International Commercial Arbitration Research Paper

Introduction

The term ‘arbitration’ is defined as an effective mechanism for settling disagreements through a written contract, which is undertaken by the respective parties. The fundamental facets of arbitration are identified as that it is consensual along with a private procedure in nature and identifies ways, through which disputes are settled and hence leads towards the binding determination of rights as well as obligations of the involved parties. Under arbitration mechanism, a dispute or an issue is settled by reaching into a generally agreed solution and by securing an enforceable reward. International commercial arbitration, on the other hand, is viewed as a way to resolve disputes that generate under global commercial contracts. To be precise, it is utilized as a substitute to litigation and is thus primarily regulated by any contractual agreement made by the parties instead of focusing on national procedural or legislation rules. 

The nature of international commercial arbitration can be either “ad hoc” or “institutional” wherein the involved parties state the procedural rules, forums, and the governing laws during the time of undertaking a contract. Under international commercial arbitration, it can be observed that most of the contractual agreements comprise a dispute resolution clause, specifying handling any sort of disagreement within the contracts through arbitration instead of litigation. Institutional arbitration denotes the situation, wherein the involved parties agree to possess an arbitral institution for administering the disputes, being created within the contractual agreements. The laws that are found to be applicable in international commercial arbitration comprise national legislation and international treaties, which are substantive as well as procedural in nature. The International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration, which was published by the International Bar Association, was approved during the year 2014. These guidelines fundamentally reflect the collective knowledge of the arbitration institutions, practitioners and the users over the previous decade. Although not binding in nature, the IBA guidelines offer significant direction to the involved contractual parties, their respective arbitrators, lawyers and arbitral institutions on the issue concerning conflicts of interest. 

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The arbitration users, arbitrators, and the practitioners must remain aware of the main changes being made in the IBA guidelines, as they are often invoked by the involved parties creating challenges in responding well to conflicts of respective situation. These individuals are held liable to review the IBA guidelines in a way so that favorable or positive outcomes are generated to the maximum possible extent. Emphasizing the issue, the research paper intends to determine whether the IBA guidelines on conflicts of interest in international arbitration should be binding in international commercial arbitrations administered by the major arbitral institutions. Various significant aspects including the objectives of the IBA guidelines and changes being made on the same among others will be addressed in this particular research work. 

A Brief Description of the IBA Guidelines on Conflicts of Interest 

The IBA guidelines being published on conflicts of interest have received immense acceptance particularly in the context of global arbitration community since their initial adoption. In general, the chief objectives of the IBA guidelines are identified as promoting a higher level of consistency, thereby evading redundant challenges being faced by the arbitrators. The effectiveness of the IBA guidelines in international commercial arbitrations that are administered by the major arbitral institutions can better be comprehended from its two parts. The initial part provides an understanding of seven general standards and the second part establishes a practical application of the general standards by presenting a situations list that may take place within a contractual agreement. This second part is then segregated into different colors such as red, green and orange that is found to be similar with the colors of a traffic light. Conceptually, the red list details the situations that create acceptable doubts towards neutrality and sovereignty of the arbitrators. On the other hand, the orange list deciphers those particular situations, wherein the arbitrators possess the duty of disclosing such situations in the form of a contract. Finally, the green list represents the conditions, where no real conflict of interest takes place from an objective standpoint. The parties who are involved in a contract follow the IBA guidelines in order to challenge the arbitrators or oppose their individual viewpoints, while adopting major decisions. 

Disagreements associated with conflicts of interest increasingly pose threats and create problems to global arbitration. This is owing to the reason that the arbitrators often remain unsure about the facts to be disclosed and thereby make choices along with adopt decisions based on the similar situation. It can be stated that the arbitrators, users, involved contractual parties and the courts experience complex decisions on what is to be disclosed and the standards that need to be applied. Rising tensions amid the parties concerning disclosure of situations might reasonably raise questions about the self-governing nature or the sole objective of an arbitrator. Thus, in order to ensure that both sovereignty and impartiality of an authority are maintained, there is a necessity to bind the IBA guidelines on conflicts of interest in global commercial arbitrations. These guidelines are not considered as the lawful conditions and thus do not overrule any arbitral regulation or applicable national law being followed by the parties involved in a contract. In terms of results, the IBA guidelines find general acceptance within the community of international arbitration, resulting into maintaining independence, objections, impartiality, and disclosure that remains inherent within an arbitration procedure. These guidelines are also regarded as an opening instead of an end of the arbitration procedure that provides better and concrete guidance to the involved parties. 

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Principal Changes Made to the IBA Guidelines 

Evidence suggests that there are five principal changes, which have been made as per the general standards of the IBA guidelines. These changes typically comprise ‘issue conflicts and double hats’, ‘duty of parties/arbitrators to enquire’, ‘advance waivers’, ‘barrister and law firm issues’ along with ‘third-party funding’. Moreover, change in ‘advance waivers’ can be related to the revisions being made in General Standard 3, which reflects the approach undertaken by the arbitral institutions for the waivers to maintain their impartiality or independence. The changes being made to the IBA guidelines with respect to ‘advance waivers’ can be witnessed in the forms of disclosing information to the arbitrators as well as their lawyers and responding well to a situation of conflicts of interest, it rises. The IBA guidelines do not take into concern maintaining the validity and the effect of advance waivers but clarify the ways, through which the duties of the arbitrators are discharged in an efficient way. This clarification eventually provides a greater understanding of the maintenance of autonomy or fairness of both the waivers and the arbitral institutions. 

Issue conflicts refer to the relationship existing between an arbitrator and the subject matter of a dispute, wherein an arbitrator has expressed a legal opinion previously on an issue, which rose while undertaking a contract. On the other hand, ‘double hats’ signifies the dual practices and the roles performed by the practitioners such as an arbitrator and a counsel. These practices and roles increase the chance of biases along with the issue of asymmetrical information amid the arbitrators due to the expression of distinct legal opinions. The changes being made in issue conflicts and ‘double hats’ under the IBA guidelines can be related to the disclosure specifically listed in General Standard 3. Apart from the changes being made in issue conflicts and double hats, the IBA guidelines revised the duty of the involved parties and the arbitrators to enquire the incidence of any conflicts of interest. It is generally under General Standard 7, wherein the parties were engaged in arbitration and the arbitrators as well perform an ongoing duty of making reasonable enquiries and recognizing the situation of conflicts of interest. Within General Standard 7, it is prescribed that the parties, as well as the arbitrators, are ought to examine any sort of relevant information accessible to them with the objective of satisfying their individual duties of disclosure. In the context of newly revised IBA guidelines, General Standard 7 also postulates that reasonable inquiries, which should be performed despite an arbitrator, are a member of a large or a small business corporation. 

According to the IBA guidelines, there are certain potential reasons, for which the probability of conflicts raises to the maximum possible extent. One of these reasons fundamentally includes the appearance of the arbitrators belonging to this modern day context, which generally performs huge legal practices worldwide regardless of structure, creating potential biases. As clarified by General Standard 6(a), the arbitrators are principally considered to abide by the principles of their respective law firm, considering potential disclosures and conflicting situation of interest. As per this particular standard, the actions conducted by the arbitrator’s law firm and the association existing between an arbitrator and the respective firms must be considered in order to identify the condition of conflicts of interest. Modifications to the IBA guidelines with respect to barrister and law firm issues represented that numerous chambers of the barristers have certainly developed into specialized ones, which are marketed as similar to the law firms composing both arbitrators and arbitration counsel. This complies with the regulations of General Standard 7(b) that imposes a duty on the involved parties to unveil the characteristics of their individual counsel, thereby materializing the arbitration and of any modification being made to the council team. 

The explanatory note relating to General Standard 6(a) elucidates that the chambers of the barristers must not be connected with the law firms and the disclosures can be warranted to determine the associations persisting amid the barristers, counsels and the involved parties with the objective to evade any conflicts of interest situation. Correspondingly, the regulations of General Standard 7(b) clearly portrays that disclosure of a party’s counsel identity should be made ‘at the earliest opportunity’ for the purpose of circumventing late-rising disagreements, which can discriminate the feelings or the intentions of the opposing parties or put the proceedings at stake or danger. One of the principal changes to the IBA guidelines can also be witnessed in the form of a third-party funding, which plays a critical function in addressing issue conflicts to a certain extent. In a particular arbitration, presence or involvement of a third-party funder can comprise a situation or a fact necessitating disclosure. Third-party funders have an important role to play in addressing any situation of conflicts of interest due to their direct monetary interest in the dispute and their probable engagement in conducting the case. 

Explanatory note being associated with General Standard 6 defined third-party funders and insurers as “‘third-party funder’ and ‘insurer’ refers to any person or entity that is contributing funds, or other material support, to the prosecution or defense of the case and that has a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration.” Changes being made to the IBA guidelines with regard to third-party funding establish a link between the arbitrators, the tribunal and the other involved participants, which address any conflicts of interest situation by reflecting the gradual evolution in disclosures. It can hence be inferred that an intermediary shall refuse to accept an appointment of the parties if an arbitration procedure has already been initiated. Moreover, an arbitrator can also decline to perform relevant activities continuously, if he or she has any doubt to comply with the factors of independence and impartiality. In this case, an arbitrator can reject the appointment being made with any of the involved parties, regardless of the proceedings stage. This can hence be considered as the principal changes being made to the IBA guidelines with the intentions of avoiding confusions and encouraging confidence in the overall arbitral procedure. 

Procedures to Administer International Commercial Arbitrations by the Major Arbitral Institutions 

International commercial arbitrations, according to the major arbitral institutions, are considered as an advocacy-oriented attempt, wherein the involved parties i.e. the lawyers, in particular, believe that their individual likelihood to attain success raises proportionally with the experiences and the competencies of the supporters. The procedures to administer international commercial arbitrations by the chief arbitral institutions are identified to depend largely on detailed written advocacy instead of oral presentations at hearings. In this context, it can be observed that the lawyers often prepare and deliver the arbitral panel within a global commercial proceeding, through which the arbitrations are administered by written statements and direct testimonies. Legal education programs can also be considered as the other primary procedures of administering international commercial arbitrations by the different arbitral institutions, as these create insights about dissimilar international as well as comparative legal research to address the specialized requirements of global arbitration. The foremost arbitral institutions identified the need to administer the international commercial arbitrations due to several changes being witnessed in the previous 20 years. These changes can hence be identified as the legal practitioners, who have become more mobile in nature, wherein their insider knowledge has been scattered throughout the profession and the business world has become more internationalized, thereby leading towards dramatic escalation in the figure of worldwide arbitrations in every financial year.

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The other procedure for the major arbitral institutions to administer international commercial arbitrations is arbitral immunity, which is recognized as a well-established standard in the context to worldwide arbitration. These institutions strongly believe that eliminating the global arbitrators from certain liabilities such as designing effective laws to address any conflicts of interest that can further help in safeguarding dizzy lawsuits being filed by the involved parties, who are not satisfied with the advantages of the arbitral award. The nature of arbitral immunity is not absolute due to the fact that the arbitrators possess the duty of acting impartially, thereby maintaining fairness, particularly in arbitration proceedings. It is in this context that the major arbitral institutions along with the state courts point out the ethical duties owed by the arbitrators and the involved parties, which in turn, raises the chances to address any situation of conflicts of interest efficiently. These ethical duties of the arbitrators and the involved parties include the duty to act in a fair way along with upholding the veracity of the arbitration procedure and the duty to disclose any situation of conflicts of interest. In addition, the other moral duties encompass the obligation of acting independently, thereby evading impropriety and the responsibility of conducting proceedings diligently. Under certain jurisdictions, the arbitration legislation or the rules may extend from rendering awards or proceedings expeditiously and not withdrawing from the arbitration except in certain stipulated conditions. 

The major arbitral institutions intend to perform efficient global commercial arbitrations with the objective of forming, developing and maintaining transparency in the overall procedure. In order to fulfill this particular objective, the chief arbitral institutions follow certain vital procedures to administer global commercial arbitrations. These procedures fundamentally entail transparency, public access, and disclosure. Conceptually, transparency is duly regarded as a significant asset for any specific decision-making body within a jurisdictional context. This particular factor can be used to administer international commercial arbitrations by the major arbitral institutions, as it is regarded as an indispensable precondition of legitimacy along with a prospect for critiquing the procedures. Even though transparency is largely recognized at the global level as compared to that of public access, it is narrower in terms of scope. This represents the fact that transparency signifies the information being delivered to the interested participants about a decisional procedure, wherein public access is deemed as a right for every citizen. It is argued that transparency should not be insisted in all the cases, as the general public does not have an interest in every case. This certainly raises the situation of conflicts of interest within the respective jurisdictions, wherein transparency gained in context with the international arbitration are under-appreciated at large. 

With regards to adjudicatory proceedings and international commercial arbitration, public access is fundamentally regarded as the right of an individual including the involved parties, arbitrators, and their respective lawyers to attend and access proceedings in an efficient way. This specific right is specifically significant for the mechanisms of common law, wherein the arbitrators are deliberately thrilled with law-making powers. This eventually results in increasing commitment towards guaranteeing the public access right. Therefore, based on these notions, it can be inferred that the major arbitral institutions use the procedure of public access to administer international commercial arbitrations to facilitate monitoring the activities being performed by the arbitrators and the judges as well. Furthermore, the global commercial arbitrations can also be administered through public access procedure by checking against the potential abuses of power, which eventually contributes to maintaining overall judicial quality. Public access is deemed a part of transparency, which is applicable in international commercial arbitration to foster a greater degree of steadiness, thereby evading unnecessary threats posed to the arbitrators. This particular aspect can be connected with the idea of a political community, which believes enforceability as against a political arrangement. 

It is hence argued that public access is a system to endorse lucidity in worldwide commercial arbitration; however, it is not viewed as an indispensable facet of transparency due to the existence of arbitral rules. The above-discussed aspects i.e. transparency and public access intend to evaluate and scrutinize the procedures of decision-making that help in promoting legitimacy as per the expectation level. Disclosure obligations are considered to be the other mechanism of administering global commercial arbitrations by the chief arbitral institutions, as this is designed to provide benefits to those who seek to acquire substantive data. The fundamental aim of disclosed data is to facilitate the recipients to make strategic choices, which in turn, establishes a close link amid the arbitrators, lawyers, and the users at large. Even though transparency is identified to improve the potential for monitoring decision makers, disclosure obligations, on the other hand, are observed to satisfy certain specific regulatory targets as well. These targets principally comprise preserving healthy capital markets, safeguarding the public from health and safety threats, easing difficulties being witnessed for shifting labor markets and informing the end users about the products or services that they seek for. 

The application of disclosure obligations to administer international commercial arbitrations can be better comprehended by allowing adequate tracking of decision-making, which in turn, promotes transparency by a considerable level. Disclosing material financial data by the publicly traded companies can also be considered as a classic example of disclosure obligations outside the context of dispute resolution. This disclosure certainly facilitates the potential investors to assess whether the firms are profitable or not, thereby rendering the decision-making procedure to become more powerful as per the desired level. In relation to the case of international commercial arbitrations, it is the individual arbitrators who are needed to abide by all the arbitral rules and thereby follow meaningful enforcement standards while disclosing required information to any individual acting as the third party. This disclosure of data eventually supports the evaluation of whether the arbitrators are subjected to unacceptable conflicts and render more transparent decision-making procedure with viable relationships and experiences. It can hence be stated that the parties involved in an international commercial arbitration are regarded as the members of global corporate entities, who are engaged in a specific commercial dispute. Disclosing relevant information by these parties under international commercial arbitrations through legal proceedings not only ensures transparency but also strengthens the decision-making procedure to the maximum possible extent. 

Considering that the financial disclosures are able to capture more data than generally being presumed, these disclosures will not be able to capture all the public interests that are particularly implicated under global commercial arbitration. In the earlier years, it can be observed that the international commercial arbitration was primarily a compromise-oriented procedure, wherein “strictly legal considerations [could be] pushed aside for the sake of achieving unanimity among the arbitrators and giving something to both parties.” Under this circumstance, arbitrator’s approach of tilting towards transparency may result in avoiding redundant challenges being imposed to the arbitrators. However, in the present day context, the international commercial arbitration evolved as a dynamic activity for the involved parties and the arbitrators as well to encourage greater consistency in the overall procedure. 

Determination of Binding the IBA Guidelines on Conflicts of Interest in International Commercial Arbitrations 

There are mixed results and responses regarding the binding of the IBA guidelines on conflicts of interest in international commercial arbitrations that are administered by the major arbitral institutions;. On one hand, it is claimed that the IBA guidelines on conflicts of interest should be bound in the international commercial arbitrations in order to serve two major purposes including evasion of unnecessary challenges posed to the arbitrators and promotion of greater consistency in the results. On the other hand, it is argued that the IBA guidelines on conflicts of interest 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 [the conclusion] that a reasonable impression of partiality can form when an actual conflict of interest exists and the lawyer has constructive knowledge of it.” Support of binding the IBA guidelines on conflicts of interest in global commercial arbitrations are administered by the major arbitral institutions, which can be related to the case of W Ltd v M SDN BHD [2016] EWHC 422 (Comm). 

According to this particular case, the claimant W Ltd and the defendant M SDN BHD were in disagreement regarding a project contract based in Iraq. This dispute was referred to arbitration and was thus subjected to English law. The case highlighted that the claimant posed challenges to the defendant regarding the awards based on the serious grounds of irregularity and apparent biased conflict of interest under Section 68(2) of the Arbitration Act 1996. However, after conducting regular enquires and investigations about the case, the judge arrived at a conclusion that the situation is fair enough and remained within the Non-Waivable Red List’s paragraph 1.4. Thus, based on these grounds, the judge took the decision of dismissing the challenge posed by the claimant on the defendant within the amended 2014 edition of the IBA guidelines, stating that there does not exist any apparent bias in the situation. There were certain facts that are considered by the judge while finding out no apparent bias in the situation. One of these facts can be identified as that the claimant was not involved in advising the defendant of any situation, thereby limiting the chance of arising at any sort of bias. Considering that the revised IBA guidelines emphasize avoiding redundant threats posed to any of the involved parties and the arbitrators, as observed in the case of W Ltd v M SDN BHD [2016] EWHC 422 (Comm), these guidelines should be bound in the international commercial arbitrations being administered by the major arbitral institutions;. 

On the other hand, the case New Regency Prods., Inc. v. Nippon Herald Films, Inc. provides greater insights about the fact that the revised IBA guidelines should not be bound in international commercial arbitrations that are administered by the chief arbitral institutions;. The stated case is about upholding a challenge to an award amid a film distribution corporation and a production company. According to this particular case, the arbitrator failed to unveil work as a senior executive with a firm negotiating with one of the involved parties to finance a motion picture. Thus, deficiency in actual knowledge possessed by the arbitrator eventually led towards causing disagreements amid the two parties involved in the case, substantiating that the IBA guidelines should not be bound in the international commercial arbitrations. This might not only restrict in fostering a higher level of consistency but also creates unnecessary threats for the arbitrators. The framework of the international commercial arbitrations can better be comprehended from three fundamental sources of regulations comprising the arbitrate agreement persisting amid the involved parties, the institutional rules that are select as well as followed by these parties and the arbitration jurisdictional laws, wherein the arbitration is seated. 

Evidence suggests that there is a necessity to bind the IBA guidelines on conflicts of interest in international commercial arbitrations managed by the chief arbitral institutions for the purpose of forming, developing and preserving a baseline of suitable practices. These practices are likely to help the arbitrators to disclose any relevant data and thereby help in eliminating biasedness by an extensive level. The IBA guidelines on conflicts of interest can also be considered as a supplementary foundation of a set of laws that focus on contracting the courts’ prudence and decreasing the potential for any debate along with uncertainty. The IBA guidelines on conflicts of interest should be bound in international commercial arbitrations in order to establish a close association amid the traditions of common and civil law, thereby offering a common ground for the opposing parties. Moreover, the other reasons for binding the IBA guidelines on conflicts of interest in international commercial arbitrations can be recognized as saving both time and costs that are likely to be spent by the involved parties and the users as well while dealing with any arbitral court debating materials such as documentary disclosure. It can hence be stated that lesser focus on binding the IBA guidelines on conflicts of interest in international commercial arbitrations may restrict either one of the involved parties to retain a higher level procedural flexibility throughout the entire proceedings. 

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It was earlier mentioned that the major aspects revised in the IBA guidelines included third-party funding, the impacts of ‘advance waivers’, the neutrality and the self-governing arbitrators, lawyers along with the involved parties and disclosure obligations as well as ‘issue’ conflicts. Binding these principle revised matters in the global commercial arbitrations is thus expected to maintain and encourage transparency and evade unnecessary challenges being faced by the arbitrators, thereby ignoring their removal or withdrawal. However, evidence also suggests that the case of W Ltd v M SDN BHD [2016] EWHC 422 (Comm) does not favor binding the IBA guidelines in the worldwide commercial arbitrations due to confusions or complexities in disclosure requirements and obligations. It is evident that the issue concerning conflicts of interest drastically raises the challenge of global arbitration for the respective arbitrators and the parties involved in a particular contract;. Due to this particular issue and challenges, the arbitrators often remain confused about the facts that need to be released and thereby make necessary choices to create favorable or positive consequences;. 

Factors including development in the global business and the ways, through which it is conducted, gaining momentum of globalization along with internationalization and interconnecting corporate associations have certainly raised more disclosures and created more problems to determine the issue of conflicts of interest. These certainly led towards causing objections and withdrawing or removing the arbitrators, affecting their sovereignty as well as impartiality to an extensive level;. Therefore, there is a necessity for the involved parties, arbitrators and the arbitral institutions to bind the revised IBA guidelines in the worldwide commercial arbitrations. It can be stated that these participants are likely to face composite decisions about the facts required to be disclosed and the standards to be applied to derive significant positive or favorable outcomes. The growing tensions in the rights of the parties and the arbitrators to maintain their objectivity or self-determination on an individual basis eventually create the necessity to bind the amended IBA guidelines specifically in the international commercial arbitrations. Furthermore, binding these guidelines to the global commercial arbitrations can ensure wider developments in the national laws, regulations relating to arbitration, judicial decisions, applications concerning impartiality and practical considerations. This, in turn, results in forming, developing and preserving a higher level of disclosure as well as independence in the domain of international arbitration;. 

Conclusion 

The IBA guidelines on conflicts of interest have been revised for the major arbitral institutions, involved parties, arbitrators and the users in order to promote transparency and avoid the likelihood of creating challenges relating to impartiality or independence. There are certain topics or fields, wherein principle changes have had been made to the IBA guidelines. These topics or fields typically encompass ‘barrister and law firm issues’, ‘advance waivers’, ‘third-party funding’ and ‘duty of parties/arbitrators to enquire.’ The arbitrators and the parties involved in an agreement should remain aware of the changes made on the respective topics or fields in order to address a critical situation of conflicts of interest. The key arbitral institutions of this present day context follow certain effective ways to administer global commercial arbitrations to reap several significant benefits such as increased transparency and enhanced disclosure requirements or obligations. For instance, the chief arbitral institutions are observed to manage worldwide commercial arbitrations by relying more on comprehensively written advocacy rather than oral presentations at court proceedings. Moreover, these arbitral institutions are also noted to consider direct testimonies as well as written statements for successfully managing international commercial arbitrations. 

There are mixed responses about the binding of the IBA guidelines on conflicts of interest in worldwide commercial arbitrations that are administered by the potential arbitral institutions. Evidence, on one hand, suggests that the IBA guidelines on conflicts of interest should be bound in international commercial arbitrations, as this has the ability to evade biases and thereby ensures avoidance of any uncertainty to the arbitrators. However, it is argued that binding these guidelines in the global commercial arbitrations may create difficulties in disclosing facts, such as in the case of W Ltd v M SDN BHD [2016] EWHC 422 (Comm). From the futuristic perspective, the IBA guidelines on conflicts of interest should be bound in the international commercial arbitrations for the purposes of developing the standards associated with disclosure obligations and addressing issue conflicts in an efficient manner.