Arbitrator Bias: Have Halliburton and Sun Yang taught us what’s at stake for ADR?

 Arbitrator Bias: Have Halliburton and Sun Yang taught us what’s at stake for ADR?

This short article aims to address the topic of arbitrator’s bias by considering two recent and landmark decisions: the Halliburton case (Halliburton Co v Chubb Bermuda Insurance Ltd [2020] UKSC 48) and the Sun Yang case (Tribunal Fédéral Suisse, Ire Cour de droit civil, 22.12.2020, Sun Yang v. AMA (WADA) and FINA, 4A_318/2020).

Those two cases are very complex (Sun Yang, in particular, involved several decisions which are best understood by reading the decision itself). However, in a nutshell, in the Halliburton case the United Kingdom Supreme Court addressed the issue of multiple appointments and the duty to disclose information. In Sun Yang the Swiss Supreme Court dealt with the issue of comments spread by an arbitrator on social media regarding people with the same nationality as one of the parties involved and the fact that the related “duty of curiosity” (devoir de curiosité) lay with the challenging party (Sun Yang, para 6.5., p. 13).

Here we are dealing with two duties that mirror or complement each other: the arbitrators’ duty to disclose information  and the parties’ duty to be curious and ask for information.

The Duty of Disclosure

In Halliburton, the Supreme Court of the United Kingdom held a challenge by the US oilfield services multinational Halliburton against an arbitrator baseless. This was because the arbitrator failed to disclose his appointment in two other arbitrations involving an overlapping subject matter and an appointment by the opposite party – Chubb Bermuda Insurance Ltd (formerly Ace Bermuda Insurance Limited) – that gave rise to an appearance of bias. Although the Supreme Court held that the arbitrator breached his duty of disclosure, he was not to be removed from the arbitral tribunal in charge to decide the Halliburton case (Halliburton, 147, 149 and 150).

Due to the paramount importance of the legal issue at stake, the Supreme Court allowed the intervention of five well-known arbitral institutions – ICC, LCIA, LMAA, CIArb and GAFTA.

The opening of Lord Hodge’s opinion stated:

It is axiomatic that a judge or an arbitrator must be impartial; he or she must not be biased in favour of or against any party in a litigation or reference. A judge or arbitrator, who is not in fact subject to any bias, must also not give the appearance of bias: justice must be seen to be done (Halliburton, 1).

We might compare this to Sun Yang, where the Swiss Supreme Court held that:

It does not require disqualification only when bias of the judge is established, as a provision of the domestic forum can hardly be proven; it is sufficient that the circumstances give the appearance of bias and give rise to an apprehension of biased activity on the part of the judge (Sun Yang, p. 15).

The duty of impartiality – as Lord Hodge pointed out it is a ‘cardinal duty’ – is enshrined in Sec. 33 English Arbitration Act 1996. This obligation includes the duty of disclosure, that is a part of this duty. Indeed, the Supreme Court upheld the Court of Appeal’s opinion that it is an actual legal duty and not merely good arbitral practice. As the Court stated: “It is also an essential corollary of the statutory obligation of impartiality: an arbitrator who knowingly fails to act in a way which fairness requires to the potential detriment of a party is guilty of partiality” (Halliburton, 78). Notably it added, “one way in which an arbitrator can avoid the appearance of bias is by disclosing matters which could arguably be said to give rise to a real possibility of bias” (Halliburton, 70).

But what has to be disclosed? The Court of Appeal stated: “disclosure should be given of facts and circumstances known to the arbitrator which, in the language of section 24 of the Act, would or might give rise to justifiable doubts as to his impartiality” ([2018] EWCA Civ 817, 71). To this, the Supreme Court added that an arbitrator should “make reasonable enquiries as to whether there are facts or circumstances [unknown to the arbitrator] which might lead the fair-minded and informed observer to conclude that there was a real possibility of bias” (Halliburton, 107), as provided for in the IBA Guidelines on Conflict of Interest (Part I, General Standard 7(d)).

Precedents have established that any facts that give rise to doubts regarding an arbitrator’s bias have to be considered by a “fair-minded and informed observer” (Porter v Magill [2002] 2 AC 357, 103) that is “neither complacent nor unduly sensitive or suspicious” (Johnson v Johnson (2000) 201 CLR 488, 53) on a case-by-case basis.

Accepting multiple appointments on overlapping cases is not a solid ground for  challenging an arbitrator as such. But, as pointed out in Halliburton, it “may, depending on the relevant custom and practice, give rise to an appearance of bias” (Halliburton, 131).

So, it is up to each arbitrator to promptly and fully disclose to the parties each fact or circumstance that can cast justifiable doubt on their impartiality.

The Duty of Curiosity

Now, turning to the Sun Yang case, we have to face another form of lack of impartiality – arbitrator’s comments on social media. This case accentuated the challenging party’s duty of curiosity.

In this case, Mr Sun Yang –  a famous Chinese olympian swimmer and gold medallist – filed a request for the revision of an award by the Court of Arbitration for Sport (CAS) due to its chairman’s lack of impartiality. The chairman was Mr Franco Frattini, an Italian judge and former minister.

It was brought to light that, prior to the CAS case, Frattini had published numerous objectively harsh and prejudiced comments about Chinese people and culture on Twitter. I do not repeat them here, but there were quoted in the court decision (pp.  9-10,18).

Sun’s counsels submitted that he became aware of Frattini’s abusive and discriminating comments only on 15 May 2020, when they appeared on a website.

The opposite parties submitted that these comments were already on Twitter before the CAS case and that Sun should have searched for them at the time of Frattini’s appointment. They referred to art. R34 Code of Sports-related Arbitration with the assumption that Sun’s challenge was time-barred. The Code reads that an arbitrator “may be challenged if the circumstances give rise to legitimate doubts over her/his independence or over her/his impartiality.” In such cases “The challenge shall be brought within seven days after the ground for the challenge has become known”.

The Swiss Supreme Court held that the challenging party has a duty of curiosity, but that this duty is not unlimited.

It stated that “[t]he parties are certainly obliged to carry out certain investigations, in particular on the Internet” (Sun Yang, p. 13), citing Despina Mavromati and Matthieu Reeb’s The Code of the Court of Arbitration for Sport (2015, no. 68 ad Art. R34) and  Antonio Rigozzi and Gabrielle Kaufmann-Kohler’s, International Arbitration – Law and Practice in Switzerland (2015, n. 8.138 ff). The core passage of the decision that followed, however, is worth quoting at length:

While they can certainly be required to use the main computer search engines and to consult sources likely to provide, a priori, elements revealing a possible risk of bias on the part of an arbitrator, such as the websites of the main arbitral institutions, of the parties, of their counsel and of the law firms in which they practice, the law firms in which certain arbitrators work, and – in the field of sports arbitration – those of the Respondent Foundation and of the sports institutions concerned, one cannot, however, expect them to systematically and thoroughly scrutinize all the sources relating to a given arbitrator … Moreover, while it is true that it is possible to easily access the data appearing on open access websites with a single click, this does not mean that the information in question is always easily identifiable (Sun Yang, p. 13).

To support this conclusion, the Court cited Karim El Chazli’s L’impartialité de l’arbitre, Étude de la mise en oeuvre de l’exigence d’impartialité de l’arbitre (2020, p. 325 and 330 ff, which refer to French case law).

What’s at stake for arbitration?

Based on this, we may conclude that arbitrators have to disclose every fact or circumstance that could potentially give rise to doubt of their impartiality, including a duty to research regarding possible conflicts of interest. Meanwhile, it is up to the parties to make appropriate research on arbitrators’ background, past statements and tweets that could lead to the successful challenge of the biased arbitrator.

The significance of this is also, of course, that the credibility of arbitration, as a system, to solve disputes is rooted in the actual independence and impartiality of the arbitrators.

Image credit: Image Credit: Christine Smith, under Creative Commons 4.0 license.

Bernardo Cartoni

Bernardo Cartoni, FCIArb, is an arbitrator at Hong Kong International Arbitration Centre.

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