THE AUTHOR:
Sahaj Mathur, Associate at Shardul Amarchand Mangaldas & Co
Introduction
In February 2024, the International Bar Association (“IBA”) released the revised IBA Guidelines on Conflicts of Interest in International Arbitration (“Revised Guidelines”). The IBA Guidelines are a soft-law instrument that arbitrators, counsel, and arbitral institutions rely on to identify conflicts of interest and assess the need for disclosure in arbitral proceedings.
The Revised Guidelines embody the same underlying principles as the earlier versions of the IBA Guidelines on Conflicts of Interest in International Arbitration, which were first released in 2004 and later revised in 2014. However, the Revised Guidelines introduce important changes to the “General Standards” as well as the list of applications of the General Standards. The Revised Guidelines are based on the need for concerted efforts to ensure the transparency, impartiality, and independence of arbitration proceedings.
This article provides a critical commentary on the key salient features of the IBA Guidelines on Conflict of Interest.
Dissecting the Key Features of the IBA Guidelines on Conflicts of Interest
The Revised Guidelines clarify and refine the framework of the Guidelines on Conflicts of Interest. Part I of the Guidelines sets out the General Standards, while Part II provides a list of practical applications of these General Standards through illustrative examples. A key addition to Part I of the Revised Guidelines is the clarification that the General Standards should govern the question of whether an arbitrator should accept or refuse an appointment, continue or refuse to serve, or make a disclosure regarding a potential conflict of interest. Accordingly, the principles in the General Standards prevail over the illustrative lists provided in Part II. This has key practical implications, given instances where arbitrators have relied exclusively on the examples set forth in the illustrative lists to determine disclosure requirements, rather than considering the obligation to disclose in a holistic manner, as the Revised Guidelines now provide for.
Tests for Conflicts of Interest
The Revised Guidelines clarify that the test that an arbitrator must apply when deciding whether to decline an appointment or refuse to continue in its role as an arbitrator due to conflicts of interest is objective rather than subjective. In this regard, an arbitrator should decline an appointment or refuse to continue to act as an arbitrator in the circumstances provided in the non-waivable Red List.
Threshold for Disclosures
The Revised Guidelines have elevated several clauses from the explanation to General Standards.In doing so, the Revised Guidelines highlight that an arbitrator must undertake a subjective rather than objective assessment of the facts and circumstances when considering whether to make a disclosure. In other words, they must take into account all facts and circumstances known to them to determine whether the information should be disclosed.
Tests for Conflicts of Interest
The Revised Guidelines include additional information that must be disclosed by the parties, including details about any party or entity over which they have a controlling influence, as well as any other person or entity that an arbitrator should consider when making such a disclosure. Accordingly, the parties’ duty to disclose relationships includes situations where a person or entity has a controlling influence, a direct economic interest, or a duty to indemnify a party for the award to be rendered in the arbitration.
Identity of a Party
The General Standards are based on a ‘top-down’ approach to determine whether a person or legal entity could be considered to bear the identity of a party to the arbitration. In this regard, the Revised Guidelines provide an important clarification regarding third-party funders, who could fall within this category. A third-party funder could be considered to bear the identity of a party in an arbitration if they ‘have a direct economic interest’ in the case, ‘a controlling influence on a party to the arbitration’, or ‘influence over the conduct of proceedings’. This is a key addition to the Revised Guidelines, given the growth of third-party funding in international arbitration and the need for clarity regarding the roles and obligations of third-party funders.
Duty to Inform
The Revised Guidelines also enhance the parties’ duty to inform arbitrators of any person or entity that such party believes an arbitrator should take into account when they make a disclosure in accordance with the General Standards, as well as to explain the relationship of such persons and/or entities to the dispute.
Lists of Practical Application
The Revised Guidelines provide non-exhaustive lists of situations where actual and potential conflicts of interest may exist, raising concerns about an arbitrator’s independence or impartiality. These have been categorised into three lists: Red, Orange and Green.
- The Red List comprises of a non-waivable list of incurable conflicts and a waivable list of less serious conflicts which can be waived by the parties.
- The Orange List outlines scenarios that may raise doubts about the arbitrator’s independence or impartiality.
- The Green List sets out situations where no appearance or actual conflict of interest can exist, either under the subjective or objective standard. Numerous updates have been made to these lists to ensure greater consistency and evolution of the lists, along with the practical issues that arise in international arbitration.
The Red List continues to include non-waivable scenarios where an arbitrator represents a party and derives significant income therefrom, either directly or through the firm. However, a waivable scenario has been added, where the firm, without the arbitrator’s direct involvement, represents a party and derives significant financial income. This is an important change, in line with the increasing frequency of partners from leading law firms being routinely appointed as arbitrators.
The Orange List has four notable updates. The first is that an arbitrator must disclose concurrent services with a co-arbitrator in another matter, as well as when an arbitrator and counsel for one of the parties jointly serve as arbitrators in another matter. Secondly, arbitrators who have been hired by the parties or legal counsel to assist with mock hearings must disclose that fact. Thirdly, arbitrators must provide a disclosure of their expert work, including any involvement in other arbitrations as an expert, collaboration with an expert in another matter, or other affiliations with experts. Lastly, the Orange List clarifies that the scope of disclosure and consequences of repeat appointment by an arbitrator in specialized fields of arbitration, such as maritime, sports or commodities arbitration, may differ from those set forth in the Revised Guidelines. This is because arbitrators in these fields may be drawn from a specialised pool of individuals or selected from a mandatory list, and parties active in those fields may be aware of a custom or practice for appointing the same arbitrator in different cases.
The Green List has one major change, which clarifies that an arbitrator does not need to disclose a scenario where an expert appearing before the arbitrator in one matter has also appeared, or is appearing, before the same arbitrator in another matter.
Practical Implications and Concluding Remarks
The Revised Guidelines aim to establish a stronger framework to prevent conflicts of interest in arbitration, which is expected to enhance legitimacy and increase confidence in arbitration. The Revised Guidelines would require arbitrators to exercise greater due diligence in identifying potential conflicts of interest. Similarly, the Revised Guidelines envisage the parties and their legal counsel playing a greater role in avoiding conflicts of interest, including through detailed disclosures regarding their affiliations, which provides a more holistic framework for assessing potential conflicts.
A notable impact of the revisions is that the Revised Guidelines uphold party autonomy by providing parties with the option to waive potential conflict situations. In practice, this must be carefully balanced with the need for independence and impartiality to safeguard the legitimacy of the arbitral process and minimize potential challenges to awards. The revisions also reflect the growth of arbitration, and account for key issues that have arisen in international arbitration. For instance, the Revised Guidelines now recognise and address the increasingly common role of third-party funders in arbitration, and the potential issues of conflict that may arise therein.
The Revised Guidelines represent a significant evolution in the management of conflicts of interest in international arbitration, aiming to ensure the credibility and independence of arbitration as a dispute resolution mechanism. Arbitrators, arbitral institutions and parties must adapt to these changes by developing efficient systems to effectively manage these disclosures and ensure that such disclosures cannot be used to delay proceedings or unnecessarily challenge arbitrators.
ABOUT THE AUTHOR
Sahaj Mathur is an Associate with the International Arbitration practice at Shardul Amarchand Mangaldas & Co in New Delhi, India.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
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