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Arbitrator challenge dismissed – Court of Appeal rules on Deepwater appointment

Posted on 20 April 2018

Arbitrator challenge dismissed – Court of Appeal rules on Deepwater appointment

The Court of Appeal has dismissed a challenge to an arbitrator in a dispute between Chubb, the insurance company, and Halliburton, an oil services corporation, arising out of the Deepwater Horizon oil rig explosion in 2010.

The 2010 explosion in the Gulf of Mexico triggered extensive claims by the US Government and corporate and individual claimants against Halliburton and other concerned parties. When Chubb refused to pay Halliburton under its liability insurance policy, Halliburton commenced arbitration. Three arbitrators were appointed, including the arbitrator known as "M".

M was subsequently appointed in separate proceedings arising out of the Deepwater explosion, including another set of proceedings involving Chubb. M did not disclose these appointments to Halliburton. When Halliburton learnt of the appointments, it sought M's removal on the basis that M had conflicting interests which had not been disclosed.

In early 2017, the Commercial Court dismissed Halliburton's application to remove M. On 19 April 2018, the Court of Appeal dismissed Halliburton's appeal.

Halliburton's central argument was that the appointment of the same arbitrator in overlapping references with only one common party could give rise to unfairness, where the common party acquires information unknown to the other party.

The court ruled that both as a matter of good practice and as a matter of law, M should have disclosed the appointment to Halliburton at the time of M's appointment in the later proceedings. 

Nevertheless, Lord Justice Hamblen noted that the "mere fact of overlap does not give rise to justifiable doubts as to impartiality". Indeed, the court held that the overlap between the various arbitrations was, in this case, limited. Further, M's omission of the potential conflict was accidental rather than deliberate. A failure to disclose does not automatically equate to a suggestion of bias.

The message from the court was clear: M should have disclosed his appointment. However, the failure to disclose in itself would not have led a fair-minded and informed observer to conclude that there was a real possibility that M was biased. The appeal was accordingly dismissed.  

The judgment serves as a pertinent reminder that whilst the challenge of arbitrators is regularly mooted, launching a successful challenge remains an uphill battle.

For more information please contact Sonia Campbell or Jenny Hindley.