International Arbitration Update: UK Supreme Court Decision: Halliburton Company v Chubb Bermuda Insurance Ltd

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I

Position of the USKC

The UK Supreme Court (the “UKSC”) rendered a decision on November 27, 2020 (the “decision”), regarding the independence and impartiality of arbitrators under English law. The decision rendered the UKSC view on:

      Multiple Appointments: If an arbitrator on the same or overlapping subject matter with only one common party can accept multiple appointments. 

      Disclosure: Can the arbitrator accept such multiple appointments and not make such disclosure to a party that is not a party in common. 

[1] Halliburton Company v Chubb Bermuda Insurance Ltd (Formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48.

The position of the UKSC, is that:

  • Objective Observer: A real possibility of bias could be concluded in circumstances, in which the acceptance of appointments in various cases could be concluded by the objective observer (the “observer”). However, this conclusion could be reached subject to the facts of each particular case and by taking into account the arbitration custom and practice in that field.
  • Legal Duty Disclosure of Appointments: If the conclusion of the observer is that there is a real possibility of bias, the arbitrator is under a legal duty to disclose such appointments. Consequently, a fair-minded and informed observer can determine if the failure of the arbitrator to make such disclosure constitutes a real possibility of bias.
II

Background

The dispute arises out of a liability insurance claim between Halliburton Company (“Halliburton”) and a Chubb Bermuda Insurance Ltd. (“Chubb”), following the Deepwater Horizon offshore drilling rig explosion and oil spill on April 20, 2010, in the Gulf of Mexico (the “Disaster”) in which Halliburton was a service contractor.

An international arbitration began out of Chubb’s refusal to indemnify Halliburton pursuant to the liability insurance claim concerning the Disaster (the “Arbitration”). Chubb’s reasoning for non-payment was that Halliburton’s settlement in U.S. courts of US$1.1 billion was not reasonable and that Chubb did not give settlement consent.

During the Arbitration one of the arbitrators failed to disclose prior arbitration appointments in which Chubb was a party. Since Chubb did not consent to the arbitrator resignation, Halliburton sought an order for the arbitrator to be removed before the English High Court (“EWHC”) and for the appointment of a replacement arbitrator pursuant to Section 24(1)(a) of the English Arbitration Act of 1996 (the “AA”). 

The EWHC dismissed Halliburton’s appeal and agreed with the fair-minded and informed observer conclusion. After a revision of the facts of the case, the EWHC did not conclude that there was a real possibility that the arbitrator was biased. Afterward, Halliburton appealed to the UKSC, and the UKSC dismissed the appeal by rendering the decision.  

III

Conclusion

The decision confirms that the requirements for disqualification of arbitrators under English law are high. This was a highly anticipated decision, that enhances the duty of impartiality and the arbitrator’s duty of disclosure under English law.

The UKSC decision ratifies the position that the real possibility of bias could be determined by a fair-minded and informed observer after an analysis of the specific facts and context of the case. Moreover, it should also be taken into account the customs and practices of particular fields in international arbitration for the real possibility of bias.