Conflicts of interest in arbitrator appointments are a key concern for arbitrators and parties alike.
For the businesses and people who become party to a dispute, it is important to ensure that the individuals who will review and ultimately decide their case are free from any conflicts. This is particularly so given that arbitrators are typically not bound by previous decisions and, while successful challenges of awards are not common, bias on the part of the arbitrator may provide a basis on which a party may seek to bring a challenge.
For the arbitrators' part, they want to be confident that they have complied with their legal duties and are conflict-free.
The IBA Guidelines on Conflicts of Interest in International Arbitration are used by parties, arbitrators and courts worldwide when ascertaining what constitutes a conflict of interest and the associated duties of arbitrators and parties.
The Orange and Green Lists
Many users of arbitration will be familiar with the Guidelines from reference to the Red, Orange and Green Lists. These Lists provide practical examples of facts that may or may not be likely to give rise to doubts as to an arbitrator's impartiality or independence.
- 'Red situations' are divided depending on their severity. Some are 'Non-Waivable', others are 'Waivable' but only if done so expressly.
- 'Orange situations' can be waived and parties may be deemed to have done so if no timely objection is made following an arbitrator's disclosure.
- 'Green situations' are understood not to create a conflict of interest or appearance thereof.
The IBA proposes various additions to the Orange List. These cover, inter alia, where two or more arbitrators (or an arbitrator and counsel for a party) currently sit as co-arbitrators in separate, unrelated proceedings, an arbitrator having assisted in a recent mock trial or hearing preparations and an arbitrator having recently acted as expert for a party.
The IBA also clarifies that an arbitrator publicly advocating a position on the case (an 'Orange situation') includes comments made on social media or a professional networking platform.
On the Green List, the IBA proposes including cases where an arbitrator has heard testimony from an expert in the case in separate proceedings.
Osborne Clarke comment: In many cases falling under the proposed 'Orange' additions, there may be no conflict. However, some cases will be unclear and disclosure of the facts would assist the parties and may help protect the arbitrators from later allegations of undisclosed conflict. While many of the proposed changes reflect what is already being done in practice, the changes provide clarity and modernise the Guidelines, for example, in a world of social media.
Parties' duty to enquire (General Standard 4)
The key change here is that a party will be deemed to have learned of any facts or circumstances that could constitute a potential conflict of interest where such facts/circumstances could have been discovered upon "reasonable enquiry". This is relevant to ascertaining whether a party has waived a conflict.
Osborne Clarke comment: This change introduces the concept of 'constructive knowledge' of a party. It would increase the burden on parties to make reasonable enquiries into potential areas of conflict, both at the outset and on an ongoing basis during proceedings.
Relationships (General Standards 6 and 7)
General Standards 6 and 7 consider the relationships that may be relevant to determining whether a disclosure is required or a conflict of interest exists. They apply to both arbitrators and parties.
The key proposed additions are:
- Express confirmation that any legal entity or natural person over which a party has a "controlling influence" may be considered to bear the identity of the party.
- An expansion of the parties' disclosure obligations. Specifically, they will be required to disclose (to the tribunal, other parties and any appointing authority), any relationship between an arbitrator and "any other person or entity [the party] believes an arbitrator should take into consideration when making disclosures".
- Confirmation that relationships with regional or local authorities or autonomous agencies must be considered on a case-by-case basis.
Osborne Clarke comment: The proposed updates reflect the ways in which businesses, individuals, states and others interact and expand the types of relationships that arbitrators and parties should consider when making disclosures.
Osborne Clarke comment
Whilst the Guidelines are soft law not binding without party agreement, they are widely adopted internationally and are considered to promote best practice.
The next stage is for the IBA Council to decide whether to adopt the changes. We expect the decision to be made this month.
See the 2014 Guidelines here and the proposed 2024 Guidelines here.
This article has been co-authored by Solicitor Apprentice Jai Balaghan.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.