Tackling Arbitrators’ Conflicts of Interest Under China’s Revised Arbitration Law

1. Arbitrators Face Challenges in Fully Identifying Conflicts Due to Objective Conditions

Current conflict of interest rules rely heavily on voluntary disclosure by arbitrators. In practice, arbitrators usually complete a declaration when accepting an appointment, either stating that there may be a conflict of interest between themselves and the parties or representatives in the case, or affirming that they have no such conflict. Theoretically, arbitrators should fulfill ongoing and comprehensive disclosure obligations throughout the arbitration process. However, in practice, several issues arise.

Firstly, existing regulations only stipulate the disclosure obligations of arbitrators in principle, without specifying the exact scope of disclosure. From a legislative standpoint, it’s challenging to clearly define the scope of disclosure through exhaustive enumeration. Thus, only the principle of disclosure can be established, leaving the arbitrator to decide whether to disclose, the parties to decide whether to apply for a challenge, and the arbitration institution to determine whether to uphold the challenge based on the case facts. However, this ambiguity inevitably causes difficulties for arbitrators in effectively fulfilling their disclosure obligations. For example, clearer guidance is needed on whether derivative associations—such as relationships between an arbitrator and a party’s affiliates, situations where the arbitrator and a party’s agent belong to the same large law firm but practice in different branches, or cases where an arbitrator’s former organization has been acquired by a party’s parent company—should be included within the scope of disclosure.

Secondly, arbitrators may not be able to identify potential conflicts of interest on their own, especially those serving within large groups that may lack a conflict of interest management system like those in law firms. Arbitrators may be unaware of relationships between other companies in their group and the parties involved in the case, leading to a failure to disclose such conflicts in a timely manner. Regarding lawyer arbitrators, since arbitrator roles are part-time positions held by individual lawyers—distinct from their primary legal practice—even if there is an internal profit system, larger law firms might, to balance interests, not consider situations where lawyers act as arbitrators and as counsel in different cases to be significant conflicts. Moreover, arbitration proceedings can be lengthy, and lawyer arbitrators typically do not conduct regular conflict checks during the process. Consequently, they may not timely discover conflicts arising from other lawyers in their firm acting as counsel in related cases through the firm’s internal case management systems, and thus fail to voluntarily disclose them.

2. Confidentiality of Arbitration Hinders Parties from Retrieving Information Through Public Channels

One of the major characteristics of arbitration is confidentiality. Except for investment arbitration awards, commercial arbitration awards are not disclosed to the public. Even in rare instances where some awards are made public, information about the parties involved and the arbitrators is usually concealed. Therefore, parties are often unable to ascertain through public channels whether an arbitrator has participated in other cases involving the same parties, whether they have accepted appointments from the same party multiple times, or whether they have participated in other cases at the same arbitration institution as counsel. These circumstances may give rise to reasonable doubts about the independence and impartiality of the arbitrator.

3. Filing an Application for Recusal After the Trial May Face Higher Evidentiary Requirements

When an arbitrator does not voluntarily disclose a conflict, parties may remain unaware of its existence during the tribunal formation stage. Often, it is not until the case enters substantive proceedings that parties realize the existence of the conflict. By this time, the case has already been substantively heard, and the main arbitration procedures are essentially complete. Unless the conflict of interest is one that must be avoided under legal provisions or arbitration rules, the arbitration institution may, for the sake of efficiency, choose to overlook conflicts that parties can waive. They might persuade parties to withdraw the application for recusal or directly decide not to recuse the arbitrator.

However, it is precisely because parties have reasonable doubts about an arbitrator’s independence and impartiality that they actively seek relevant evidence. The timing of these doubts often occurs in the mid to late stages of arbitration proceedings. At this point, parties may face a higher burden of proof, needing to collect more direct and substantial evidence of conflicts to persuade the arbitration institution. This presents significant challenges.

Moreover, if a party files an application for challenge in the middle or late stages of the arbitration procedure, and the arbitral tribunal or arbitration institution accepts the application, it will inevitably extend the trial period of the case significantly and affect the case’s efficiency.

Suggestions for Parties to Independently Search for Conflicts of Interest

Despite the practical challenges in searching for arbitrators’ conflicts of interest, parties can still investigate relevant conflicts through public channels or professional databases. Below are some recommendations for parties seeking to identify conflict situations on their own.

1. Understand Common Conflict Situations and Conduct Targeted Searches

Having a clear search objective is crucial for efficient investigation. The International Bar Association (IBA) released the latest version of the IBA Guidelines on Conflicts of Interest in International Arbitration (the “IBA Guidelines”), which lists numerous circumstances that may raise reasonable doubts about an arbitrator’s independence and impartiality. The IBA Guidelines distinguish between three levels of conflicts:

• Red List: Conflicts that must be avoided.
• Orange List: Conflicts that can be waived by the parties.
• Green List: Conflicts that do not require avoidance.

Parties can review the IBA Guidelines before initiating a search to gain a fundamental understanding of various conflict situations and then conduct targeted searches.

Common serious conflicts include:

• Employment or Economic Relationships: The arbitrator has an employment relationship or other economic connection with a party or their agent.
• Financial Interests: The arbitrator has a financial interest in one of the parties or in the outcome of the case.
• Dual Roles: The arbitrator is acting as legal counsel to a party.

It’s important to note that although the IBA Guidelines are well-known in the international arbitration community, they are self-regulatory and serve only as a reference unless agreed upon by the parties or stipulated in the arbitration rules. Therefore, even if a conflict situation aligns with the IBA Guidelines, the arbitral institution still has the discretion to determine the reasonableness of a challenge.

2. Utilize Public Information to Identify Potential Conflicts

Based on the nature of their work, parties can explore various public sources:

1. National Enterprise Credit Information Publicity System and Commercial Databases

The equity relationship between the arbitrator and one of the parties can be publicly searched through national enterprise credit information systems or commercial databases. If the arbitrator is a senior executive of a party or its affiliates, this information can be retrieved via these platforms. However, since information about an arbitrator’s shareholding and tenure is relatively transparent, arbitrators might decline appointments in such cases or proactively disclose the information.

1. Law Firm Websites and Official Accounts

In a notable international investment arbitration case, parties discovered through the official website of an arbitrator’s law firm that the arbitrator was participating in 13 other similar cases, representing investors, all involving the application of the same international treaty. The Permanent Court of Arbitration (PCA) upheld a challenge against the arbitrator due to conflicting roles, which might have adversely affected the award’s impartiality.

Many law firms now maintain official accounts on platforms like WeChat, where they publish recent case outcomes. These publications may provide information about arbitrators’ clients and case involvements. In one instance, our team was involved in a recusal application where the presiding arbitrator was a partner at a law firm. The firm’s official account had posted that the arbitrator and other partners acted as legal counsel for the opposing party. We filed an application for recusal on this basis. Although the arbitration commission did not make a decision on the recusal, the arbitrator ultimately resigned. Therefore, law firm official accounts are effective tools for identifying potential conflicts.

1. Social Media Platforms

In the well-known “Sun Yang case,” the Swiss Federal Supreme Court upheld the request to set aside the arbitral award because one of the arbitrators had made hateful remarks about China on his personal Twitter account. The court considered these remarks racist and believed they might objectively raise reasonable doubts about his impartiality.

Therefore, an arbitrator’s comments on social media can serve as evidence of preconceived bias against a party.

Common social media platforms include WeChat, Weibo, Douyin (TikTok in China), Xiaohongshu, and overseas platforms like Twitter (X), Facebook, and TikTok. Additionally, professional networking platforms like LinkedIn may reveal employment relationships between the arbitrator and a party, which can be grounds for a challenge.

1. Academic Papers and Publications

Scholars, lawyers, and arbitrators often publish academic articles or works that may reflect their stances on specific issues. In another PCA case, an arbitrator had a clear academic stance on the “essential security interests” clause in investment treaties. He had expressed his views in previous awards and re-emphasized his position in a book chapter he authored. The case involved the interpretation of the same clause. The party applying for the challenge argued that the arbitrator’s strong academic inclination affected his openness to the dispute, potentially leading him to favor his prior views. The PCA held that the arbitrator might not be able to deal with the dispute fairly and impartially and upheld the challenge.

However, it’s important to note that an individual’s academic views are not static, and applying abstract theories to specific cases may yield different results. Even if an arbitrator has expressed a particular opinion, it does not directly prove bias in the current dispute. Challenges based solely on academic views carry a higher risk of failure. The success of the aforementioned case hinged on the controversial nature of the clause and the arbitrator’s consistent adjudication, which raised doubts about his openness to contrary opinions. Therefore, it’s necessary to demonstrate how academic views impact an arbitrator’s independence and impartiality, considering the dispute’s specifics.

1. Professional Databases

Professional databases, such as Wolters Kluwer’s dispute resolution modules, may include arbitral awards or provide conflict of interest search services. However, these are often accessible only to law firms and academic institutions.

Suggestions for Arbitration Institutions in Addressing Arbitrators’ Conflicts of Interest

Ensuring that arbitrators fully and continuously fulfill their disclosure obligations is crucial, and arbitration institutions can play a more active role.

For example, the International Chamber of Commerce (ICC) Court of Arbitration provides arbitrators with a declaration of independence and impartiality, guiding them to disclose “any relationship of any nature, whether direct or indirect, personal or economic, with the parties or their representatives,” emphasizing that “any doubt must be disclosed.”

Other arbitration institutions may adopt similar practices to encourage full disclosure when arbitrators accept appointments.

When dealing with conflicts of interest, arbitration institutions should also consider the efficiency of proceedings and the legitimacy of challenge applications. They should prevent parties from unduly delaying proceedings through challenge applications. In practice, there have been cases where a party suddenly changes its attorney during the adjudication stage, creating a direct conflict between the arbitrator and the new counsel, thereby affecting the case’s progress. Article 21.3 of the Arbitration Rules of the Shanghai International Arbitration Centre (SHIAC) provides that if a party needs to change or add a new representative after the tribunal is formed, the arbitral tribunal has the right to decide whether to agree. This provision prevents parties from deliberately creating conflicts and could serve as a model for other institutions.

Conclusion

Identifying an arbitrator’s conflict of interest is only the first step in a challenge application. When deciding whether to uphold a challenge, the arbitration institution needs to comprehensively assess whether the conflict affects the arbitrator’s independence and impartiality from the perspective of a reasonable third party and based on the case facts.

For example, it is generally accepted that a high-level executive of a company should not serve as an arbitrator in a case involving that company or its affiliates. However, whether a former employee who left the company years ago is prohibited from serving as an arbitrator requires careful analysis. Therefore, discovering potential conflicts does not necessarily lead to recusal. Parties need to present specific facts and select appropriate arguments to demonstrate the reasonableness of a recusal application.

By proactively understanding common conflict situations and strategically utilizing public resources, parties can better identify potential conflicts involving arbitrators. While challenges exist due to the confidential nature of arbitration and the timing of disclosures, these steps can enhance the fairness and integrity of the arbitration process.

Anjie Broad, China, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact china@transatlanticlaw.com

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