Conflicts of Interest

A conflict of interest is a clash between the private interests and the official responsibilities of a person in a position of trust. To safeguard the integrity of the arbitral process, arbitrators must be independent and impartial. Conflicts of interest may concern arbitrators, as well as ad hoc committee members, counsel, experts, and secretaries.

The rules of many arbitral institutions provide grounds for the challenge of arbitrators based on conflicts of interest. These include, among others, the International Centre for the Settlement of Investment Disputes (ICSID),¹ the United Nations Commission on International Trade Law (UNCITRAL),² the arbitral rules of the International Chamber of Commerce (ICC),³ the London Court of International Arbitration (LCIA),⁴ and the International Centre for Dispute Resolution (ICDR).⁵

In addition, many national laws also provide for the removal of arbitrators who fail to disclose conflicts of interest.⁶

The International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration are a series of general standards meant to provide uniformity in the approach of arbitrators when faced with a conflict, or potential conflict.⁷ Arbitrators and parties commonly refer to the Guidelines when making appointments, disclosures, and arbitrator challenges.⁸ The Guidelines have persuasive authority,⁹ but they are indicative and not binding.¹⁰  

In addition to its “General Standards Regarding Impartiality, Independence and Disclosure,” the IBA Guidelines contain a “Practical Application of the General Standards.” The practical application section provides examples of specific situations that do, or do not, warrant disclosure by an arbitrator or the disqualification of an arbitrator.¹¹ These situations are separated into four lists:

1. A non-waivable red list: circumstances that objectively present a conflict of interest, and in which an arbitrator cannot act, even with the consent of all parties.
2. A waivable red list: serious but not severe situations, whereby the parties can knowingly agree to waive the conflict.
3. An orange list: matters which, depending on the facts, may lead to justifiable doubts regarding the arbitrator’s impartiality and independence.
4. A green list: matters where there is, objectively, no apparent or actual conflict of interest, and therefore no duty to disclose.¹²

The IBA Guidelines may serve as reference equally to investment arbitration and to international commercial arbitration, as well as to legal and non-legal professionals serving as arbitrators.¹³

Arbitrators have a duty to disclose potential conflicts of interest, and must inform the parties of any circumstances that emerge during the proceedings that could give rise to doubts over their impartiality or independence.¹⁴ This obligation is ongoing for the entire duration of the arbitration.¹⁵

Arbitrators also have a duty to investigate – that is, they must make reasonable efforts to inform themselves of potential interests or relationships that might create a conflict.¹⁶ See further Arbitrator's duties.

Many arbitral rules provide for the duty to disclose potential conflicts of interest.¹⁷

An arbitrator’s failure to disclose a conflict of interest may result in serious consequences. It could constitute a ground to challenge the arbitrator’s appointment and, if successful, lead to the disqualification of the arbitrator.¹⁸ It could also result in the annulment of the arbitral award.¹⁹

Some arbitrators seek an “advance waiver,” by which the parties agree that the arbitrator may continue to serve even if conflicts of interest later arise, or that the arbitrator need not make additional related disclosures.²⁰ There is limited available guidance concerning the use, validity, and enforceability of such waivers.²¹

Counsel must refrain from representing a party in an arbitration when the legal relationship would create a conflict of interest.²² However, IBA Guidelines refer to “‘significant’ interests - not ‘any’ economic or personal interest”.²³

Experts may also be subject to conflicts of interest considerations. Tribunal-appointed experts are generally bound by similar conflicts rules as the arbitrators and should have no conflict of interest with any party to the proceeding. See further Disqualification of expert witness.

For party-appointed experts, an appearance of partiality does not result in disqualification of an expert witness, but can detract from the weight that the tribunal will accord to the expert’s evidence.²⁴

Relationships between arbitrators or counsel and third party funders may also need to be disclosed.²⁵

Generally, assistants or secretaries to the tribunal must observe the same disclosure obligations as arbitrators.²⁶