Halliburton Company v Chubb Bermuda Insurance Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen |
| Judgment Date | 19 April 2018 |
| Neutral Citation | [2018] EWCA Civ 817 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2017/0623 |
| Date | 19 April 2018 |
[2018] EWCA Civ 817
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
Lord Justice Simon
and
Lord Justice Hamblen
Case No: A3/2017/0623
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HON. MR JUSTICE POPPLEWELL
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Grabiner QC, Neil Kitchener QC and Owain Draper (instructed by K & L Gates LLP) for the Appellant
Michael Crane QC, David Scorey QC and David Peters (instructed by Clyde & Co LLP) for the First Respondent
Hearing date: 7 February 2018
Judgment Approved
Introduction
This is the judgment of the Court.
This appeal raises issues of importance in relation to commercial arbitration law and practice. The specific issues upon which the judge gave permission to appeal may be summarised as follows:
(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.
The second of those issues gives rise to the consideration of two further general issues, namely:
(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
On 20 April 2010 there was an explosion and fire on the Deepwater Horizon oil rig in the Gulf of Mexico, when a well which was in the process of being plugged and temporarily abandoned suffered a blow out (“the incident”).
BP Exploration and Production Inc (“BP”) was the lessee of the rig. Transocean Holdings LLC (“Transocean”) was the owner of the rig and had been engaged by BP to provide crew and drilling teams. The Appellant (“Halliburton”) provided cementing and well-monitoring services to BP in relation to the temporary abandonment of the well.
Both Transocean and Halliburton purchased liability insurance on the Bermuda form from the First Respondent (“Chubb”). It appears that the material policy terms were the same. Halliburton's insurance policy provided coverage of US$100 million excess US$500 million. It was governed by New York law but provided for arbitration in London by a tribunal consisting of three arbitrators, one appointed by each party and the third by the two arbitrators so chosen; in the event of disagreement between the arbitrators as to the choice of the third, the appointment was to be made by the High Court.
Following the incident, numerous claims were made against BP, Halliburton and Transocean by the US Government and corporate and individual claimants. The US Government claims were for civil penalties under various federal statutes. The private claims for damages were pursued through a Plaintiffs' Steering Committee (“PSC”). Many of the claims were consolidated into a single ‘Multi District Litigation’.
Following a liability trial in the Federal Court for the Eastern District of Louisiana, judgment was given on 4 September 2014 holding the apportionment of blame to be BP 67%; Transocean 30% and Halliburton 3%. Shortly before judgment, Halliburton concluded a settlement of the PSC claims against it in the sum of approximately US$1.1 billion. Following the judgment, Transocean settled the PSC claims for some US$212 million and paid civil penalties of about US$1 billion to the US Government.
Halliburton made a claim on its liability insurance against Chubb. However, Chubb refused to pay Halliburton's claim, contending amongst other things that Halliburton's settlement of the claims was not a reasonable settlement, and/or that Chubb had reasonably not consented to the settlement.
Halliburton commenced arbitration by appointing N, the third respondent, as its arbitrator on 27 January 2015 (“reference 1”). The fourth respondent, P, was appointed on behalf of Chubb. The identity of the third arbitrator could not be agreed and so an application was made to the High Court for appointment of a third arbitrator. Following a contested hearing, in which a number of candidates were put forward on both sides, Flaux J appointed M, the second respondent, as the third arbitrator by an order of 12 June 2015. M was Chubb's preferred candidate. Halliburton's main objection to Chubb's candidates, including M, was that they were English lawyers and this was a policy governed by New York law. Halliburton did not seek to appeal against that order.
Prior to expressing his willingness to be appointed, M disclosed that he had previously acted as arbitrator in a number of arbitrations in which Chubb was a party, including appointments on behalf of Chubb, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved.
Halliburton served its Statement of Claim in reference 1 on 18 September 2015. Chubb served its Statement of Defence on 11 December 2015.
In December 2015 M accepted appointment by Chubb through Clyde & Co, who were also Chubb's solicitors in reference 1, in relation to an excess liability claim arising out of the incident made by Transocean under its liability insurance policy with Chubb (“reference 2”). The same manager, Mr Trimarchi, was responsible for monitoring the claims made by both Transocean and Halliburton on behalf of Chubb and took the decision to refuse the claim in each case.
Prior to his acceptance of this appointment, M disclosed to Transocean his appointment in reference 1 and in the other Chubb arbitrations which had been disclosed to Halliburton. Transocean raised no objection. M did not, however, disclose to Halliburton his proposed appointment by Transocean.
In August 2016 M accepted appointment as a substitute arbitrator in another claim made by Transocean against a different insurer on the same layer of insurance (“reference 3”). This proposed appointment was also not disclosed to Halliburton.
In references 2 and 3 there was an order for a trial of a preliminary issue which was potentially dispositive of the claims, if decided in favour of the insurers. It involved construction of the policy terms on undisputed facts relating to the exhaustion of underlying layers by reference to the fines and penalties paid by Transocean. The preliminary issue was heard in November 2016.
On 10 November 2016 Halliburton learned of M's appointment in references 2 and 3. On 29 November 2016 Halliburton's US lawyers, K & L Gates, wrote to M, referring to the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (“the IBA Guidelines”) concerning the continuing duty of disclosure of potential conflicts of interest, and asking for clarifications and explanations.
M replied by email on 5 December 2016, explaining in outline how he came to be appointed in references 2 and 3. He stated that he had not made disclosure to Halliburton at the time of those appointments because it did not occur to him at the time that he was under any obligation under the IBA Guidelines to do so, an explanation which is accepted as truthful by both parties. He further stated as follows:
“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.”
Halliburton responded repeating its concerns about M's impartiality and suggesting that he resign, to which Chubb was not prepared to agree. M responded further by email of 15 December 2016 in which he stated:
“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...
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