Singleton Urquhart Reynolds Vogel LLP
Canada / April 8 2024
Introduction
As arbitration practitioners will appreciate, the International Bar Association’s (the “IBA Guidelines”)[1] are widely considered to be the authoritative resource on conflicts of interests for arbitrators; as such, they are a topic of particular interest. The IBA Guidelines were initially published in 2004, and were revised in 2014. Given the passage of another ten years, the IBA Guidelines were therefore ripe for further revision. Arbitration has continued to grow as a preferred mechanism for dispute resolution and the law on conflicts of interest has continued to evolve, such that those participating in arbitration will wish to ensure that the most recent changes are adhered to.
The IBA Guidelines are used by legal professionals across common law and civil law jurisdictions, and have been recognized as persuasive authority in Canadian courts.[2] As noted in the foreword in the IBA Guidelines, they are “recognised as a solid soft law instrument reflecting standards expected to apply to impartiality and independence of arbitrators, as well as disclosures in specific circumstances.”[3] While the IBA Guidelines do not override any applicable legislation or rules chosen by parties, they can be used as general guidance for practitioners and can be binding by agreement by the parties.
The IBA Guidelines are comprised of two parts. Part I set outs the “General Standards” regarding impartiality, independence and disclosure, along with accompanying explanatory notes on those standards. Part II provides three different non-exhaustive lists of situations that may occur in arbitration. The lists are broken down into Red, Orange, and Green, and are commonly known as the Traffic Light system (i.e. red means stop, orange means caution, and green means go).
While the recently revised IBA Guidelines (the “2024 Guidelines”) offer relatively modest amendments to both Part I and Part II, below we highlight some of the key changes and consider their implications.
Part I Changes
Changes were made to the following Sections in Part I:
(3) Disclosure by the Arbitrator
The 2024 Guidelines now expressly provide that “in determining whether facts or circumstances should be disclosed, an arbitrator should take into account all facts and circumstances known to the arbitrator.”[4] While similar language was in the explanatory notes in the 2014 version, this has now become an express obligation of the arbitrator.
Another critical change in the 2024 Guidelines is with respect to professional secrecy rules affecting an arbitrator’s duty to disclose. The 2024 Guidelines now provide that if an arbitrator must make disclosure, but is prevented from doing so by professional secrecy rules or other rules of practice or professional conduct that preclude disclosure, the arbitrator should reject the appointment or resign.[5]
Lastly, the 2024 Guidelines have clarified that a failure to disclose when required does not automatically result in a conflict of interest. In particular, the new rule provides that an “arbitrator’s failure to disclose certain facts and circumstances that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence, does not necessarily mean that a conflict of interest exists, or that a disqualification should ensue.”[6]
(4) Waiver by the Parties
The 2024 Guidelines have introduced a new rule which incentivizes parties to conduct investigations into any potential conflicts of interest. The 2024 Guidelines provide that a party is deemed to have learned of any facts or circumstances that could constitute a potential conflict of interest for an arbitrator that a “reasonable enquiry” would have yielded if conducted at the outset or during the proceedings.[7]
(5) Relationships
In general, the recent amendments have broadened the relationship considerations throughout the 2024 Guidelines with respect to the arbitrator’s employment. For example, the term “or employer” has been added throughout the 2024 Guidelines when a rule makes reference to an arbitrator’s law firm (i.e. the Guidelines no longer assume that employment related conflicts of interest only arise via employment at a law firm). In addition, the 2024 Guidelines provide a modern description of the concept of a “law firm” to account for the evolution in the structure of legal practices.[8]
The 2024 Guidelines have also created a new general rule that “[a]ny legal entity or natural person over which a party has a controlling influence may be considered to bear the identity of such party.”[9]
(6) Duty of the Parties
The 2024 Guidelines have amended the list of relationships that a party must disclose to the arbitrator so as to include any relationship between the arbitrator and “a person or entity over which a party has a controlling influence”,[10] and a party must disclose any relationship between the arbitrator and “any other person or entity it believes an arbitrator should take into consideration when making disclosures”.[11] This accordingly encompasses a very broad scope of potential relationships, although it does not extend as far as relationships that the parties ought to have known about, thus refraining from introducing a more challenging (and fraught) standard for parties to meet.
A new accompanying explanatory note to Section (7) also provides that the parties are required to explain the persons’ and entities relationship to the dispute “[w]hen providing the list of persons or entities the parties believe an arbitrator should take into consideration when making disclosures”.[12]
Part II Changes
In Part II, the Red Lists (both Waivable and Non-Waivable) did not undergo any significant substantive change. Notably, though, the 2024 Guidelines for the Red List have clarified that an “affiliate” also includes “an individual having a controlling influence on the party in the arbitration, and/or any person or entity over which a party has a controlling influence”.
The majority of the substantial changes in the 2024 Guidelines in Part II were to the Orange List. As readers will appreciate, the Orange List is a “non-exhaustive list of specific situations that, depending on the facts of a given case, may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence.”[13]
The following situations were added to the Orange List:
- The arbitrator has, within the last three years, been appointed to assist in mock-trials or hearing preparations on either (1) two or more occasions by one of the parties on an unrelated matter[14] or (2) more than three occasions by the same counsel, or the same law firm.[15]
- The arbitrator serves or has served as counsel in another arbitration on a related issue or matter involving one of the parties, or an affiliate of one of the parties.[16]
- The arbitrator currently serves as an expert for one of the parties in an unrelated matter or has, within the past three years, acted as an expert for one of the parties in an unrelated matter[17] or has been appointed as an expert on more than three occasions by the same counsel, or the same law firm.[18]
- An arbitrator and counsel for one of the parties or an arbitrator and their fellow arbitrator(s) currently serve together as arbitrators in another arbitration.[19]
- The arbitrator has been associated with an expert in a professional capacity, such as a former employee or partner,[20] or is currently instructing an expert appearing in the arbitration proceedings for another matter where the arbitrator acts as counsel.[21]
- The arbitrator has publicly advocated a position on the case through social media or on-line professional networking platforms.[22]
The Green List only had one notable change, which was the addition of the following situation: “The arbitrator, when acting as arbitrator in another matter, heard testimony from an expert appearing in the current proceedings.”[23]
Conclusion
Although the overall changes to the IBA Guidelines are modest, the Orange List will of course be the subject of particular interest given the more extensive additions to it. In that regard, the additions reflect a number of circumstances that are not uncommon in the construction context, insofar as it is a relatively small bar both domestically and internationally such that the repeat appointments of arbitrators and experts is not uncommon. In the international context, it is not uncommon for counsel to act as arbitrators or legal expert witnesses in other matters, such that there is a heightened possibility of the new Orange List categories being engaged.
It is possible that the recent amendments to the IBA Guidelines may have a larger impact on the construction industry than others, given the nature and use of construction arbitrators and the pool of arbitrators to draw from. Given recent case law in Ontario finding that the IBA Guidelines are of persuasive value, even where the parties have not agreed they are applicable to their arbitration,[24] and given the degree of uncertainty as to what will qualify as a reasonable apprehension of bias in the arbitration context,[25] legal practitioners of the construction bar should therefore be particularly conscious of the IBA Guidelines irrespective of whether or not the construction contract specifies that the IBA Guidelines are binding.
