Arbitrator Impartiality: Insights From Recent U.S. Court Rulings And New IBA Guidelines

What You Need to Know

• Key takeaway #1
  This client alert explores the International Bar Association release of new Guidelines on Conflicts of Interest in International Arbitration, and a subsequent Supreme Court denial of a certiorari petition to review an Eleventh Circuit decision upholding arbitrator impartiality.

In February 2024, the International Bar Association ("IBA") released its most recent version of the IBA Guidelines on Conflicts of Interest in International Arbitration ("2024 IBA Guidelines"). In close succession, the United States Supreme Court denied a petition for certiorari for review of an Eleventh Circuit decision upholding arbitrator impartiality. These two events underscore the importance of arbitrator impartiality and disclosure of even potential conflicts of interest.

New IBA Guidelines on Conflicts of Interest in International Arbitration

The 2024 IBA Guidelines provide a wide-ranging set of standards to guide arbitrators, counsel, institutions, and other organizations in identifying conflicts of interest and the necessity for disclosure. They are widely accepted in international arbitration and often incorporated into arbitration agreements or rules agreed upon by the parties. These Guidelines are important to promote consistency and predictability in arbitration proceedings and enhance parties' confidence in the integrity of the arbitration process.

The 2024 IBA Guidelines introduce notable clarifications and considerations from the previous 2014 version:

• They confirm principles expressed in the 2014 version that "every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so until the final award has been rendered or the proceedings have otherwise finally terminated;"
• They approve use of the "reasonable third person" test when assessing whether an arbitrator should be disqualified;
• They confirm that "a 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;" and
• They include more general references to the "arbitrator's employer" (referencing organizations other than a law firm) when discussing potential conflict of interest relationships.

The 2024 IBA Guidelines amend the "traffic light" system, which provides example scenarios (in red, orange, and green categories) that may constitute conflicts of interest and the level of disclosure required in each scenario. Most additions are made to the "Orange List," which references relationships that may raise justifiable doubts about an arbitrator's impartiality. The Orange List now includes the following new scenarios:

• Appointment of an arbitrator as a current or former expert for a party or affiliate in unrelated matters within the past three years;
• Appointment of an arbitrator as an expert on more than three occasions by the same counsel or the same law firm within the past three years;
• Appearance together of arbitrator and counsel, and arbitrator and fellow arbitrators, in a different proceeding; and
• Experts appearing in the arbitration proceedings for another matter where the arbitrator acts as counsel.

SCOTUS' Denial of Grupos Unidos' Cert Petition and the Preceding Decision Concerning Arbitrator Bias

Following closely on the heels of the 2024 IBA Guidelines' release was the U.S. Supreme Court's March 2024 denial of Grupos Unidos' petition for certiorari to review an Eleventh Circuit decision, which had refused to vacate a $285 million arbitral award issued to the Panama governmental agency and operator of the Panama Canal, Autoridad del Canal de Panama ("Autoridad del Canal").

In an August 2023 decision, Grupos Unidos por El Canal, S.A. v. Autoridad del Canal, the Eleventh Circuit considered vacatur of an arbitral award to the Autoridad del Canal (in one of seven related arbitrations, the "Panama 1 Arbitration"), because the arbitrators failed to disclose their involvement in unrelated arbitrations.

The arbitrators in question were Dr. Robert Gaitskell (nominated by the Autoridad del Canal and confirmed by the International Court of Arbitration ("ICA")), Claus von Wobeser (nominated by Grupos Unidos and confirmed by the ICA), and Pierre-Yves Gunter (tribunal president, agreed on by both parties and confirmed by the ICA). Following confirmation, each arbitrator submitted "a statement of acceptance, availability, impartiality and independence," including "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" or "could give rise to reasonable doubts as to the arbitrator's impartiality." Rules of Arbitration of the International Chamber of Commerce ("ICC Rules"), Art. 11(2) – (3).

Following awards to the Autoridad del Canal, Grupos Unidos sought further disclosures from the arbitrators, requesting "any facts or circumstances that may affect [their] independence in the eyes of any of the Parties or that could give rise to reasonable doubts as to their impartiality." In light of those disclosures, Grupos Unidos unsuccessfully challenged the arbitrators' impartiality before the ICA; unsuccessfully moved for vacatur of the awards in the United States District Court for the Southern District of Florida; and appealed that decision before the Eleventh Circuit. Four of the further disclosures from the arbitrators were at issue:

• Disclosure 1: while the Panama 1 Arbitration was pending, Gaitskell served as an arbitrator in an unrelated arbitration in which he and a co-arbitrator nominated (and the ICA confirmed) Gunter to serve as tribunal president. That arbitration involved entirely different counsel and different parties.
• Disclosure 2: while the Panama 1 Arbitration was ongoing, von Wobeser served as an arbitrator in an unrelated arbitration with a co-arbitrator, who served as one of Autoridad del Canal's attorneys in the instant arbitration.
• Disclosure 3: several years before the Panama 1 Arbitration began, Gaitskell served as an arbitrator in an unrelated arbitration with another co-arbitrator, also one of Autoridad del Canal's attorneys.
• Disclosure 4: since 2016, Gaitskell had been serving as an arbitrator in an unrelated arbitration in which a different party was represented by another of Autoridad del Canal's attorneys in the Panama 1 Arbitration.

The Eleventh Circuit affirmed the Southern District of Florida's denial of vacatur and confirmation of awards under both the Federal Arbitration Act and the New York Convention, holding that Grupos Unidos had not met the high threshold of proof required for vacatur. The court declared, "[t]o rule for Grupo Unidos, we would need to hold, in essence, that mere indications of professional familiarity are reasonably indicative of possible bias."

• Addressing the Disclosure 1, the court reasoned that there were many sound and impartial reasons for the parties to have nominated Gunter to serve as tribunal president in the present case.
• In response to Disclosure 2, the court found no evidence of conflict of interest between two co-arbitrators, whose relationship is "fundamentally different than the relationship between two counsel representing two co-defendants" (the scenario in University Commons, which Grupos Unidos cited to supports its claim of partiality).
• As for Disclosure 3, the court cited to University Commons for the premise that "'standing alone, the fact that an arbitrator . . . had previous contacts with counsel for one of the parties does not suggest evident partiality.'" 304 F.3d at 1340. The court stated that familiarity due to the same areas of expertise does not indicate bias; here, Gaitskell was an experienced arbitrator in the field, which made his prior contact with another co-arbitrator "hardly a conflict at all, let alone a conflict that requires vacatur."
• Finally, addressing Disclosure 4, the court opined that repeated appearances establish only familiarity, and familiarity does not indicate bias; therefore, the fact that Gaitskell served as an arbitrator in an unrelated case where a member of Autoridad del Canal's counsel represented a party was "a non-issue."

The court qualified that while "it may have been prudent for Gaitskell and von Wobeser to provide broader disclosures," (referring to Disclosures 2 and 4) the ICA found no reason to believe they had violated ICC Rules—and neither did the Eleventh Circuit.

The Eleventh Circuit decision and Supreme Court's denial of Grupos Unidos' petition for certiorari suggested that the fundamentals of arbitrator conflicts of interest remain largely the same. Taken together with the subsequently published and more comprehensive 2024 IBA Guidelines, arbitrator impartiality remains essential to a successful case—and when in doubt, it is now wise to err on the side of caution and disclose even potential conflicts of interest from the Orange List.