Now in its third decennial iteration, the International Bar Association (“IBA”) has issued its updated Guidelines on Conflicts of Interest in International Arbitration (the “Guidelines”).
The Guidelines are a “soft law” instrument which have been widely accepted as “best practice” since their first publication in 2004 and are, in our experience, ubiquitous in any application regarding a purported conflict of interest.
To identify whether (and how) the 2014 Guidelines should be updated, the IBA first conducted a survey of arbitration practitioners. This confirmed that an overhaul of the Guidelines was not necessary, but identified certain areas where the Guidelines could be updated, such as arbitrator disclosures, third-party funding, expert witnesses, States, non-lawyer arbitrators and social media. An IBA task force was then divided into teams to propose updates in respect of these areas and other possible issues. A draft of the updated Guidelines was then circulated for public consultation, including to all major arbitration institutions, with comments (in particular clear areas of consensus) taken into account in the final version.
The 2024 Guidelines contain relatively modest changes to the 2014 version, but that was probably driven by the 2014 Guidelines being so widely adopted and the “if it ain't broke, don't fix it” message the IBA received through its survey. There are, however, some important (and welcome) amendments and clarifications which are consistent with our view of what represents best practice.
The structure of the Guidelines is unchanged. Part I comprises seven “General Standards”, accompanied by explanatory notes, and Part II contains the illustrative “Application Lists” in which the General Standards are applied to various circumstances across a “Non-Waivable Red List”, “Waivable Red List”, “Orange List” and “Green List”. The General Standards continue to take precedence over the Application Lists (something the IBA has emphasised in its Foreword to the updated Guidelines).
So, what has changed?
- General Standard 1 (“General Principle”)
now confirms that an arbitrator's obligation of impartiality
and independence ends after the final award is rendered (and any
corrections or interpretations issued). The obligation does not
extend to the time period in which an award might be challenged
before relevant courts or bodies.
- General Standard 2 (“Conflicts of
Interest”) has been amended to clarify that, when
deciding whether to decline an appointment (or refuse to continue
to act), an arbitrator should bear in mind the objective standard:
“a conflict of interest exists from the point of view of
a reasonable third person having knowledge of the relevant facts
and circumstances”. If, when applying the objective
standard, “justifiable doubts” exist as to a
possible conflict of interest, then the arbitrator should either:
(i) decline the appointment (or refuse to continue to act), for
example if the circumstances are those which appear on the
Non-Waivable Red List; or (ii) make a disclosure, for example in
circumstances described on the Waivable Red List. In our
experience, this is consistent with the practice of arbitrators in
any case, but the clarification is welcome.
- General Standard 3 (“Disclosure by the Arbitrator”) has been supplemented, mostly by ‘raising' wording from the explanatory notes to the General Standard itself, to confirm that:
a. When deciding whether a disclosure is necessary, and subject to a general requirement to make reasonable enquiries, the arbitrator is to assess “all the facts and circumstances known to the arbitrator” (i.e. it is a subjective standard).
b. If the arbitrator would make a disclosure but is prevented from doing so by professional secrecy rules, or other rules of practice or professional conduct, then the arbitrator should decline the appointment (or resign).
c. A failure to disclose certain facts or circumstances that might, from the parties' perspective, give rise to doubts as to arbitrator's impartiality or independence does not necessarily mean that a conflict exists or that the arbitrator should be disqualified.
- The only material change to General Standard 4
(“Waiver by the Parties”) is that parties are
now deemed to know facts or circumstances that could constitute a
potential conflict of interest for an arbitrator that would be
revealed by a reasonable enquiry at the outset or during
proceedings. Accordingly, the parties will be deemed to have waived
any potential conflict of interest if they do not raise an express
objection within 30 days of such constructive knowledge. This does
create an obligation on the parties (and their legal advisors) to
“do their homework” at the outset, but is a welcome
change in our view, and ought to reduce the scope for some of the
cynical attacks on arbitrator independence/impartiality that
parties sometimes deploy for tactical reasons during the course of
proceedings.
- There are no material changes to General Standard 5
(“Scope”).
- General Standard 6 (“Relationships”) has been amended to confirm:
a. That arbitrators may be employees of companies (and not just partners or employees of law firms), and, accordingly, “bear the identity” of the law firm or employer.
b. The need to take into account the law firm or employer's organisational structure and mode of practice in determining whether a conflict of interest might arise. Structures through which separate law firms might co-operate and/or share profits might justify an arbitrator bearing the identity of such other law firms. This amendment, and the amendment noted above, continue to make the exercise of obtaining arbitrator appointments whilst working at a law firm difficult, and so the trend of legal practitioners needing to choose between working in private practice or as an arbitrator looks set to continue.
c. That an entity or natural person over which a person has a controlling influence may be considered to bear the identity of such person (i.e. where a parent company is party to proceedings its subsidiary may be considered to bear the parent's identity, and similarly where a person is party to proceedings their closely held company may be considered to bear their identity).
d. That third-party funders and insurers might have different levels of involvement (including influence over conduct of the proceedings), which may be relevant when considering whether such entities bear the identity of a party.
e. The criteria of “controlling influence” and “direct economic interest” might not apply to States, and so matters involving States and State entities should be considered on a case-by-case basis, taking into account relationships between State entities and their relevance to the subject matter of the dispute. Arbitrators should err on the side of disclosure where States or State entities are involved. This is a welcome addition, as in our experience State influence can be pervasive, and can be a particularly sensitive point for private entities or investors.
- General Standard 7 (“Duty of the Parties and the Arbitrator”) has been amended to:
a. Require parties to also disclose relationships between an arbitrator and (i) a person or entity over which a party has a controlling influence, or (ii) any other person or entity the parties believe the arbitrator should take into consideration when making disclosures pursuant to General Standard 3.
b. Require parties, when disclosing relationships, to explain the relationship of the relevant persons and entities to the dispute. This is a welcome addition, as it ought to clarify where an actual conflict arises/may arise, and where a party is merely seeking to play a tactical game.
c. Expand “disclosable” counsel to include those who advise on the arbitration (and not just those who appear for the parties in the arbitration). In practice, this obligation on the parties can be (and often is) created in the first procedural order, but it is a welcome addition to the Guidelines.
- As regards the Application Lists:
a. The Red Lists (Non-Waivable and Waivable) are generally unchanged except to make them consistent with the updated General Standards (for example, recognising that an arbitrator might be employed by an entity other than a law firm).
b. The Orange List has been expanded, and provides welcome clarity on points that often arise in practice, so that a disclosure is now likely to be required where:
i. An arbitrator has been engaged by one of the parties or an affiliate to assist with (unrelated) mock-trials or hearing preparations on two or more occasions in the past three years. Where an arbitrator is engaged for the same purpose by the same counsel or law firm, the threshold is at least three occasions in the past three years.
ii. An arbitrator has been engaged as counsel (and not just arbitrator) in another arbitration on a related issue or matter involving one of the parties or an affiliate in the past three years.
iii. An arbitrator has been engaged as expert for one of the parties or an affiliate in an unrelated matter in the past three years. Where an arbitrator is engaged as an expert by the same counsel or law firm, the threshold is at least three occasions in the past three years.
iv. Two arbitrators have the same employer (and are not just lawyers in the same law firm).
v. Another lawyer in the arbitrator's law firm is an arbitrator on another dispute involving the same party or parties (or affiliates), on a related issue or matter.
vi. Two or more arbitrators, or an arbitrator and counsel for one of the parties, currently serve as co-arbitrators in another arbitration.
vii. An arbitrator is instructing an expert appearing in the arbitration in another matter where the arbitrator is acting as counsel.
viii. An arbitrator has publicly advocated a position on the case, including through social media such as LinkedIn.
ix. An arbitrator holds a decision-making position within the relevant arbitral institution or appointing authority and has participated in decisions regarding the arbitration.
c. The Green List is, like the Red Lists, also generally unchanged except to make them consistent with the updated General Standards, and to confirm that no disclosure is required where an arbitrator has previously heard testimony from an expert appearing in the arbitration.
In the latest iteration of the Guidelines, the IBA has avoided the all-too-common pitfall of change for the sake of change, but has provided welcome further clarity in the form of an evolution of the tried and tested principles that have made the Guidelines so widely adopted. In our view, this latest iteration of the Guidelines ought to be helpful to parties and arbitrators and is consistent with, and supportive of, best practice.
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