Apparent bias and applications to remove arbitrators

By Jeremy Glover, Partner

At the end of 2020, the UK Supreme Court, in the case of Halliburton Co v Chubb Bermuda Insurance Ltd [2021] AC 1083,1 had to consider an application under section 24 of the Arbitration Act 1996 for the removal of the arbitrator. When considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. The court decided that, as at the date of the hearing, to remove the arbitrator, the fair-minded and informed observer would not have concluded that circumstances existed that gave rise to justifiable doubts about the arbitrator’s impartiality. However, the judgment also provided, as you would expect, a number of helpful comments about how a court should approach similar applications.

In the case of H1 & Anor v W & Ors [2024] EWHC 382 (Comm), the claimants (referred to in the judgment as “the insurer”) also sought an order for the removal of the sole arbitrator (“W”) on the ground of apparent bias. The dispute in question was with a film company and a film production guarantor (“the insured”).2

Why it was suggested that the arbitrator was biased

Although the original grounds of the claim were wide-ranging, at the time of the hearing before Mr Justice Calver, they focused upon the observations made by W during the second procedural hearing which the insurer said gave rise to: “justifiable doubts about the arbitrator’s ability to assess the witness evidence impartially”. Specifically, the insurer complained that:

“statements made by W, concerning his knowledge of the insured’s factual and expert witnesses, gives rise to an apprehension that he has pre-determined favourable views of those witnesses and pre-determined negative views of the insurer’s witnesses. They also complain about the inconsistency of explanations given by W as to the nature and extent of his relationships with the insured witnesses.”

The insurer was clear that it was not suggesting that W was actually biased, but that applying the test in Halliburton, a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.

On 29 June 2023, the parties agreed W’s Terms of Appointment. By the agreement, the parties confirmed that they waived any objection to the appointment on the grounds of potential conflict of interest and/or lack of independence or impartiality in respect of any matters known to them at the date of the agreement. In statements exchanged on 10 November 2023, the insured’s experts disclosed that they had all previously had some dealings with and knew W. The insurer did not at that stage request any further information about these relationships.

On 23 November 2023, the second procedural hearing was held via Microsoft Teams. There was no approved transcript and the judge relied on contemporaneous notes. The judge commented that whilst these notes were not as full and informative as a transcript would be, there was no dispute between the parties as to the accuracy of these notes.

One of the notes recorded W as saying: 

“W: Okay, look, I have 12 witnesses I would like to appear. For me, I don’t need to hear any of the expert witnesses. I don’t think they will add any value. I know what they are saying. They are exceptional people in their fields. They are the best, but I don’t need them to say what is normal on a film. I know what is normal on film.

JP (counsel for the insurer): Well, there are a number of ways to go about this: we can cross examine; or we can make submissions. You can control what and how this proceeding works, but it is important that the parties aren’t shut out from making submissions. You may not accept them but I need to be able to make them.

W: Look, if you want to cross examine the expert witness, that is fine by me. But I don’t think we need to listen to them. I know them all personally extremely well on the insured side. I don’t know your expert witnesses. You have an underwriter expert [JY]. But I don’t think he adds much” [Emphasis added].

The judge noted that it was clear that what the arbitrator was saying was that he knew the three expert witnesses for the insured extremely well, that they were exceptional people in their fields, and so it was not necessary to call them for cross examination because he would believe what they were saying.

Following the hearing, solicitors for the insurer wrote to W to request further information about his relationship with the insured’s witnesses. W replied that the witnesses for the insured were known to him, as he had made clear at the second procedural hearing. He stated that he had worked with each on at least one film and had no shared financial interests with any of them. Reflecting on the industry, he considered that he would be surprised if any experienced film producer had not either known and/or worked with some of the expert witnesses in the arbitration. The experts in response to the removal application gave statements which confirmed the position.

Legal principles

Mr Justice Calver noted that in cases (such as here) where there is an allegation not of actual bias but of apparent bias, the relevant legal test is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. The judge further noted that the matters raised in Halliburton that were potentially relevant to the present application included:

“(1) Given the private and confidential nature of arbitration and limited discovery, there is a premium on frank disclosure (Halliburton at [56]).

(2) An arbitrator is not subject to appeals on issues of fact and often not on issues of law (Halliburton at [58]).

(3) There is a marked difference between a judge who is the holder of a public office, funded by general taxation and has a high degree of security of tenure of office and, therefore, of remuneration, and an arbitrator who has a financial interest in obtaining further income from other arbitral appointments and so may have an interest in avoiding action which would alienate the parties to an arbitration (Halliburton at [59]).

(4) Arbitrators may have very limited involvement in and experience of arbitration (Halliburton at [60]).

(5) The professional reputation and experience of an individual arbitrator is a relevant consideration for the objective observer when assessing whether there is apparent bias (Halliburton at [67]).

(6) The objective observer is alive to the possibility of opportunistic or tactical challenges (Halliburton at [67]).”

The context of the industry in which the appointment takes place was also relevant. For example, a fair-minded and informed observer would understand that arbitrators in a relatively small industry are likely to have formed acquaintanceship with others in that industry in the course of their work. Where the parties have agreed to the appointment of a sole arbitrator because of his technical skill and knowledge, procedural responses to a case involving relatively complicated evidence might not necessarily reflect the kind of management regime that would be imposed by an experienced legal professional.  

The insured noted that an arbitrator may display conduct which is “palpably bad” without giving rise to an apprehension of bias. Behaviour may be “inept” and show lack of due forethought but not occasion a real possibility of apparent bias. There is also a crucial distinction between a predisposition towards a particular outcome and a predetermination of the outcome; the former is consistent with a preparedness to consider and weigh factors in reaching a final decision; the latter involves a mind that is closed to the consideration and weighing. 

The insurer said that an arbitrator should not be influenced in expressing his views by extraneous matters, in particular by assessing witnesses’ evidence and their credibility by reference to his previous knowledge of them.

The decision

The judge was clear that there could not be any justifiable doubts about W’s impartiality based purely upon the degree of professional acquaintance shown by the details of his past relationships with the witnesses. The fair-minded and informed observer would understand that such commercial dealings are entirely to be expected of “an experienced practitioner in … television programme production” who has been in the market for some time and the parties must be taken to have had this in mind at the time of the arbitration agreement.

However, the remarks which W made about the witnesses generally would result in the fair-minded and informed observer, having considered the facts in the present case, concluding that there was a real possibility that W was biased. The judge’s reasons included that:

1. Whilst ultimately agreeing that the parties could call their witnesses, including their expert witnesses, and have them cross-examined, the arbitrator expressed a clear view that it was not necessary for them to be called. This remark was coupled with the observation that he did not know the insurer’s expert witnesses.The fair-minded and informed observer would consider that the arbitrator was saying that he would accept at face value the evidence of the insured’s expert witnesses because he knew them to be “exceptional people in their fields”. He was thereby pre-judging the merits of the dispute. This prejudice in favour of the insured’s expert witnesses would prevent an impartial assessment of the evidence of the insurer’s witnesses.
2. The appearance of bias in the sense of appearing to pre-judge this issue by reference to the expert’s status was not cured by the arbitrator saying, in response to the comment, that he should first hear the evidence before making up his mind, “I will of course reserve my judgement,” because he then immediately added, “but I have read the statements and I know the professionals. I can say now what I think”. A fair-minded and informed observer would not be reassured by this further statement. Instead, it would reinforce in their mind that, regardless of what might happen when the evidence is tested in cross-examination, the arbitrator would judge that evidence by reference to his personal knowledge of the status of the expert he knew.
3. This was not a case where an arbitrator was merely indicating a predisposition towards a particular outcome, giving the parties an opportunity to persuade him that his initial assessment of an issue may be wrong. It was a case where: “the arbitrator had given the firm impression of having already allowed extraneous, illegitimate factors to influence his assessment of evidence which he has not yet heard and, moreover, of not even realising that that is an unfair approach to adopt”. 
4. This was a sole inexperienced arbitrator (without the “tempering” influence of two other co-arbitrators), making findings of fact which were not susceptible to appeal.

This was not a case of expressing a preliminary view as to the merits of a dispute or the credibility of a witness after hearing the parties’ evidence. It was the expression of such a view before even hearing the witnesses, based upon knowing that witness by reputation or acquaintance. The parties would expect the arbitrator: “ to undertake an objective assessment of the evidence after he had heard it and heard it tested in cross examination.”

The judge accordingly held that W should be removed as arbitrator pursuant to section 24(1) of the 1996 Act.

Comment

The facts of the case, when distilled, suggest that the decision was an obvious one, but as originally brought, the application was far more wide ranging, and the court made its decision on only one of those issues. However, the judgment provides a very helpful example of how the Halliburton principles will be applied generally. It also provides a useful reminder of the value of careful contemporary notes hearing. 

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• 1. See Dispatch, Issue 246.
• 2. The case arose out of an accident during a stunt scene during filming which led to the lead actor’s face being badly burned, and delays to the filming schedule. A claim was made for anticipated costs of around £3 million, but the insurer rejected the claim and declined cover.