IBA Guidelines and Rules
We are grateful to the IBA which has kindly allowed us to publish the IBA Guidelines on Conflicts of Interest in International Arbitration as a resource for parties and their representatives and for arbitral tribunals acting under the NZDRC Arbitration Rules.
When making appointments under the NZDRC Arbitration Rules, NZDRC undertakes to have regard to, but is not bound to apply, the IBA Guidelines on Conflicts of Interest in International Arbitration current at the date of the Notice of Arbitration.
IBA Guidelines on Conflicts of Interest in International Arbitration
The Guidelines on Conflicts of Interest define the framework by which the impartiality of arbitration in the international arena can be most effectively assured. The publication sets out a series of seven general standards of independence and disclosure to govern the selection, appointment and continuing role of an arbitrator. The most recent version of the Guidelines was adopted by resolution of the IBA Council on Thursday 23 October 2014. This version updates and clarifies the original Guidelines, which were approved by the Council of the IBA on 22 May 2004. The Guidelines are intended for use around the world.
2014 IBA Guidelines on Conflicts of Interest – what’s changed?
In October 2014, the IBA Council passed a resolution adopting the revision to its Guidelines on Conflicts of Interests in International Arbitration. These Guidelines have been widely used and referred to by practitioners and arbitrators since their adoption in 2004.
The revised Guidelines do not mark a substantial departure from the Original Guidelines, but instead make refined changes that correct anomalies that have arisen over the last ten years, and to respond to market trends and practice.
The revised Guidelines were drafted by the IBA Conflicts of Interest Subcommittee (IBA Subcommittee), made up of 27 leading arbitrators and arbitration practitioners. The IBA Subcommittee consulted 150 arbitral practitioners by an online survey, as well as 19 arbitral institutions, and sought to reflect “diverse legal cultures and a range of perspectives, including counsel, arbitrators and arbitration users”.
We have provided the previous 2004 Guidelines for your reference: IBA Guidelines on Conflicts of Interest in International Arbitration 2004(PDF).
1. Third Party Funders are required to disclose their identity
General Standard 6(b) has been amended so that a “legal or physical person having a controlling influence on the legal entity or a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration may be considered to bear the identity of the legal identity”.
The Explanation to this amendment clarified that “third party funders and insurers in relation to the dispute may have a direct economic interest in the award, and as such, may be considered to be the equivalent of that party“.
This revision means that parties who have third party funding are now expected to disclose the existence of funding to the Tribunal and to other parties. The 2014 Guidelines do not, however, require the parties to disclose the terms of its funding arrangements.
This grants parties an insight into their respective abilities to finance the arbitration, and as such could change parties’ assessments as to how they conduct the arbitration and their willingness to pursue or defend their cases to an award.
Third party funders should be aware that this imposes a greater likelihood of being directly involved in the proceeding. This is because, firstly, an opposing party might apply for a security for costs order early on in the arbitration, and secondly, an opposing party may request that the Tribunal hand down a costs award that is to be enforced against the third party funder as well as the party to the arbitration.
In contrast, parties informed of third party funding may wish to use this information to help decide whether to settle rather than arbitrate their dispute.
2. Arbitrators who are members of law firms must also “bear the identity” of his or her law firm – (this does not extend to barristers and their chambers)
The 2014 Guidelines, in General Standard 6(a) requires an arbitrator, if he/she is a member of a law firm, to “bear the identity” of that law firm, thereby introducing the ability of parties to consider potential conflicts of interest between the respective law firm (despite the fact that the individual arbitrator may not necessarily be conflicted), and the arbitrator’s duties in the arbitration.
This revision reflects the modern reality that many international law firms also accept individual appointments as arbitrators.
The Guidelines explain that this revision does not extend to barristers and their chambers, although disclosure “may be warranted in view of the relationships among barristers, parties or counsel”.
3. “Advance waivers” by arbitrators do not discharge an ongoing duty of disclosure
An “advance waiver” is a request by an arbitrator that parties waive their rights to bring challenges against the arbitrator if he or she, or his or her law firm, has a conflict of interest in the future. This is a practice that has been adopted by some arbitrators in order to avoid last minute challenges when the parties have spent considerable time and money on advancing proceedings towards a hearing.
The IBA Guidelines do not expressly state whether such waivers should either be widely accepted in practice, or enforceable, but instead state that advance waivers “do not discharge the arbitrator’s ongoing duty of disclosure under General Standard (3)(a)”.
This revision ensures that an arbitrator cannot rely on an “advance waiver” as means to prevent any future challenges to his/her appointment.
As the arbitrator’s “identity” also includes that of their law firm, this revision will also place an on-going duty on the arbitrator to review the activities of their own law firm.
4. 2014 Guidelines apply to non-lawyers sitting as arbitrators
This clarification ensures that Guidelines can be referred to in specialist arbitrations where an arbitrator comes from a non-legal profession, such as engineering or finance. The same applies for the application of the Guidelines to investment and commercial arbitrations.
Although this was the case under the previous Guidelines, it was not very well known.
5. Disclosure of identity of parties’ counsel, including if the counsel is a member of the same chambers as the arbitrator
It is now the responsibility of the parties to inform the Arbitral Tribunal, the arbitral institution, and the other parties, of the identity of the counsel appointed (General Standard 7(b)). Parties also need to inform its counter-party/ies whether there is a relationship between the counsel it has appointed and an arbitrator. This extends to all members of the counsel team the party has appointed and includes the situation where the counsel and arbitrator are members of the same chambers.
This scenario was covered previously (under Article 3.3.2 of the Orange List). However, the reference in the General Standards clarifies that the parties have responsibilities in relation to their counsel. The obligation on the party to make this disclosure at the outset of proceedings attempts to avoid a situation where late disclosure of the relationship gives rise to a challenge by the other party to the impartiality of the arbitrator.
Please note: the NZDRC Arbitration Rules (Rules 17.1 – 17.9) expressly deal with the question of party representation and the parties’ and their representatives’ obligations and duties under the Rules, and the Tribunal’s powers in the event of breach.
6. Duty of impartiality and independence extends to Tribunal Secretaries
To address the increasing number of appointments of Tribunal Secretaries by Tribunals, the 2014 Guidelines extend the duty of independence and impartiality (including the duty of disclosure) to Tribunal Secretaries (at General Standard 5(b)). It is the responsibility of Arbitral Tribunals that their Secretaries uphold those duties.
This imposes the need for arbitrators to carefully scrutinise their prospective administrative support staff in relation to their impartiality and independence.
7. Arbitrator to consider disclosure in situations falling outside Orange List time limits
The revised Guidelines state that even if a situation is not listed in the Orange List or falls outside the time limits used in the Orange List, the Arbitrator is still under a duty to consider disclosure.
This changes the previous position whereby situations outside the time limits stated in the Orange List were to be considered as falling within the Green List, such that no disclosure would be required.
The Guidelines provide the example of repeat appointments of an arbitrator being used by the same party or counsel, outside of the ‘three year period’ stipulated in the Orange List. Under the revised Guidelines, disclosure should still be considered.
8. Disclosure that arbitrator and other arbitrator / counsel currently act or have acted together as co-counsel within the last three years
The Orange List has been revised to include a new scenario (at 3.3.8), whereby the arbitrator must disclose whether another arbitrator on the Tribunal, or the arbitrator and counsel for one of the parties, have acted together as co-counsel within the past three years.
It does not specifically refer to the scenario where an arbitrator and counsel for one of the parties were or are currently opposing counsel, although it includes (at 3.3.7) the scenario where “enmity exists between an arbitrator and counsel appearing in the same arbitration”.