05/6/2024
Impartiality and independence of the judges are principles inherent to the due process of law, whether in arbitration or litigation. In arbitration, these principles are complemented by the duty of disclosure, which obliges arbitrators to disclose facts that may cause justifiable doubts as to their independence and impartiality, under the terms of §1 of art. 14 of the Brazilian Arbitration Act (“Law n. 9.307/1996”).
As these concepts are vague, the players of the arbitral community become responsible for establishing the parameters for their interpretation and application. In this context, the International Bar Association (“IBA”), the main international organization that aims to protect and advance the rule of law through the collaboration of legal practitioners at a global level, has prepared and released the 2024 revision of its Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines”), originally published in 2004.
The IBA Guidelines seek to instruct practitioners and to make the fulfillment of arbitrators’ disclosure duties more comprehensible. To this end, they establish general standards, as well as non-exhaustive lists of situations that may occur in arbitration proceedings, requiring or not disclosure by arbitrators, which are divided into (i) green; (ii) orange; and (iii) red.
The green list addresses situations in which there is no conflict or even the appearance of a conflict of interest, so the arbitrator has no duty to disclose; the orange one describes situations in which, depending on the circumstances of the case, there may be doubts about the arbitrator’s impartiality and independence, which is why disclosure is necessary; and in the third list, the red one, situations are classified into two categories, waivable or non-waivable, in which there is a conflict of interest since there are justifiable doubts regarding the impartiality and independence of the arbitrators, and, only in waivable situations, it is possible for the parties to expressly state their willingness to have such a person acting as arbitrator.
These guidelines are not mandatory but are commonly regarded and have been recognized as a solid law instrument reflecting standards expected to apply.
The most recent update of the IBA Guidelines has not changed the essence of the 2004 Guidelines, but it added new circumstances in the illustrative lists, emphasizing that the examples must be analyzed in the light of the General Principle[1]. Some of the main changes are highlighted below:
- the duties of impartiality and independence remain only until the final award has been rendered, and do not extend during any proceedings to challenge the arbitral award in the courts;
- the arbitrator should not accept the appointment, or should resign if they are prevented from disclosing due to professional secrecy;
- the arbitrator’s failure to disclose a certain fact or circumstance does not necessarily mean that a conflict of interest exists or that a disqualification should ensue;
- the attribution of a “duty to inquire” to the parties, to clarify that a party shall be deemed to have learned of any facts or circumstances that a reasonable inquiry would have yielded if conducted at the outset or during the proceedings;
- the obligation of the parties to inform the arbitrators of the existence of persons or legal entities with which they have a relationship of economic interest.
These guidelines should help with the current discussions on the duty of disclosure of arbitrators and the possibility of challenging the arbitrators’ independence and impartiality, a topic that has instigated debate in the legal community and that impacts the conduct of arbitration proceedings.
L.O. Baptista is available to assist its clients with the best practices in arbitration, both domestic and international, and in the defense of our clients’ interests.
The IBA Guidelines can be found at the following website: IBA guides and reports | International Bar Association (ibanet.org).
[1] According to the IBA Guidelines, these principles are based on the laws and jurisprudence of many jurisdictions and on the understanding and experience of experts in international arbitration.
Co-Authored by: Julia Guimarães Rossetto, Mariana Dias Sallowicz , José Victor Palazzi Zakia, Silvia Rodrigues Pachikoski and Gabriel Rogenfisch Quintans
