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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Halliburton Company v Chubb Bermuda Insurance Ltd & Ors [2018] EWCA Civ 817 (19 April 2018) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2018/817.html Cite as: [2018] 3 All ER 709, [2018] WLR 3361, [2018] 1 WLR 3361, [2018] 1 Lloyd's Rep 638, [2018] 1 CLC 751, [2018] BLR 375, [2018] EWCA Civ 817, [2018] CILL 4137, 180 Con LR 23, [2018] Lloyd's Rep IR 402, [2018] WLR(D) 229, [2018] 2 All ER (Comm) 819 |
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ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HON. MR JUSTICE POPPLEWELL
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE SIMON
and
LORD JUSTICE HAMBLEN
____________________
Halliburton Company |
Appellant |
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- and - |
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(1) Chubb Bermuda Insurance Ltd (2) [M] (3) [N] (4) [P] |
Respondents |
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Michael Crane QC, David Scorey QC and David Peters (instructed by Clyde & Co LLP) for the First Respondent
Hearing date : 7 February 2018
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Crown Copyright ©
LORD JUSTICE HAMBLEN:
Introduction
(1) Whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias.
(2) Whether and to what extent he may do so without disclosure.
(1) When should an arbitrator make disclosure of circumstances which may give rise to justifiable doubts as to his impartiality?
(2) What are the consequences of failing to make disclosure of circumstances which should have been disclosed?
The factual background
"I do not think and did not think that the above circumstances put any obligation upon me to make any disclosure to you or your clients under the IBA Guidelines. However, I appreciate, with the benefit of hindsight, that it would have been prudent for me to have informed your clients through your firm, and I apologise for not having done so.
It is correct that all three References arise from the Deepwater Horizon incident, but it is not the case, as you suggest, that they raise the same or even similar issues. The two claimants, Halliburton and Transocean, as I understand it, performed very different roles and the issues were totally different and, so far, beyond matters which are public knowledge, my only involvement in the Transocean cases, has concerned the issue of construction argued by Counsel in two 2-day Hearings, without any evidence save as to the circumstances of the making of the relevant insurance contract. I have received no information which would not be shared by my co-arbitrators in the Halliburton case.
Both you and your clients have my assurance that during the period of about 20 years during which I have practised as a full-time international commercial arbitrator, I have at all times remained independent and impartial and will continue to do so.
That said, I readily acknowledge that it is important that both parties in arbitration should share confidence that the dispute will be determined fairly on the evidence and the law without bias.
I do not believe that any damage has been done but, if your clients remain concerned, I would be prepared to consider tendering my resignation from my appointment in the two Transocean cases if the results of the determination of the preliminary issues of construction, which are likely to be issued shortly, does not effectively bring them to an end."
"It is in accordance with my duty to both parties that my response seeks to take into account what I believe to be the best interests of both.
I do not think that it would be helpful to either party for me to continue the debate as to whether or not, by accepting appointment in the two Transocean arbitrations, I was in breach of any duty to Mr Birsic's clients by failing to disclose the fact, and presumably, giving them an opportunity to object. I would merely add that, even if the IBA Guidelines did apply (and I think Mr Payton is probably right in his view that they did not) I remain unpersuaded that I was in breach of them. However, I have accepted in my earlier letter that, with the benefit of hindsight, it would have been prudent for me to have made disclosure to avoid any sense of a lack of transparency on my part.
In relation to the other points raised in Mr Birsic's letter I can only repeat that neither him nor his clients need have any fear that I will have learned anything in the course of the Transocean arbitrations which could be of any relevance in the Halliburton case. The points so far considered relate only to preliminary issues of construction as to the attachment point, and I learned nothing about the facts of the incident and its consequences which is not public knowledge and which would not be well known to my co-arbitrators …
Putting the above to one side, the current potion [sic] is clearly unsatisfactory, to say the least. I repeat that I believe it is of fundamental importance that both parties should have confidence in the impartiality of the members of the Tribunal, and in particular the chairman, and, if my first letter together with what I have added above does not both put Mr Birsic's and his clients' minds at rest, there is what seems to be a total impasse between the parties, to both of whom I owe an obligation.
Mr Payton wishes me to remain as chairman and for the hearing to go ahead. But if I were to decline Mr Birsic's invitation to resign, I have little doubt that an application would be made to the court to remove me which may well take some time to resolve….
… were the decision left to me to be determined in accordance with my own self-interests, I would resign. I have no wish to continue to serve as chairman in a tribunal in a case in which one of the parties, through its legal team, has expressed serious doubts as to my impartiality. Furthermore, as you may know, I plan to retire later this year and would not wish that my long career as an international commercial arbitrator which has spanned over three decades should end with my being the subject of a debate in the Commercial Court as to whether I have behaved improperly.
However, as I have already indicated, I have duties to both parties: by accepting the Court's appointment as chairman, I undertook to continue to serve in that capacity until I had completed the task, unless prevented by circumstances beyond my control and I would, I think, be in breach of those duties were I simply to resign in the face of strong opposition from one party.
In these circumstances, might I venture to propose to the parties that, even now, they put aside their differences to the extent of concentrating their attention on trying to agree upon a mutually acceptable replacement chairman who would be available for the hearing, without spending further time on argument, and applications to the Court.
Were they to do so, I would gladly resign. If that does not occur, I fear that I would have no alternative but to leave my fate in the hands of the Court."
"…arbitrators who decide cases cannot ignore the basic fairness of proceedings in which they participate. One side secured appointment of its chosen candidate to chair this case, over protest from the other side. Without any disclosure, the side that secured the appointment then named the same individual as its party-selected arbitrator in another dispute arising from the same events. The lack of disclosure, which causes special concern in the present fact pattern, cannot be squared with the parties' shared ex ante expectations about impartiality and even-handedness."
The judgment
"29. The informed and fair-minded observer would not therefore regard M as unable to act impartially in the reference between Halliburton and Chubb merely by virtue of the fact that he might be an arbitrator in other references arising out of the incident, and might hear different evidence or argument advanced in another such reference. The objective and fair-minded assessment would be that his experience and reputation for integrity would fully enable him to act in accordance with the usual practice of London arbitrators in fulfilling his duties under section 33 by approaching the evidence and argument in the Halliburton reference with an open mind; and in deciding the case, in conjunction with the other members of the tribunal, in accordance with such material, with which Halliburton will have a full and fair opportunity to engage."
The grounds of appeal
(1) The judge erred in concluding that M's acceptance of the Transocean appointments was unobjectionable.
(2) The judge erred in giving no or insufficient weight to the failure to disclose.
(3) The judge should have found that the appearance of bias was reinforced by M's failure to deal appropriately with Halliburton's concerns.
(4) The judge failed to address properly or at all Halliburton's submissions in support of the application.
The law
The duty of impartiality
"(1)(a) that circumstances exist that give rise to justifiable doubts as to his impartiality …"
Whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias
"9. In circumstances where the arbitrations will therefore be taking place separately, it seems to me that Swiss Re has a legitimate basis for objecting to the appointment as the third member of the tribunals in its arbitrations of the same person who is the third arbitrator and chair of the tribunal in the Markel arbitration. If the same person were to be appointed, there would be a legitimate concern that that person would be influenced in deciding the Swiss Re arbitrations by arguments and evidence in the Markel arbitration. Indeed, the likelihood that that would occur is implicit in the very argument which Guidant makes that appointment of the same person would minimise the risk of inconsistent decisions. Swiss Re is not a party to the Markel arbitration and will have no opportunity to be heard in that arbitration or to influence its outcome. Indeed, without a waiver of confidentiality, they will not be privy to the evidence adduced or the submissions made in the Markel arbitration. If the Markel arbitration were to be heard first, the members of the tribunal in that arbitration would form views, without any input or opportunity for input from Swiss Re, from which they may afterwards be slow to resile."
"10. I accept the submission made by Mr. Tse on behalf of Guidant that the appointment of a common arbitrator does not justify an inference of apparent bias. The fact that the same person has been appointed by Guidant as its arbitrator in the Markel arbitration is not, therefore, a ground on which an application could be made to seek to disqualify him from acting in the Swiss Re arbitrations. Guidant is entitled to choose the same individual as their arbitrator in all three arbitrations, as they have. But conversely Swiss Re, for their part, are in my view reasonably entitled to object to having forced upon them an arbitrator who has already been appointed in the Markel arbitration and about whose involvement in that arbitration they are entitled to feel the concern which I have indicated."
"31. If unilateral telephone calls are strongly discouraged (if not verging on prohibited) due to the appearance of potential unfairness, it is very difficult, if not in my judgment impossible, for an adjudicator to be permitted to conduct another adjudication involving one of the same parties at the same time without disclosing that to the other party. Conducting that other adjudication may not only involve telephone conversations, but will undoubtedly involve the receipt of communications including submissions, and may involve a hearing. If all that takes place secretly, in the sense that the other party does not know it is even taking place, then that runs an obvious risk in my judgment of leading the fair minded and informed observer to conclude that there was a real possibility of bias. All of this can be avoided by disclosing the existence of the appointment at the earliest opportunity."
"20. In my judgment, the mere fact that the tribunal has previously decided the issue is not of itself sufficient to justify a conclusion of apparent bias. Something more is required. Judges are assumed to be trustworthy and to understand that they should approach every case with an open mind. The same applies to adjudicators, who are almost always professional persons. That is not to say that, if it is asked to redetermine an issue and the evidence and arguments are merely a repeat of what went before, the tribunal will not be likely to reach the same conclusion as before. It would be unrealistic, indeed absurd, to expect the tribunal in such circumstances to ignore its earlier decision and not to be inclined to come to the same conclusion as before, particularly if the previous decision was carefully reasoned. The vice which the law must guard against is that the tribunal may approach the rehearing with a closed mind. If a judge has considered an issue carefully before reaching a decision on the first occasion, it cannot sensibly be said that he has a closed mind if, the evidence and arguments being the same as before, he does not give as careful a consideration on the second occasion as on the first. He will, however, be expected to give such reconsideration of the matter as is reasonably necessary for him to be satisfied that his first decision was correct. As I have said, it will be a most unusual case where the second hearing is for practical purposes an exact rerun of the first.
21. The mere fact that the tribunal has decided the issue before is therefore not enough for apparent bias. There needs to be something of substance to lead the fair-minded and informed observer to conclude that there is a real possibility that the tribunal will not bring an open mind and objective judgment to bear."
"The decision in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, and the foregoing discussion, is also relevant in the fairly common situation where a loss, whether from boom or batch, gives rise to a number of arbitrations against different insurers who have subscribed to the same programme. A number of arbitrations may be commenced at around the same time, and the same arbitrator may be appointed at the outset in respect of all these arbitrations. Another possibility is that there are successive arbitrations, for example because the policyholder wishes to see the outcome of an arbitration on the first layer before embarking on further proceedings. A policyholder, who has been successful before one tribunal, may then be tempted to appoint one of its members (not necessarily its original appointee, but possibly the chairman or even the insurer's original appointee) as arbitrator in a subsequent arbitration. Similarly, if insurer A has been successful in the first arbitration, insurer B may in practice learn of this success and the identity of the arbitrators who have upheld insurer A's arguments. It follows from Locabail and AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [2005] 1 All ER 723 that an objection to the appointment of a member of a previous panel would not be sustained simply on the basis that the arbitrator had previously decided a particular issue in favour of one or other party. It equally follows that an arbitrator can properly be appointed at the outset in respect of a number of layers of coverage, even though he may then decide the dispute under one layer before hearing the case on another layer."
When should an arbitrator make disclosure of circumstances which may give rise to justifiable doubts as to his or her impartiality?
"Where a judge is subject to a disqualifying interest of any kind ('actual bias'), this is almost always recognised when the judge first appreciates the substance of the case which has been assigned. The procedure is then quite clear: the judge should, without more, stand down from the case. It is rare in practice for difficulties to arise. Apparent bias may raise more difficult problems. It is not unusual for a judge, at the outset of a hearing, to mention a previous activity or association which could not, properly understood, form the basis of any reasonable apprehension of lack of impartiality. Provided it is not carried to excess, this practice is not to be discouraged, since it may obviate the risk of misunderstanding, misrepresentation or misreporting after the hearing. It is also routine for judges, before or at the outset of a hearing, to disclose a previous activity or association which would or might provide the basis for a reasonable apprehension of lack of impartiality. It is very important that proper disclosure should be made in such cases, first, because it gives the parties an opportunity to object and, secondly, because the judge shows, by disclosure, that he or she has nothing to hide and is fully conscious of the factors which might be apprehended to influence his or her judgment. When such disclosure is made, it is unusual for an objection to be taken ... (emphasis added)
There are of course a number of entirely honourable reasons why a judge may not make disclosure in a case which appears to call for it, among them forgetfulness, failure to recognise the relevance of the previous involvement to the current issue or failure to appreciate how the matter might appear to a fair-minded and informed observer who has considered the facts but lacks the detailed knowledge and self-knowledge of the judge. However understandable the reasons for it, the fact of non-disclosure in a case which calls for it must inevitably colour the thinking of the observer."
". . . If, in any case not giving rise to automatic disqualification and not causing personal embarrassment to the judge, he or she is or becomes aware of any matter which could arguably be said to give rise to a real danger of bias, it is generally desirable that disclosure should be made to the parties in advance of the hearing. If objection is then made, it will be the duty of the judge to consider the objection and exercise his judgment upon it. He would be as wrong to yield to a tenuous or frivolous objection as he would to ignore an objection of substance." (emphasis added)
"A further general comment which we would make, is that judges should be circumspect about declaring the existence of a relationship where there is no real possibility of it being regarded by a fair-minded and informed observer as raising a possibility of bias. If such a relationship is disclosed, it unnecessarily raises an implication that it could affect the judgment and approach of the judge. If this is not the position no purpose is served by mentioning the relationship. On the other hand, if the situation is one where a fair-minded and informed person might regard the judge as biased, it is important that disclosure should be made. If the position is borderline, disclosure should be made because then the judge can consider, having heard the submissions of the parties, whether or not he should withdraw. In other situations disclosure can unnecessarily undermine the litigant's confidence in the judge." (emphasis added)
"50. On the matter of disclosure, we consider that the judge ought to have disclosed his appointment to the QICDRC in a case which involved Qatari government interests in the form of the petitioning preference shareholders. That is independent of our decision on this appeal. The purpose of such disclosures, which often go beyond legitimate concerns as to independence and impartiality which would, subject to waiver, require a judge to recuse himself, is to enable the parties to consider the disclosures made and either to assure themselves in advance that there is no legitimate problem or to make submissions to the judge, or to finesse any potential problem by means of waiver. Such matters can only be efficiently and safely handled in advance. Once judgment has been entered, and a winner and a loser emerge, the matter becomes much more difficult. Losers feel aggrieved whatever the rights and wrongs of the situation are, specious claims to bias may be raised, and all the difficulties of retrospective consideration fall for debate and decision."
"21. Against this background, the Court of Appeal repeated an observation made earlier in its judgment, namely that, although this was not the test of apparent bias, the judge ought to have disclosed his appointment in Qatar to enable the position to be clarified and considered and avoid possible later challenges such as the present. Mr Francis Tregear QC, representing the JOLs, realistically, did not take issue with this, and the Board need say no more than that it also agrees with it."
"34. In the result, the Board, with some reluctance, has come to the conclusion that the Court of Appeal was right to regard it as inappropriate for the judge to sit without disclosure of his position in Qatar as regards the period after 26 June 2013 and that this represented a flaw in his apparent independence, but has also come to the conclusion that that the Court of Appeal was wrong to treat the prior period differently. The judge not only ought to have disclosed his involvement with Qatar before determining the winding-up petition. In the Board's view, and at least in the absence of any such disclosure, a fair-minded and informed observer would regard him as unsuitable to hear the proceedings from at least 25 January 2012 on. The fact of disclosure can itself serve as the sign of transparency which dispels concern, and may mean that no objection is even raised. An alternative to disclosure might have been to ask the Chief Justice to deploy another member of the Grand Court, to which there would, so far as appears, have been no obstacle."
What are the consequences of failing to make disclosure of circumstances which should have been disclosed?
Application to the facts
Acceptance of the appointment
(1) The fact that M had been appointed against the wishes of Halliburton and was the preferred candidate of Chubb;
(2) The degree of overlap between those arbitrations;
(3) The fact that M accepted the benefit of paid employment at the nomination of Chubb at a time when he was sitting in judgment on Chubb's dispute with Halliburton;
(4) M's failure to disclose the Transocean appointments;
(5) The fact that the need to make disclosure should have been obvious and the only explanation offered was one of oversight;
(6) M's failure to deal with Halliburton's concerns appropriately, after it had discovered the further appointments.
Circumstances of M's appointment
Degree of overlap
Financial benefit from the further Chubb appointment
Non-disclosure
M's response to Halliburton's concerns
The views of N
Conclusions
"As to a possible predisposition of the judge in His Majesty's favour, we think the observer would take the view earlier expressed by this court that 'judicial experience, by its nature, conditions the mind to independence of thought and impartiality of decision'. He would know that any judge appointed to the High Court would not be lacking in experience. We see no room for unconscious predisposition."