The growing use of arbitration in Peru is due to various virtues: its level of specialisation, speed, lower procedural burden, efficiency, flexibility, confidentiality; but none of these prevent circumstances from arising that may condition the fairness of the award. This is what happens, for example, when the arbitrators have interests related to some of the parties or to the dispute itself, thus undermining their suitability to resolve the conflict.

In order to reduce such situations, the challenge mechanism, whereby one of the parties requests the removal of an arbitrator for reasons that question his or her impartiality or independence, has been provided for.

In the Peruvian legal system, the challenge is regulated in Article 28 of Legislative Decree No. 1071 - Law that regulates arbitration, but which does not provide specific grounds to identify when an arbitrator is liable to be removed. The referred regulation limits itself to indicate that every arbitrator must maintain the quality of independent and impartial.

For local arbitration centres, there is also no exhaustive list of grounds for challenge. Thus, for example, the Arbitration Rules of the Lima Chamber of Commerce (2017) refer in Article 15 that: "An arbitrator may be challenged if there are circumstances that give rise to justifiable doubts regarding his impartiality or independence [...]". Along the same lines are the rules of the Arbitration Centre of the American Chamber of Commerce of Peru (2021) and the Arbitration and Dispute Resolution Centre of the Pontifical Catholic University of Peru (2017), which regulate the challenge mechanism in their articles 25 and 30 respectively.

Contrary to what one may think, the lack of a list with specific grounds for challenge is not a negligent omission of the legislator, nor should it be seen as a negative aspect of the Peruvian arbitral process. The circumstances in which an arbitrator's suitability may be compromised are varied, so it would be impossible for a rule to contain a list of all such circumstances. In situations such as these, where a normative provision is not sufficient, it is better to have an open regulation that allows the decision-making body to interpret and analyse on a case-by-case basis.

Notwithstanding the above, there is a healthy habit in local arbitration practice of resorting to international arbitration criteria, such as the so-called IBA Guidelines, drawn up by the International Bar Association, to define in which cases we find ourselves before a challengeable arbitrator.

Their use in Peruvian arbitration has intensified because they allow the introduction of ethical standards that arbitrators must follow to ensure their impartiality and clarity in the arbitration process.

The IBA Guidelines identify three lists, marked by colours, which describe the cases in which a challenge does not proceed, in which it may proceed and in which it will always proceed. These lists are as follows:

- Red List: In turn, it is divided into Red Non-Waivable, in which there is no doubt of a conflict of interest involving the arbitrator, for example: that the arbitrator is a representative of one of the parties; and Red Waivable, in which the parties may waive the situations that constitute a conflict of interest, for example: that the arbitrator has previously intervened in the dispute that he or she has now been called upon to resolve.

- Orange List: These are situations which, in the perception of the parties, could possibly create doubts as to the suitability of the arbitrator. For example, if the firm to which the arbitrator belongs has previously advised one of the parties.

- Green List: These are situations that are not likely to create a conflict of interest and therefore the arbitrator has no duty to disclose them. For example, if the arbitrator has a previous academic relationship with another arbitrator or with the counsel of one of the parties.

These classifications are not a closed list, they are non-exhaustive enumerations, so new conflict of interest scenarios may emerge in the case-by-case analysis.

Apart from the regulatory aspect, some local arbitration centres have incorporated tools that allow foreseeing possible grounds for recusal. This is the case of the web portal called Faro de Transparencia, implemented by the Arbitration Centre of the Lima Chamber of Commerce, which compiles the background of the arbitrator to be appointed: his challenges, the annulments of the awards he has issued, the sanctions that the Superior Council of the Centre has imposed on him, the parties that appoint him on a recurrent basis and even the awards he has issued in public procurement cases.

All of the above allows us to conclude that, although there are unforeseeable cases for the parties, Peruvian arbitration has tools that reduce the possibility of conflicts of interest affecting the decisional content of an award, which facilitates the maintenance of transparency and trust in our arbitration system and allows it to continue to develop in an adequate manner.

Author: Piero Cortina Gonzales