Nemo iudex in causa sua – no one should be a judge in their own cause.

This precept would appear to be universal in all formal systems of law. In international arbitration, most arbitration rules (and certainly all the major ones) impose a duty on a prospective tribunal member to declare any conflict of interest and, in certain situations, to act only if the other party waives such conflict. This duty is an on-going one. In the event that an arbitrator fails to disclose a conflict of interest, he or she may be subject to a challenge by the prejudiced party: see for example Articles 11 and 12(1) of the UNCITRAL Arbitration Rules (as revised in 2010), Rules 10 and 11 of the SIAC Rules (2010) and Articles 5 and 10.3 of the LCIA Rules.

The IBA Guidelines on Conflicts of Interest in International Arbitration (the “IBA Conflicts Guidelines“) is a useful tool for arbitrators and for arbitration practitioners to decide whether “circumstances arise to give rise to any justified doubts as to the [arbitrator’s] impartiality or independence” and what sorts of conflicts (or appearance thereof) need to be disclosed.

As the introduction to the IBA Conflicts Guidelines explains:

“[p]roblems of conflicts of interest increasingly challenge international arbitration. Arbitrators are often unsure about what facts need to be disclosed, and they may make different choices about disclosures than other arbitrators in the same situation. The growth of international business and the manner in which it is conducted, including interlocking corporate relationships and larger international law firms, have caused more disclosures and have created more difficult conflict of interest issues to determine. Reluctant parties have more opportunities to use challenges of arbitrators to delay arbitrations or to deny the opposing party the arbitrator of its choice. Disclosure of any relationship, no matter how minor or serious, has too often led to objections, challenge and withdrawal or removal of the arbitrator”.

The IBA Conflicts Guidelines, therefore, provides a non-exhaustive list of facts and circumstances which commonly arise in international commercial arbitration which are thought to give rise to situations of conflict. The list is broken down as follows:

1. Red List: divided into (a) Non-Waivable Red List and (b) Waivable Red List;

2. Orange List; and

3. Green List.

Red List

The Red List enumerates a non-exhaustive list of situations which give rise to an objective conflict of interest from “the point of view of a reasonable third person having knowledge of the relevant facts”. However, it is considered that the non-waivable Red List describes situations which violate the principle of nemo iudex in causa sua, such that disclosure cannot cure the conflict. The waivable Red List describes situations that “are serious but not as severe” and require not simply disclosure but also a specific waiver from the prejudiced party.

(a) Non-Waivable Red List

The Non-Waivable Red List describes the following four situations (List 1.1 to 1.4).

1. There is an identity between a party and the arbitrator, or the arbitrator is a legal representative of an entity that is a party in the arbitration.

2. The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling influence in one of the parties.

3. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.

4. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.

(b) Waivable Red List

In respect of the Waivable Red List, some of the scenarios described are as follows:

1. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held (List 2.2.1).

2. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties (List 2.3.3).

3. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself (List 2.3.5).

4. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, but neither the arbitrator nor his or her firm derives a significant financial income therefrom (List 2.3.7).

Orange List

General Standard 3(a) of the IBA Conflicts Guidelines provides that, “[i]f facts or circumstances exist that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence, the arbitrator shall disclose such facts or circumstances to the parties, the arbitration institution or other appointing authority (if any, and if so required by the applicable institutional rules) and to the co-arbitrators, if any, prior to accepting his or her appointment or, if thereafter, as soon as he or she learns about them“.

The Orange List reflects situations which would fall under General Standard 3(a) (see Part II, Point 3). Critically, while the situations enumerated in the Orange List “may give rise to justifiable doubts as to the arbitrator’s impartiality or independence“, disclosure of such situations “should not automatically result in a disqualification of the arbitrator” and that “no presumption regarding disqualification should arise from a disclosure” (see Part II, Point 5).

Parties should be aware of some of the key examples falling within the Orange List.

1. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties (except where there is a practice or custom from drawing from a small pool, specialised pool of arbitrators as in the case of maritime or commodities arbitration) (List 3.1.3).

2. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties (List 3.1.5).

3. The arbitrator and another arbitrator are lawyers in the same law firm (List 3.3.1).

4. A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties (List 3.3.4).

5. The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm (List 3.3.7).

6. If the arbitrator is a former judge, he or she has within the past three years heard a significant case involving one of the parties (List 3.4.4).

7. The arbitrator has publicly advocated a specific position regarding the case that is being arbitrated, whether in a published paper or speech or otherwise (List 3.5.2).

Note, however, that with the exception of the situations in the Non-Waivable Red List, parties may waive any objections to these situations of conflict or apparent conflict. In fact, under General Standard 4 of the IBA Conflicts Guidelines, if a party does not, within 30 days, raise a specific objection to a disclosed fact or circumstance or does not do so after hearing of such fact or circumstance, that party is deemed to have waived any potential conflict of interest by the arbitrator based on such facts or circumstances and may not raise any objections to the same at a later stage.

Another point that parties should note is that a challenge predicated on the fact that an arbitrator did not disclose certain facts or circumstances should not in itself result in a non-appointment, an automatic disqualification or successful challenge to an award. The Working Group makes clear that “non-disclosure cannot make an arbitrator partial or lacking independence; only the facts or circumstances that he or she did not disclose can do so” (see Part II Point 4).

Green List

Finally, the Green List represents a non-exhaustive list of situations which do not require disclosure by the arbitrator. This is because such situations do not create any actual or apparent conflict of interest from the relevant objective point of view (see Part II, Point 6). These include the following scenarios.

1. The arbitrator has previously published a general opinion (such as in a law review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated) (List 4.1.1).

2. The arbitrator’s law firm has acted against one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator (List 4.2.1).

3. The arbitrator and counsel for one of the parties or another arbitrator have previously served together as arbitrators or as co-counsel (List 4.4.2).

Conclusion

Much like the IBA Rules on the Taking of Evidence in International Arbitration which we addressed in an earlier blog post, the IBA Conflicts Guidelines have become very much a de facto international standard on this area of international arbitration. It is a very helpful tool for practitioners and parties concerned about (potential) issues of conflicts and/or whether a particular appointment might give rise to issues of conflict and more importantly, challenges to appointments.

It is generally understood that the major arbitration institutes will refer prospective arbitrators to the IBA Conflicts Guidelines for purposes of disclosure and appointment and that experienced arbitrators will also refer to the same when engaging in the exercise of disclosure of conflict of interests (if any). Nevertheless, parties could choose to incorporate the IBA Conflict Guidelines into their arbitration agreement and otherwise expand or narrow the scope of the various Lists as they deem fit.