<h3>The IBA recently issued a revised version of its Guidelines on Conflicts of Interest in Arbitration. This Homburger Bulletin summarizes the most important changes.</h3>
<h3>A. Introduction</h3>
<p>In February 2024, the International Bar Association (<strong>IBA</strong>) published its updated Guidelines on Conflicts of Interest in International Arbitration (the <strong>Guidelines</strong>). The IBA has described the Guidelines, which were first issued in 2004 and revised in 2014, as «<em>the most comprehensive work to date defining the framework by which the impartiality of arbitration in the international arena can be most effectively assured</em>»<a href="#_ftn1" name="_ftnref1">[1]</a>. Although the Guidelines are non-binding and must be applied in accordance with applicable laws, rules and standards, they play an important role in providing guidance to the arbitral community. The role of the Guidelines has also been recognized by the Swiss Federal Tribunal, which has qualified them as a useful resource that should influence the practice of arbitral institutions and courts<a href="#_ftn2" name="_ftnref2">[2]</a>.</p>
<p>The purpose of the recent revision (the <strong>2024 Revision</strong>) was to modernize and clarify the Guidelines. As summarized in the Foreword of the 2024 Revision, the following areas were identified as requiring some updating: (i) arbitrator disclosure; (ii) third-party funding; (iii) issue conflicts; (iv) organisational models for legal professionals in different jurisdictions; (v) expert witnesses; (vi) sovereigns or their agencies and instrumentalities; (vii) non-lawyer arbitrators; and (viii) social media<a href="#_ftn3" name="_ftnref3">[3]</a>.</p>
<p>The IBA has also published a helpful comparison between the 2014 and 2024 versions (<a href="https://www.ibanet.org/document?id=Guidelines-on-Conflicts-of-Interest-in-International-Arbitration-comparison-2014-2024" target="_blank" rel="noopener">link</a>).</p>
<h3>B. The Structure of the Guidelines</h3>
<p>The Guidelines consist of two parts.</p>
<ul>
<li>Part I sets out the general standards and principles (the <strong>General Standards</strong>)</li>
<li>Part II contains lists of practical situations based on the so-called «traffic light system», which are categorized as green, orange, waivable red and non-waivable red on an increasing scale of seriousness (the <strong>Application Lists</strong>).
<ul>
<li>The green list contains situations that are generally considered not to create any conflict of interest (the <strong>Green List</strong>).</li>
<li>The orange list contains situations that require disclosure but allow the arbitrators to continue to serve unless the parties object (the <strong>Orange List</strong>).</li>
<li>The waivable red list contains situations that create a serious conflict of interest, but not as serious as those on the non-waivable list. Accordingly, parties may expressly waive them (the <strong>Waivable Red List</strong>).</li>
<li>The non-waivable red list includes situations that create a severe conflict of interest, such as an arbitrator having a personal interest in the outcome of the dispute. Because they are based on the overriding principle that no person can be his or her own judge, they cannot be waived by the parties (the <strong>Non-Waivable Red List</strong>).</li>
</ul>
</li>
</ul>
<p>The 2024 Revision emphasized the importance of the General Standards, which «<em>contains the principles that must always be considered</em>»<a href="#_ftn4" name="_ftnref4">[4]</a> over and above the Application Lists, which «<em>cover many of the varied situations that commonly arise in practice,</em>» but which «<em>do not purport to be exhaustive, nor could they be</em>»<a href="#_ftn5" name="_ftnref5">[5]</a>.</p>
<h3>C. Main Changes of the 2024 Revision</h3>
<p>The General Standards have been amended to address some of the areas where experience over the past few years has shown that some adjustment is needed, such as the impact of secrecy rules on disclosure, the role of non-disclosure in determining the existence of conflicts of interest and the due diligence obligations of the parties.</p>
<ul>
<li><strong>Impact of secrecy on arbitrators&#8216; disclosure: </strong>New General Standard 3(e) provides that an arbitrator should not accept an appointment or should recuse himself or herself if he or she is required to disclose information that may affect his or her impartiality or independence but is prevented from doing so by rules of confidentiality or secrecy. The purpose of this provision is to balance the arbitrators&#8216; duty of disclosure with their duty of confidentiality.</li>
<li><strong>Consequences of failure to disclose:</strong> General Standard 3(g) clarifies that failure to disclose does not necessarily indicate a conflict of interest, and that the parties and the arbitrators should consider the relevant facts and circumstances, as well as the applicable legal standards, in determining whether a conflict of interest exists. This provision recognizes that disclosure is not an end in itself, but a means to ensure the integrity and fairness of the arbitration proceedings.</li>
<li><strong>Reasonable enquiries and timely objections:</strong>
<ul>
<li>General Standard 4(a) now includes an additional paragraph stating that a party shall be presumed to be aware of any fact or circumstance that may constitute a potential arbitrator conflict of interest «<em>that a reasonable enquiry would have yielded if conducted at the outset or during the proceedings</em>». This presumption, together with the requirement to raise an objection within 30 days of either the receipt of an arbitrator&#8217;s disclosure or the discovery of the aforementioned facts or circumstances, encourages parties to conduct a reasonable inquiry at an early stage and discourages opportunistic tactics such as delaying or withholding objections until a later stage in the proceedings.</li>
<li>However, it remains important to consider how recent case law has set the boundaries for what constitutes a reasonable enquiry and what information parties are expected to review. In <em>Tidewater Inc &amp; Ors v. Venezuela</em>, the arbitral tribunal ruled that past appointments listed on the ICSID website constituted readily identifiable public information, and an arbitrator&#8217;s decision not to disclose it was «<em>an honest exercise of judgment on </em>[the arbitrator&#8217;s]<em> part in the belief that publicly available information did not require specific disclosure</em>»<a href="#_ftn6" name="_ftnref6">[6]</a>. Information available on the website of Global Arbitration Review, which charges a fee for access but is widely used by the arbitral community, may also be considered public and readily available<a href="#_ftn7" name="_ftnref7">[7]</a>. A «reasonable enquiry» does not require parties to conduct a full-scale investigation that catches all publicly-available information. Arguably, publicly-available information that can only be found through extensive review, such as attendance at conferences<a href="#_ftn8" name="_ftnref8">[8]</a> or – as ruled by the Swiss Federal Tribunal – biased tweets<a href="#_ftn9" name="_ftnref9">[9]</a>, is outside the scope of what a reasonable enquiry requires.</li>
</ul>
</li>
<li><strong>Expanded notion of law firm/business structures</strong>: General Standard 6 has been updated to reflect the diversity and complexity of the international legal practice structures. The «<em>law firm’s or employer’s organisational structure and mode of practice</em>» are expressly listed among the circumstances that should be considered in determining whether a potential conflict exists and whether disclosure should be made. The explanation to General Standard 6 now provides that «[a]<em>s a general proposition, a law firm for these purposes is any firm in which the arbitrator is a partner or with which the arbitrator is formally associated, including in the capacity of an employee of any designation, as counsel, or of counsel</em>». Overall, the revised General Standard 6 is better suited to account for various forms of cooperation, collaboration, or profit-sharing among lawyers or law firms, as well as the use of alternative business structures.</li>
<li><strong>Third-party funders and insurers:</strong> General Standard 6 has also been revised to give due consideration to whether third-party funders and insurers may have a direct economic interest in the dispute, a controlling influence over a party, or influence over the conduct of the proceedings.</li>
</ul>
<p>The main changes to the Application Lists are:</p>
<ul>
<li><strong>Additional scenario in the Green List</strong>: An arbitrator hearing testimony from an expert who is appearing in another matter in which the arbitrator acts as counsel, cf. Green List 4.5.1.</li>
<li><strong>Several amendments to the Orange List</strong>: The additional scenarios include an arbitrator and counsel for one of the parties serving together as arbitrators in another arbitration (Orange List 3.2.12) and another in which an arbitrator, within the past three years, has been appointed as an expert on more than three occasions by the same counsel/law firm (Orange List 3.2.9). Orange List 3.4.2, which concerns an arbitrator publicly advocating a position on the case, has also been revised to include the use of «<em>social media or on-line professional networking platforms</em>».</li>
<li><strong>Limited changes to both the Waivable and Non-Waivable Red List</strong>: 2.3.1, which referred to the scenario in which the arbitrator currently represents one of the parties, has been revised to incorporate what was previously part of 2.3.7, which related to the arbitrator regularly advising one of the parties, provided that no significant income is derived from such advice. Revised 2.3.1 now treats as waivable the situation in which an arbitrator currently or regularly represents or advises a party or party affiliate, but only if the arbitrator «<em>does not derive significant financial income therefrom</em>».</li>
</ul>
<h3>D. Conclusive Remarks</h3>
<p>Although the Guidelines are not binding, they are often the first source to which parties and arbitrators turn regarding potential conflicts of interest. They have a significant impact on the conduct of arbitrators, counsel and parties. Accordingly, all users of arbitration should take note of the Guidelines and the changes in the 2024 Revision.</p>
<h6><a href="#_ftnref1" name="_ftn1">[1]</a> IBA website, https://www.ibanet.org/resources.</h6>
<h6><a href="#_ftnref2" name="_ftn2">[2]</a> Swiss Federal Tribunal, judgment of 22 December 2020 (4A_318/2020), cons. 7.4.; Swiss Federal Tribunal, judgment of 7 September 2016 (4A_386/2015), cons. 3.1.2.</h6>
<h6><a href="#_ftnref3" name="_ftn3">[3]</a> Guidelines, Foreword, p. 2.</h6>
<h6><a href="#_ftnref4" name="_ftn4">[4]</a> Guidelines, Introduction, para. 7.</h6>
<h6><a href="#_ftnref5" name="_ftn5">[5]</a> Guidelines, Introduction, para. 7.</h6>
<h6><a href="#_ftnref6" name="_ftn6">[6]</a> Tidewater Inc &amp; Ors v Venezuela, Decision on Claimants&#8216; Proposal to Disqualify Professor Brigitte Stern, Arbitrator dated December 23, 2010, para. 55.</h6>
<h6><a href="#_ftnref7" name="_ftn7">[7]</a> Paris Court of Appeal, PT Ventures v. Vidatel and others, judgment of January 26, 2021.</h6>
<h6><a href="#_ftnref8" name="_ftn8">[8]</a> Paris Court of Appeal, j Dommo Energia v. Enauta Energia and Barra Energia, judgment of February 25, 2020 in Dommo Energia.</h6>
<h6><a href="#_ftnref9" name="_ftn9">[9]</a> Swiss Federal Tribunal, judgment of 22 December 2020 (4A_318/2020)</h6>


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The 2024 Revision of the IBA Guidelines on Conflicts of Interest in Arbitration: What's New?

<h3>I. The Dispute</h3>
<p>The dispute arises from a complaint filed by two athletes in 2014. The athletes complained about certain rules of the International Skating Union (<strong>ISU</strong>) providing for sanctions in case of participation in competitions other than those authorized by the ISU. After conducting a competition law investigation, in December 2017, the European Commission issued an infringement decision finding that the ISU eligibility rules restricted competition within the meaning of Article 101 TFEU. The European Commission also found that the rules providing that disputes with the ISU in relation thereto shall be solved through CAS arbitration aggravated such infringement because of the lack of proper review of EU competition law issues in CAS arbitration proceedings.</p>
<p>The General Court confirmed that the ISU eligibility rules constituted an infringement of EU competition law. However, it overturned the European Commission&#8217;s decision on the rules providing for CAS arbitration. Referring to ECHR case law (such as Mutu and Pechstein v. Switzerland), the General Court found that the ISU rules providing for the exclusive jurisdiction of the CAS were justified by legitimate interests relating to the specific nature of sports disputes, such as the use of a specialized tribunal capable of resolving disputes quickly and economically, and the need to ensure international uniformity.</p>
<p>While the ISU challenged the infringement finding, the decision of the General Court on the CAS arbitration rules was challenged by the two athletes and an athletes&#8216; association with the support of the European Commission.</p>
<h3>II. The ECJ Decision</h3>
<p>Ruling on the appeal of the athletes, the ECJ sided with the European Commission and overturned the General Court&#8217;s decision regarding the rules providing for CAS arbitration. The ECJ elaborated on what constitutes «effective judicial review» of EU competition law issues.</p>
<p>The ECJ recalled that sports associations have legal autonomy to adopt rules relating, inter alia, to the organization of competitions, their proper functioning and the participation of athletes in those competitions. However, sports associations cannot restrict the exercise of the rights and freedoms conferred on individuals by EU law. According to the case law of the ECJ, such individual rights and freedoms include the rights underlying Articles 101 and 102 TFEU. Hence, rules of sport associations concerning matters such as the prior authorization of sports events and eligibility rules must be subject to effective judicial review, especially where the arbitration mechanism «must be regarded as imposed» on the athletes.</p>
<p>The requirement of effective judicial review means that in the event that such rules contain provisions conferring mandatory and exclusive jurisdiction on an arbitration body, the court having jurisdiction to review the awards made by that body may confirm that those awards comply with Articles 101 and 102 TFEU. In addition, the requirement of judicial review entails that such courts satisfy all the requirements of Article 267 TFEU, so that they are entitled, or, as the case may be, required, to refer a question to the ECJ and obtain a preliminary ruling.</p>
<p>The ECJ found that since the rules at stake concern the organization and marketing of skating events as well as the participation of professional athletes in such events, any dispute relating thereto arises in the context of economic activities as opposed to merely the sport as such. Accordingly, any decisions enforceable within the territory of the EU must comply with EU competition law, irrespective of the place of establishment of the entities that adopted rules providing for arbitration as a dispute resolution mechanism.</p>
<p>Applying the above principles, the ECJ concluded that the rules at issue were not justified by legitimate interests relating to the specific nature of sports disputes and that they rather aggravate a potential infringement since they fail to ensure the required effective judicial review: CAS awards are reviewed only by the Swiss Federal Tribunal, i.e. a court of a third State that cannot obtain a preliminary ruling from the ECJ, and such review does not include compliance with EU competition law. On this basis, the ECJ held that «<em>[i]n the absence of such judicial review, the use of an arbitration mechanism is such as to undermine the protection of rights that subjects of the law derive from the direct effect of EU law and the effective compliance with Articles 101 and 102 TFEU, which must be ensured – and would therefore be ensured in the absence of such a mechanism – by the national rules relating to remedies</em>».</p>
<p>The ECJ noted that the possibility of claiming damages does not compensate for the lack of a remedy against the infringement as such. As to complaints lodged with the European Commission, the ECJ observed that complainants are not entitled to obtain a decision on the existence or non-existence of the alleged infringement.</p>
<h3>III. Potential Implications of the ECJ Decision</h3>
<p>There is no debate that disputes involving competition law issues, including those arising under EU law, are arbitrable under Swiss arbitration law. Moreover, under certain conditions set out in Article 19 of the Swiss Private International Law Act, it is possible for a court or an arbitral tribunal sitting in Switzerland to take into account EU competition law as a mandatory provision of EU law regardless of the law applicable to the merits of the case. Indeed, numerous CAS awards consider and apply EU competition law, either directly or on the basis of Article 19 of the Swiss Private International Law Act.</p>
<p>All this does not matter according to the ECJ. By finding that the required effective judicial review of EU competition law issues may only be ensured within the EU judicial system, the ECJ makes it practically impossible for the sport associations to ensure homogenous conditions for all athletes. It remains to be seen whether athletes will share the ECJ&#8217;s view that the courts of the EU Members States are better placed to hear their claims despite the lack of specialization, the duration of state court proceedings and the costs involved. Voluntary submission by the athletes to CAS arbitration is not impacted by the ECJ ruling which does not question the validity of the sport associations&#8216; offer to arbitrate. It is submitted that well-advised athletes may well continue to turn to CAS arbitration to enforce their rights, including those arising under EU competition law.</p>
<p>It is difficult to see how the current framework of CAS arbitration may be reconciled with the ruling of the ECJ, as such ruling requires that CAS awards involving the exercise of a sport as an economic activity in the EU be reviewed by the courts of a Member State. Absent the possibility of having such disputes heard by a CAS arbitral tribunal sitting in a Member State, rules included in the statutes or regulations of sport associations providing for CAS arbitration may not be enforceable in the EU countries in case of disputes with athletes involving EU competition law. The new ECJ ruling may effectively open up the possibility of submitting the «same» dispute to a myriad of different fora, which inevitably translates into greater legal uncertainty and a greater risk of contradictory and/or discriminatory rulings.</p>


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Does CAS Arbitration Clash with EU Competition Law?

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<p>We are delighted that <a href="https://www.homburger.ch/en/team/lorenzo-togni/">Lorenzo Togni </a>has joined our partnership. <a href="https://www.homburger.ch/en/team/benedict-thomann/">Bénédict Thomann</a> is strengthening our team as counsel. Find out more <a href="https://www.homburger.ch/en/home/welcome/">here</a>.</p>


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<p>On November 4, 2021, Roche Holding AG (<strong>Roche</strong>), the world&#8217;s largest biotech company, with a market capitalisation of around CHF 320 bn, announced that it agreed with Novartis to repurchase 53.3 m Roche shares from Novartis Holding AG for an aggregate consideration of approx. CHF 19 bn. The transaction is conditional upon the approval of a capital reduction by cancellation of the repurchased shares and the approval of interim financial statements prepared for the purpose of the transaction by an extraordinary general meeting of Roche.</p>
<p>Homburger acted as legal counsel to Roche. The Homburger team was led by partners Heinz Schärer and David Oser and included partner Daniel Häusermann, counsel Micha Fankhauser, associates Sarah Chevalley and Jasmin Künzle (all Corporate / M&amp;A), partners Reto Heuberger and Dieter Grünblatt and associates Laetitia Fracheboud and Kevin Müller (all Tax), partner Jürg Frick, counsels Lee Saladino and Eduard De Zordi and associate Stefan Bindschedler (all Finance), partner Balz Gross, counsel Bénédict Thomann and associates Luca Angstmann and Sebastian Wyler (all Dispute Resolution).</p>


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<p>In a decision published this week and marked as a leading case, the Swiss Federal Tribunal (<a href="https://www.bger.ch/ext/eurospider/live/de/php/aza/http/index.php?lang=de&amp;type=show_document&amp;highlight_docid=aza:%2F%2Faza:%2F%2F22-06-2021-1B_333-2020&amp;print=no" target="_blank" rel="noopener">DFT 1B_333/2020</a>) held that communications of persons with lawyers admitted to practice in jurisdictions outside of the EU, EFTA, and the UK are not protected from seizure by the attorney-client privilege unless the person is the target of the criminal investigation.</p>
<p>The case arose out of a criminal investigation involving allegations of bribing foreign officials and money laundering. During the investigation prosecutors seized documents from a third party. The seized documents included privileged correspondence between the third party and its attorneys, who were admitted to practice outside the EU, EFTA, and the UK.</p>
<p>The Swiss Federal Tribunal confirmed that the attorney-client communications of an <em>accused party</em> relating to legal advice and the representation in legal proceedings remain privileged and cannot be searched and seized during a criminal procedure regardless of where the accused&#8217;s lawyer is admitted to practice.</p>
<p>However, the Swiss Federal Tribunal ruled that documents and communications protected by attorney-client privilege and exchanged between a <em>third party</em> and his/her lawyers admitted to practice outside the EU, EFTA, and the UK may be searched and seized in criminal proceedings.</p>
<p>The decision is in line with the Swiss Federal Tribunal&#8217;s restrictive approach regarding the scope of the attorney-client privilege and of other confidentiality interests. Companies and individuals in Switzerland who retain lawyers from outside the EU, EFTA, or the UK should be mindful that their communications may be searched and seized in the course of criminal and regulatory proceedings. In relevant matters, companies and individuals may want to consider retaining lawyers not admitted to practice in Switzerland, the EU, EFTA, or the UK through an attorney allowed to practice in those countries.</p>


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Homburger advises Roche Holding AG on the repurchase of the Novartis stake in Roche Holding AG and the financing of the transaction

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The 2024 Revision of the IBA Guidelines on Conflicts of Interest in Arbitration: What's New?

Does CAS Arbitration Clash with EU Competition Law?

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