Gordon Bell
Partner
Head of International Arbitration
Article
17
In February 2024, the International Bar Association ("IBA") published an updated version of its Guidelines on Conflicts of Interest in International Arbitration (the "IBA Guidelines"). The IBA Council approved the updated version on 25 May 2024.
In this article we summarise:
We also provide some examples of how the IBA Guidelines have been used in practice by parties, arbitrators and national courts in a number of different jurisdictions.
The IBA Guidelines are designed for use in both international commercial and investment arbitration. They are a "soft law" instrument which sets out guidance on the selection and appointment of arbitrators and are often invoked by parties and their counsel as the basis for challenges to arbitral appointments.
First published in 2004 and revised in 2014, the 2024 update is the product of the latest 10-yearly survey of arbitration practitioners conducted by the IBA Arbitration Committee. Following this consultation, the Committee determined that a complete overhaul of the Guidelines was not warranted. Accordingly, the structure of the IBA Guidelines remains unchanged and the 2024 update modernises and refines the existing framework.
This comprises of:
We examine some of the key changes to both Parts I and II below.
General Standard 2 addresses when an arbitrator should decline an appointment or refuse to continue to act on the basis of a potential conflict of interest.
The 2024 update reaffirms that (as expressed in the 2014 Guidelines) an objective test should be applied when assessing whether an arbitrator should be disqualified. The test for disqualification is, as before, a 'reasonable third person test'. This focusses on whether facts or circumstances exist which, from the point of view of a reasonable third party having knowledge of the relevant facts, would give rise to justifiable doubts about the arbitrator's impartiality or independence.
The main updates to General Standard 2 are in the explanatory notes. These clarify the concept of "justifiable doubt" applied in the objective test described above. They confirm that where "justifiable doubt" arises in connection with circumstances described in the:
The duty of disclosure owed by arbitrators to parties to arbitration has been subject to much debate. In particular, the question that is often asked is whether the test for disclosure (under the rules of a particular arbitral institution, or the lex arbitri - the national law of a seat) is an objective or a subjective one.[1]
General Standard 3 reaffirms that an arbitrator's duty to disclose under the IBA Guidelines is governed by a subjective test. This considers whether facts or circumstances exist which may, "in the eyes of the parties", give rise to doubts as to the arbitrator's impartiality or independence. If such circumstances exist, then the arbitrator is required to disclose these to the parties - following which the objective test set out in General Standard 2 will be applied in order to determine whether a conflict exists.
The key changes to General Standard 3 include the elevation of two principles that were previously only included as explanatory notes, into the General Standards:
General Standard 4 provides that a party is deemed to have waived any potential conflict of interest within 30 days after:
Note that this does not however apply in relation to facts or circumstances that would fall into the Non-Waivable Red List.
General Standard 4 has been amended to include a presumption that a party is deemed to have learned of any fact or circumstance "that a reasonable enquiry would have yielded if conducted at the outset or during the proceedings." This puts the onus on the parties to conduct reasonable enquiries at an early stage. It will also prevent parties from tactically delaying / withholding objections until the proceedings have advanced.
General Standard 6 describes relationships that may constitute a conflict of interest or require disclosure. This has been updated to include a more general reference to an arbitrator's "employer" (this previously only referred to a law firm). It also recognises a broader range of working backgrounds, recognising that arbitrators may be employees of law firms and not exclusively partners.
The explanatory notes further acknowledge the evolution in the structure of international legal practices and clarify that "structures through which different law firms cooperate and/or share profits may provide a basis for deeming an arbitrator to bear the identity of such other firms".
There is also a significant new provision in General Standard 6(c). This clarifies the dynamics of party-controlled entities, confirming that any "legal entity or natural person over which a party has a controlling influence may be considered to bear the identity of such party". This would apply, for example, to the relationship between parent company and subsidiary.
Further clarification is also given in respect of:
The 2024 IBA Rules also underline the important role of the parties and their counsel in ensuring that arbitration proceedings are conducted impartially, independently and transparently. In this vein, the disclosure obligations imposed on the parties by General Standard 7 have been expanded.
General Standard 7 has always required parties to inform all involved in the arbitration of "any relationship, direct or indirect" between the arbitrator and:
This list has been expanded to include relationships between the arbitrator and:
While the second limb of this extension may appear onerous, it should be read in the light of the continuing obligation in General Standard 7 to "perform reasonable enquiries and provide all relevant information available" to them in order to achieve compliance.
While there have been only minor updates to the Red and Green Lists, the Orange List has been expanded to cover a number of new scenarios requiring disclosure by an arbitrator.
Some of the main new scenarios included in the Orange List are where:
Section 3.4.2 has also been expanded such that an arbitrator is now required to disclose any public positions or statements they have made on the case through "social media or on-line professional networking platforms" (this previously only covered statements in a "published paper or speech").
The Guidelines have also been updated to use gender-neutral language throughout.
Despite being non-binding, international courts and tribunals increasingly rely on the IBA Guidelines as a reflection of best practice in international arbitration matters, in assessing arbitrators' independence, impartiality and disclosure duties.
For example, in 2020 the UK Supreme Court referred to the IBA Guidelines as setting out "good arbitral practice which is recognised internationally", while noting that they do not of themselves give rise to legal obligations or override national law or the arbitral rules chosen by the parties.[2] We described the Supreme Court's decision in our previous insight.
The same principle was echoed by a tribunal at the International Centre for Settlement of Investment Disputes (ICSID). The tribunal confirmed it considered it "useful to refer to the Guidelines for their indicative value" in ICSID arbitrations, while noting that they must ultimately apply the legal standard laid down in the ICSID Convention.[3] The tribunal observed that in the case of ICSID appointments, details of all appointments to arbitral tribunals are published on the ICSID website. However, out of an abundance of caution, an arbitrator's disclosure statement ought to include even publicly available arbitral appointments.[4]
The IBA Guidelines are also gaining acceptance in the Canadian international and domestic arbitration space, being widely recognized as an authoritative source of information. Canadian courts have confirmed a strong presumption of arbitrator`s impartiality. Still, the Ontario Superior Court has found arbitrators biased for failing to disclose a subsequent retainer from the same lawyer while the current matter was ongoing;[5] or arbitrators on related matters being partners in a small firm.[6] However, the Ontario Superior Court has upheld a three-member Tribunal decision, where only one of the arbitrators was found to be biased.[7] The Ontario Superior Court has also noted that no obligation exists for a former partner to conduct a conflict of interest search with their previous firm.[8]
If you have any questions about this article, please get in touch with Gordon Bell, Todd Burke or James Plotkin.
Footnotes
[1] For example, as described in our previous insight the UK Supreme Court ruled on the position under English law in Halliburton Company v. Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) [2020] UKSC 48, confirming that an arbitrator is subject to a legal duty of disclosure under English law in relation to facts and circumstances which would or might give rise to justifiable doubts as to his or her impartiality. The test to determine whether disclosure is required under English law is an objective one, i.e. what would the "fair-minded and informed observer" conclude? This differs from the subjective test set out in the IBA Guidelines as well as certain institutional rules such as the ICC and LCIA Rules.
[2] Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) (First Respondent) (supremecourt.uk), paragraph 71.
[3] Tidewater Inc & Ors v Venezuela, Decision on Claimants' Proposal to Disqualify Professor Brigitte Stern, Arbitrator dated December 23, 2010, para. 41.
[4] Tidewater Inc & Ors v Venezuela, Decision on Claimants' Proposal to Disqualify Professor Brigitte Stern, Arbitrator dated December 23, 2010, para. 41.
[5] Aroma Franchise Company Inc et al v Aroma Espresso Bar Canada Inc et al, 2023 ONSC 1827.
[6] Telesat Canada v Boeing Satellite Systems International, Inc, 2010 ONSC 4023.
[7] Vento Motorcycles, Inc v United Mexican States, 2023 ONSC 5964. (This decision is currently under appeal).
[8] Jacob Securities Inc v Typhoon Capital B V, 2016 ONSC 604.
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