Conflicts of Interest and Disclosures: Are We Making a Mountain Out of a Molehill?
David Allen Larson
September, 11 2008
South Texas Law Review, Vol. 49, No. 4, 2008
The ethical standards governing conflicts of interest disclosure requirements for arbitrators and mediators are numerous and varied. In spite of the considerable attention that conflict of interest questions attract, both the extent to which an arbitrator must disclose past, present, and potential conflicts of interest and the consequences of a failure to make an appropriate disclosure remain unclear. This article examines disclosure requirements themselves, as well as the sanctions and penalties that may result from a failure to disclose information concerning a neutral's impartiality. Particular attention is paid to what generally is regarded as the most extreme consequence of failure; that being, vacatur.
Much of the confusion regarding disclosure requirements results from the fact that it is not always clear which conflict of interest and disclosure standard is controlling. Relevant standards include arbitral associations' codes of conduct, local codes of ethics, statutes, rules of professional conduct, and judicial decisions. The existing myriad of relevant guidance, regulations, and judicial decisions concerning conflicts of interest and required disclosures can lead arbitrators to make choices that conceivably result not only in sanctions but the nuclear option of the arbitral world, vacatur. Arbitral institutions, such as the American Arbitration Association and the National Arbitration Forum, have not been sufficiently careful to ensure that their codes, standards, and bills of rights do not articulate inconsistent standards as to what conflicts of interest must be disclosed and the consequences of both disclosure (possible removal) and failure to disclose (sanctions and vacatur).
A cynic might assert that in an apparent effort to assure potential clients that their arbitration services are as credible, ethical, and trustworthy as any other dispute resolution process, arbitral institutions have aggressively incorporated every available, recognized external ethics code or codes of conduct (such as judicial codes and local ethics codes) into the arbitral association's own code. A more forgiving commentator might reply that the associations are incorporating external codes because those codes generally have been in existence for a significant period of time, have undergone intense scrutiny, and can help achieve the arbitral association's goal of providing reliable and ethical services. Adopting and incorporating external codes that may have been drafted to regulate services other than arbitration, however, can create obligations inconsistent with the arbitral association's own codes and incompatible with the goals and realities of arbitration.
A call for the courts to adopt a more uniform standard for determining when a failure to disclose a conflict of interest will result in evident partiality warranting vacatur may not be answered any time soon. But there is no reason why arbitral institutions cannot review and, if necessary, amend their own codes and recommendations to ensure that their expectations concerning conflict of interest and disclosures are defined as clearly as possible.
Number of Pages in PDF File: 42
Keywords: ethics, ethical,ADR,dispute resolution,arbitration,arbitrator,disclosure,conflict of interest,alternative,code of conduct,vacatur,FAA,Federal Arbitration Act,misconduct,sanction,international,professional responsibility,standard,neutral,partiality,bias,RUAA,judicial,settlement,IBA,AAA,NAF,JAMS,award
JEL Classification: J00, J38, J39, J40, J41, J50, J51, J52, J53, J58, J59, J78, J79, K12, K20, K30, K31, K33, K40, K41
Date posted: September 14, 2008