgment was given apportioning blame between the parties, and Halliburton settled the claims against it. Chubb refused to pay out  under the liability policy, contending that Halliburton’s settlement was not a reasonable settlement. The same happened to Transocean. The Bermuda Form provided for arbitration.

Mr Rokison was appointed as sole arbitrator in Halliburton’s arbitration against Chubb, after the parties were unable to agree a third arbitrator. Subsequently Mr Rokson was appointed as an arbitrator in two further Deepwater Horizon references. The first appointment was made by Chubb and related to Transocean’s claim against Chubb. The second was a joint nomination by the parties involved in a claim by Transocean against another insurer.

When Halliburton discovered this they applied to the court under section 24 of the Arbitration Act 1996 to remove Mr Rokison as an arbitrator. That application was refused. The Court of Appeal then found that, while Mr Rokison’s proposed appointment in the subsequent references should have been disclosed to Halliburton, an objective observer would not in the circumstances conclude there was a real possibility of bias.

On Friday the Supreme Court unanimously agreed, Lord Hodge giving the principal judgment, and dismissed the appeal. In considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. The duty of disclosure is a legal duty and not simply good arbitral practice, and is a component of the arbitrator’s statutory obligations of fairness and impartiality. It does not, however, override the arbitrator’s duty of privacy and confidentiality. The duty of disclosure requires the arbitrator to disclose matters which might reasonably give rise to justifiable doubts as to his or her impartiality, and a failure to do so is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias, having regard to the facts and circumstances known at the time of the hearing to remove the arbitrator.

Five factors pointed against any finding of bias. First, at the time, it had not been clear that there was a legal duty of disclosure. Secondly, the Transocean arbitrations had commenced several months after the Halliburton arbitration. Thirdly,  in his measured response to Halliburton’s challenge Mr Rokison hadexplained that it was likely the subsequent references would be resolved by a preliminary issue (as they in fact were) and that, if they were not, he would consider resigning from the Transocean arbitrations. Fourthly, there was no question of his having received any secret financial benefit. Fifth, there was no basis for inferring any unconscious ill will on his part.

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