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Updates to IBA Guidelines on Conflicts of Interest in International Arbitration: How to determine the impartiality of the tribunal

Author: Nicola Sharp  15 April 2024
4 min read

The International Bar Association (IBA) publishes information across all aspects of law to support the international legal community. They have recently published a 2024 version of Guidelines on Conflicts of Interest in International Arbitration (the Guidelines), which updates the 2014 guidelines.

Purpose of the Guidelines

The purpose of the guidelines is to ensure the impartiality of arbitration in the international arena. It is a ‘soft law’ instrument, which reflects the standards expected to apply to impartiality and independence of arbitrators. 

Parties to an arbitration, or the arbitrator(s) themselves consult the Guidelines if they are concerned about real or perceived conflicts of interests. 

Why the updates?

The reason why the guidelines have been updated now is that the IBA Arbitration Committee assesses whether its rules and guidelines should be adapted every 10 years. The Guidelines were first issued in 2004, then updated in 2014, and revised again in 2024, according to this 10-yearly cycle. 

Summary of the Guidelines

The Guidelines comprise a series of seven general standards of independence and disclosure to govern the selection, appointment, and continuing role of an arbitrator. 

The document is split into two parts:

  • General Standards; and
  • Application Lists

The Application Lists describe issues to be considered by parties and arbitrators facing potential conflicts of interest. 

There is a ‘Red List’ for situations that indicate a conflict. These are either waivable, or non-waivable. 

The ‘Green List’ shows issues that present no conflict. 

The ‘Orange List’ describes issues that may present a conflict and against which the parties should make disclosures. If a disclosure is made, then the parties can object to the appointment of the arbitrator making the disclosure. If no objection is received within 30 days the disclosure, the potential conflict is deemed to be waived, (unless the disclosure falls within the Non-Waivable Red List). 

Summary of selected updates

It is the Orange List that has undergone the most changes in the recent update. Perhaps that is unsurprising as it is the ‘grey’ areas that require the most thought and consideration. Situations which are now on the Orange List include:

  • The appointment of an arbitrator, who has acted as an expert for a party in unrelated matters within the past three years.
  • The appointment of an arbitrator, who has been appointed as an expert on more than three occasions by the same counsel or the same law firm within the past three years.
  • The situation in which an arbitrator publicly advocates a position through a post on social media or online professional networking platforms.

There are several other situations on the list. The three above are perhaps the ones that parties may come up against most often, and the inclusion of social media behaviour is a novel insertion, based on the input from the stakeholders consulted. 

Notably, the updated Non-Waivable Red List includes instances where the arbitrator currently advises either party, or the arbitrator’s firm derives significant income from providing that advice. 

Other updates reflect the increase in third party funding of arbitration, and the importance of experts and expert evidence.

Impartiality and independence in arbitrations

One of the attractive features of arbitration is the opportunity to appoint an arbitrator who is an expert in the industry of the dispute, who may not necessarily be a lawyer. 

In some industries, this can lead to a small pool of well-known and respected arbitrators, who are routinely appointed by law firms that specialise in that industry. These arbitrators in particular are more likely to know the solicitors, experts, and possibly even the clients involved in the dispute.

Understandably, that could be considered as a risk of showing favouritism to one party or the other, particularly if continued instructions are seen to be linked to one party’s success.

It’s a tricky area for arbitrators and parties, so the Guidelines have been updated to provide more specific advice in the non-exhaustive list of potential conflict scenarios in the ‘Orange List’. 

These changes reflect a synergy in the English and Welsh statute, the Arbitration Act 1996, which makes provision to remove an arbitrator “if circumstances exist that give rise to justifiable doubts as to his / her impartiality” (section 24) 

In the Guidelines, General Principle 2 expands on what is meant by ‘justifiable doubts’ explaining that doubts are justifiable if a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching the arbitrator’s decision. 

Justifiable doubts necessarily exist as to the arbitrator’s impartiality or independence in any of the situations described in the Non-Waivable Red List.

Guidance for arbitrators familiar with the parties

In the recent case of H1 v W [2024] EWHC 382 (Comm), Judge Calver removed a sole arbitrator on grounds of apparent bias because the arbitrator accepted expert witness evidence without the expert appearing at a hearing for cross-examination. That in itself may not have been enough to justify removal, but the arbitrator also made remarks about his familiarity with the expert witness. 

Judge Calver commented that the familiarity was not problematic in itself, noting that specialist arbitrators often know their peers. The key factor is for the arbitrator not to prejudge any matter or base a finding on anything other than the evidence presented to them. 

The leading Supreme Court case of Halliburton Co v Chubb Bermuda Ltd [2020] UKSC 48 provides important dictum here. It established that the test for conflicts was an objective one, looking at whether a “fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

Comment

The updated Guidelines help parties to better assess the impartiality of the tribunal, particularly in circumstances where the arbitrators are well-known to one or both of the parties in a professional, or personal capacity. 

Appointing arbitrators can be an expensive and drawn out process. So too can removing them. The guidance helps to avoid these costly situations by making it clearer when disclosures against conflicts should be raised. In practice, arbitrators, solicitors and barristers do this routinely as part of their ongoing transparency in an arbitration. But arbitrators who are specialist in their subject, but are not practising lawyers, can sometimes get caught out by the rigour expected from the impartiality rules.

If conflict is a potential issue, then parties can consider a two or three person tribunal, if the institutional rules, and the arbitration agreement allows. That helps to balance out any perceived bias. 

Nicola Sharp C 09983

Nicola Sharp

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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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