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Mr Gustavo Laborde

Principal - Laborde Law

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Arbitrator Disclosure

I. Definition

1.

In accordance with the best international standards and practices, an arbitrator has a duty to disclose any fact or circumstance which, from the perspective of a reasonable third person, would give rise to justifiable doubts as to his or her impartiality or independence.1 Doubts are justifiable if a reasonable third person believes it is likely that the arbitrator would decide the case based on factors other than the merits of the case.2 This is a continuing duty: it applies before the arbitrator accepts an arbitral appointment, and then continually throughout the proceedings if new facts and circumstances emerge.3

2.

This is also in line with the Draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement (the “Draft Code”),4 which provides in Article 5(1) that arbitrators—and more generally adjudicators—“shall disclose any interest, relationship or matter that could reasonably be considered to affect their independence or impartiality”.5

3.

The disclosure standard is an objective standard. More specifically, the “reasonable third person” test is an objective test. This follows from both the IBA Guidelines and the Draft Code. Arbitral tribunals and courts have also applied an objective disclosure standard. An ICSID tribunal has expressly embraced the objective “reasonable person” test in relation to disqualification of an arbitrator.6 In turn, an English court has observed how similar the disclosure standards are under both the UNCITRAL Rules and the English common law, with the test being objective in both instances.7

II. Justification

4.

The duty of disclosure is rooted in the arbitrator’s pre-eminent duty to be impartial and independent of the parties, and to remain so throughout the proceedings. Commentators have consistently highlighted the link between arbitrator disclosure and the arbitrator’s duty to be and remain impartial and independent of the parties.8

5.

Because the arbitrator has easier access to much of the information relevant to assess his or her impartiality or independence, he or she should bear the onus of disclosing this information. According to the American Arbitration Association, the “major burden of disclosure falls on the arbitrator,” precisely because he or she has ready access to relevant information as to whether a relationship or circumstance might raise doubts about impartiality or independence.9

6.

Just as the duty of impartiality and independence is a continuous one, so is the duty of disclosure. Most arbitration laws and rules provide for a continuing duty of disclosure. For instance, this continuing duty is reflected in Article 12 of the UNCITRAL Model Law on International Commercial Arbitration 1985,10 embraced by arbitration tribunals and echoed in national laws.11

III. Objective test

7.

To ascertain if there are justifiable doubts about an arbitrator’s impartiality or independence, an objective viewpoint is typically adopted: that of a reasonable third person.12 The test is whether a reasonable third person having knowledge of the relevant facts would believe that a circumstance is likely to give rise to justifiable doubts about an arbitrator’s impartiality or independence. An objective test was also introduced by the IBA Guidelines on Conflicts of Interest in International Arbitration, in response to previous concerns that the 2004 version of the rules imposed “sweeping disclosure obligations” as they did not contain “any express objective limitation.”13

IV. In dubio pro disclosure

8.

As per the best international practices and standards, any doubt as to whether the arbitrator is to make a disclosure should be resolved in favour of disclosure.14 This is also the approach adopted in the recent Draft Code of Conduct; at the same time, this draft expressly clarifies that adjudicators need not disclose “trivial” matters.15

9.

Further, the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines”), Explanation to General Standard 3(a) states that “[t]he arbitrator’s duty to disclose under [the IBA Guidelines] General Standard 3(a) rests on the principle that the parties have an interest in being fully informed of any facts or circumstances that may be relevant in their view.”16 Karel Daele argues that a number of arbitration rules also adopt this rule, and that while the rule is absent from the ICSID arbitration rules, the ICSID Secretariat “usually endorses” this rule.17

10.

In the case of Merck Sharpe & Dohme (I.A.) LLC v. The Republic of Ecuador, the UNCITRAL tribunal expressly endorsed the principle that, in case of doubt, an arbitrator should err on the side of disclosure.18 An ICSID tribunal has also expressly embraced this principle in the case Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain.19

V. Scope of disclosure

11.

The arbitrator must, as a general rule, disclose three sets of circumstances: (i) a prior involvement in the dispute in some other capacity; (ii) any direct or indirect financial interest in the outcome of the dispute; and (ii) any past or present relationship with a party, an affiliate of a party, counsel to a party, another arbitrator, a witness or expert.20 See also the Jus Mundi Conflict checker tool. These three broad circumstances are reflected in the “waivable Red List” and the “Orange List” of the 2014 IBA Guidelines.21

12.

Under some rules, anticipated future relationships during the course of the proceedings should also be disclosed. For example, the arbitrator disclosure checklist of the American Health Law Association (AHLA) expressly requires disclosure of “prospective relationships” as manifested in either ongoing discussions or existing arrangements.22 For instance, in Noel Madamba Contacting Co. v. Romero and A&B Green Building, LLC23 the Hawaii Supreme Court held that a reviewing court was required to set aside the arbitrator’s decision because of a failure to disclose a potential future relationship with the law firm representing one of the parties in the arbitration. For the Hawaii Supreme Court, this undisclosed anticipated future relationship created an impression of partiality. 

13.

Lastly, secretaries of, and assistants to, arbitral tribunals are bound by the same duty of disclosure as arbitrators themselves – the reason being that tribunal secretaries and assistants are generally bound by the same duties of impartiality and independence as arbitrators, and are often required to file declarations of impartiality and independence under the applicable arbitration rules.24

VI. Due diligence

14.

As part of the duty to disclose, the arbitrator must make reasonable efforts to identify conflicts of interest and to investigate the facts and circumstances underlying any potential conflict,25 – and, like the duty of disclosure, this is also a continuous duty. Generally, arbitration rules, such as UNCITRAL, ICSID and the ICC, are silent on this issue. Nevertheless, it is generally considered that the duty to investigate potential conflicts of interest is inherent to the arbitrator’s general duty of disclosure. Thus, as Karel Daele points out, “most commentators agree that in international commercial arbitration a duty to investigate is implied in the duty to disclose.”26 In investment arbitration, in particular, the existence of a duty to investigate a potential conflict of interest “has been accepted in several ICSID cases.”27

VII. IBA Guidelines

15.

The IBA issued Guidelines on Conflicts of Interest in International Arbitration. These Guidelines, first issued in 2004 and revised in 2014, codify the best international standards and practices on the arbitrator’s duty of disclosure.28 Whilst they are not binding, they are influential and widely relied upon. For example, in a study by White & Case and the Queen Mary University, 71% of survey respondents considered they were familiar with the IBA Guidelines on conflicts (p. 35), and 60% deemed the Guidelines to be “effective.”29

16.

The IBA Guidelines notably distinguish between three different colour-coded scenarios: (i) the Red List, where there is a conflict of interest and the arbitrator must disclose it; (ii) the Orange List, where there may be a conflict of interest and the arbitrator must disclose it; (iii) and the Green List, where there is no conflict of interest and the arbitrator has no duty of disclosure.30

17.

An ICSID tribunal underlined the “persuasive authority” of the IBA Guidelines in Alpha Projektholding GmbH v. Ukraine.31 By contrast, an ICSID tribunal struck a different note in ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela,32 observing that the IBA Guidelines “are not law for ICSID tribunals.” 

VIII. Effect of disclosure and of non-disclosure

18.

Once an arbitrator makes a disclosure, there are two possibilities: a party must either promptly challenge the arbitrator,33 usually within a period of 30 days, or be deemed to have waived any future objection based on the facts and circumstances covered by that disclosure.34 However, the most serious conflicts of interest – as reflected in the Guidelines’ Non-Waivable Red List – may not be waived, even if a party fails to make a challenge.35

19.

In turn, the effect of non-disclosure depends on the nature of the fact or circumstance left undisclosed. In general, non-disclosure per se is not a ground for disqualification of the arbitrator who failed to make the disclosure, or a ground for annulment of the decision or award following the failed disclosure. For example, ICSID tribunals have held that non-disclosure per se cannot be a ground for disqualification of the non-disclosing arbitrator.36 ICSID tribunals further noted that the public nature of the non-disclosed information is relevant to assess the relevance and magnitude of the non-disclosure. In particular, because the non-disclosed information was publicly available, the tribunals held that its non-disclosure did not warrant the disqualification of the arbitrator in question.37

20.

Conversely, if the undisclosed fact or circumstance is deemed to be material, it may result in the disqualification of the arbitrator in question or the annulment of the decision or award. In Eiser v. Spain, an ICSID ad hoc Committee annulled an arbitral award on the ground that the arbitrator’s non-disclosure of a business relationship “could have had a material effect on the Award.”38

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