2024 Update to the International Bar Association Guidelines on Conflicts of Interest – what are the key changes?

17 minute read
05 June 2024

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 is expected to have ruled on the adoption of the 2024 IBA Guidelines at its meetings in late May 2024.

In this article we summarise:

  • what the IBA Guidelines are and when they are used;
  • how the IBA Guidelines are structured; and
  • some of the key changes in the 2024 update.

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.



Reminder: what are the IBA Guidelines?

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.

How are the Guidelines structured and has this changed?

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:

  • Part I: which sets out the general standards and principles regarding impartiality, independence and disclosure that must always be considered (the General Standards)
  • Part II: which contains a list of situations that commonly arise in practice, based on a "traffic light" system (the Application Lists). These are designated the:
  • "Green list", which lists situations where there is no conflict of interest, and no disclosure is necessary;
  • "Orange list", which lists situations where, depending on the facts of a given case, there may be doubts as to an arbitrator's impartiality or independence, and disclosure is required - but the arbitrator may continue to act if there is no objection;
  • "Red list", which describes circumstances where there are justifiable doubts as to the arbitrator's impartiality or independence (this is divided into "waivable" and "non-waivable" situations).

We examine some of the key changes to both Parts I and II below.

What are the key changes in the IBA 2024 update?

Determining Conflicts of Interest

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:

  • Non-Waivable Red List, the arbitrator should decline the appointment or refuse to continue to act.
  • Waivable Red List, the arbitrator should make a disclosure under General Standard 3 to give the parties an opportunity to waive the potential conflict.

Arbitrator's Disclosure Duties

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:

  1. Secrecy - new General Standard 3(e) provides that an arbitrator should not accept an appointment or should resign if they should make a disclosure but are prevented from doing so by professional secrecy rules or other rules of practice or professional conduct.
  2. Failure to disclose - new General Standard 3(g) confirms that an arbitrator's failure to disclose certain facts that may give rise to doubts as to their impartiality or independence does not necessarily mean that a conflict of interest exists or that they should be disqualified.

Waiver by the parties

General Standard 4 provides that a party is deemed to have waived any potential conflict of interest within 30 days after:

  1. disclosure by the arbitrator; or
  2. that party otherwise learns of facts or circumstances that could constitute a potential conflict of interest.

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.

Relationships, including with law firms

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:

  1. Third party funders - the explanatory notes to General Standard 6 acknowledge that third party funders or insurers may have a direct economic interest in the dispute, a controlling influence over a party, or influence over the conduct of the proceedings.
  2. State-controlled entities - given the complexities involved in state-controlled relationships, these should be considered on a case-by-case basis. However, it is suggested that arbitrators should consider disclosing any relationships with entities such as regional or local authorities, autonomous agencies, or State-owned entities, whenever a State or a State entity, subdivision, or instrumentality is party to the arbitration, irrespective of whether they are part of the organisation of the State or have a private status, and vice-versa. This applies even when the status of such entity is disputed.

Expanded duty of disclosure on parties

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:

  • The party;
  • Any company within the same group;
  • Persons / entities which have a controlling influence on the party; and
  • Persons / entities having a direct economic interest in the arbitration.

This list has been expanded to include relationships between the arbitrator and:

  1. Persons / entities over which a party has a controlling influence; and
  2. any other person or entity it believes an arbitrator should take into consideration when making disclosures in accordance with General Standard 3.

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.

Practical Application lists: Additions to the Orange List

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:

  • an arbitrator "currently serves, or has acted within the past three years, as an expert for one of the parties or an affiliate of one of the parties in an unrelated matter" (Section 3.1.6)
  • an arbitrator has "within the past three years, been appointed as an expert on more than three occasions by the same counsel, or the same law firm" (Section 3.2.9)
  • an arbitrator has "within the past three years, been appointed to assist in mock-trials or hearing preparations on more than three occasions by the same counsel, or the same law firm" (Section 3.2.10) - and Section 3.1.4 has also been amended to cover scenarios where an arbitrator has been appointed to assist in mock-trials or hearing preparation on two or more occasions by parties / their affiliates in unrelated matters.
  • an arbitrator and counsel for one of the parties currently serve together as arbitrators in another arbitration (Section 3.2.12)
  • an arbitrator and their fellow arbitrator(s) currently serve together as arbitrators in another arbitration (Section 3.2.13)
  • an arbitrator is instructing an expert appearing in the arbitration proceedings for another matter where the arbitrator acts as counsel (Section 3.3.6)

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").

Modernisation and gender-neutral approach

The Guidelines have also been updated to use gender-neutral language throughout.

How have the IBA Guidelines been applied in practice in different jurisdictions?

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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