The International Bar Association (“the IBA”) published its 2024 Guidelines on Conflicts of Interest in International Arbitrations (“the Guidelines”). Arbitrators are expected to maintain a high level of independence. Therefore, the Guidelines aim to assist arbitrators in making decisions and aiding parties in assessing whether disclosed information or a lack thereof may create doubt as to the arbitrator's impartiality.
The Guidelines are no longer only applicable to commercial and investment arbitrations but extend to all international arbitrations. While not legally binding, the Guidelines aim to garner universal acceptance across all international arbitrations.
The Guidelines also uphold the three lists that categorise potential conflicts of interest: red, orange, and green. A situation on the red list signifies a conflict of interest, while the orange list could potentially create doubt as to the arbitrator's independence and must therefore be disclosed. Matters that fall under the green list pose no conflict of interest.
General standards regarding impartiality and independence
Previously, an arbitrator was required to remain impartial when a court orders for a dispute to be referred back to the same arbitrator. After the recent changes, if an arbitration award is challenged in court, the obligation for an arbitrator to remain impartial ceases, regardless of whether or not a court orders a dispute to be referred back to the same arbitrator.
Previously, an arbitrator would need to decline an appointment as an arbitrator if they doubt their independence. Now, an arbitrator also has to recuse themselves from a dispute where this doubt arises.
Regarding independence and impartiality, arbitrators must conduct an objective inquiry. This objective test requires the arbitrator to adopt the perspective of a reasonable third person with knowledge of the dispute and if this third person doubts the arbitrator's independence and impartiality, the arbitrator must refuse to accept the appointment or recuse themselves.
General standards regarding disclosure
Previously, arbitrators were not obliged to refuse their appointment or recuse themselves if bound to secrecy in terms of other laws, regulations or professional conduct. However, under the current rules, when such a disclosure cannot be made by the arbitrator due to this duty of secrecy, an arbitrator must now refuse to accept the appointment or recuse themselves.
Although the parties to the dispute may question their independence and impartiality due to the arbitrator's failure to disclose a fact, this does not automatically give rise to a conflict of interest. A key change to the Guidelines is the “third-person” test to objectively determine a conflict of interest. As such, it is this test that applies rather than a party's mere suspicion of a lack of independence and impartiality.
Waiver by a party
The new Guidelines stipulate that where a party has received a disclosure made by an arbitrator, yet fails to raise an express objection relating to a potential conflict of interest within 30 days after that, such a party is deemed to have waived the right to object regarding the arbitrator accepting the appointment.
Relationships
Previously, the conduct of a law firm to whom an arbitrator belongs would be considered in determining whether the law firm could influence the outcome of arbitration proceedings. This was due to an arbitrator being deemed as bearing the legal identity of a law firm. Now, the Guidelines also include “employers” and not only law firms. Arbitrators are now deemed to bear the legal identity of their employer, whether they are employed by a law firm or not. Thus, the conduct of both employers generally and law firms is considered in determining whether arbitration proceedings could be influenced.
The new Guidelines also make provision for an arbitrator to bear the identity of multiple law firms. Where a law firm employs an arbitrator, and such a law firm cooperates with other law firms and shares profits with same, the arbitrator is deemed to bear the legal identity of both law firms.
In the context of companies, where a parent company is a party to arbitration proceedings, its subsidiaries are now deemed to bear the identity of the parent company if said parent company has a controlling influence over it. Similarly, where a natural person is a party to arbitration proceedings and has a closely held company, the company now bears the natural person's identity.
Where the State or a State entity is a party to arbitration proceedings, the arbitrator must now disclose their relationship with the State or State entity.
Duty of the parties and the arbitrator
There is now a “catch-all” provision concerning a party disclosing certain information to the arbitrator. A party to arbitration proceedings must now disclose any relationship that it maintains that the party believes the arbitrator should be aware of. The party must also explain the nature of the relationship to the arbitrator.
Practical application of the Guidelines
Although the Guidelines maintain the three lists of red, orange and green, it is clear that not every situation fits into these categories. As such, the Guidelines stipulate that its provisions should govern every scenario, whether falling into a specific list or not.
Where a situation falls outside the scope of the orange list, there is no presumption that a disclosure should be made. However, the arbitrator must still assess the situation as the circumstances require and assess whether disclosure should nevertheless be made by applying the objective third-person test to assess whether a party doubts the arbitrator's independence.
The three lists are broken up into:
- The non-waivable red list;
- The waivable red list;
- The orange list; and
- The green list.
The non-waivable red list
Previously, where an arbitrator was an advisor to a party in arbitration and the arbitrator's employer or law firm derived a financial benefit from this relationship, the arbitrator could not act in proceedings. However, the updated Guidelines illustrate that this is now only the case where the arbitrator is currently involved in rendering advice. As a result, the arbitrator may act in proceedings even where past advice has been given to a party to the proceedings.
The waivable red list
If an arbitrator is presently or regularly advising a party to the arbitration proceedings, a party can now waive this as grounds for showing a conflict of interest but may only do so where the arbitrator does not derive a significant financial income from rendering such advice.
The orange list
Should an arbitrator have acted as an expert for one of the parties to the proceedings, disclosure of this fact is now required as it could, depending on the circumstances, give rise to a conflict of interest.
If an arbitrator has been appointed by one of the parties to assist in mock-trials within the past three years, disclosure of this fact is required. Similarly, where the arbitrator's employer or law firm renders services to a party to arbitration proceedings, even if the services rendered do not involve the arbitrator, disclosure of this fact is now required.
Where an arbitrator has publicly advocated a position as to the dispute, whether through social media, online professional networking platforms or otherwise, this fact must be disclosed to the parties. The same applies where an arbitrator holds an executive or other decision-making position with an administering institution and in that position has participated in decisions with respect to the arbitration.
The green list
This remains largely unaltered. However, the Guidelines introduce the addition of contact between an arbitrator and one of the experts involved in proceedings. As such, where an arbitrator has heard the testimony of the same expert but in different proceedings, this will not give rise to a conflict of interest and thus no disclosure is required.
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.
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