The cornerstone of international arbitration is party autonomy. In a 2018 interview, Gary Born described the relation to arbitrator selection as follows:

The parties['] autonomy to select arbitrators of their own choosing, who they consider appropriate to their particular dispute, is an essential characteristic of international arbitration. In fact, the freedom, and responsibility, for selecting the tribunal for every case is one of the distinguishing features of the arbitral process.

Given this, it makes sense that parties exercise this autonomy and seek to find arbitrators with whom they are comfortable. Moreover, it makes sense that having been through an arbitration with an arbitrator, a party may want to appoint that same arbitrator to serve in a future dispute.

At a certain point, however, repeat appointments can become problematic. In general, under national arbitration laws and arbitral rules, arbitrators are required to be and remain impartial and independent, and to disclose all facts that may be relevant to their impartiality and independence. While the meaning of the terms may differ under different legal regimes and arbitral rules, these concepts are respectively understood as requiring: (1) that the arbitrators neither favor one party nor are predisposed with regard to the disputed issue(s), and (2) that no relationship between the parties and the arbitrators exists that may or at least appear to affect the arbitrator's freedom of judgment.

When an arbitrator has been repeatedly appointed by the same party, it raises questions as to whether that arbitrator can serve without favoring that party or, at a minimum, appearing to be dependent on that relationship in a way that would affect the arbitrator's freedom of judgment.

The IBA Guidelines and Repeat Appointments

In international arbitrations, parties, counsel, and arbitrators will look to the International Bar Association Guidelines on Conflicts of Interest (the Guidelines). The Guidelines are not mandatory and thus neither override the rules chosen by the parties or applicable law. Nonetheless, they were designed with the hope that they would be generally accepted and adhered to within the international arbitration community. They have largely achieved this goal as they are commonly referenced and considered persuasive authority in international arbitration.

For example, in Applied Industrial Materials v. Ovalar Makine Ticaret Ve Sanayi, A.S., No. 05 CV 10540(RPP), 2006 WL 1816383 (S.D.N.Y. June 28, 2006), the U.S. District Court for the Southern District of New York reviewed and relied on the Guidelines in the context of assessing whether an umpire's alleged failure to disclose provided grounds for vacating an arbitral award. The court's use of the Guidelines appeared to be grounded in the notion that enforcing such rules of ethics for arbitrators encourages business confidence in the integrity of the arbitration process and this, in turn, facilitates international transactions. Id. at *9.

The Guidelines utilize a color-based system whereby specific factual scenarios are grouped within one of four groupings: a non-waivable Red List, a waivable Red List, an Orange List, and a Green List. Factual scenarios listed on the non-waivable Red List are those which are considered so severe that even disclosure and acceptance of the conflict cannot cure the conflict, deriving from the principle that no person can be his or her own judge. By contrast, the Green List involves those situations in which there is not even the appearance of a conflict and thus the arbitrator has no duty to disclose. The scenarios on the waivable Red List and the Orange List fall in between these extremes.

The issue of repeat appointments is generally considered to fall within the Orange List. The Orange List involves scenarios in which there may be justifiable doubts as to the impartiality and independence of an arbitrator. In these scenarios, the arbitrator has a duty to disclose. Orange List scenarios involving repeat appointments include those in which:

• The arbitrator has, within the past three years, been appointed as arbitrator on two or more occasions by one of the parties, or an affiliate of one of the parties (3.1.3);
• The arbitrator current serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties, or an affiliate of one of the parties (3.1.5); or
• The arbitrator has, within the past three years, been appointed on more than three occasions by the same counsel, or the same law firm (3.3.8).

The first of these scenarios, however, contains a footnote regarding repeat appointments in specialized areas of practice. Specifically, it provides that "[i]t may be the practice in certain types of arbitration, such as maritime, sports or commodities arbitration, to draw arbitrators from a smaller or specialized pool of individuals. If in such fields it is the custom and practice for parties to frequently appoint the same arbitrator in different cases, no disclosure of this fact is required, where all parties in the arbitration should be familiar with such customs and practice."

'Halliburton v. Chubb'

These very issues came to a head in Halliburton Company v. Chubb Bermuda Insurance Ltd (formerly known as ACE Bermuda Insurance Ltd), Case ID: UKSC 2018/0100, a case pending before the Supreme Court of the United Kingdom.

Halliburton provided cementing and well-monitoring services to BP in the Gulf of Mexico. In 2010, there was an explosion and fire on an oil rig, which led to a catastrophic oil spill in the Gulf of Mexico (the "Deepwater Horizon oil spill"). As a result, thousands of claims were brought against Halliburton, Transocean (which provided similar services), and BP. BP, in turn, brought claims against Halliburton. Halliburton had liability insurance in place which it had purchased from Chubb.

After a trial in which fault was apportioned amongst the parties, Halliburton entered into a settlement. Halliburton then sought to recover part of the settlement under its liability insurance policy. After Chubb refused to honor its policy obligations, arbitration was commenced.

Party-appointed arbitrators were selected but the parties could not agree to an umpire. An English court was asked to intervene, and it ended up selecting Chubb's first-choice candidate ("M").

Halliburton sought M's removal as an arbitrator after finding out that subsequent to M's appointment, and without Halliburton's knowledge, M had accepted appointments as arbitrator in two related matters. Halliburton's application was rejected.

The intermediate appellate court, with reference to the fact that this was a Bermuda form arbitration, held that, "[t]he mere fact that an arbitrator accepted appointments in multiple references containing the same or overlapping subject matter with only one common party does not of itself give rise to an appearance of bias." [2018] EWCA Civ 817, ¶ 52-53. Rather, the Court of Appeal explained, "in order to lead to the objective conclusion of apparent bias something more would be required, and that must be 'something of substance.'" Id. ¶ 77.

The Court of Appeal then reviewed the six grounds set forth by Halliburton as being "of substance" and rejected all six. Of interest in this context was the Court of Appeal's rejection of Halliburton's concern that the arbitrator would receive financial benefits from the further Chubb appointments.

Of further interest was the Court of Appeal's handling of M's non-disclosure of the other appointments. Noting that it was good practice for disclosure in the context of international arbitration, the Court of Appeal referenced the applicable Orange List reference in the Guidelines where an arbitrator serves in an arbitration on a related issue involving one of the parties. Id. ¶ 88. The Court of Appeal also noted that even Chubb's counsel admitted that 10 appointments for one party might objectively give rise to justifiable doubts as to the impartiality of the arbitrator. Id. ¶ 90.  Nevertheless, the Court of Appeal affirmed the rejection of Halliburton's application.

The Court of Appeal's decision has been appealed to the Supreme Court, and the Supreme Court has received briefing and heard oral argument.

Takeaways

As the world anxiously awaits the Supreme Court's decision, there are a few key takeaways for arbitrators, counsel, and parties to arbitrations.

First, arbitrators should err on the side of disclosure. Per the Guidelines, there are numerous factual scenarios which may raise concern for the parties, but certain conflicts may be waived if disclosed.

Second, it is incumbent upon counsel and the parties to study arbitrator disclosures, to research items of concern, and to promptly raise concerns or questions. Time is of the essence as parties may have limited time to raise concerns under the operative arbitration rules or law.

Third, parties and their counsel may avoid the issue by simply appointing different qualified arbitrators.  An additional benefit to this approach is that it will help diversify the pool of arbitrators and, in turn, create more options for arbitration users as a greater pool of arbitrators will have relevant experience.

Halliburton underscores that repeat appointments can raise the appearance of impartiality. Given the key role of party autonomy and the importance of arbitrator selection, this may be reason enough to dissuade repeat appointments.

Peter A. Halprin is a partner in Pasich LLP's New York office. Kayla M. Robinson is an associate at the firm.