International Bar Association Releases Updated Guidelines on Conflicts of Interest
In Short
The Situation: In February 2024, the International Bar Association ("IBA") updated its Guidelines on Conflicts of Interest in International Arbitration ("Guidelines"). The Guidelines provide detailed guidance for arbitrators and counsel when considering conflicts of interest.
The Result: The updates address emerging trends, such as third-party funding, and refine disclosure requirements, particularly those concerning expert witnesses. The IBA has published a useful redline version of the Guidelines, showing all of the changes.
Looking Ahead: Although the Guidelines are not binding and cannot override any applicable national laws, they will continue to be widely used in international arbitrations as a reference point when considering potential conflicts and challenges.
Summary of Major Changes
The Guidelines consist of two parts. Part I establishes the general standards of impartiality, independence, and disclosure. Part II concerns the practical application of these standards. The Guidelines famously follow a "traffic-light" system. The red list addresses conflicts that are so serious they would normally prevent an arbitrator from acting (although there are certain "waivable" red list conflicts). The green list addresses situations that are not sufficiently serious to be a conflict of interest. Finally, the orange list sets out situations that may raise conflicts of interest depending on the circumstances.
The Guidelines have been comprehensively updated and refined.
The major changes include:
An arbitrator should decline an appointment or recuse himself if bound by secrecy or confidentiality obligations that would prevent necessary disclosures. However, in practice, many arbitrators already adopt this approach (general standard 3(e)).
An arbitrator's failure to disclose, while certainly a factor that might give rise to doubts about impartiality or independence, is not per se sufficient to disqualify that arbitrator. This is in line with the practice of many of the world's leading arbitral institutions, including the ICC (general standard 3(g)).
When addressing a conflict of interest, the arbitrator and his employer bear the same identity. This is an expansion of the previous standard that concerned only law firms, so that all employers are captured. This reflects the increasingly diverse arrangements by which arbitrators practice (general standard 6).
When considering a conflict of interest, the party and any legal entity or natural person who has a direct economic interest or controlling influence, or a duty to indemnify that party, bears the same identity (general standard 6). This change recognizes the growing role of third-party funders in arbitration and seeks to protect arbitral proceedings from conflicts with third-party funders or insurers.
Parties must perform "reasonable enquiries" to disclose any relationships between an arbitrator and a party, related companies, or any persons or entities with controlling influence over a party or direct economic interest in the outcome of the arbitration. These changes create a standard of enquiry that parties must meet to ensure that conflicts of interest are appropriately brought to the arbitral tribunal's attention (general standard 7).
Either a current or recent (within the past three years) appointment of an arbitrator as an expert by parties, or repeat appointments (more than three within the past three years) by counsel or law firms, may raise a conflict of interest (3.1.6 and 3.2.9—orange list). Where an expert is appearing before an arbitrator, and that arbitrator is separately instructing that expert in his or her capacity as counsel in another proceeding, may also raise a conflict of interest (3.3.6—orange list). By adding three new situations involving experts, these changes recognize that arbitrators frequently carry on work as, and/or instruct, experts alongside their work as arbitrator, which may lead to conflicts.
There is no conflict of interest where an arbitrator has heard testimony from the same expert in another proceeding (4.5.1—green list). By making this clarification, it is hoped that there will be fewer arbitrator challenges on this ground.
An arbitrator advocating a position on a case through social media or online professional networking platforms may create a conflict of interest (3.4.2—orange list). To modernize the Guidelines, advocating on social media has been added to more-traditional means of publishing, because arbitrators are increasingly active on such platforms.
Three Key Takeaways
- The Guidelines are a reference point when considering conflicts of interest but must be understood in the context of the applicable arbitration rules and mandatory laws.
- The duty to disclose has been expanded, requiring parties to make "reasonable enquires" to identify potential conflicts of interest (although what exact standard applies will depend on the applicable arbitration rules and mandatory laws).
- There are a number of new situations requiring disclosure for arbitrators. These include cases where arbitrators have repeatedly been appointed as experts by parties or counsel, and where arbitrators are instructing the same expert in a different capacity as counsel.
