Author

Ms May Khoury

Associate - Chaffetz Lindsey LLP

Editors
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Conflicts of Interest

I. Definition

1.

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.

II. Laws, Rules, and Guidelines governing conflicts of interest

A. Institutional rules and national laws on conflicts of interest

2.

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

3.

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

B. The IBA Guidelines on Conflicts of Interest in International Arbitration

4.

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.

5.

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.8 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.9 
6.

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.10

III. Conflicts of interest for arbitrators

A. The duty to disclose potential conflicts

7.

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.11 This obligation is ongoing for the entire duration of the arbitration.12

8.

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.13

9.

Many arbitral rules provide for the duty to disclose potential conflicts of interest.14

B. Challenges to an arbitrator based on a conflict of interest

10.

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.15 It could also result in the annulment of the arbitral award.16

11.

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.17 There is limited available guidance concerning the use, validity, and enforceability of such waivers.18

IV. Conflicts of interest for non-arbitrators

A. Party representatives

B. Experts

C. Third party funders

D. Secretaries and administrative assistants

16.

Generally, assistants or secretaries to the tribunal must observe the same disclosure obligations as arbitrators.22

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