Conflicts of Interest in International Arbitration: new IBA Guidelines

The IBA Guidelines establish internationally recognised standards for the identification and management of conflicts of interest in international arbitration. The 2024 edition offers additional clarification and examples.

An updated version of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration was recently adopted by the IBA Council on 25 May 2024 (the “Guidelines”).[1]

Initially introduced on 22 May 2004,[2] then updated on 23 October 2014,[3] the IBA Guidelines established internationally recognised standards pertaining to the identification and management of conflicts of interest in international arbitration.

In 2022, the IBA carried out a survey which confirmed that these Guidelines were not only a useful and effective tool but were also widely used. It was determined that a complete overhaul was not warranted but the survey did, however, identify areas where the Guidelines needed to be modernised and fine-tuned.[4] The revised version is the result of this work, involving also a year-long public consultation process involving arbitration professionals and institutions from around the world.

The 2024 edition offers additional clarification, context, and examples to the existing Guidelines, while keeping the substance and spirit of the earlier versions. In this article, we delve into some of the key revisions introduced in the latest iteration of the IBA Guidelines and  analyse their implications for arbitrators, parties, and the arbitration process.

1. Conflicts of interest

While the test set forth in the General Standard 2 applicable to the disqualification of an arbitrator in the event of a conflict of interest remains unchanged,[5] the Explanation to such General Standard has been updated.

First, regarding the circumstances under which an arbitrator should decline an appointment or resign if already appointed under General Standard 2, the updated explanatory guidance in the Guidelines now clarifies that "justifiable doubts" should be assessed using the objective test outlined in Article 12(2) of the UNCITRAL Model Law on International Commercial Arbitration.

Further, the amended Guidelines also seek to draw a distinction between circumstances that are described in the Non-Waivable Red List in Part II of the Guidelines (where an arbitrator should decline or refuse to act) and circumstances falling within the Waivable Red List (where an arbitrator can make a disclosure under General Standard 3 instead).

2. Arbitrators' Disclosure

The updated IBA Guidelines have broadened the standards of disclosure expected from arbitrators.

First, as to the Arbitrator’s duty to disclose under General Standard 3, some key changes must be noted.[6]

General Standard 3(a) clarifies that an arbitrator’s duty to disclose is determined by applying a subjective test. When deciding whether to make a disclosure, arbitrators should consider all known facts and circumstances.

A new General Standard 3(e) has been introduced, which advises that if an arbitrator finds she or he should make a disclosure, but that professional secrecy rules or other rules of practice or professional conduct prevent such disclosure, the arbitrator should not accept the appointment, or should resign.

General Standard 3(g) recognises that a failure to disclose does not automatically imply a conflict of interest.

Second, General Standard 6 which provides that when addressing whether there is a conflict of interest, the arbitrator and his employer bear the same identity, has also been amended.[7]

General Standard 6(c) now states 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”.

The impact of such a broader standard on arbitrators is significant, as they have to  consider their ties with more than just the parties to the arbitral procedure.

For one, the IBA Guidelines refer to third-party funders and insurers.[8] Since they may influence the selection of  the arbitrator, they are considered “as bearing the identity of a party”. Accordingly, arbitrators should consider their ties to parties’ third-party funders and insurers, which implies that they should be disclosed beforehand.

In addition, the amended Guidelines consider that the activities of an arbitrator’s law firm or employer and the “law firm’s or employer’s organisational structure and mode of practice”[9] should also be considered. Indeed, arbitrators may be associated or collaborate with  law firms, even though they do not work per se for such firms.

Finally, arbitrators are also advised to disclose relationships with entities that are potentially State-related or State-owned entities – such as regional authorities or autonomous agencies – regardless of whether they are private entities or are legally and politically independent from the central government.

3. Parties' Disclosure

The IBA Guidelines also extend the disclosure obligations of the parties involved in arbitration.

The parties are now required to disclose any direct or indirect relationships between arbitrators and entities over which the parties hold a “controlling influence”.[10] This includes “relationships with a legal entity or natural person having a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration”.[11] Moreover, it is specified that when the identity of these entities is disclosed, the parties must explain their relationship to the dispute.

Additionally, parties must disclose the identity of all counsel advising on the dispute, not just those appearing in the arbitration. This duty extends to all members of that party’s counsel team and arises right from the outset of the proceedings.

4. Updates to Green, Orange, Waivable Red, and Non-Waivable Red Lists

The IBA Guidelines introduce some revisions to the Green, Orange, Waivable Red, and Non-Waivable Red Lists, which define conflicts and disclosure obligations.

Parties are unable to waive conflicts that arise in cases where  an arbitrator's firm or employer derives “significant income” from past or ongoing work for a party or its affiliate.[12] However, the Waivable Red List clarifies that, when an arbitrator advises a party but does not derive significant financial income from the engagement, they may make a disclosure, and the parties to the arbitration can decide to waive the conflict of interest.

Second, the catalogue of scenarios necessitating disclosure on the Orange List has been broadened to include additional situations. This expansion includes instances where arbitrators publicly advocate a stance on the case via social media “or online professional networking platforms”.[13] The Orange list also now provides for instances where an arbitrator served on another tribunal alongside counsel for one of the involved parties, or where  two arbitrators have the same employer.[14] The Orange list also includes cases where an arbitrator has been appointed in the last three years to act in mock-trials or hearing preparations by a party or affiliate.[15]

The revised Guidelines are in reality more of a modernization rather than an actual revolution. In the wake of several high-profile challenges to arbitrators, they are meant, above all, to underline the importance of comprehensive and transparent disclosure by arbitrators and parties,

The IBA Guidelines generally emphasise the duty of arbitrators to investigate and disclose potential conflicts. One may now wonder how they will practically be applied, and whether they will not become too burdensome and time consuming for all involved.