Halliburton applied: Apparent bias challenge to leading reinsurance arbitrator rejected

19/11/18

The Commercial Court (HHJ Waksman QC) has handed down its judgment, refusing a challenge by the Pakistani state-owned reinsurance company under s.24 Arbitration Act 1996 to remove an arbitrator for apparent bias in a reinsurance dispute, in a case with important market implications.

Equitas Limited and Equitas Insurance Limited (“Equitas”) are the successors in title to the assets and liabilities of all Lloyd's syndicates for 1992 and prior years of account. In April 2016, it began 9 relatively small arbitrations against various reinsurers. One of those arbitrations was against Pakistan Reinsurance Company Limited (“PRCL”), which is owned by the Pakistani state.

The arbitrator, C, is a leading figure in the reinsurance industry. As described in the judgment:

“C, himself, is a well-known and highly experienced commercial arbitrator. As he states in paragraph 4 of his witness statement, he spent all his life working in the insurance industry from 1970. He has worked for a number of major insurers and reinsurers over the years, sometimes as an underwriter and sometimes on the claims side. He has also had non-executive directorships, as well as acting as an independent peer review of the ten Lloyd's syndicates, and has come across many different classes of business. He has acted as an expert witness in numerous insurance and reinsurance cases here, in the US, Canada and Ireland.He has been appointed in 54 litigated cases and 28 arbitrations, all now concluded. He is involved in six ongoing cases. He has had 88 appointments in all.”

Equitas appointed C as an arbitrator in each of the nine arbitrations commenced in April 2016. One reason for the appointment was that the pool of appropriately-qualified ‘market men’ with experience of Lloyd's in the relevant period is small.

PRCL relied on two grounds said to give rise to C’s apparent bias:

1. His appointment by the same party, Equitas, in all nine different arbitrations against different reinsurers;
2. His appointment as an expert on behalf of Equitas in an unrelated claim in the US, for which he was paid about US$20,000 during a period when the arbitration with PRCL was stayed.

The Court rejected the challenge to Equitas’ appointed arbitrator on grounds of apparent bias. The Judge gave detailed consideration to the authorities, noting that the application had to be judged at the time of the hearing to remove the arbitrator rather than the time of the challenging party’s objection. That meant that the impartial observer was aware of the “small pool” point advanced by Equitas. He then considered the expert appointment, and held that C’s actual involvement and remuneration were sufficiently small that it did not give rise to any risk of apparent bias. The Judge further considered that the arbitrations did not overlap, and there was no risk of “inside information” concerning Equitas obtained from the other arbitrations being used by C to decide the present one. Bearing in mind the “small pool” point, there were no facts which could suggest C was apparently biased.

The Judge also held that PRCL had lost its right to object under s.73.

The judgment should give important comfort to insurers engaged in multiple arbitrations on similar policies, where they appoint a single arbitrator because the sums involved are small and the pool of arbitrators is narrow.

The judgment is here.