The growth in international arbitration has been fueled by many factors, including the substantial growth in international trade and commerce, the expertise of the prime international arbitration institutions like the ICC (which Robert Briner has led in such a distinguished manner for so many years), the development of new and wellrooted regional arbitration institutions and the increasing internationalization of the legal profession itself. As the number of international arbitrations has grown, so have the challenges facing those involved in the process. The rapid pace of international business today requires more efficient arbitration processes to speed resolution. The increased complexity and size of disputes requires a larger roster of smart and experienced international arbitrators. And the greater number of parties involved in international arbitration from regions without a long history of such disputes necessitates more attention to the awareness and fairness of standards and procedures at every stage of the case- in procedural matters and in making the final determination. How well the international arbitration community deals with these issues will determine whether international arbitration continues to grow or whether new forms of dispute resolution develop that can better accommodate the needs of business in the twentyfirst century.

All of these factors converge in an area of growing challenges for international arbitration: the appointment of, disclosure by and challenges to arbitrators. Issues of conflict of interest have become more and more important in international arbitration. The complex structure of multinational corporations and the globalization of international law firms have made less clear whether certain situations may or may not be a conflict of interest. The entry of new parties and new arbitrators has led to even greater disparities in disclosures made by arbitrators and responses to such disclosures. As the stakes grow in these disputes, so does the importance of proper resolution of these issues. [Page191:]

The debate surrounding these issues has been heightened by the recent adoption by the International Bar Association of the IBA Guidelines on Conflicts of Interest in International Arbitration (the 'Guidelines'). These Guidelines were adopted by the Council of the IBA on 22 May 2004 after a twoyear study by a Working Group of nineteen experts in international arbitration from fourteen different countries. These experts reviewed the national laws and jurisprudence in all fourteen of their jurisdictions, which include all of the major international centres. They also considered the practices of arbitrators and arbitration institutions. The Working Group decided, from the outset, 'to consider the usefulness of existing standards by which the impartiality and independence of arbitrators were assessed and also to formulate new standards for situations that had not previously been addressed'. 1The Group found that 'even though laws and arbitration rules provide some standards', 2 there is a lack of detail both 'in their guidance and of uniformity in their application'. 3

In order to provide more guidance on these issues to the international arbitration community, the Working Group drafted the Guidelines. Several drafts of the Guidelines were made public, at IBA annual conferences and otherwise, for public discussion and comment. In particular, the Working Group sought and considered the views of major arbitration institutions, and their views were carefully incorporated into the final Guidelines.

As a result of these discussions, the Working Group decided that the Guidelines should have two parts. In the first part, General Standards regarding impartiality, independence and disclosure are set out. As will be described below, these General Standards reflect international law and norms and provide broad guidance. However, the Working Group decided that simply restating these principles was not sufficient to deal with the growing complexity of these problems. Therefore, in order to make the Guidelines more useful and to reduce the uncertainty and inconsistency in the application of the General Standards in disclosure and disqualification situations, the Working Group developed three nonexhaustive lists of specific situations. The lists were categorized as Red, Orange and Green, which respectively indicate situations that do represent a conflict of interest, situations that may be a conflict depending upon the specific[Page192:]

circumstances and therefore require at least disclosure by the potential arbitrator, and situations that, from any relevant objective point of view, cannot be considered to be a potential conflict of interest and therefore do not require disclosure. As described more fully below, the IBA hopes and expects that these lists will assist the international arbitration community in achieving greater fairness and uniformity of practice with respect to disclosure and disqualification.

This paper considers the internationally accepted standards for independence and impartiality, the current inconsistency in application of these standards, and potential solutions, including the Guidelines, to the current problems in this area.

1. Independence and impartiality

The Guidelines begin with an internationally accepted principle: 'Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated.' 4This standard derives from Article 12(2) of the UNCITRAL Model Law on International Commercial Arbitration, and it is reflected in the rules of virtually all major international arbitration institutions and ad hoc arbitration rules.

As with judges, the first qualification of an arbitrator must be his or her ability to make independent and impartial decisions. Absent that core ability, a person cannot be deemed fit for appointment as arbitrator. In fact, arbitrators-again, like judges-must not only be impartial, but must also clearly appear to be impartial.

It is true that independence and impartiality are both distinct and related concepts. The independence of arbitrators is the foundation of their duty to be impartial. Only an independent arbitrator is able to render an award impartially. Impartiality is a 'status or relationship resting on objective conditions or guarantees, as well as a state of mind or attitude' in the exercise of the arbitration duties. 5 The word impartiality connotes, it has been said, 'absence of bias, actual or perceived' 6 It also implies that arbitrators, like judges, 'must not[Page193:]

harbour preconceptions about the specific matter put before them, and must not act in ways that promote the interest of one of the parties'. 7 Impartiality is therefore not only a matter of perception; it is also the actual absence of bias and the need to avoid any kind of prejudgment. Both concepts are, however, essential to project public confidence and command respect in the operation of the different international arbitration mechanisms available in today's world.

Impartiality is directly concerned with the issues of conflicts of interest-in other words, with the possibility of divided loyalties, influences, pressures, or interference related to the arbitrator's duties. There is a conflict of interest when an arbitrator's selfinterest may interfere with his or her central duty of impartial adjudication. 8

The requirement of impartiality is not only an essential aspect of the process leading towards a fair adjudication, but it is also a well established principle in international law. In fact, this specific requirement is contained in Article 14(1) of the International Covenant on Civil and Political Rights; in Article 7(1) of the African Charter on Human and Peoples' Rights; in Article 8(1) of the American Convention on Human Rights; and in Article 6(1) of the European Convention on Human Rights. Thus, these principles may be considered universal. While it is disputed whether or not these particular conventions apply to arbitration tribunals, since such tribunals are not established by law, their standards are generally the same as those recognized as applying to arbitrators, such as the Guidelines General Standard 1. The requirement of guaranteeing impartiality and independence is probably central in most jurisdictions when determining whether in any proceeding-judicial or arbitral-'due process' has been respected.

The European Court of Human Rights has consistently ruled that the notion of impartiality includes two different requirements. One is of a subjective nature, requiring the absence of prejudice and bias. Another is instead of an objective nature, which means that there must be no doubts as to the impartiality of judges. In this connection, even appearances are important since they may inspire distrust in the parties or the public. 9[Page194:]

2. Application of these principles

While there is widespread agreement about these fundamental principles of international arbitration, problems arise because of their inconsistent application. The Guidelines General Standard 1 appears in the UNCITRAL Model Law and in many arbitration rules, but these provisions do not define further what is meant by independent and impartial. Nor do they define the circumstances that require disclosure except in the most general terms. For example, the ICC Rules of Arbitration provide:

Every arbitrator must be and remain independent of the parties involved in the arbitration. . . . Before appointment or confirmation, a prospectivearbitrator shall sign a statement of independence and disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator's independence in the eyes of the parties. 10

Similarly, the rules of the AAA International Center for Dispute Resolution

state:

Arbitrators acting under these rules shall be impartial and independent.

Prior to accepting appointment, a prospective arbitrator shall disclose to

the administrator any circumstance likely to give rise to justifiable doubts

as to the arbitrator's impartiality or independence. 11

The LCIA Rules, for their part, provide as follows:

All arbitrators conducting an arbitration under these Rules shall be and remain at all times impartial and independent of the parties. . . . Beforeappointment by the LCIA Court, each arbitrator . . . shall sign a declaration to the effect that there are no circumstances known to him likely to give rise to any justified doubts as to his impartiality or independence, other than any circumstances disclosed by him in the declaration. 12

There can be no genuine dispute that individual arbitrators apply very different standards to determine what circumstances need to be disclosed and in how much detail. Disclosure also varies depending upon national custom and national law. Situations that may be potentially disclosable in one country are sometimes considered to be benign in another culture and therefore not disclosable. 13[Page195:]

Examples of inconsistency in disclosure abound. Within the IBA's Working Group alone, discussions presented many situations in which those nineteen individuals made different decisions. Arbitrators may make different decisions as to whether or not they must reveal that their law firm was adverse to one of the parties to the arbitration in a current or recent matter. Some believe that because being adverse does not provide access to confidential information or raise possibilities of favouritism, no disclosure need be made, while others feel that the fact that a law firm was adverse to one of the parties could potentially be seen to influence an arbitrator's judgment. Similarly, arbitrators differ on whether or not they must disclose that a party or law firm had appointed him or her in the past and, if so, how many such appointments would trigger such disclosure. Members of the Working Group also differed in their practice with respect to affiliates of parties: while some felt that any corporate relationship had to be disclosed, others believed that more distant relationships, particularly involving unrelated matters, need not be disclosed.

Moreover, arbitration institutions vary in their approach as to such disclosures. Each institution must make its own determination as to whether or not a particular situation that has been disclosed warrants a disqualification or a decision by that institution not to name that individual as a sole arbitrator or chairman of a tribunal. Most international arbitration institutions do not state their reasons for any decision on a challenge, and none at the moment make public such determinations. Indeed, institutions' decisions whether or not to name an individual are usually made administratively, without a need for reasons.

This inconsistency causes disruption in the international arbitration system. When institutions encourage potential arbitrators to disclose 'everything' that may be of interest to the parties, they do not provide a standard for arbitrators to apply. Arbitrators may not disclose enough, or they may disclose situations that no reasonable person could believe would constitute a conflict of interest. When that occurs, an opposing party may use a disclosed situation as an opportunity to challenge the independence and impartiality of that arbitrator, in order to deny the other party its choice or to avoid an arbitrator legitimately chosen as the best arbitrator for the case by an institution. When such a disclosure and challenge occur at the beginning of the case, many institutions have publicly stated that it is their practice to remove or not appoint the arbitrator if that arbitrator does not withdraw voluntarily. [Page196:]

As a recent example, in a case in which one of the authors was involved, a sole arbitrator appointed by an institution disclosed, after a procedural hearing had already been scheduled, that his law firm had been hired to represent a party negotiating a political risk insurance policy with one of the parties to the arbitration. The arbitrator was not to be involved in these negotiations, and he stated that he did not view the situation as a conflict but mentioned it out of an abundance of caution. The other side challenged the arbitrator on the ground that the arbitrator might rule for the political risk insurer in order to make the insurer more likely to grant his firm's client's application for insurance. Any person with a minimum knowledge of insurance risk underwriting would know that could not happen, but the institution nevertheless removed the arbitrator.

Situations of overdisclosure leading to unnecessary challenges cause several problems for international arbitration. They delay the ultimate resolution of the case. More importantly, they may deny a party the arbitrator of its choice. Frequently, parties have chosen international arbitration because of the ability to name one of the arbitrators, but in these situations the other side may deny a party that right.

Institutions' willingness to remove or not name sole arbitrators or chairmen who do not have clean disclosure at the beginning of the case can also lead to underdisclosure. An arbitrator who wants to be appointed may fail to mention something that can be of consequence to one of the parties in order to have a clean disclosure.

3. Solutions to the problems of inconsistency

A. The IBA Guidelines

Because of these problems and concerns, the IBA Working Group proposed, and in May 2004 the IBA approved, the Guidelines. Just as the IBA Rules of Evidence in International Arbitration, published in 1999, has very successfully filled a void in arbitration rules by offering a set of procedures that parties and arbitrators can use or adapt in their proceedings, it is hoped that the IBA Guidelines will similarly assist parties and arbitrators where there are no other published standards.

As noted above, the Guidelines seek to assist the international arbitration community by providing more guidance than exists anywhere else. The Guidelines do so by categorizing particular situations into the Red, Orange and Green[Page197:] lists. As the Guidelines note: 'These lists obviously cannot contain every situation, but they provide guidance in many circumstances, and the Working Group has sought to make them as comprehensive as possible.' 14 circumstances will control, and the Guidelines express a hope that they 'will be applied with robust common sense and without pedantic and unduly formalistic interpretation'. 15

It cannot be our purpose here to analyze each of the situations appearing in the Application Lists. Some examples, however, can be illustrative. The Red List contains situations that would universally be viewed as creating a conflict of interest, such as the arbitrator having a significant financial interest in the outcome of the case (¶ 1.3) or the arbitrator currently representing or being a director of one of the parties (¶¶ 2.3.1, 2.3.4). Some of these situations-where the arbitrator would be acting as a judge of his or her own case-are considered nonwaivable, while the remaining situations may be waived by the parties with explicit disclosure and a clear acknowledgment and waiver.

The Orange List contains situations that may give rise to justifiable doubts as to the arbitrator's impartiality or independence, although the determination of whether or not in fact a conflict of interest exists will depend upon the particular circumstances of the case. It is worth noting, as did the authors of the Guidelines, that disclosure does not mean that the arbitrator believes that a conflict exists or that one does in fact exist. Examples of such situations are:

- The arbitrator has within the past three years served as counsel for one of the parties. (¶ 3.1.1)

- A law firm that shares revenues or fees with the arbitrator's law firm renders services to one of the parties. (¶ 3.2.2)

- The arbitrator has within the past three years been a partner of, or otherwise affiliated with, another arbitrator or any of the counsel. (¶ 3.3.3)

- A close personal friendship exists between an arbitrator and a counsel for one of the parties, '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'. (¶ 3.3.6) [Page198:]

- The arbitrator's law firm is currently acting adverse to one of the parties. (¶ 3.4.1)

- The arbitrator has publicly advocated a specific position regarding the case that is being arbitrated (¶ 3.5.2).

Finally, the Guidelines also include a Green List, which includes situations that, despite the subjective standard for disclosure stated in the Guidelines, need not be disclosed because no reasonable person could believe that a conflict of interest would exist in the circumstance: for example, the arbitrator's law firm has previously acted against one of the parties in an unrelated matter without the involvement of the arbitrator (¶ 4.2.1), or the arbitrator has a relationship with another arbitrator or with counsel through membership of the same professional association or social organization (¶ 4.4.1).

The use of these lists has generated considerable controversy. Institutions and others have criticized the Guidelines as seeking to limit disclosure. The Guidelines do not, however, seek to promote or to restrict disclosure, but to provide useful guidance. Institutions cannot merely announce that arbitrators should disclose everything that is relevant to the consideration of the parties, because arbitrators necessarily must engage themselves in some linedrawing about what to disclose or not to disclose. It is not sufficient to state, as did an official of a leading arbitration institution at a recent conference, that if one does not meet the numerical standard in one of the Orange List items, an arbitrator is not 'off the hook.' If not this standard, then what standard should the arbitrator apply?

For example, it should be clear that an arbitrator would not need to disclose that twenty years ago one of the lawyers in the case appointed the arbitrator to serve as an arbitrator in an unrelated matter or that the arbitrator and counsel once attended the same IBA programme. At the same time, it should also be clear that an arbitrator should disclose that the same lawyer has appointed him or her to serve as an arbitrator in ten different matters in the past year, or that they regularly vacation together. When situations arise between these two extremes, as they usually do, arbitrators must determine on which side of the disclosure line the situation falls. The fact is that institutional rules do not provide any guidance about this linedrawing, but the IBA Guidelines do provide some standards against which one can measure disclosure. It may or may not be appropriate to set the line, for example, at disclosure of having been appointed[Page199:] as an arbitrator on two or more previous occasions within the past three years by one of the parties, or three appointments within the same time period by the same law firm, but the IBA reasonably believed that these criteria were an appropriate starting point for making a disclosure determination.

Use of the Guidelines should create more uniformity in disclosure and, one hopes, treatment by parties and institutions of such disclosure. If so, they will provide a significant benefit to the international arbitration community. Moreover, the IBAArbitration Committee has established a new working group that will liaise with institutions and gather information from arbitrators and parties about how the Guidelines are being used and whether or not the specific provisions of the Guidelines are appropriate. The Arbitration Committee plans to review this information in approximately two years to consider whether or not the Guidelines have been beneficial and whether they should be revised or supplemented.

B. Publication of challenged decisions

When an arbitrator's independence or impartiality is challenged, institutions deal with the challenge in different ways. The LCIA and the CPR Institute for Dispute Resolution appoint members of the LCIA Court or a standing CPR body, respectively, to determine the challenge. On the other hand, the ICC International Court of Arbitration and the AAA each make the challenge determinations administratively. The LCIA and CPR decisions are written; no written decision is made by the ICC Court or the AAA.

The LCIA now plans to publish these challenge decisions, in a redacted form to protect the identities of the parties and the arbitrators involved. The CPR is considering doing the same for its written decisions. Such written decisions made available to the public would be enormously helpful in providing guidance to arbitrators and parties as to when a conflict of interest may or may not exist. As with the IBA Guidelines, such publication would promote greater uniformity in the application of the general standards promulgated by all the institutions and underlying national law in this area. When institutions keep their reasoning to themselves, in the guise of maintaining administrative flexibility, confusion remains about the appropriateness of when disclosure needs to be made and how it will be treated. The authors hope that other institutions will review the LCIA model of publishing such decisions as it moves forward and determine whether the international arbitration community would be better served by more publication of these institutional decisions. Moreover, publication will[Page200:] promote uniformity in standards being applied and, because they will be subject to publication, perhaps require greater analysis of the particular facts of each situation being reviewed to determine whether the challenge is justified.

Conclusion

Conflicts of interest will continue to be faced by arbitration institutions, arbitrators, lawyers and parties, and each case may bring new and previously unexplored issues. Resolution of these issues is important, so that parties can receive a fair hearing from an independent and impartial tribunal. At the same time, parties' rights to select arbitrators and to have efficient hearings that are not burdened by inappropriate controversies will also need to be protected.

The best means to protect the international arbitration process is to have greater clarity regarding issues that may lead to disclosure or disqualification. Leaving parties, arbitrators and institutions to make decisions on an ad hoc basis will only continue to cause uncertainty, inefficiency and ultimately less faith in the process. The guidance that is provided by the IBA Guidelines and potential publication of decisions made by institutions about challenges should help achieve greater clarity and avoid uncertainty in the future. [Page201:]

1
See O.L.O. de Witt Wijnen, N. Voser & N. Rao, 'Background Information on the IBA Guidelines on Conflicts of Interest in International Arbitration'Business Law International, vol. 5, no. 3 (September 2004) 433.

2
Guidelines, Introduction, para. 2.

3
Ibid., para. 3.

4
Guidelines, Part I, General Standard 1.

5
Guidelines, Introduction, para. 7.

6
Ibid., para. 2.

7
See Valente v. The Queen (1985), 2 S.C.R. at 689 (Canada) and Human Rights in the Administration of Justice: a Manual for Judges, Prosecutors and Lawyers, United Nations, Professional Training Series No. 9, Office of the High Commissioner for Human Rights in cooperation with the International Bar Association, 2003, 119.

8
Statement by J. Le Dain in Valente v. The Queen, supra note 7 at 685. Also cited in Canadian Judicial Council, Ethical Principles for Judges (1998) at 30.

9
UN GAOR, UN Doc. A/48/40, Vol. II, p. 120, para. 7.2.10ICC Rules of Arbitration, Art. 7(1), 7(2).11International Centre for Dispute Resolution, International Arbitration Rules, Art. 7(1).12LCIA Rules, Art. 5.2, 5.3.

13
For an example of a jurisdiction that imposes extreme standards of disclosure, see California's recently promulgated rules, Cal. Rules of Court, Division VI, adopted pursuant to Cal. Code of Civil Procedure, s. 1281.85. These rules exceed what is generally expected elsewhere in the United States.

14
Guidelines, Part II, para. 1.

15
Guidelines, Introduction, para. 6.