by Andrew Flake
In a prior post, we looked at the lead up to the U.K. Supreme Court’s Halliburton opinion, an important decision that enters the thicket of disclosure practices, and emerges having cleared an open path. It involved a Chubb-selected arbitrator who did not disclose his related and contemporaneous participation in other, related references.
As we saw, the justices framed the duty as one founded on concerns of not only actual, but unconscious bias, a duty rooted in English law and shaped by international practice. I expect that Halliburton will be cited frequently and looked to by parties, courts, and arbitrators across jurisdictions, and for that reason, I want to unpack this holding more here, giving you some analysis that can be quickly digested.
To frame it, let’s first look at the short and rich summary the Court provides, reviewing what triggers the duty, the perspective of the reasonable observer, and the duty of privacy and confidentiality in the related appointments being disclosed:
…the arbitrator’s legal obligation of disclosure imposes an
objective test. This differs from the rules of many arbitral institutions which look to
the perceptions of the parties to the particular arbitration and ask whether they might
have justifiable doubts as to the arbitrator’s impartiality. The legal obligation can
arise when the matters to be disclosed fall short of matters which would cause the
informed observer to conclude that there was a real possibility of a lack of
impartiality. It is sufficient that the matters are such that they are relevant and
material to such an assessment of the arbitrator’s impartiality and could reasonably
lead to such an adverse conclusion. Whether and to what extent an arbitrator may
disclose the existence of a related arbitration without obtaining the express consent
of the parties to that arbitration depends upon whether the information to be
disclosed is within the arbitrator’s obligation of privacy and confidentiality and, if
it is, whether the consent of the relevant party or parties can be inferred from their
contract having regard to the customs and practices of arbitration in their field.
There’s a lot here. Let’s start with what triggers the duty:
Facts that “Might” Give Rise To Doubts. The arbitrator’s own complete knowledge, including any facts that would dispel doubts, does not change the disclosure obligation; if the facts are such that they might be the basis for a challenge in the view of the reasonable observer, they must be disclosed. The arbitrator should let the parties make the assessment, deciding whether they need additional information to evaluate potential bias.
This difference between what needs to be disclosed, and whether those facts amount to actual bias, comes across in the final result: the Court determines that although arbitrator Rokison should have disclosed, letting Halliburton know of his role in multiple appointments 2 and 3, there was no basis for inferring unconscious bias or ill-will, meaning that the appeal ultimately failed.
Failure to make disclosure as itself relevant. Related to the need to disclose cases that “might” give rise to a challenge, even where there is no objective bias, not disclosing in an instance in which a fair and impartial observer might reasonably find one to exist, is evidence of potential partiality: “The failure to disclose may demonstrate a lack of regard to the interests of the noncommon party and may in certain circumstances amount to apparent bias.” Non-disclosure in that instance might also be cause for an award even to an unsuccessful challenger of the costs of the challenge.
Ongoing duties. Not surprisingly, the Court notes the duty is ongoing, its existence defined by the current circumstances, not later known facts, its evaluation by the arbitrator a continuing one through the case. Later facts may exacerbate, or mitigate, the consequences of a failure to disclose; the duty itself is always evaluated based on circumstances at the time the arbitrator acquired the relevant knowledge.
Reasonable inquiry. The duty laid out in Halliburton applies to facts known to the arbitrator. But the Court does not rule out that a duty of “reasonable inquiry” may also exist. IBA guidelines already acknowledge it as recommended practice, and the fact that the Court raises the issue at all, suggests it may in another opinion become a feature of English commercial law.
Bias Itself Evaluated at Time of Hearing. By contrast, and this also makes practical sense, the determination of whether unconscious bias exists is made later, not at the time of required disclosure, but considering the facts as they exist at the time of hearing.
Balancing duties of privacy. How does the disclosure obligation square with the requirements of privacy and confidentiality attendant to arbitration? Or as Lord Hodge phrases it, “what are the boundaries of the arbitrator’s obligation of privacy and confidentiality which would allow for or prevent disclosure?” The tension is that, on the one hand, an arbitrator in Matter A has a duty to disclose a related appointment in Matter B, but on the other, the appointment in Matter B carries with it a duty to maintain privacy of the proceedings. So is party consent required, and if so, what happens if the Matter B parties don’t provide it? This is an eminently practical question.
How this tension gets resolved will be determined case-by-case. Current practices across arbitral institutions, and certainly in ad hoc arbitrations, differ. In considering English practice, the Court notes that it is accepted to disclose the existence of another arbitration involving a common party in a prospective appointment, and to disclose the prospective appointment involving a common party in a pending arbitration. Beyond that, and where parties may require further information to assess the disclosure, consent of the parties could be required. On the recipient side, a party receiving such a disclosure has an equitable duty to use it “only for the purpose of judging the impartiality and suitability of the arbitrator making the disclosure.” Context, of course, is key.
The actual holding limits itself to the particular variety of insurance arbitration at hand:
…in Bermuda Form arbitrations an arbitrator may, in the absence of agreement to the contrary by the parties to the
relevant arbitration, make disclosure of the existence of that arbitration and the
identity of the common party in accordance with the practice which I have described
without obtaining the express consent of the relevant parties. The consent of the
common party can be inferred from its action in seeking to nominate or to appoint
the arbitrator. The consent of the other party is not required for such limited
disclosure.
Multiple appointments: This is the real problem that so mightily concerned Halliburton: overlapping subject matter among the tribunals, along with the inability to know fully what related information the arbitrator is hearing from one’s opponent, what Lady Arden’s concurrence nicely phrased an “inequality of arms and material asymmetry of information.” That issue is also going to be case-specific.
In making a call in a particular case, the custom and practice of the particular field is highly relevant and must be examined closely. Similarly, whether disclosure of the multiple appointments is necessary, is informed by the “realities of international arbitration” and custom and practice in a given field or industry. If disclosure is called for, the acceptance of multiple appointments and a failure to disclose, when combined, may result in the appearance of bias.
In the case at hand and similar cases involving Bermuda-form policies, unless the parties have agreed otherwise, the Court determines that multiple disclosures must be disclosed.
A final note: As with all arbitrations, party autonomy, the ability of the contracting parties to make choices about how their arbitration proceeds, remains important. Even the duty to disclose could be defined, to expand or to limit it, by contract.