IBA Guidelines on Conflicts of Interest in International Arbitration: brief account of the review process and of special interest issues

David Arias
Chair, IBA Arbitration Committee's Conflicts of Interest Subcommittee, 2012; Arias SLP, Madrid
david.arias@ariasslp.com

Soft law instruments have an eminent role in international arbitration. They allow our field of practice to swiftly adapt to new circumstances with the issuance of rules that anticipate challenges or codify best practices. A good example is the IBA Guidelines on Conflicts of Interest in International Arbitration (the 'Guidelines'), which are one of the most relied upon instruments when it comes to arbitration issues. The Guidelines were originally published in 2004 and updated ten years later with the objective of tackling new practices in international arbitration. 

The review process was conducted under the leadership of Pierre Bienvenu and Bernard Hanotiau. I was lucky enough to chair the Conflicts of Interest Subcommittee entrusted with the task in 2012, to be joined later by Julie Bédard as Co-Chair and to have an all-star roster of members to carry out the mandate.^[1] I take this opportunity to thank all the members and assistants to the Subcommittee, especially my partner Oliver Cojo.^[2] Since I was involved in many of the steps taken until the reviewed Guidelines became a reality in 2014, in this article, I attempt to recount the main steps of the review process and how the Subcommittee dealt with some of the issues that the international arbitration community considered of special interest.

Process leading to the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration

The process leading to the updated Guidelines was initiated by the IBA Arbitration Committee in 2012 with the creation of the diversely comprised Subcommittee mentioned above, which included arbitration practitioners, arbitrators and users from around 20 countries representing diverse legal cultures. The first conclusion that we reached within the Subcommittee after an initial investigation was that the 2004 Guidelines had been effective and greatly fulfilled the expectations of the international arbitration community. According to the saying, 'if it ain’t broke, don’t fix it', and this is exactly what we did. Thus, our goal was simply to clarify the Guidelines where needed and incorporate the required amendments pertaining to issues of special interest for the international arbitration community.

Our action plan to identify those issues included an analysis of statutes and case law on disclosure and conflict issues in 35 countries, and the gathering of views from 18 arbitral institutions and more than 150 arbitration practitioners through questionnaires and surveys. As a result, we identified various special interest issues, including advance waivers, third-party funding, double-hatting or consequences of non-disclosure. Subgroups were created within the Subcommittee to delve deeper into each issue and determine whether any amendments to the Guidelines were warranted. 

The subgroups drafted reports on each issue, which were discussed within the Subcommittee and used as a starting point for preparing a preliminary draft of the reviewed Guidelines. More drafts followed as a result of further discussions and comments from the heads and members of the IBA Arbitration Committee, international arbitration practitioners and arbitral institutions. These discussions and comments served to prepare the final version of the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration, which was finally adopted by a resolution of the IBA Council in October 2014. 

Handling of special interest issues 

As explained above, the Subcommittee identified various special interest issues during the review process. Some of them resulted in relevant amendments in the 2014 Guidelines and others did not. I briefly refer now to two examples in each category.

Issues producing relevant amendments: advance waivers and third-party funding

Advance waivers imply that the parties in an arbitration agree in advance that the arbitrator’s firm may act in unrelated matters involving the same parties or their subsidiaries. The Subcommittee carefully analysed this matter because, as explained in the responses to the questionaries that we sent to institutions, it was common practice to accept appointments with caveats. One institution even described advance waivers as an undesirable development. In its analysis, the Subcommittee verified that the regulation of waivers greatly varied from jurisdiction to jurisdiction. That being so, as indicated in the explanation to general standard No. 3(b), the 2014 Guidelines do not take a position on the validity and effect of advance waivers. However, they clearly establish in general standard No. 3(b) that an advance waiver does not discharge the arbitrator’s ongoing duty of disclosure.

Third-party funding is an issue on which institutions were also enquired in the questionnaires sent to them. Although one institution stated that regulating third-party party funding was premature and could hinder its healthy use, the majority of institutions indicated that this issue should be addressed in the reviewed Guidelines. The position of the Subcommittee was that the benefits of disclosing third-party funding outweighed the detriments and, as a result, the 2014 Guidelines extended the duty of disclosure of a party to any relationship between an arbitrator and a third-party funder in general standard No. 7. This was the first regulatory instrument extending rules on conflicts of interest in international arbitration to funders and has definitely paved the way for the various institutional or arbitration rules that nowadays establish analogous or even stricter disclosure requirements in connection with third-party funding.  

Issues not producing relevant amendments: double hatting and non-disclosure

Double-hatting was another special interest issue identified during the process. The Subcommittee considered whether the practice of acting as counsel and arbitrator, specifically in investment cases, should somehow be limited to avoid issue conflicts. In the questionnaires, some institutions already pointed out that such a limitation would have the undesirable effect of excluding arbitrators by virtue of their expertise. The Subcommittee agreed and concluded that separating roles in a generalised manner was not a reasonable solution. Therefore, this limitation is left out from the 2014 Guidelines. However, paragraph No. 6 on the practical application of the general standards acknowledges that acting as counsel in an unrelated case, in which similar issues of law are raised, may need to be disclosed depending on the circumstances.

The consequences of non-disclosure were also identified as a special interest issue by the Subcommittee. In particular, the possibility of sanctioning non-disclosure was a topic mentioned in the country reports and in the questionnaires sent to arbitral institutions. Some institutions indicated that sanctioning could be appropriate, but the majority opposed this idea. The subgroup dealing with this issue narrowed down the matter in its report. It essentially considered whether non-disclosure (i) was irrelevant by itself for conflict purposes as provided for in the 2004 Guidelines; (ii) should be taken into account when determining if a conflict of interest exists by examining if the non-disclosure was innocent or deliberate; or (iii) should automatically constitute a conflict of interest. The conclusion was that any modification in this sense would effectively broaden the duty of non-disclosure and require arbitrators to make extensive disclosures of trivial and irrelevant matters. Therefore, the text of the previous version remained unaltered.

Conclusion

The reviewed Guidelines were the result of a process led by a diversely comprised Subcommittee, which took into account the views of the international arbitration community. As a result, the issues of concern for that community at the beginning of the previous decade were identified and carefully considered during the review process. The consensus at that time was that the reviewed Guidelines provided for a balanced standard on conflicts. Nowadays, stricter standards are found in other norms or suggested by authoritative voices, but it is my view that the 2014 Guidelines still provide for an adequate standard when it comes to issues relating to conflict of interest or disclosure. In any case, I am sure that any review that the IBA may adopt in the future will again have the necessary legitimacy within the international arbitration community.

Notes

^[1]The rest of the members of the expanded Subcommittee were Habib Almulla, José Astigarraga, Karl-Heinz Böckstiegel, Yves Derains, Teresa Giovannini, Eduardo Damião Gonçalves, Paula Hodges, Toby Landau, Christian Leathley, Carole Malinvaud, Alexis Mourre, Ciccu Mukhopadhaya, Yoshimi Ohara, Tinuade Oyekunle, Eun Young Park, Constantine Partasides, Peter Rees, Anke Sessler, Guido Tawil, Jingzhou Tao, Gäetan Verhoosel, Nathalie Voser and Nassib Ziadé.

^[2]Assistance to the Subcommittee was provided by Niuscha Bassiri, Oliver Cojo, Alison Fitzgerald and Ricardo Dalmaso Marques.