Multi Reference Arbitration: Probability of Arbitrator Bias?

Preface

Arbitration is a concept implemented to privately resolve the differences of parties in dispute. Overtime, the said concept has seen a significant rise. Interestingly, there are certain instances wherein multiple disputes stem out from a singular cause of action. Every now and then, considering the nature and complexity of disputes, an arbitrator becomes a part of multiple arbitrations, which in turn has led to the development of a concept called ‘Multi- Reference Arbitration’. In this context, it is often wondered if the appointment of an arbitrator in multiple arbitrations can give rise to doubts on his ability to independently and impartially adjudicate the multiple matters put before him, and whether he will be able to fairly discharge his duties and not let any subsequent disclosure affect his position. The question holds importance because arbitration as a dispute resolution mechanism prides itself in speedy resolution of disputes, while maintaining the principles of independence, impartiality, and confidentiality.

On that note, the article will analyze and comment on the recent judgment of the Supreme Court of United Kingdom in the case of Halliburton v. Chubb [2020] UKSC 48], wherein the Supreme Court, has analyzed the concept of arbitrator bias in International Commercial Arbitration, while antecedently highlighting the basic principles surrounding independence and impartiality of arbitrators from the perspective of the Arbitration Act, 1996 (“1996 Act”).

Independence, Impartiality, Confidentiality and Bias

Under English Law, Section 33 of the 1996 Act provides for the general duty of the arbitral tribunal and mentions that the Tribunal, while adjudicating any dispute is to act fairly and impartially as between the parties. This is so mentioned because it is the duty of the arbitrator/s to uphold the principles of natural justice in a dispute and not to the parties that appoint them. In furtherance of this principle, the arbitrators so appointed are to maintain the highest standards of impartiality. Since they are to uphold the principles of natural justice, any arbitrator which seems to be impartial is said to be biased, be it apparent or perceived.

Article 12 of the UNCITRAL Model Law on International Arbitration explicitly mentions that any arbitrator may be challenged, if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence. The two principles are central to the very concept of arbitration and have been enshrined under Section 1 of the 1996 Act. An arbitrator can be removed if he fails to discharge his duties properly or in the existence of any situation which raises questions as to his impartiality, provided it can be established before a Court. All such intervention by the Courts is explicitly mentioned under Section 24 of the 1996 Act.

There is nothing in the UK Arbitration Act which provides any insight into the concepts of privacy or confidentiality. This, however, was a purposeful omission. The report provided by the Departmental Advisory Committee on Arbitration Law on the Arbitration Bill of 1996, mentioned that despite privacy and confidentiality being of essence in the arbitration system, should be left to the pragmatic deliberation of the Courts. The Committee observed that the quantification (or providing technical definitions) of such concepts will give rise to doubts over the scope of these concepts. On that note, it was recommended that there shall not be any codification in this respect.

Now this does lead to an interesting question, i.e., whether English seated arbitrations are private and confidential in nature? This question was answered in the case of Dolling-Baker v. Merrett, wherein it was held that the English-seated arbitrations are indeed both private and confidential. The duty of the parties to uphold these concepts is disguised as an implied obligation, arising from the very features of arbitration as a dispute resolution mechanism.

Coming to the concept of arbitrator bias, the Cambridge Dictionary defines the term ‘bias’ as ‘the action of supporting or opposing a particular person or thing in an unfair way, because of allowing personal opinions to influence your judgment’. A bare reading of this definition would outrightly indicate what bias is. In the context of arbitration, especially multi-reference arbitration, the involvement of an arbitrator in more than one dispute arising from a single cause of action, might give rise to the appearance of bias, where there is a common party in multiple matters. To make it even simpler, it can be said that the failure of an arbitrator to provide a proper disclosure regarding his multiple appointments to a party in arbitration, would in turn, lead the other party to question his impartiality and his ability to decide and pass an award.

Now the question that arises is whether the failure to disclose a subsequent appointment in a multi-reference arbitration would in turn give rise to an apparent bias? The following question amongst a few others, was raised in the case of Halliburton which shall be discussed below.

Haliburton v. Chubb: Stepping into Uncharted Territory

The aforementioned case provides some much-needed deliberation, in so far as matters relating to multi reference arbitration are concerned. In the given case, the court has established that it is an arbitrator’s legal duty to disclose matters, which according to a prudent person after having considered the facts, would lead to the conclusion or a possibility of biasness to any of the parties involved. The primary issue of contention which was involved in the case was whether not disclosing the subsequent appointment with the other party would lead to an apparent bias or not, which would in turn render the arbitrator impartial to pass a judgment.

Apparent Bias, as the term suggests, is when on the face of it, the arbitrator’s conduct leads to grave concerns or apprehensions about his impartiality. In the given case, Mr. Kenneth Robinson, who was appointed as an arbitrator in the underlying arbitration between Halliburton and Chubb advanced the issue of arbitrator disclosure, which was concerned with the dispute relating to the explosion and fire on the Deepwater Horizon drilling rig situated in the Gulf of Mexico. The arbitrator involved accepted arbitral appointments in three separate references, failing to disclose about the same to one of the parties involved named “Halliburton”. Consequently, Halliburton approached the Supreme Court in hope of relief (Halliburton failed to obtain adequate relief in respect of the aforementioned issue in the lower courts) but were disappointed to find it being dismissed there as well.

The Apex Court based its decision on the reasoning that, mere appointments in the multiple references by an arbitrator concerning the same or an overlapping subject matter with only one common party does not give rise to apparent biasness, there has to be “something of substance” involved. Furthermore, it was opined that for the determination of the existence of apparent bias, it becomes important to consider the failure on the arbitrator’s part to either disclose the facts or how he/she deals with the concerns raised. Factors like these play a decisive role in either concluding or fortifying the apparent bias. If the reasons are justified for either of these, there would be no apparent bias like it was in this case, wherein Mr. Rokison’s failure to disclose was accidental and that he appropriately handled all the concerns that were raised. This judgment in essence provides clarification to the contentious legal issue of multi reference arbitration applicable to disclosures and the duty of impartiality, the reasoning of which is grounded in the recognition of the practical realities of international arbitration.

Conclusion

The legal duty of disclosure is a part of arbitrators’ duty to act in a fair and impartial manner. Impartiality, as correctly stated by the Privy Council in Millar v. Dickinson, is to be adjudicated or decided when the case has been taken up by the Arbitrator. This judgment has been very significant in the field of International Commercial Arbitration.

The court decided to dismiss the appeal filed by Halliburton, which in turn said that Mr. Rokison, did not fail to discharge his duties in the highest form required, but also that his conduct did not give rise to any apparent bias on the basis of which he was asked to step down. However, they did take a note of the fact that his failure to disclose was actually a breach of his legal duty to disclose, but on the basis of the facts presented before the court, he did not commit any wrongdoing and it did not amount to apparent bias.

The Court took cognizance of the lack of clarity in English law in this regard and it is indeed true, that the English law has left this issue to the open scrutiny of the judiciary, which is why the decision in this case was long awaited by the Arbitration community. The final thing, which was noted by the court, was the lack of clarity when it comes to confidentiality and subsequent disclosures in other forms of arbitration. This grey area would in turn lead to further disputes and require judicial intervention.

(This post has been authored by Harsha Sadhwani and Dhruv Srivastava. Harsha (II Year) and Dhruv (Final Year) are students at Lloyd Law College with a deep interest in Alternative Dispute Resolution)

Cite as: Harsha Sadhwani and Dhruv Srivastava, ‘Multi Reference Arbitration: Probability of  Arbitrator Bias? ‘ (The Contemporary Law Forum, 12 January 2021) <https://tclf.in/2021/01/12/multi-reference-arbitration-probability-of-arbitration-bias/> date of access.