Debate within the arbitration community—a view from London International Disputes Week 2021

Debate within the arbitration community—a view from London International Disputes Week 2021

London International Disputes Week 2021 (LIDW21) took place virtually during the second week of May 2021 under the main theme of ‘Looking forward: change, challenge, and opportunity’. The LIDW Member-hosted event programme complemented the core programme which was generally method of dispute resolution neutral, and included an impressive number of sessions with several of them dedicated to changes, challenges and opportunities in arbitration. This felt timely after a year of adjustments due to the coronavirus (COVID-19) pandemic, and following two notable arbitration-related decisions handed down in 2020 by the Supreme Court of the United Kingdom (UKSC).  

This blog post will briefly present elements discussed during two sessions, the first one ‘Enka v Chubb and Halliburton v Chubb, which will prove to be the most significant, and how do they impact on London as an arbitration centre?’ chaired by Peter Ashford, Partner at Fox Williams, with Colin Liew, Counsel and Arbitrator at Essex Court Chambers Duxton (Singapore Group Practice), Iain Quirk QC, Barrister at Essex Court Chambers, and Sarah Vasani, Partner at Addleshaw Goddard. The second one was the debate ‘Are arbitrators getting away with too much?’ moderated by Barry Fletcher, Head of Arbitration and Head of the Dispute Resolution Group at LexisNexis UK, with the participation of Philippa Charles, Partner at Stewarts, Jean-François Le Gal, Partner at Pinsent Masons, Poonam Melwani QC, Barrister at Quadrant Chambers, and Hendrick Puschmann, Partner at Farrer & Co.  

The session chaired by Ashford focused on two major cases handed down by the UKSC in 2020, namely Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 and Halliburton Company v Chubb Insurance (Bermuda) Ltd [2020] UKSC 48. Sparing readers the suspense, the speakers and the chairman unanimously agreed that between the two cases, Halliburton v Chubb was the most significant one, which will be the focus of this section of my post.

 

What was the background to Halliburton v Chubb?

 

The case arose following the explosion on an oil rig in 2010 in the Gulf of Mexico where several individuals were severely harmed, and others succumbed to their injuries. Unsurprisingly, this event led to the surge of thousands of civil claims brought against the companies involved on the oil rig. The Halliburton Company settled claims raised in the US and agreed to a certain amount of damages. It then sought to recover a proportion of the settlement to the insurance company, Chubb Bermuda Insurance Ltd, under its liability policy. Arbitration proceedings were commenced under the insurance policy following Chubb’s refusal to pay on the grounds that Halliburton had concluded unreasonable settlements.

Kenneth Rokison QC was appointed as the chair of the tribunal by the English Commercial Court following a dispute between the parties as to who should be appointed. Rokison had been proposed to the court by Chubb. After this appointment, Rokison accepted two other appointments by Chubb in arbitration proceedings related to the same facts without informing Halliburton about the new circumstances. The issue raised before the Supreme Court concerned the duty of disclosure of an arbitrator in circumstances which may lead to justifiable doubts as to their impartiality. The UKSC upheld the decision of the Court of Appeal in dismissing Halliburton’s application to remove Rokison as arbitrator, while holding that arbitrators had a legal duty of disclosure. 

 

What are the impacts of this case?

 

According to Vasani, a positive element of this decision was the reaffirmation by the UKSC of the duty of disclosure of arbitrators under English law. The UKSC rejected Chubb’s argument that under English law arbitrators didn’t have such duty and that this could be reduced to a simple argument of fairness. Despite highlighting that it appears to be manifest, Vasani welcomed the choice of the UKSC to explicitly state that this duty remained throughout the arbitration. She also mentioned that the clarification brought by the UKSC was helpful and that what should be taken from this decision could be simply put as ‘When in doubt, disclose’.

However, Vasani also discussed some negative elements of this case. According to her, the burden of proof should be switched to the arbitrators to prove that they are not inclined to favour one side. She also raised the issue of timing under the test to assess whether an arbitrator has an apparent bias. Indeed, the applicable test consists of asking ‘whether “at the time of the hearing to remove” the circumstances would have led the fair-minded and informed observer to conclude that there was in fact real possibility of bias’ (paragraph [123] of the decision). She pointed out that the test should instead be applied at the time of the failure, namely when the arbitrator accepted the subsequent appointment.

When commenting on the latter point, Liew mentioned that Singapore courts had recently dealt with two similar cases in which the legal reasoning was drawn from Australian jurisprudence. One factually important distinction with Halliburton v Chubb was that the challenge to remove the arbitrator arose after the delivery of the award – in both cases the challenge had been brought by the unsuccessful party.  Contrarily to Vasani, Liew mentioned that it was relevant to apply the test at the time of the hearing to remove instead of at the time of the failure as it then permitted the court to have access to a fuller picture. When questioned by Ashford on the importance of the appearance of justice, Liew added: ‘in a real sense, the award is the only means through which the arbitrators can speak and can demonstrate their independence or impartiality (…) I would have thought that this is the best evidence’.

Liew also highlighted that the approach taken in Singapore when determining the possibility of bias was that an association per se between an arbitrator and a party was considered insufficient, and it was rather the capacity of the association to influence the decision of the arbitrator that would be examined. In Liew’s words, ‘some rational connection between the association and the prospect of biais might be proven by demonstrating the duration, the intensity, or the nature of that association’. Like with Halliburton v Chubb, the failure to disclose might be one factor which supports the presence of bias, but other circumstances must also lead to this conclusion.

Furthermore, Vasani insisted that the decision resulted in a ‘deeply unsatisfying’ outcome as the UKSC first highlighted the existence of a legal duty of disclosure, then found that this legal duty had been breached, and nevertheless didn’t remove Rokison. According to Vasani, this decision shows how it is difficult to remove an arbitrator despite non-compliance with their duties. Quirk later commented that in the case of inadvertent non-disclosures, he didn’t believe that the removal of arbitrators would necessarily serve justice and added that a presumption of bias would be dangerous. In his view, the test for removal should remain whether or not the inadvertent breach meant that what had not been disclosed were circumstances which gave rise to apparent bias. Vasani replied that Halliburton v Chubb was not a case of inadvertent non-disclosure or of an oversight, but of the choice of an arbitrator not to disclose their new appointments knowing that they ‘were absolutely worthy of disclosure’. She further added that the facts of the case were ‘egregious’ and that Rokinson ‘should have known better’.

Ashford and Vasani also commented that this case arose from an ad hoc arbitration and that the same outcomes may have been avoided had it been conducted under institutional arbitration rules with the oversight of an arbitral institution. It should also be noted that given the importance of the issue, several arbitration institutions received the permission of the UKSC to intervene in the case, including the London Court of International Arbitration (LCIA), International Chamber of Commerce (ICC), and the Chartered Institute of Arbitrators (CIArb). The London Maritime Arbitrators Association (LMAA) and the Grain and Feed Trade Association (GAFTA) also submitted written submissions to the UKSC, but as rightly pointed out by Quirk, they took a different stand than the other arbitral institutions involved by explaining that repeated appointments were common in their fields of activity.

The four experts agreed on the legal principle, but they did not agree on the factual implications of this case and on the need to proceed to the removal or not of the arbitrator, echoing the lively and impassioned debate between panellists at the session ‘Are arbitrators getting away with too much?’.

 

Are arbitrators getting away with too much?

 

Before opening the discussion, Fletcher highlighted the potential competing principles of finality and fairness in arbitration proceedings. He reminded the audience about the limited provisions under the Arbitration Act 1996 (AA 1996) which can be invoked to challenge or appeal arbitral awards in English courts. The three grounds are the lack of substantive jurisdiction of the tribunal (AA 1996, s 67), serious irregularity which has caused or will cause substantive injustice (AA 1996, s 68), and appeal on a point of English law (AA 1996, s 69). AA, 1996, s 24 which was at issue in Halliburton v Chubb was not directly referred to during the debate, the question ‘Are arbitrators getting away with too much?’ was rather asked in the context of the challenge and appeal mechanisms of the AA 1996. Puschmann and Melwani argued that arbitrators were indeed getting away with too much, whereas Charles and Le Gal took the opposite view. It should be noted that the debate was conducted in good spirits, with each participant rising to the occasion of arguing their assigned side of the argument.

Puschmann identified two issues within the arbitration community, one of quality and one of self-perception. He compared arbitration to a dogma where practitioners simply trusted the system without relying on any empirical evidence nor questioning it. As part of the changes required, he mentioned that AA 1996, s 69 should be further extended to cover appeal on points of non-English law. He then referred to Halliburton v Chubb adding that a mechanism should be put in place to demote ‘bad arbitrators even if they are not biased’. Finally, he doubted that commercial parties were really choosing arbitration as some circumstances simply precluded any other dispute resolution methods, including international constraints and the choice of certain experts. Therefore, the finality principle should not limit parties to the access of further recourse and better oversight. 

Melwani also denounced the difficulties faced by parties seeking to challenge and appeal awards under AA 1996, ss 67-69.  She highlighted that the ‘root causes’ of this problem were ‘the cardinal principles of the arbitration community’, namely confidentiality and finality. According to her, confidentiality precludes scrutiny within the arbitration community because even if a party succeeds to challenge an award due to serious irregularity (AA 1996, s 68), the preponderance of confidentiality principle will most of the time prevent it from making this information available to other practitioners. This leads to ‘bad arbitrators’ being reappointed and never facing the consequences of their behaviour. Furthermore, she criticised that AA 1996, ss 68 and 69 applications to challenge or appeal arbitral awards were rarely successful and had to be extreme in order to succeed. Like Puschmann, she doubted that it was what commercial parties were opting for when choosing arbitration. Finally, she also raised the issue of partisanship by referring to Halliburton v Chubb. According to her, it was incomprehensible that there was still an on-going debate about the pre-disposition of appointed arbitrators as complete impartiality is necessary.

On the other side of the virtual table, Charles and Le Gal strongly disagreed with the vision shared by their colleagues. While recognising the presence of certain issues, Charles mentioned that it was an error to lay the blame on arbitrators.  She notably mentioned that it was the responsibility of parties to appoint arbitrators, and that it should be done wisely. In a series of arguments to highlight why arbitrators are not getting away with too much, she highlighted that as AA 1996, s 68 applications were mostly made by unsuccessful parties, a distinction should be drawn between cases where there were challengeable and appealable awards and those where unsuccessful parties were simply unsatisfied with the result of the arbitral award. She further added that arbitral institutions provided important oversight.

On the same topic, Le Gal mentioned that arbitral institutions provided an important level of scrutiny. He took as an example the ICC where tribunals have to submit their written awards to a review committee before issuing them. It was noted that the review was ‘broad, with far-reaching remarks’ sometimes requiring the full award or a part of it to be re-drafted. Le Gal highlighted that another solution for parties would be to include an appeal process in their arbitration clause. When responding to the issue of procrastination among arbitrators, he mentioned that fast-track arbitration proceedings were available to parties. Regarding the issue of confidentiality raised by the other side, he rejected the argument by implying that the bad conduct of arbitrators was not kept secret.

After hearing arguments from both sides, the audience was invited to cast their votes. Charles and Le Gal were surprise that 45% of them responded that arbitrators were getting away with too much. For the rest, 32% responded no, and 22% were ‘on the fence’.

 

Conclusion

 

Parallels can be made between the debate and the outcome in Halliburton v Chubb. As notably highlighted by Vasani, Halliburton v Chubb demonstrated how are arbitrators indeed sometimes getting away with too much, in this case by failing at their duties without having to be removed. It is also a good example of how parties might not have agreed to this mode of resolution of dispute or to the appointment of the arbitrators. On the other hand, Halliburton v Chubb also demonstrates how arbitrators do not completely get away with their actions and are not immune from negative press even if they are not found to be biased.

According to the 2021 International Arbitration Survey Report: Adapting arbitration to a changing world conducted by the School of International Arbitration at Queen Mary University of London in partnership with White & Case LLP, 90% of respondents favoured international arbitration to resolve cross-border disputes (31% preferred international arbitration on its own, and 59% in conjunction with alternative dispute resolution). This info could either reinforce Puschmann’s vision that arbitration practitioners have locked themselves in a hermetic ‘bubble’, or simply suggest that arbitration users are satisfied with this method and believe as Le Gal that ‘arbitration is at the very minimum the least bad system’. One thing is certain, the debate is not yet over.

 

Note: this is a summary of the discussions and does not purport to be a full account of the event. The session ‘Enka v Chubb and Halliburton v Chubb, which will prove to be the most significant, and how do they impact on London as an arbitration centre?’ can now be listened here.

 

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About the author:
Elodie Fortin is a Paralegal in the Lexis®PSL Paralegal Hub. She earned her Bachelor of Civil Law (BCL) and Bachelor of Laws (LLB) degrees from McGill University in Canada, pursuant to which she completed her specialist Master of Laws (LLM) in Public International Law at the London School of Economics. She undertook several legal internships abroad, notably in Italy at the International Institute for the Unification of Private Law (UNIDROIT). She has a particular interest in International Arbitration.