MULLERAT - The IBA Guidelines On Conflicts of Interest Revisited (Journal Spanish Club of Arb 2012)
MULLERAT - The IBA Guidelines On Conflicts of Interest Revisited (Journal Spanish Club of Arb 2012)
International Bar
Association First Introduction
The purpose of the following pages is to comment on the IBA Guidelines on
Bibliographic Conflicts of Interest in International Arbitration 2004 ((3)) , bearing in mind that
reference the IBA “view these Guidelines as a beginning, rather than an end, of the
Ramón Mullerat, 'The process … seek comments on the actual use of the Guidelines, and … plan to
IBA Guidelines on supplement, revise and refine the Guidelines based on that practical
Conflicts of Interest experience” (Introduction 7).
Revisited Another The success of arbitration proceedings rests on the moral and professional
Contribution to the qualities of the arbitrator and the trust of the public on the arbitrators and the
Revision of an P 62
Excellent Instrument, arbitration institution ((4)) . For this reason, arbitrators are subject to rigorous
Which Needs a Slight legal and ethical obligations. Undoubtedly, the most prominent of them is the
Daltonism Treatment', duty of arbitrators to be fully independent and impartial.
Spain Arbitration
Review | Revista del Second The Iba Guidelines on Conflicts of Interest
Club Español del ((5)) ((6))
Arbitraje, (© Club
Español del Arbitraje; I Different Perceptions on the Circumstances Affecting
Wolters Kluwer Independence and Impartiality
España 2012, Volume Independence and conflicts of interest —in politics, in business, in professional
2012 Issue 14) pp. 61 practice— are issues which raise difficult problems and attract the attention of
- 99 lawmakers, judges, lawyers, ethicists and the public in general.
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(6)Due to the paramount importance of independence and impartiality, these
problems constantly challenge international arbitration. However, arbitrators
are often unsure about which circumstances make them to decline or to
disclose, and they may make different choices than other arbitrators in a
similar situation. In addition, the growth of international business, including
interlocking corporate relationships and larger international law firms, has
required more disclosures and, as a result, has created more difficult
independence issues to evaluate.
It is difficult to determine the criteria that must be followed urbi et orbi in order
to determine the arbitrator's independence and impartiality. Different cultures
have different perceptions on particular circumstances. Thus, as the
Introduction (2) recognises, “parties, arbitrators, institutions and courts face
complex decisions about what to disclose and what standards to apply”. The
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complexity of these varying standards creates a tension on the balance
between the parties' rights to a fair hearing, which embodies the disclosure of
facts that may reasonably call into question an arbitrator's independence or
impartiality, and the parties' right to select arbitrators of their choice. Even
though laws and arbitration rules provide some standards, there is a lack of
detail in their guidance and a lack of uniformity in their application. As a result,
“quite often members of the international arbitration community apply different
standards in making decisions concerning disclosure, objections and
challenges”.
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Third Particular Considerations About the
Guidelines
I General Standards Regarding Impartiality, Independence and
Disclosure
A General Standard 1. General Principle (GS-1)
The GS-1 contains the most relevant principle in arbitration: “every arbitrator
shall be impartial and independent of the parties …” ((13)) .
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The title of the GS-1 and the whole text of the Guidelines place the concept of
“impartiality” before the concept of “independence” ((14)) . Although some
believe that there tends to be an overemphasis on the latter (independence)
at the expense of the former (impartiality), in my view the order should be
inverted, because “independence” (the quality of being free from the influence,
guidance or control of others) comes logically first. “Independence” is a
situation of fact, while “impartiality” is a state of mind. An arbitrator can be
independent but be biased ((15)) . In my view, then, “independence” should be
positioned before “impartiality”.
The WG was guided by the principle that the arbitrator must be independent
and impartial at the time he accepts an appointment and must remain so
during the entire course of the proceedings. The WG considered whether this
obligation should extend even during the period that the award may be
challenged, but decided against this and took the view that the arbitrator's
duty ends when the arbitral Tribunal has rendered the final award or the
proceedings have otherwise been finally terminated. In my view, the
arbitrator's obligation to remain independent and impartial continues after the
termination of the proceedings. An arbitrator, for instance, should not receive
gifts or employment or professional offers from the parties even after the
proceedings are completed. That is why some rules require that arbitrators
“shall be and remain at all times impartial and independent of the parties” (art.
5.2, LCIA Rules) and the National Arbitration Forum Code of Conduct for
Arbitrators (Canon 2) provides: “for a reasonable period of time after a case,
arbitrators should avoid entering into any such relationship, or acquiring any
such interest, in circumstances which might reasonably create the
unfavourable appearance that they had been influenced by the anticipation or
expectation of the relationship or interest”.
B General Standard 2. Conflicts of Interest (GS-2)
GS-2 states the duty to decline or refuse if the arbitrator “has any doubts as
to his or her ability to be impartial or independent”.
The main ethical guiding principle is that actual bias from the arbitrator's own
point of view must lead to that arbitrator declining or refusing his appointment.
Courts have held the bias must be direct, definite and capable of reasonable
documentation, rather than remote or speculating ((16)) . They have also
refused vacation of the award when the charge of the arbitrator's misconduct
was based on an affidavit of a party's original attorney, “which was entitled to
no weight inasmuch as it was a verbose collection of conjectures, surmises,
assumptions, and outright demands of personal knowledge of the subject
matter”,
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and statement of self-doubt attributed to the arbitrator was constructed by
arbitrator's simple, clear and self-confident award in the matter ((17)) .
The Guidelines evoke the concept of “conflict of interests” in the title of the
Guidelines and of the GS-2. I wonder whether the principle to be evoked
should be “independence”. Although the ethical rules for arbitrators
(independence and impartiality) do not coincide with the ethical rules for
lawyers (independence but partiality), regarding the latter the lawyers' three
basic ethical principles are: independence, confidentiality and avoiding
conflicts of interest (loyalty) and all other lawyers' ethical duties originate from
the three basic ones. Therefore, at least from a legal ethics perspective, the
obligation to avoid conflicts of interests derives from the loyalty and not from
the independence principle. The situations addressed by the Guidelines are
basically related with independence ((18)) . On the other hand, if the arbitrator's
function is comparable to that of judges (rather to that of lawyers), judges are
disqualified for lack of independence or impartiality.
In any case, the title of this GS-2 (“Conflicts of interest”) is wrong because all
the Guidelines, not only GS-2, refer to such conflicts. GS-2 should be
renamed as “Arbitrator's obligation to decline or to refuse”.
The GS-2 contains four paragraphs (a), (b), (c) and (d), all of them at the
same level. Paragraphs (a) and (b) contain the basic principle of the need to
refuse the appointment in two cases: (a) when the arbitrator considers himself
not to be independent or impartial; and (b) if facts or circumstances give rise
to justifiable doubts to a reasonable third party. In my view, this GS-2 should
only contain the two mentioned paragraphs (a) and (b); paragraph (c)
(defining “justifiable doubts') should be attached to paragraph (b); paragraph
(d) should be deleted.
Paragraph (a) uses the expression “if he or she has any doubts as to his or
her ability to be impartial or independent”. This may be a question of
semantics, but if “ability” is the quality of being able to do something or a
natural or acquired skill or talent, the expression is not correct because the
quality or independence or impartiality does not depend on the arbitrator's
ability. I would suggest to use another expression as “considers himself or
herself to be impartial and independent” as used, for example, by GS-3(b).
Paragraph (b) obliges arbitrators to decline or refuse to act as arbitrator if
circumstances exist “that, from a reasonable third person's point of view …
give rise to justifiable doubts”. I wonder whether the elements of
“reasonability” and “justification” could not be also required in paragraph (a)
when similar doubts are raised by the arbitrator.
Paragraph (d) should be deleted. There is no point in GS-2 repeating the
situations of the Non-Waivable Red List (see 1.1 to 1.3), particularly when it
only
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mentions some of them and omits the others. Mentioning only part of them
can be dangerous.
C General Standard 3. Disclosure by the Arbitrator (GS-3)
If GS-2 contains the fundamental arbitrator's obligation of declining or refusing
if the arbitrator considers himself not to be independent or impartial, GS-3
contains of the obligation of disclosure. If the arbitrator considers that he is
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independent and impartial, but “in the eyes of the parties” there are factors
that may influence the independence or impartiality of the proposed or already
appointed arbitrator, the arbitrator must disclose them, because, if, in the
“arbitrator's own eyes”, they influence his independence or impartiality, he
must decline or refuse the appointment (GS-2(a)).
For this reason, GS-3(b) justly reminds us that “an arbitrator who has made a
disclosure to the parties considers himself or herself to be impartial and
independent of the parties, despite the disclosed facts, or else he would have
declined the nomination or resigned”. However, the arbitrator has to make the
disclosure for two reasons: first, so that the parties or the institution
understand the existence of a fact that may affect the independence or
impartiality and accept it if they so decide; second, to protect the appearance
of independence and impartiality which is essential for all adjudicators.
Although the language could be improved, the Guidelines take a dual-test
approach for disqualification of arbitrators: an objective one and a subjective
one. The objective test is set out in GS-2(b) (“if facts or circumstances exist,
or have arisen since the appointment, that, from a reasonable third person's
point of view having knowledge of the relevant facts, give rise to justifiable
doubts as to the arbitrator's impartiality or independence”). The subjective test
is described in GS-3(a) (“if facts of circumstances exist that may, in the eyes
of the parties, give rise to doubts as to the arbitrator's impartiality or
independence”).
Although generally admitted, I think that the notions of “objective” and
“subjective” are imprecise. The views of a third person are as subjective as
the views of the parties. Perhaps “external” and “internal” would be better
denominations, but I will continue using the existing terms.
As the Explanation to GS-3 states, a purely objective test for disclosure exists
in the majority of jurisdictions and in the UNCITRAL Model Law. Nevertheless,
the WG recognised that the parties have an interest in being fully informed
about any circumstances that may be relevant in their view and added a
subjective disclosure approach. Because of the views of many arbitration
institutions that the disclosure test should reflect the perspectives of the
parties, the WG accepted a subjective approach for disclosure and adopted
the language of article 7(2) ((19)) of the ICC Rules. However, the WG believed
that this principle should not be applied without limitations. Because some
situations should never lead
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to disqualification under the objective test, such situations need not be
disclosed, regardless of the parties' perspective. These limitations to the
subjective test are reflected in the Green List, which contains some situations
in which disclosure should not be required.
Explanation GS-2(b) also states that “the test for disqualification should be an
objective one … and the use of an appearance test based on justifiable
doubts or to the impartiality and independence of the arbitrators ((20)) … [is] to
be applied objectively (a “reasonable third party test”)”.
GS-3(d) could be deleted simply by inserting a few words in GS-3(a): “If facts
or circumstances, at the beginning or at a later stage, exist…”.
D General Standard 4. Waiver by the Parties (GS-4)
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GS-4, which sets out the parties' rights to accept or reject any arbitrator on
the basis of a conflict, is disorganised. First, I think that the waiver of the facts
and circumstances described in the Application Lists should be addressed by
its own separate standard. Similarly, the possibility for arbitrators to assist the
parties on reaching a settlement should be in a separate standard. Second, I
think that the possibility of waiver should be clearly distinct. This should start
with the impossibility to waive the situations of the Non-Waivable Red List,
followed with the possibility to waive by express waiver the situations of the
Waivable Red List, and end with the possibility to waive the situations of the
Orange List by the parties' silence during a 30-day period.
Concerning the situations listed in the Orange List, once the arbitrator states
any of the circumstances that may influence his independence or impartiality,
the parties can object to the appointment or the continuity of the arbitrator.
This objection needs to be raised in a reasonable time after the circumstance
is disclosed by the arbitrator or the party learns about it. The GS-4(a)
currently requires that an explicit objection needs to be made within 30 days
after the receipt of the arbitrator's disclosure or after the party learns of the
circumstance that could constitute a potential conflict. The 30 day period
seems to be sufficient when the dies a quo is the first case (making the
disclosure) but not sufficient in the second case (if the party learns of the
facts, which can be totally independent from the disclosure), because, for the
party who may learn of the facts (often living in a different country from the
arbitrator's), 30 days may be insufficient to explore the reality or the impact of
such facts on the arbitrator's independence.
The courts have declared that when a party has had ample notice of an
arbitrator's impartiality, but has failed to raise any objection until the award is
rendered, will not thereafter be allowed to repudiate the award on the
grounds of the arbitrator's partiality ((21)) ; that, similarly, if a party, although
aware of
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certain conditions that might influence on the arbitrator's judgement,
nevertheless has not objected, cannot thereafter question the award on the
grounds that the arbitrator did not act in good faith ((22)) ; that when a
representative of a party has, during the proceedings, become aware of the
existence of bias, prejudice or fraud on the part of the majority of the
references but does not raise an objection, preferring instead to take
advantage of the possibility of a favourable outcome, proof of his awareness
as to the existence of “bias, prejudice or fraud” is a weak premise for
disqualification; ((23)) and that the defeated party cannot object to an award
when he had notice of the existence of conditions which might influence the
arbitrators' judgement, or, when he had knowledge of the partiality of one or
more of the referees to entitle him to raise an inquiry but he chose to remain
silent ((24)) .
GS-4 also states that, if a party does not raise objections, it is deemed to
have waived any potential conflict based on such fact or circumstance.
The Guidelines accept that arbitrators can also act as mediators if both
parties expressly agree. This is a concept that is not common in the US but is
known in Europe ((25)) , where cases are often settled through arbitration ((26)) .
The CPR Institute insisted that the Guidelines specifically mention mediation
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and cited the CPR Rules for non-administered Arbitration of International
Disputes but required someone other than a member of the arbitration
Tribunal to act as neutral. GS-4(d) allows arbitrators to assist the parties in
reaching a settlement, provided that the arbitrator receives an express
agreement by the parties that acting in such measures shall not disqualify him
from continuing to serve as arbitrator. My suggestion is that, instead of the
phrase “shall receive an express agreement by the parties”, “shall receive an
agreement by all parties in writing” would be preferable. In spite of what is
said in the Explanation, I think that the parties' agreement to the arbitrator's
assistance in a settlement is an exceptional extension of the arbitrator's
normal attributes, which needs to be protected with maximum guarantees.
E General Standard 5. Scope (GS-5)
GS-5 provides that “the Guidelines apply equally to Tribunal chairs, sole
arbitrators and party-appointed arbitrators”, but it excludes “non-neutral
arbitrators”, who do not have an obligation to be fully independent and
impartial.
GS-5 states that when non-neutral arbitrators “do not have an obligation to be
independent and impartial” the Guidelines do not apply to them since their
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purpose is to protect impartiality and independence. All arbitrators, including
non-neutral arbitrators, must be independent and impartial. However, some
rules allow them to be “predisposed” towards and have communications with
the appointing party, while subject to a general obligation “to act in good faith
and with integrity and fairness”.
The current GS-5, which refers to whom it applies, should be located as the
last GS at the end of Part I, since it refers to all other GS and not only to the
previous four.
F General Standard 6. Relationships (GS-6)
I find the title of this GS-6 (“Relationships”) insufficient and it should be
changed to “Law firms and legal entities” or a similar one. Indeed, GS-6
refers only the relationships of the arbitrator's law firm with one of the parties
(paragraphs (a) and (b)). Paragraph (c) does not refer to relationships but
identifies, for the purpose of the Guidelines, that managers, directors and
members of the supervisory board of a legal entity as equivalent to the legal
entity itself. The Application Lists refer to other relationships, for instance, the
one between the arbitrator and another arbitrator or counsel (3.3), the
relationships between the arbitrator and the parties (3.4), or the relationships
between the arbitrator and another arbitrator or the counsel for one of the
parties through memberships in the same professional association or social
organization (4.4.1). For this reason, I propose that the title of this GS-6 to be
changed.
In spite that Explanation to GS-6(a) states that “the arbitrator must in principle
be considered as identical to his or her law firm”, in reality GS-6(a) creates a
presumption of the arbitrator's separation and independence from his firm
unless the facts or circumstances of the case destroy such a presumption. In
my opinion, in the interest of the arbitration institution, this presumption should
be reversed. If the arbitrator must in principle be considered identical to his
law firm ((27)) , the activities of the arbitrator's firm should normally affect his or
her independence or impartiality, unless proven otherwise, which no doubt
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may be difficult.
Paragraph (c) is well intended, but poorly drafted. It says that managers and
directors cannot be “considered to be equivalent of the legal entity”, but it
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should say that “shall be assimilated to the legal entity for the purposes of
these Guidelines”. Instead, an arbitrator will not be found to be independent in
a case involving a legal entity if his or her law firm gives legal services to the
directors or managers of such entities.
G General Standard 7. Duty of Arbitrator and Parties (GS-7)
The title (“Duty of Arbitrators and Parties”) can be improved. Most of the
Guidelines, not only GS-7, refer to arbitrators' duties. The title should be more
precise such as “Obligations to investigate causes of disclosure” or a similar
one.
To reduce the risk of abuse by unmeritorious challenges, it is necessary that
the parties disclose any relevant relationship between them with the arbitrator.
In addition, any party or potential party to arbitration is, at the outset, required
to make a reasonable effort to ascertain and to disclose publicly available
information that, applying the general standard, might affect the arbitrator's
impartiality or independence ((28)) .
The Explanation to GS-7 states that it is the arbitrator's or putative arbitrator's
obligation to make similar enquiries and, to disclose any information that may
cause his impartiality or independence to be called into question. The word
“putative” (which means commonly thought to be, or reputed) is wrongly used.
It should say “potential arbitrator”.
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3.The Orange List is an enumeration of situations which, in the eyes of the
parties, may give rise to justifiable doubts as to the arbitrator's independence
or impartiality. It thus reflects situations that would fall under GS-3(a),
therefore, the arbitrator has a duty to disclose such situations. In all of them,
the parties are deemed to have accepted the arbitrator if, after disclosure, no
timely objection is made (GS-4(a)).The purpose of the disclosure is to inform
the parties of a situation that they may wish to explore further in order to
determine whether objectively —i.e., from a reasonable third person's point of
view— there is a justifiable doubt as to the arbitrator's independence or
impartiality. Then, if the conclusion is negative, the arbitrator can act. He can
also act if there is no timely objection by the parties or, in situations covered
by the Waivable Red List, a specific acceptance by the parties in accordance
with GS 4(c).
4.The Green List contains an enumeration of situations where no appearance
of lack of independence or impartiality exists from the relevant objective point
of view. Thus, the arbitrator has no duty to disclose situations falling within the
Green List.
There was much debate as to whether there should be a Green List at all,
and also, whether the situations on the Non-Waivable Red List should be
waivable in light of party autonomy. With respect to the first question, the WG
maintained its decision that the subjective test for disclosure should not be the
absolute criterion but that some objective thresholds should be added. With
respect to the second question, the conclusion of the WG was that party
autonomy has its limits.
B The Application Lists in particular
1 Non-Waivable Red List
1.1 There is an identity between a party and the arbitrator, or the arbitrator is a legal representative of an entity that is a party in
the arbitration
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The reason that having a significant financial interest in one of the parties is a
non-waivable situation is because, in such a case, the arbitrator becomes
judge in his own cause. A financial relationship between an arbitrator and one
of the parties is a clear basis for a challenge to the lack of independence or
impartiality of the arbitrator. A challenge on the grounds of past relationships
is less likely to be successful than one based on a continuing financial
relationship, however each challenge must be looked at on its own merits.
Courts have evaluated unacceptable bias of an arbitrator and vacated the
judgement made by the biased arbitrator. Bias includes an arbitrator's
financial interest in the outcome of the arbitration; an arbitrator's ruling on a
grievance that directly concerns his own lucrative employment; a family
relationship that makes the arbitrator's impartiality suspect; the arbitrator's
former employment by one of the parties; and the arbitrator's employment by
a firm represented by one of the parties' law firm. The clearest basis for bias
is the arbitrator's material, undisclosed financial interest in the outcome of the
arbitration ((29)) .
The IBA Rules of Ethics (32) set out the principles defining unacceptable bias
such as: “facts which might lead a reasonable person, not knowing the
arbitrator's
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true state of mind, to consider that he is dependent of one party, create an
appearance of bias. The same is true if an arbitrator has a material interest in
the outcome of the dispute or if he has already taken a position in relation to
it”.
1.4 The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her
firm derives a significant financial income therefrom
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Craig, Park and Paulsson recognise that a predisposition in relation to a
dispute exists when the arbitrator has already provided an expert opinion on
the concrete legal question ((31)) . In my view, more than a predisposition, it is
a strong proclivity since, if the factual situation remains the same, an honest
arbitrator will always give an award consistent with the opinion given. To
some extent, the arbitrator has already informally advanced his decision.
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Some commentators have viewed the circumstance of having previously given
an opinion as an absolute bar to serve as an arbitrator even with the
agreement of the other party. Judge Pierre Bellet, a former First President of
the French Supreme Court, said that it is a more serious obstacle to
impartiality to have given a prior consultation in a case than to have ties of
friendship with the party; ties of friendship may be disregarded as a matter of
professional rigor, but the pride that accompanies adhering to one's earlier
opinion is a stronger emotion ((32)) . Similarly, the courts have held that an
award is rightly rejected if, previous to the selection of the arbitrators, a
portion of them made an ex parte examination of the matter afterwards
submitted to them, at the request of one of the parties, to whom the
substance of the result at which they arrived was known, and these facts
were not communicated to the other party ((33)) . The courts have found lack of
impartiality where an arbitrator has discussed the merits of the case with a
party prior to appointment and indicated his views ((34)) . In my view, both
situations described in 2.1. should be non-waivable circumstances and
transferred to List 1 as Non-waivable Red List.
I would replace “legal advice” for unqualified “advice” (as it happens in 1.4).
An architect-arbitrator, who has given technical advice, should also be
disqualified.
The arbitrator should be also objectionable if he has given advice or provided
an expert opinion on the dispute to someone who is not a party, like a
shareholder, an advisor of the party, etc. Therefore, I would delete “to a party
or an affiliate of one of the parties”.
2.1.2 The arbitrator has previous involvement in the case
As courts have held, an indisputable basis for bias is the arbitrator's prior
involvement in the dispute, either as a lawyer, decision maker, or witness ((35))
.
A previous involvement in the case is clearly a circumstance to be disclosed,
because, using both the objective test for disqualification and the subjective
test for disclosure, parties can refuse the arbitrator. But what happens when
the prior involvement has been trivial or insignificant, for instance, when the
arbitrator participates in a “beauty contest” (without the party giving sensible
information to the future arbitrator and without the arbitrator giving his
professional views) but finally the matter is entrusted to a different firm from
that of the arbitrator?
Although a semantic comment, I think that 2.1.2 should say “the arbitrator has
had previous involvement in the case”.
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2.2 Arbitrator's direct or indirect interest in the dispute
2.2.1 The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is
privately held
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The circumstance described in 2.2.1 (the arbitrator holds shares in one of the
parties, which is privately held) must be compared with 3.5.1 (the arbitrator
holds shares, which constitute a material holding in one of the parties, which is
publicly listed) and with 4.5.2 (the arbitrator holds an insignificant amount of
shares in one of the parties which is publicly listed). The Guidelines distinguish
the circumstance in which the arbitrator holds shares in one of the parties
which is privately held (2.2.1) and when the holding is one of the parties which
is publicly listed (3.5.1 and 4.5.1). It also distinguishes between any holding
(2.2.1), a material holding (3.5.1) and an insignificant holding (4.5.2) (by the
way, the two adjectives should be consistent). The holding of any amount of
shares in a privately held entity is considered a serious case by the Guidelines
(2.2.1), less serious when the holding in a publicly listed entity is material
(3.5.1) and no disclosable when the holding is insignificant (4.5.2).
To “hold shares in one of the parties” seems awkward and perhaps “to hold
shares in one of the parties, which is a corporation” is semantically better.
2.2.2 A close family member of the arbitrator has a significant financial interest in the outcome of the dispute
Final Note 4 explains that, throughout the Application Lists, the term “close
family member” refers to “a spouse, sibling, child, parent or life partner”. Does
“parent” include an ancestor?
The circumstance 2.2.2 has to be put in relation with 1.3 (the arbitrator has a
significant financial interest in the outcome of the case). The latter case
(arbitrator himself has the interest) is a non-waivable case, where the former
(a close family member of the arbitrator has the interest) is a waivable
situation.
It is doubtful if the affecting circumstance “financial interest” is correct or it
would suffice “any interest” in the outcome of the dispute. The US courts have
held that “to demonstrate evident partiality under the FAA, the party seeking
vacation has the burden of proving that a reasonable person would have to
conclude that an arbitrator was partial to the other party of the arbitration,”
and the fact that the brother of the arbitrator was employed by one of the
parties was not sufficient to invalidate the award since neither the arbitrator
nor his brother “had any discernible interest in the outcome of the proceeding”
((36)) .
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2.2.3 The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to
recourse on the part of the unsuccessful party in the dispute
The English Court of Appeal had the occasion to rule upon a failure to disclose
relevant information under the ICC Rules in AT&T Corp. & Lucent
Technologies Inc. v. Saudi Cable Co., [2000] 2 All ER (Comm) 625. AT&T is
an international telecommunications company which successfully bid for a
project in Saudi Arabia, a condition of which was that the cable required for
the project should be purchased from Saudi Cable. Disputes arose when
AT&T discovered that, as a result of a clerical error, the Tribunal chairman's
curriculum vitae did not include reference to his non-executive directorship of
Nortel, a rival to AT&T in bidding for the project. AT&T claimed that there was
an appearance of bias and applied for the chairman to be removed and the
award set aside ((37)) . The Court of Appeal found that, although AT&T would
have rather known the full disclosure of the chairman regarding his
independence, there was no showing of real danger that required the award
to be set aside. The court reasoned that in future cases failure to disclose
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similar circumstances, that pose a real danger to the independence and
impartiality of an arbitrator, could be grounds to vacate an award.
2.3 Arbitrator's relationship with the parties or counsel
In such situation the courts have taken different views. The Swiss Federal
Court ((39)) held (in 1998) that ‘the fact that two lawyers, one as arbitrator the
other one as counsel, owned together a law firm… is not in itself a ground for
revocation’. On the other hand, the Court of Genoa found (in 2006) ((40)) that
the fact that an arbitrator and one of the parties' counsel shared the same
premises (and that the grandfather of the counsel was a friend of the
arbitrator's father), were sufficient reasons to revoke the arbitrator's
appointment.
In this situation, I believe the Guidelines are too “pro arbitro”. It seems to me
that if the arbitrator is a partner in a law firm whose partners (and therefore
with common pecuniary interests) are working, even for unrelated matters for
one of the parties, this creates an appearance of partiality at least in the eyes
of the public ((41)) .
The fact that this situation is a waivable one may be considered as a
concession to large firms. I wonder whether, to protect the sacrosanct
independence principle of arbitration, the rule could not be inverted in the
sense that the arbitrator's firm is normally considered as a source of conflict
unless specific circumstances show the contrary. I think that the Explanation
to GS-6(a) that “the arbitrator must in principle be considered as identical to
his or her law firm” should be consistently reflected here.
2.3.4 The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling influence, in an
affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration
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dispute is unnecessary. In my view, the independence and impartiality of the
arbitrator may be affected if the arbitrator is a manager or director in an
affiliate of one of the parties even if the affiliate is not involved or is indirectly
involved in the subject matter of the dispute. Otherwise the “indirectness”
could be easily fabricated by, for example, interposing a shell company.
P 79
2.3.6 The arbitrator's law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of
the parties
In Spearman v. Wilson, 44 Ga. 473 (1871) the court decided that it was not
adequate for an arbitrator to render an award in favour of the party, which
had become the property of the son of the arbitrator, pending the arbitration.
The law which governs arbitration —said the court— demands the same
freedom from all bias that applies to judges, and the fact stated by the
arbitrator, showing that his judgment had not changed by the subsequent
purchase by his son, cannot make valid that which, from the fact of the
purchase, when known to the arbitrator, and without notice to the other party,
disqualified him to act in the case. The common denominator between all this
cases and the root of 2.3.9 situation is that arbitrators should be free from
interest or relationship in all cases, unless such disqualifications are waived by
informed parties.
P 80
However, in another case, the Supreme Court of Tennessee ((46)) held that the
arbitrator's failure to disclose that his brother conducted substantial business
with a subsidiary of a party's parent corporation did not necessitate vacating
the award. Even assuming that the arbitrator was aware of his brother's
business relationship with the subsidiary, there was no demonstration of the
existence of actual bias on part of the arbitrator. Arbitrators serve a quasi-
judicial function only by consent of the parties to an arbitration agreement. The
arbitrator' jurisdiction to act is conferred solely by contract or submission
appointing them, and, therefore, they, unlike judges, are not disqualified for
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being interested in the result if such circumstance had been disclosed to the
party adversely affected thereby ((47)) .
3 Orange List
3.1 Previous services for one of the parties or other involvement in the case
3.1.1 The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties
or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated
matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship
The circumstance that the arbitrator has, in the past, served as counsel for
one of the parties even in an unrelated matter is a matter of controversy.
Some court judgements have found that there is no ground for setting aside
an arbitrator's award because he had formerly been member of counsel, in
another action, for a party whom he found in favour ((48)) .
Spanish courts have addressed this issue on several occasions. The
judgement of the Provincial Court of Baleares of 4 February 1997 considered
lack of impartiality of the arbitrator who acted as lawyer of the main
shareholder (37, 5% of the shares) of a company which was party to the
proceedings. Another judgement of the Provincial Court of Barcelona of 9
December 2003 held the existence of “objective partiality” of the arbitrator
stemming from the circumstances: a) the previous legal advice given by Price
Waterhouse (which agreed with the party the legal advice of Arbitec) to one
of the parties; and, b) the conflict of interest between one of the parties and
its advisors. Austrian courts ((49)) have decided that the arbitrator lacks
independence when he has represented one of the parties throughout a long
period and on a regular basis. Finally, German courts ((50))
P 81
granted a challenge because, during the arbitration, the sole arbitrator
represented one party in court proceedings against the other party.
A similar situation, however relating to judges, was considered in the Locabail
case ((51)) by the Court of Appeal in England. The case concerned a solicitor
sitting as a deputy judge who discovered during the proceedings that his firm
had acted in litigation against the ex-husband of one of the parties. The Court
held that the pecuniary interests involved in the case were not of such nature
to automatically disqualify the judge but that it had to be determined on the
basis of the particular facts of the case whether there was a “real danger” of
bias. There, the court denied the existence of such a danger because the
judge's knowledge of the case involving the ex-husband was limited and the
judge's interest in the fees earned by his law firm in that case was tenuous
and insubstantial ((52)) .
The LCIA Court ((53)) rejected a challenge based on the arbitrator's own prior
work as counsel to the respondent on an unrelated matter, while associated
several years previously with a prior law firm. The involvement was brief and
largely supervisory, but did include meeting with employees of the respondent.
The LCIA found that the past relationship did not give rise to any doubts as to
the arbitrator's impartiality, emphasizing that in the years since leaving his
prior law firm, the arbitrator did not continue any ties with the respondent.
Although the three year period may be “an appropriate general criterion,
subject to the special circumstances of any case” (Part II, 8), three years is a
short period ((54)) . The arbitrator that has served as counsel for one of the
parties within a longer period, may abuse the confidentiality duty owed to his
former client since such duty does not expire with the termination of the client-
attorney relationship ((55)) . This situation can be considered as waivable from
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a common law perspective, where confidentiality belongs to the client, who
can release the lawyer from such duty ((56)) , but not from a civil law
perspective where the “professional secrecy” is absolute and cannot be
released by the client.
3.1.3 The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the
parties or an affiliate of one of the parties
If we strictly apply the principle of imputation (a lawyer and his firm are one
lawyer) it would result that in this situation the same lawyer would act as
arbitrator and as counsel in the same case.
P 83
The Deutsche Institution für Schiedsgerichtsbarkert agreed with the challenge
on the grounds that the defendant had requested the law firm of the
challenged arbitrator to provide a legal opinion for one of its subsidiaries
indicating that it was of no relevance whether the challenged arbitrator was
aware of the appointment of his law firm on whether he was involved in the
preparation of the legal opinion ((62)) .
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A US court also vacated an award for a subcontractor and against a
contractor on grounds of partiality. This finding was not affected by the fact
that the arbitrator was a lawyer in a small firm which had represented the
contractor and its president ((63)) . In my view, the fact that the arbitrator's law
firm is currently rendering services to one of the parties is a serious one which
needs the express approval of the parties and to be moved at least to the
Waivable Red List.
3.2.2 A law firm that shares revenues or fees with the arbitrator's law firm renders services to one of the parties or an affiliate
of one of the parties before the arbitral Tribunal
This description should say ‘the arbitrator and another arbitrator in the same
arbitration are lawyers in the same law firm’. The future compatibility of
international arbitration and an arbitrator who is a partner in a large law firm
has been questioned by some authors ((65)) . Again the community of interests
of partners of the same firm makes the Guidelines' weak treatment of this
type of situations arguable.
3.2.2 The arbitrator and another arbitrator or the counsel for one of the parties are members of the same barristers' chambers
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partnership and not sharing profits but only sharing premises and services,
they are structurally organised within the chambers, under the administrative
management of clerks, who distribute the work into the members of the
chamber and negotiate the fees with the clients. Today, at least externally,
they look like a rather integrated structure (particularly to non-lawyers or non-
English lawyers' clients), advertising the chamber's services as a whole, share
senior and junior clerks and carry out the recruitment of new members
collectively ((74)) . Therefore
P 85
the inclusion of this circumstance in the Orange List should be carefully
reconsidered.
3.3.6 A close personal friendship exists between an arbitrator and a counsel of one party, as demonstrated by the fact that the
arbitrator and the counsel regularly spend considerable time together unrelated to professional work commitments or the
activities of professional associations or social organizations
Friendship between the arbitrator and one of the parties' counsels is not
uncommon. The arbitration world is relatively small. Often it is the counsel
who proposes to the client the arbitrators to be appointed and, logically, he
proposes persons that he knows. The problem arises when the level of
friendship can influence the impartiality of the arbitrator ((75)) .
US courts have held that an undisclosed connection between arbitrator and
attorney for a sales representative seeking arbitration could not form a basis
for vacating the award on the ground of partiality of the arbitrator. There the
arbitrator did not participate in any legal matters in which the lawyers of his
firm and the sales representative's lawyer's firm were mutually involved and
the arbitrator had only two contacts with the sales representative's attorney
((76)) .
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the need that the arbitrator and the counsel “spend considerable time
together”.
Relationships between arbitrators and the law firms representing the parties
can also form the basis for a challenge on the grounds of lack of
independence or impartiality. Once again, no generalisations can be made
and decisions must be made based on the facts in each case ((78)) . In
jurisdictions with split legal professions such as the UK, a law firm
representing a party may nominate a barrister frequently retained by that firm.
Again, self restraint is called for on the part of the nominee. If he feels any
inhibition at the prospect of finding against the client of the firm which has
nominated him, he must decline the appointment. Challenges may be upheld
where the arbitrator's spouse or other close relative is acting for one of the
parties, or is a partner in the law firm that represents that party ((79)) .
In another US case ((80)) , the court found that the alleged facts did not create
a sufficient basis for “evident partiality” on the part of the arbitrator and that
the facts alleged were tenuous at best. There, the arbitrator and the lawyer
for one of the parties were two of 34 lawyers that previously represented a
corporation, not a party to the current arbitration, in a case that concluded at
least seven years earlier. Further US courts do not find “evident partiality” of
the arbitrator who was formerly employed as a legal advisor to a government
entity and a distant familial relation to the President of the US. Based on such
facts, the court found that there were not sufficient grounds for a finding of
“evident partiality” towards the US government ((81)) .
3.3.7 The arbitrator has within the past three years received more than three appointments by the same counsel or the same
law firm
This situation would need, in my view, to be listed in the Waivable Red List
and therefore requiring the express will of the parties to be waived.
3.4.2 The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a
professional capacity, such as a former employee or partner
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I would add at the end of the sentence: “… such as a former in-house
counsel, employee or partner”.
In the English case Jackson v. Barry Railway (1893), the court refused to set
aside an award where the engineer of the building owner was nominated as
arbitrator in the contract in spite that it was alleged that he could not have an
open mind ((84)) . In Nuttal v. Manchester Corporation (1892), a borough
surveyor was nominated by the building contract as arbitrator. The substance
of the builder's case was that it was the surveyor himself who had made
mistakes, which were solely responsible for a subsidence. The court held that
it would be impossible for him to sit in judgement of his own professional
competence and refused to stay an action begun by the builder. In Kimberley
v. Dick (1871) ((85)) it was alleged that the architect had made a secret
bargain with the building owner that the cost would not exceed a certain sum.
The court treated that as a disqualification and thus refused to order the stay
of an action for an account.
P 88
In the US, the fact of having acted as the agent of one of the parties
regarding the matter in controversy, or to have received and acted on ex
parte representation or evidence, or otherwise permitted undue influence from
any other quarter, has been considered to constitute such partiality as would
have invalidated an award ((86)) .
3.4.3 A close personal friendship exists between an arbitrator and a manager or director or a member of the supervisory
board or any person having a similar controlling influence in one of the parties or an affiliate of one of the parties or a witness
or expert, as demonstrated by the fact that the arbitrator and such director, manager, other person, witness or expert regularly
spend considerable time together unrelated to professional work commitments or the activities of professional associations
or social organizations
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chicanery in giving effect to
P 89
their awards. But it does mean that arbitrators are not automatically
disqualified by a business relationship in advance, or if they are unaware of
the facts but the relationship is trivial. I see no reason automatically to
disqualify the best informed and most capable potential arbitrators”.
The courts have also held that there was no “impression of partiality” because
the arbitrator and the defendant's president had been active in the affairs of
the town and because the arbitrator knew the father-in-law of the defendant's
president ((89)) but that the entertainment of an arbitrator by one of the
interested parties ordinarily is censurable and may be so flagrant as to require
the setting aside of the award ((90)) . In another case ((91)) , the court negated
the allegation that the arbitrator had “a close personal and professional
relationship” with the president of the firm that operated the vessel involved in
the arbitration on the basis of a close relationship that the arbitrator and the
company executive had served together on 19 arbitration panels and no other
concrete support was furnished for characterizing the arbitrator and the
executive as “close personal friends”.
3.4.4 If the arbitrator is a former judge, he or she has within the past three years heard a significant case involving one of the
parties
In order to maintain the reputation of both the judges and the arbitrators, the
parties should be aware if the arbitrator has intervened as a judge in any case
involving one of the parties. I would suggest deleting the adjective “significant”
because the former judge could have received sensitive information
regardless the significance of the case.
A California Court of Appeal disqualified an entire law firm when a retired
judge, who had conducted settlement talks involving two parties, joined the
law firm representing one of the parties ((92)) .
3.5 Other circumstances
3.5.2 The arbitrator has publicly advocated a specific position regarding the case that is being arbitrated, whether in a
published paper or speech or otherwise
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question —but not an opinion on the concrete question (situation 2.1.1)— do
not impair the arbitrator's impartiality. In particular, party-appointed arbitrators
are sometimes chosen according to their perception or their expected attitude
on open-mindedness to a particular agreement or scientific viewpoint ((94)) .
It is unlikely that a challenge would succeed merely on the grounds that a
potential arbitrator has had an academic article published in a legal journal in
which certain views that may not be favourable to a particular party's position
in the arbitration in question were expressed. However, there could
conceivably be a challenge based upon the views that a potential arbitrator
may have expressed publicly. The more extreme these views, the greater the
grounds for challenge on the basis of lack of impartiality.
The issue is arguably more sensitive where there is a political or philosophical
element to the question in dispute. For example, the appropriate measure of
compensation following the expropriation of an investment is a matter of
international debate with differing political views being expressed by the
governments of developed states and those of developing states. There may
be the suspicion that public expression of views on political questions are a
sign of partiality and could lead to disqualification.
Books and newspapers should also be included, and “review” instead of “law
review”. “The arbitrator has previously expressed a general opinion in an
unrelated forum (i.e. in a book, newspaper, review …)”. The adjective
“general” before “opinion” is superfluous.
P 91
4.3 Current services for one of the parties
4.3.1 A firm in association or in alliance with the arbitrator's law firm, but which does not share fees or other revenues with the
arbitrator's law firm, renders services to one of the parties or an affiliate of one of the parties in an unrelated matter
Arbitrators from law firms which are affiliated to, or have an alliance with, a
firm representing one of the parties may not be considered independent by
some tests and depending of the circumstances ((95)) .
4.4 Contacts with another arbitrator or with counsel for one of the parties
4.4.1 The arbitrator has a relationship with another arbitrator or with the counsel for one of the parties through membership in
the same professional association or social organization
The arbitrator who has a relationship with the lawyer of one side through such
membership may be considered independent. Obviously, it would depend on
the type or size of the association or organization or if the relationship is a
“close” one. The arbitrator's membership in an association, party to the
proceeding, may give rise to doubts regarding the arbitrator's independence
((96)) .
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impartiality of an arbitrator if properly conducted. It requires that the case is
not discussed in detail and that the arbitrator does not give a party advice as
to how to proceed or to frame its case ((99)) .
The courts have refused to invalidate an award when an arbitrator has been
merely shown certain key documents by the party appointing him when he
was being considered for appointment because the arbitrator had not formed
a judgement on reviewing these documents ((100)) .
However, in the arbitration law of the People's Republic of China, a special
provision stipulates that an arbitrator must withdraw from an arbitration where
“the arbitrator has privately met with the party or agent or accepted any
invitation for entertainment or gift from a party or agent” ((101)) .
4.5.2 The arbitrator holds an insignificant amount of shares in one of the parties or an affiliate of one of the parties, which is
publicly listed
This situation needs to be related with 2.2.1 in which holding shares in one of
the parties that is privately held is situation of the Waivable Red List and with
3.5.1 where if the party is publicly held integrates the Orange List.
The qualification of ‘insignificant’ will always depend on a case-by-case
analysis. In AT&T Corp. v. Saudi Cable Co. ((102)) , the English Court of
Appeal held that owning 474 common shares was a sufficiently small number
and was not therefore considered to have any impact on the arbitrator's
impartiality. Similarly, in Weatherill v. Lloyd TSB Bank, 26 July 2006, the
judge unknowingly held 470 out of 5.5 billion issued shares ((103)) .
P 93
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The adopted General Standards are as follows:
—General Standard 1 (General Principle) states that every arbitrator shall be
impartial and independent;
—General Standard 2 (Conflicts of Interest) contains the arbitrators'
obligation to decline for lack of independence and the objective test (“a
reasonable third party point of view”);
—General Standard 3 (Disclosure by arbitrator) contains the subjective test
(“in the eyes of the parties”);
P 94
—General Standard 4 (Waiver by the parties) refers to the parties approval of
the arbitrator by silence to the disclosure and the participation of arbitrator in
the settlement of the dispute;
—General Standard 5 (Scope) refers to the applications of the Guidelines to
all arbitrators;
—General Standard 6 (Relationships) refers to the arbitrators' relation with
law firms;
—General Standard 7 (Duty of arbitrators and parties) urges parties and
arbitrators to investigate any potential circumstance to impair the
independence.
Since all the Guidelines basically refer to the independence and impartiality
and the duty to disclose and its consequences, I think that the Standards
should be only 5, as follows:
•General Standard 1 (Basic principle: arbitrator's independence and
impartiality) The basic principle: I would keep the current wording, although I
would extend the obligation to be independent and impartial further to the
issuing of the award, and even during any appeal period;
•General Standard 2 (Obligation to decline). Within the main obligation for
arbitrators is to decline the appointment if they deem themselves to be
dependent or partial vis-à-vis to one of the parties or the dispute. Explanation
Standard 2(c) and 2(d) should be related;
•General Standard 3 (Objective test). If the facts or circumstances give
justifiable doubts “from a reasonable third person's point of view”, the
arbitrator shall disclose them. So the current GS-2(b) should become a
Standard of its own;
•General Standard 4 (Subjective test). If the parties have the knowledge, after
disclosure or otherwise, that the arbitrator is not independent or impartial, the
arbitrator must decline. So the current GS-3 should become Standard 2 (with
a reference to the Explanation Standard in the current 2(c) and 2(d); and
•General Standard 5 (Waivers of the parties). This Standard should regulate
all the possibility of waivers by the parties to facts and circumstances that
may impede the arbitrator's independence or impartiality. It should include the
impossibility to waive some circumstances, those which need express waiver
and those that only require implicit waiver.
The remaining current Standards do not require a separate Standard.
Standard 5 (Scope) is wrongly placed and does not need to be a Standard by
itself. It could be added in proposed Standard 1. Standard 6 (Relationship)
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and Standard 7 (Duty of arbitrators and parties) could be added to the
proposed Standard 2.
P 95
III Cases that are not Covered but Should be Covered by the
Application Lists
Although the Guidelines recognise that the Application Lists are not exhaustive
and cannot cover every conceivable situation, I agree with the authors who
suggest that the Lists should be expanded ((108)) . At least the following cases
should be included. For instance, when the arbitrator:
a.has a substantial interest in a firm with, which he or she has done a more
than trivial work with a party ((109)) ;
b.is employed by one of the parties ((110)) . A person who had been employed,
especially for a long period of time, by one of the parties may well be unable
to act impartially with respect to that party, even if he believes himself to be
able to do so. Furthermore, such a person may be in possession of
information about that party, much of which may not be put forward as
evidence before the Tribunal, which could lead him to come to a decision at
variance to that which would be reached by an arbitrator who did not possess
such additional information;
c.has a financial interest in one of the parties' competitor ((111)) . In AT&T
Corp. v. Saudi Cable Co., an eminent international arbitrator was appointed
Tribunal chairman in an ICC arbitration. One of the parties became aware that
the chairman was a non-executive director of a competing company of that
party, and that the competing company was also a disappointed bidder for the
contract, out of which, the arbitration arose. The party lodged a challenge with
ICC based on the chairman's alleged lack of independence;
d.has hired one of the party's law firm ((112)) ;
e.is a member, with no participation, in the government bodies of a health,
cultural or other non-profit organisation which is a party of the arbitration;
f.has acted as legal advisor of an association to which one of the parties
belongs should probably be included in Orange List 3.5 (other circumstances)
((113)) ;
P 96
g.has been instructed by the same lawyers in another matter, in which, similar
allegations had been made against the same witness ((114)) ;
h.has had direct contact with a witness but failed to inform the parties ((115)) ;
i.is a member of an organization that practices discrimination on the basis of
race, sex, religion, national origin or sexual orientation ((116)) ;
j.has given advice or provided an expert opinion on the dispute to someone
who is not a party of the arbitration;
k.has qualifications contradictory to the parties' arbitration agreement ((117))
(i.e. experience, condition that arbitrator must be a lawyer, nationality, etc.);
l.has taken extreme and detailed views on political or economic issues related
or affecting the arbitration ((118)) ;
m.a close family member has an insignificant financial interest in one of the
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parties which is a corporation.
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lawyer and his law firm are considered a single entity. This principle is
recognized by the CCBE Code (3.2.4) and by the ABA Model Rules (1.8).
This principle is also accepted by Explanation to GS-6(a) of the Guidelines
providing that “the arbitrator must in principle be considered as identical to his
or her law firm”. In spite of this clear statement, the reality is that the
Guidelines attitude is the reverse as shown in several situations. For example,
if the arbitrator's law firm is currently rendering services to one of the parties,
whatever the circumstances (3.2.1) or two arbitrators are of the same law
firm (3.3.1) and in a similar case, would require not the implicit but the explicit
waiver of the parties. An arbitrator should disclose that his law firm has acted
against one of the parties even in an unrelated matter and without the
involvement of the arbitrator (4.2.1), etc. Unlike what circumstance 4.4.2
recommends, I think that if the arbitrator and counsel for one of the party's
have previously served together as co-arbitrator or co-counsel this
circumstance should be disclosed by the arbitrator ((119)) .
P 98
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necessarily includes their affiliates as defined in Note 5.
In general, an effort should be also made to define some of the major terms
used in the guidelines ((120)) .
P 99
My suggestion to even improve the Guidelines making them a stricter set of
recommendations is mainly motivated by the need to protect and improve the
good reputation of the institution of arbitration, which needs to enhance the
perfect independence and impartiality of the arbitrator but particularly the
appearance of such independence and impartiality not only to the eyes of the
parties but to the eyes of the general public or “fair minded lay observers”
((121)) . I hope that these reflections can be useful for the revision.
P 99
References
★)
Ramòn Mullerat Obe: (1) Ramón Mullerat Obe is a lawyer in Barcelona and
Madrid, Spain; Iuris Valls Abogados; Avocat à la Cour de Paris, France;
Honorary Member of the Bar of England and Wales; Honorary Member of the
Law Society of England and Wales; Former professor at the Faculty of Law
of the Barcelona University; Adjunct Professor of the John Marshall Law
School, Chicago; Professor at the School of Law of the University of Puerto
Rico (Summer programme); Member of the European Board of the Emory
University (Atlanta); Former President of the Council of the Bars and Law
Societies of the European Union (CCBE); Member of the American Law
Institute (ALI); Member of the American Bar Foundation (ABF); Member of
the Executive Committee of the North-American Studies Institute (IEN);
Former member of the Council of the Section of International Law of the
American Bar Association (ABA); Former Co-Chairman of the Human Rights
Institute (HRI) of the International Bar Association (IBA); Expert of the Council
of Europe; Member of the Observatory of Justice of Catalonia; Member and
Secretary of the Academy of Jurisprudence and Legislation of Catalonia;
Member of the London Court of International Arbitration (LCIA); President of
the Association for the Promotion of Arbitration (AFA); President of the
International Senior Lawyer Project (Europe) (ISLP-E); Former Chairman of
the Editorial Board of the European Lawyer: Member of the Editorial Board of
the Iberian Lawyer. (2) This is a revised version of an unpublished article that
I wrote and which was contributed to the works of the IBA Subcommittee on
Conflicts of Interest. Report on the IBA Guidelines on Conflicts of Interest in
International Arbitration, June 2009
(3))
(4))
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(4))
(5))
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(5))
Within the extensive literature on the Guidelines, see, for example, Tore
Widen-Nilsson, “IBA Draft Guidelines on Impartiality, Independence and
Disclosure”, Stockholm Arbitration Newsletter, 2, 2003. Otto De Witt Wijnen,
Nathalie Voser and Neomi Rao, “Background information on the IBA
Guidelines on Conflicts of Interest in International Arbitration”, Business Law
International, vol. 5, no. 3 September 2004, pp. 433-458. Laurence Shore
and Emmanuelle Cabrol, “A comment on the IBA Guidelines on conflicts of
Interest: The fragile balance between principles and illustration and the
Mystery of the “Subjective Test”, The American Review of International
Arbitration, 2004, 15 pág. 599. Simon Rober Tissot and Lydia Hanssell, “UK
challenging a Judge or Arbitrator for Bars”, Monday. David A. Lawson,
“Impartiality and Independence of International Arbitrators. Commentary on
the 2004 IBA Guidelines on Conflicts of Interest in International Arbitration”,
ASA Bulletin, vol. 23. n.° 1, 2005, pág. 22, 55. Nicholas Longley, “The IBA
Guidelines on Conflicts of Interest in International Arbitration”. Available at
http://www.tannerdewitt.com/index.php Click “Publications” select “February
2005”. Markham Ball, “Probity Deconstructed: How Helpful, Really, Are the
New International Bar Association Guidelines on Conflicts of Interest in
International Arbitration?”, Arbitration International, 2005, págs. 223–341.
Gary Born and Rachael Kent, “The Internationalization of International
Commercial Arbitration”, Wilmer, 22 February 2005. Loretta Malintoppi,
“Independence, Impartiality and the Duty of Disclosure in Investment
Arbitration”, ILA Committee on Investment Law, 22 July 2005. Anne Hoffman,
“Duty of Disclosure and Challenges of Arbitration: The Standards Applicable
under the New IBA Guidelines on Conflicts of Interest and the Former
Approach”, Arbitration International, 1 November 2005. Fernando De
Trazegnies Granda, “Conflictuando el conflicto. Los conflictos de interés en el
arbitraje”, Lima Arbitration, n.° 1, 2006, pág. 163. William Park, “Procedural
Default Rules Revisited”, in Julian Lew and Loukas Mistellis (ed.), Arbitration
Insights, 2006, págs. 360-366. Leon Trakman, “The Impartiality and
Independence of Arbitrators Reconsidered”, University of New South Wales
Faculty of Law Research Series, 2007, paper 25. Dana Freyer and Julie
Bédard, “The Concept of Ethical Rules or the New IBA Guidelines on Conflicts
of Interest in International Arbitration”, in AAA. ADR & The Law, 21st Edition,
March 2007. Tom Canning, “International Arbitrators: Conflicts of Interests
and Bars”, DLA Piper International Arbitration Newsletter, 25 May 2007.
Lewis Silkin, “Arbitrators, Mediators and Conflicts of Interest”, available at
www.Legal500.com, June 2007. Matthias Scherer, “The new case law from
Austria, Switzerland and Germany Regarding the IBA Guidelines on Conflicts
of Interest in International Arbitration”, Transnational Dispute Management,
2008, vol. 5, Issue 4. Alexis Mourre, “Conflicts of Intrest: Towards Greater
Transparency and Uniform Standards of Disclosure”, Kluwer Arbitration Blog,
19 May 2009. Nathalie Bernasconi-Osterwalder, Lise Johnson and Fiona
Marshall, “Arbitrator Independence and Impartiality: Examining the Dual Role
of Arbitrator and Counsel”, IV Annual Forum for Developing Country
Investment Negotiators Background Papers, New Delhi, 27-29 October
2010.Thor G. Imsdahl, “Quo Vadis? A Shifting Standard of Impartiality and
Independence”, CPR, 2011 Writing Contest Winner. Peter Ashford,
“Arbitrators' Repeat Appointments and Conflicts of Interest”, Arbitration Law,
2011.
(6))
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(6))
William Park, “Procedural Default …”, pp. 362, and ss., who says that his
type of guidelines have been called the “soft law” of arbitral procedures in
distinction to the firmer norms imposed by statutes and treaties.
(10))
The final text included all international arbitration and not just commercial
arbitration.
(11))
At the 27th Annual Award Programme of the CPR Institute for Dispute
Resolutions, the IBA was presented with the “2004 Outstanding Practice
Achievement Award”.
(12))
Laurence Shore and Emmanuelle Cabrol, op. cit. state that he Guidelines aim
to provide guidance for the different stages when conflicts of interest may
arise. First, an arbitrator must decide whether he can accept an appointment
(“disqualification” stage). Then, even if the arbitrator is of the view that he can
act, he may decide to disclose some facts to the parties (“disclosure” stage).
Finally, on the basis of this disclosure, the parties may decide to challenge the
arbitrator (“challenge” stage).
(13))
Some rules only refer to “independence” (the ICC Rules 1988 before the
revision of 2011) while others only refer to “impartiality” (English Act, Hong
Kong Ordinances). The ICC Rules traditionally only referred to
“independence”, but the recent reform has included “impartiality” (ICC Rules
11, 1: “Every arbitrator must be and remain impartial and independent of the
parties “. although in my view in tihe wrong order.
(14))
See, among many, Alan Redfern and Martin Hunter, Law and Practice of
International Commercial Arbitration, 2004, págs. 238-239. Yves Derains and
Eric A. Schwartz, A Guide to the ICC Rules of Arbitration, 2005, pág. 119.
Leon Trakman, op. cit., págs. 6 and 13 and note 48. Witt Wijnen, Voser and
Rao, op. cit. págs. 440-441.
(16))
Del Piano v. Merrill Lynch, et. al, 859 A.2d 742 (N.J.Super.A.D., 2004).
(17))
Barnstead v. Redder, 659 N.E.2d 753, 39 Mass. App. Ct. 934, review denied
663 N.E.2d 576, 422 Mass. 1106 (1996).
(18))
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(18))
For instance, if the arbitrator has given a lecture related to the dispute
(Application List 4.1.1), the arbitrator may not be independent but does not
have a conflict.
(19))
Fox v. Hazetton, 27 Mass. 275, 10 Pick 275 (1830), Cook Industries, Inc. v.
C. Itoh & Co. (America) Inc., 449 F.2d 106 (2nd Cir. 1971) cert. denied, 405
U.S. 921, 92 S.Ct. 957 (1972).
(22))
Sherman v. Alliance Ins. Co. of Philadelphia, 163 N.E. 908, 265 Mass 305
(1928).
(23))
Tobacco Co. v. Alliance Ins. Co., 131 N.E. 213, 238 Mass. 514 (1921).
(24))
Loherty v. Phoenix Ins. Co., 112 N.E. 940, 224 Mass. 310 (1916), Wilson v.
Dan McCabe's Creative Carpentry Inc., 417 N.E.2d 49, 11 Mass. App. Ct.
956 (1981).
(25))
In Germany, Section 32.1 of the DIS Arbitration Rules: “…the arbitral tribunal
should seek to encourage an amigable settlement of the dispute…”.
(26))
(29))
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(29))
Middlesex Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir. 1982); In re
Friedman, 231 N.Y.S. 369 (App. Div. 1925) (award made void because the
arbitrator borrowed money from one of the parties during arbitration);
Knickerbocker Textile Corp. v. Sheila-Lynn, Inc., 16 N.Y.S.2d 435, aff'd, 20
N.Y.S.2d 985 (App. Div. 1939) (award vacated because the arbitrator was
the president of a party to a first arbitration and arbitrators issued
contemporaneous awards in favour of each other's firms); Shirley Silk Co. v.
American Silk Mills, Inc., 23 N.Y.S. 2d 254 (App. Div. 1940); Hyman v.
Pottberg's Ex'rs., 101 F.2d 262 (2d Cir. 1939) (award made void as the
arbitrators were also potential claimants); Rand v. Readington, 13 N.H. 72
(1842) (award made void because the prevailing party was indebted to the
arbitrators and amounts received were pledged to repay arbitrators' claims).
(30))
Lew, Mistelis, & Kröll, op. cit., pág. 262. Craig, Park, Paulsson, ICC
Arbitration, para 13-03.
(31))
See Metropolitan property & Casualty Ins. Co. v. J.C. Penney Casualty Ins.
Co., 780 F. Supp. 885 (D. Conn 1991).
(35))
Middlesex Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir. 1982); Sanko
S.S. Co. v. Cook Industries, Inc., 495 F.2d 1260 (2d Cir. 1973) (case
remanded for factual inquiry on the arbitrator who had business relations with
the party and its lawyer); American Guaranty Co. v. Caldwell, 72 F.2d 209
(9th Cir. 1934); National Shipping Co. of Saudi Arabia v. Transamerican
Steamship Corp., No. 92 Civ. 0258, 1992 WL 380302 (S.D.N.Y. 1992);
Brandeis Intsel Ltd, v. Calabrian Chemicals Corp., 656 F. Supp. 160
(S.D.N.Y. 1987); Masthead Mac Drilling Corp. v. Fleck, 549 F. Supp. 854
(S.D.N.Y. 1982); Miserocchi v. Peavey Int'l Inc., 78 Civ. 1571 (S.D.N.Y.
1978) (arbitrators' company's undisclosed receipt of $40,000 in commissions
is a basis for finding bias); a family relationship between an arbitrator and one
of the parties, one of the parties' principals, or a witness can sustain a finding
of bias: Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 (7th Cir. 1983).
(39))
Tribunal Fédéral Suisse, Cour civile (9 February 1998) ASA Bulletin (1998),
16(3), 646.
(40))
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(40))
See Consolidation Coal Co. v. Local 1643, United Mine Workers of America,
48 F.3d 125 (4th Cir. 1995).
(42))
But see the restrictive ICC provision in that matter, Craig, Park, Paulsson, op.
cit., para. 13-05 (v). Lew, Mistelis, Kröll, op. cit., pág. 262.
(44))
Cook Industries, Inc. v. C. Itoh & Co. (America) Inc., 449 F.2d 106 (2nd Cir.
1971) cert. denied, 405 U.S. 921, 92 S. Ct. 957 (1972).
(45))
See Rogers v. Schering Corp., 165 F. Supp. 295 (D.N.J. 1958) (vacating the
award because the arbitrator's firm did business with one party).
(46))
See also Andros Compañía Maritima, S.A. of Kissavos v. Marc Rich & Co.,
A.G., 579 F. 2d 691 (2d Cir. 1978).
(48))
Goodrich v. Hulbert, 123 Mass. 190 (1877). Although this fact was not
communicated to the party against whom the award was made, there was no
evidence that the fact was intentionally concealed.
(49))
LCIA Ref. No. UN3476, cited by Jean Kalicky, “Reflections on the LCIA
Arbitrator Challenge Digests.
(54))
ABA Model Rules, Rule 1.6: “A lawyer shall not reveal information relating to
representation of a client unless the client consents…”
(57))
(58))
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(58))
Parekh Const. Inc. v. Pitt Const. Corp., 577 N.E.2d 632, 31 Mass. App. Ct.
354 (1991).
(64))
See Court v. American Arbitration Ass'n., 795 F. Supp. 970 (N.D. Cal. 1992).
(65))
David A. Lawson, op. cit., pág. 37. Leon Trakman, op. cit., pág. 16.
(66))
Laker Airways Inc. v. FLS Aerospace Limited [1999] 2 Lloyd's Rep. 45.
(68))
In its amicus submission in the case, the Bar Council argued that if
membership in the same chambers created a conflict of interest, then the
public interest would be harmed since public access to a pool of barristers,
particularly in specialists' fields, would be considerably reduced. However, the
decision was criticized as an insular ex parte decision by an England judge
(Rix J. a former barrister) to protect the interests of the English Bar.
(69))
(71))
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(71))
Other judgments against the independence in similar situations exist like Nye
Sainders & Partners v. Alan E. Briston (1987) 37 BLR 92.
(74))
Several authors have stressed the necessity to re-consider this matter, taking
into consideration the changes in the barristers' practices: See, for example,
Gary Born, International Commercial Arbitration, 1520. William W. Park,
“Chapter 9, Arbitrator Integrity”, in Michael Waibel, Asha Kaushal, et al (eds.),
The Backlash against Investment Arbitration. Kluwer Law International, 2010,
Michael W. Buhler and Tom Webster, Handbook of ICC arbitration, 2008,
págs. 7–37.
(75))
In one arbitration in the US, the arbitrator was successfully challenged on the
grounds of partiality for his behaviour during the arbitration because it was
discovered that he had spent two nights in the hotel room of a female lawyer
representing the successful party in the arbitration. Report on the Mission
Insurance case in The Wall Street Journal, 14 February 1990 cited by Lew,
Mistelis, Kröll, op. cit., pág. 264.
(76))
Bernstein v. Gramercy Mills Inc., 452 N.E.2d 231, 16 Mass. App. Ct. 403
(1983).
(77))
Swiss Supreme Court, 9 February 1998, I.S.A. v. V, 16, ASA Bulletin 634,
1998.
(78))
See Johnston v. Security Insurance Corp., 86 Cal. Rptr. 133 (Cal. Ct. App.
1970).
(79))
Positive Software Solutions, Inc. v. New Century Mortgage Corp., 476 F.3d
278 (5th Cir. 2007).
(81))
The California Ethics Standards require the disclosure of the results of each
case.
(84))
Jackson v. Barry Railway, 1893, cited by John Parris, The law and practice
of arbitrations, 1974, pág. 48.
(85))
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(85))
Kimberley v. Dick, 1871, cited by John Parris, op. cit., pág. 48.
(86))
See also the Swiss judgment Hitachi Ltd. v. SMS Schloeman, 30 June 1994,
15 ASA Bulletin 99-107 (1997).
(88))
Wilson v. Dan McCabe's Creative Carpeting Inc., 417 N.E.2d 49, 11 Mass.
App. Ct 956 (1981).
(90))
Doherty v. Phoenix Ins. Co., 112 N.E. 940, 224 Mass. 310 (1916).
(91))
Matter of Andros Compañía Marítima, S.A. of Kissavos v. Marc Rich & Co.,
A.G., 579 F.2d 691 (2d Cir. 1978).
(92))
Cho v. Superior Court, 45 Cal.Rptr.2d 863 (Ct. App. 1995), cited by Carrie
Menkel-Meadow, “Conflicts and mediation practice” in ABA Dispute
Resolution, Spring 1966, pág. 5.
(93))
Mustang Enterprises, Inc. v. Plug-In Storage Systems Inc., 874 F. Supp. 881
(N.D. Ill. 1985). Lew, Mistelis, Kröll, op. cit., pág. 264.
(96))
Metropolitan Property & Casualty Ins. Co. v. J.C. Penney Casualty Ins. Co.,
780 F. Supp. 885 (D. Conn. 1991).
(99))
(100))
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(100))
Employees Ins v. National Union Fire Ins., 933 F.2d 1481 (9th Cir. 1991).
(101))
Arbitration Law of the People's Republic of China, 1994, s. 34, 4, cited by Fali
Nariman, “East meets West: Tradition, Globalization and the Future of
Arbitration”, International Arbitration, vol. 20, 2 November 2004, pág. 135.
(102))
AT&T Corp. v. Saudi Cable Co., [2002] 2 Lloyd's Rep 127. English Court of
Appeal, 15 May 2000.
(103))
However, the editorial of the New York Times (11 March 2012) refers to a
judicial case in which a judge had awarded four oil companies $87.3 million
from the federal government to reimburse them for their costs in cleaning up
hazardous waste and later the judge told the parties that he realised his wife
owned 98 shares of stock in the parent of two of the companies in the lawsuit
and the government filed a motion to require that the judge recused himself
from the case under the Code of Conduct of US Judges.
(104))
Nathalie Voser.
(106))
V.V. Veeder, “The English Arbitration Act 1996: its 10th and Future
Birthdays”, Experts in Commercial Arbitration. Available at
http://www.expertguides.com.
(107))
Michael Hwang, op. cit., pág. 242. Nicholas Geoff and Constantine
Partasides, “LCIA to publish challenge decisions”, June 2006.
(108))
Judith Gill, LCIA's Symposium, Madrid, 3 May 2007, Session A, question 22.
(109))
(112))
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(112))
In the California case Banwait v. Hernández, 252 Cal. Rptr. 647 (Cal. Ct.
App. 1988) the court held that the fact that the neutral arbitrator had hired one
of the parties' law firm to represent him in a lawsuit which generated about
$400 legal fees for the firm did not create an impression of possible bias
“since the services rendered by the firm to the neutral arbitrator were
insignificant”.
(113))
Houston Village Buildings, Inc. v. Falbaum, 105 S.W.3d 28 (Tex. App. 2003).
The arbitrator of a dispute between the home owner and the builder was
required to disclose his representation of the house builders' trade association
of which the builder and its parent company were members. Although they did
not have a direct attorney-client relationship with the builder, because the
arbitrator's representation was personal and ongoing at the time of arbitration,
the relationship created the impression of partiality in favour of the builder.
(114))
See ASM Shipping Ltd. of India v. TTMI Ltd. of England [2005] EWCA Civ
1341.
(115))
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