Introduction1

1. A few months ago, I had a preparatory conference in an international commercial arbitration. One of the co-arbitrators was suddenly prevented from flying in because of a strike by his national airline. We were able to postpone the hearing until the next day when he was able to make it to the venue. How? He called the party that had appointed him, which was from the same country and had the same problem. That party had meanwhile chartered a private plane and offered 'their' arbitrator a place-at no cost, as far as I know. He accepted and we were able to have a successful conference. Question: Was this arbitrator entitled to call the party that appointed him? Was it possible for that party to offer him a seat on the plane? Should he have accepted?

2. This situation is one of the many that are not, in so many words, covered by the IBA Guidelines on Conflicts of Interest in International Arbitration ('the Guidelines') 2 or any of the lists attached thereto ('the Lists'). Is that bad? Is that proof that the Guidelines have failed in attempting to chart what is acceptable and what is not with regard to conflicts of interest? My answer is no. It has never been the purpose of the Guidelines and the Lists to cover any and all sorts of situations of (potential) conflicts that can occur. For the obvious and simple reason that it is impossible to even try and envisage-let alone list-the innumerable conflict situations that can occur in actual practice. This was acknowledged by the IBA Working Group that prepared the Guidelines in its Introduction to the Guidelines. 3

Have the Guidelines worked?

3. Apart from this, what can one say about the Guidelines? Have they worked? Have they failed? One could say: it is too early in the day to even try to come to any conclusion after only three years. And the moment when one can draw concrete, real, useful and valid conclusions may lie in a distant future-if ever. [Page107:]

4. After the promulgation of the Guidelines, Committee D of the IBA Section on Business Law instituted a working group to monitor the use of the Guidelines. In its first report, made to Committee D at its 2006 meeting, Judith Gill, chair of the monitoring sub-committee, concluded, on the basis of reports that she had received from a great number of countries, that the reach of the Guidelines had not been as wide as might have been accepted or hoped, but that the beginning was nevertheless encouraging. The Guidelines were in use, to varying degrees, in seven important jurisdictions in Western Europe and in the United Kingdom, USA. and Canada. There was less use in jurisdictions elsewhere in the world but, as an example, the Arbitrators and Mediators Institute of New Zealand adopted the Guidelines for use when acting as appointing authority and CIETAC and the Beijing Arbitration Commission apparently considered the Guidelines when preparing their own ethical rules but found them too detailed and in part irrelevant to arbitration in China.

5. As far as I have been able to ascertain, there has unfortunately been no subsequent update of this report. But I believe that it is common knowledge that lawyers and arbitrators all over the world do consult the Guidelines. Since the time that they were promulgated, I have been called many times by lawyers and arbitrators on questions regarding conflicts. I know that many of my colleagues in the Working Group have had the same experience. The Guidelines are often referred to in discussions and disputes, as has been confirmed by Geoff Nicholas and Constantine Partasides: the Guidelines 'are now being referred to widely by parties challenging arbitrators, parties opposing the challenge to arbitrators and institutions that are deciding those challenges'. 4

6. In many situations that I discussed, the conclusion was that the Guidelines did not precisely cover the facts of the case. But also that, per analogiam to situations that were listed, a conclusion could be reached as to what should be considered the right thing to do in those cases. I consider this to be extremely important. And I commend the members of my Working Group on the Guidelines, and in particular those who served on the two task forces that tackled two of the most delicate and complex problems with which we were confronted, 5 for their foresight in thinking of and listing situations that indeed appear to be a guidance in the real world of conflicts. The situation mentioned at the beginning of this contribution is an exception where I was unable to find an analogy with any of the situations mentioned in either of the Red Lists or in the Orange or Green Lists.

What more is needed to make the Guidelines work? The role of institutions

7. One of the issues that was of concern to the Working Group was the lack of transparency in challenge 'jurisprudence'. Rulings on challenges by State courts are reasoned and published. This was not the case with such decisions by arbitration institutions, which leads to anomalies of the kind referred to below, 6 where there was almost simultaneously a fully reasoned decision by a State court and a non-reasoned decision by the appointing authority in the same case. The Working Group has on[Page108:] various occasions expressed the wish that arbitration institutions start reasoning and publishing their rulings as well.

8. In what has been referred to as a landmark decision, the Court and the Board of the LCIA decided in 2006 that the LCIA's rulings on challenges to arbitrators would be published. It would appear from the official publication announcing this move7 that the promulgation of the IBA Guidelines had a part to play. This is, in any event, a major step forward.

9. As far as I am aware, the LCIA is unfortunately the only major international body that has taken this step. 8 It should be the hope of the whole international arbitration community that others will follow. For the ICC Court that may be difficult, as long as the decisions on challenges are taken by the full Court. But why not delegate the decision on a challenge to a small committee, as the LCIA does? If this system can work at the LCIA, why not at ICC? And if the system of the 'comité restreint' can work for the scrutiny of awards, why not for decisions on challenges? In any event, the argument that it may be difficult to write comprehensive (reasoned) decisions taken by a forum as big as the ICC Court, and therefore to publish those decisions, does not seem to apply to other important bodies where such decisions are made by a smaller group of persons. 9

10 There is no doubt in my mind that there is a need for reasoned and published decisions, not only in the abstract and/or for theoretical interest. It is also highly important in actual practice. That was confirmed to me recently when I learned that parties to a challenge procedure before the ICC Court decided to transfer this procedure to the LCIA because they wanted to have a reasoned decision. 10

11. There is another important argument for reasoned and published decisions. A representative of one of the major institutions mentioned to me that the Guidelines and the Lists may be of help to arbitrators for purposes of disclosure, but not to the institutions when they have to rule on a challenge. I can understand this. But the Lists could be of great(er) help, also for the institutions, if their case law were published. As Nicholas and Partasides wrote, the LCIA decisions that they studied provide a rich source of understanding for parties, practitioners and arbitrators. 11 So, although the criticism that the Guidelines offer little help to institutions may in itself be understandable, it is precisely up to the institutions themselves to remedy this more than anybody else.

12. Of course, even if there were more transparency in this regard, situations are bound to occur that do not exactly match those covered in previously published and reasoned decisions. But there would be more guidance available, even where a precedent does not furnish an absolute match. And the greater transparency could be relevant to certain[Page109:] general questions, such as the borderline between a proper approach to the subjective and objective tests for arbitrator independence/impartiality. 12

The Guidelines, national law and the State courts

13. One of the criticisms made of the various drafts of the Guidelines was that they might present a potential danger, as they could conflict with applicable national laws. 13 In the first three years of the Guidelines' existence, I have seen no report of a national court finding that there was such a conflict.

14. Until recently, I was not aware of any State court judgement that referred to the Guidelines. In the case decided by The Hague District Court on 18 October 2004, where it was ruled that an arbitrator in an investment dispute could not at the same time act as advocate in another investment case where the same (principal) issues were at stake, the Guidelines were part of the debate between the parties but not of the court's decision. 14

15. Recently however, a decision of a US Court of Appeal was brought to my attention, which I consider to be of great importance. 15 In that case, the question was whether an arbitrator had constructive knowledge of a (potential) conflict of interest which was important enough to be disclosed. On the facts of this case, the lower courts and the appellate court answered this question affirmatively and vacated the arbitrator's award.

16. In coming to this conclusion, the appellate court explicitly took into consideration General Standard 7 (c) of the Guidelines and the AAA/ABA Code of Ethics. It noted, after referring to the rules of the arbitration institution that was involved and the relevant Californian statute, 'Canon I (C) of the American Arbitration Association and American Bar Association Code of Ethics for Arbitrators in Commercial Disputes (2004) states that "[a]fter accepting appointment and while serving as an arbitrator, a person should avoid entering into any business, professional, or personal relationship, or acquiring any financial or personal interest, which is likely to affect impartiality or which might reasonably create the appearance of partiality." Canon II(B) of the Code also provides that arbitrators have an ongoing duty to "make a reasonable effort to inform themselves of any interests or relationships" subject to disclosure. General Standard 7(c) of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (2004) states that "[a]n arbitrator is under a duty to make reasonable enquiries to investigate any potential conflict of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned." The standard continues: "Failure to disclose a potential conflict is not excused by lack of knowledge if the arbitrator makes no reasonable attempt to investigate."' [Page110:]

The court continued: 'Although these sources are not binding authority and do not have the force of law, when considered along with an attorney's traditional duty to avoid conflicts of interest, they reinforce our holding in Schmitz that "a reasonable impression of partiality can form when an actual conflict of interest exists and the lawyer has constructive knowledge of it. That the lawyer forgot to run a conflict check . . . is not an excuse."'

17. Interestingly, and importantly, the Court continued further: 'See also Commonwealth Coatings, 393 U.S. at 149 (treating the AAA rules as persuasive authority)' (my emphasis). 'Persuasive authority', also for State courts: this is precisely what was hoped when the Guidelines were drafted16 and promulgated.

Other developments

18. Another development that is of interest is the decision by the International Council of Arbitration for Sport (ICAS), published in October 2006, concerning the representation of parties before the CAS by CAS members. The ICAS noted that it had been carefully considering the steady increase in the number of counsel mandates performed by CAS members before the CAS. Even if this issue had been unsuccessfully raised in appeals filed by dissatisfied parties with the Swiss Federal Court, the ICAS considered that the current situation might create an appearance of imbalance where, of two parties appearing before a CAS panel, one party is assisted by a counsel who is a CAS member and the other party is assisted by a counsel who is not a CAS member. Therefore, the ICAS expressed the wish that the representation of parties before the CAS shall no longer be performed by active CAS members or by colleagues from their law firms. It therefore strengthened the recommendation made in the 'Memorandum to the CAS Arbitrators' to the effect that a CAS member appointed as arbitrator in a CAS panel shall not act as counsel in another CAS procedure during the same time period. In the appeals procedure, the president of the panel shall be appointed only from among the CAS members who do not or whose law firm does not represent a party before the CAS at the time of such appointment.

In addition, there is a duty to disclose, at the appointment and thereafter, any activity of the arbitrator and/or his firm as counsel. Interestingly, the ICAS added: 'For the time being, the ICAS has decided not to insert a formal provision in the Code of Sports-related Arbitration in order to avoid the creation of a new criterion for the challenge of arbitrators.'17

19. The Guidelines have no such specific provision as this ICAS recommendation. I do not know of any other institution that has taken a similar position (publicly). In the Lists accompanying the Guidelines, the situation covered by this new CAS recommendation is not envisaged. The yardstick in the Lists is narrower: there has to be a certain identity of the parties, their counsel, or the issues involved. 18[Page111:]

Final remarks

20. Where will the Guidelines be in another three years? I am biased of course, but if the developments are as in the past three years-with the LCIA's decision to start publishing its decisions on challenges and a judgment like that of the US Court of Appeals in New Regency Productions-I am also optimistic. In any event, I hope that the worldwide discussions will continue, that experience and observations will continue to be exchanged all the time, and that an efficient system will be established to monitor these developments. [Page112:]

1
I am very grateful to Anne-Marie Whitesell, former Secretary General and now Senior Strategy Advisor to the ICC International Court of Arbitration (ICC Court), Matthieu Reeb, Secretary General of the Court of Arbitration for Sport (CAS), and Adrian Winstanley, Director General of the London Court of International Arbitration (LCIA), for their helpful information on questions that I raised with them.

2
The Guidelines were officially approved by the IBA Council in May 2004 and are available on the website of the International Bar Association (<www.ibanet.org>) under Publications.

3
See Introduction at para. 7.

4
(2007) 23 Arbitration International 1 at 2.

5
One on the arbitrator as member of a law firm and one for the drafting of the Lists.

6
See below at para. 14.

7
LCIA News, vol. 11, issue 2, June 2006.

8
I understand that ICAS-whose decisions on challenges are reasoned-is considering to publish these decisions.

9
Publication of the (reasoned) decisions of the ICC Court would, of course, require an amendment to Article 7(4) of the ICC Rules of Arbitration.

10
The procedure, which involved a State party, was brought under the Rules of ICC as Appointing Authority in UNCITRAL or Other Ad Hoc Arbitration Proceedings.

11
See supra note 4. In a recent message to me, Adrian Winstanley confirmed that it is common knowledge that the LCIA has not formally embraced the IBA Guidelines on Conflicts but that it is clear that these are gaining currency and that the LCIA keeps copies at the Secretariat for reference purposes. It remains the position of the LCIA, however, that each of the (very few) challenges it must decide is analysed in detail by reference to many sources of practice and procedure.

12
See in this respect L. Shore & E. Cabrol, 'A Comment on the IBA Guidelines on Conflicts of Interest: The Fragile Balance between Principles and Illustrations, and the Mystery of the "Subjective Test"' (2004) 15 The American Review of International Arbitration 599.

13
See Background Information to the Guidelines at paras. 1.1 and 1.3.4.

14
I am not sure that this decision was ever published internationally but it was at the time widely discussed in chatboxes and in certain fora.

15
United States Court of Appeals for the Ninth Circuit. New Regency Productions, Inc. a California Corporation v. Nippon Herald Films, Inc., a Japanese Corporation. (No. 05-55224 D.C. no. CV-04-09951-AHM Opinion, September 2007).

16
See Introduction to the Guidelines at para. 6.

17
The relevant formal provisions in the Code are in (the first paragraph of) R33/34 and read as follows: 'Independence and Qualifications of ArbitratorsEvery arbitrator shall be and remain independent of the parties and shall immediately disclose any circumstances likely to affect his independence with respect to any of the parties. . . . ChallengeAn arbitrator may be challenged if the circumstances give rise to legitimate doubts over his independence. The challenge shall be brought within 7 days after the ground for the challenge has become known. . . .'

18
See (waivable) Red List 2.3, Orange List 3.2/3.4 and Green List 4.3/Orange List 3.5.2. See also the Hague Court decision referred to in para. 14 above. That situation, in my view, was per analogiam covered by Green List 4.1/Orange List 3.5.2.