Selecting arbitrators prudently

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request for annulment of the ICSID award is to be decided by an ad hoc Annulment Committee of three persons appointed by the Chairman of the ICSID Administrative Council. For non-ICSID investment awards, the only remedy against awards is an application for setting aside awards in the domestic courts at the place of arbitration on primarily procedural grounds, for example for lack of arbitral jurisdiction or violation of due process.

An investment award, if not annulled by an ad hoc Annulment Committee or not set aside by the domestic court at the place of arbitration, has worldwide enforceability without court review of its merits. For ICSID investment awards, each contracting state of the ICSID Convention shall recognize and enforce them within its territories “as if it were a final judgment of a court in that State” according to Article 54 of the Convention. Therefore, ICSID awards can be recognized and enforced in any contracting state of the ICSID Convention having 151 state parties. For non-ICSID investment awards, the winning party may seek the recognition and enforcement of investment awards in one of the 155 contracting states of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The widespread enforceability of investment awards certainly will give the losing states a strong incentive to comply with them.

5.2 Coping strategies provided by the investor-state arbitration

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respondent tends to involve complex guesswork and strategizing. ⁴⁵⁸ Parties and especially their counsels generally will spend a great deal of time and effort to scrutinize the background of arbitrators, their reputation, academic opinions, prior appointments and their persuasiveness to convince the other two arbitrators (in particular the presiding arbitrator). ⁴⁵⁹ Since most arbitration rules impose qualifications on arbitrators in general terms, such as requiring arbitrators to be persons of high moral character, any person could be appointed by the disputing party as an arbitrator as long as he is considered to be sympathetic to the party. Thus, a stricter demand of arbitrator qualification can be expected if treaty parties desire to limit the pool of arbitration candidates. For instance, treaty parties may require arbitrators, especially the presiding arbitrator, to have recognized competence or experience in the field of public international law. ⁴⁶⁰ For those arbitrators coming from a commercial background, treaty parties may require them to have knowledge of public international law including treaty interpretation rules. Article 35(2) of the ASEAN Comprehensive Investment Agreement, for example, expressly requires that

“any person appointed as an arbitrator shall have expertise or experience in public international law, international trade or international investment rules. An arbitrator shall be chosen strictly on the basis of objectivity, reliability, sound judgment and independence.” Likewise, Article 24(2) of the China-Canada BIT provides that

“arbitrators shall have expertise or experience in public international law, international trade or international investment rules, or the resolution of disputes arising under international trade or international investment agreements.”

Secondly, treaty parties may strengthen their control over the presiding arbitrator candidates. According to most existing investment treaties, the appointing authorities designated have wide discretion as to the appointment of the presiding arbitrators. If treaty parties were to determine that the presiding arbitrators should be selected from a limited pool of candidates, they could provide a list of the presiding arbitrator candidates who meet the qualifications specifically set out in investment treaties. Thus, treaty parties may require that the presiding arbitrator be appointed by agreement of both disputing parties. If the parties cannot agree, then the presiding arbitrator will be

458 David Gaukrodger & Kathryn Gordon, Investor-State Dispute Settlement: A Scoping Paper for the Investment Policy Community, OECD Working Papers on International Investment, No. 2012/3, 2012, p. 43.

459 Michael Waibel & Yanhui Wu, Are Arbitrators Political, ASIL Research Forum, UCLA, 5 November 2011, p.

13.

460 Anthea Roberts, Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System, American Journal of International Law, Vol. 107, No. 1, 2013, pp. 88-89.

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appointed from the list established by parties to the investment treaty.

Thirdly, treaty parties may intensify the rules of conduct for arbitrators to avoid their conflict of interest. It is true that major arbitration rules, including ICSID Arbitration Rules, UNCITRAL Arbitration Rules and ICC Arbitration Rules, do not have prohibitive or restrictive regulations on the multiple roles of investment arbitrators as counsels, advocates or expert witnesses in other cases. While arbitration rules generally require arbitrators to disclose information that might give rise to justifiable doubts about their independence and impartiality, they do not describe in detail what needs to be disclosed. The disclosure is left to the arbitrators’ discretion.

Failure of arbitrators to disclose relevant information does not automatically lead to disqualification. Even if arbitrators indeed disclose their multiple roles as legal counsels, advocates or experts in other cases, it does not necessarily provide sufficient ground for challenging the qualification of arbitrators under the existing arbitration rules.

Given these issues, a number of options can be adopted to address the issue of potential conflict of interest. These options are not mutually exclusive. Rather, they can be used in combination. One option would be through revising these major arbitration rules. Arbitration rules may be revised to clarify the disclosure obligations of arbitrators and grounds for challenging the qualification of arbitrators.

Theoretically, arbitration rules could be revised to prohibit or restrict arbitrators concurrently acting as counsels in other cases. In practice, amending these arbitration rules cannot be easily expected. An alternative approach would be through issuing interpretative guidance by the arbitral institutions regarding the application of arbitration rules. The arbitral institutions may issue mandatory directions or non-binding guidance on the issue of arbitrators’ conflict of interest. Of particular relevance, in its Practice Direction VII and VIII, the ICJ directs the parties, when choosing a judge ad hoc, to refrain from nominating persons who are acting as agent, counsel or advocate in another case before the Court in the last three years. In the same vein, a person who has been a member of the court, a judge ad hoc, registrar, deputy-registrar, or high official of the Court should not, for a period of three years after leaving his or her position, be designated as agent, counsel, or advocate in a case before the Court.

A third option would be to impose strict requirements on the conduct of arbitrators in specific investment treaties. Treaty parties may require a strict obligation of timely

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and complete disclosure for arbitrators in cases of potential conflict of interest in investment treaties. ⁴⁶¹ An illustrative list of information to be disclosed is needed to describe in detail what needs to be disclosed. The multiple roles of arbitrators in other cases should be included in the list of information to be disclosed. A striking example of this approach is the WTO’s Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes. Besides imposing the disclosure obligation on members of WTO Dispute Settlement Body, it provides an Illustrative List of Information To Be Disclosed. Each covered person has a continuing duty to disclose information about “any interests the person may have in domestic or international proceedings, and their implications, where these involve issues similar to those addressed in the dispute in question”. Meanwhile, treaty parties may identify the dual arbitrator/counsel role as a ground for challenging the qualification of arbitrators to avoid their conflict of interest caused by multiple roles as arbitrator, counsel or expert witness in various cases. Likewise, failure to disclose this information may also be considered as sufficient ground for the disqualification of arbitrators.

The inclusion of express requirements on the conduct of arbitrators in investment treaties is a very direct approach in addressing the issue of arbitrators’ conflict of interest. It nevertheless presents at least two difficulties. First, the other treaty parties may not wish to include such a restriction. Second, investment treaties may end up containing lengthy and complex provisions on the conduct of arbitrators in order to exhaust all kinds of possible circumstances of arbitrators’ conflict of interest. An alternative option is to refer to a separate code of conduct for arbitrators in which the concrete rules of conduct are laid down. ⁴⁶² The separate code of conduct option may have some advantages over the inclusion of express requirements in investment treaties option. Particularly, a separate code of conduct could be amended on agreement of treaty parties without the need to renegotiate the investment treaty itself.

A separate code of conduct for arbitrators could also be more comprehensive than a few provisions on arbitrators in the investment treaty.

An example can be found in Article X.25 of the Canada-EU FTA, which provides

461 Catherine A. Rogers, Regulating International Arbitrators: A Functional Approach to Developing Standards of Conduct, Stanford International Law Review, Vol. 41, 2005, p. 53; Loretta Malintoppi, Independence, Impartiality, and the Duty of Disclosure of Arbitrators, in Peter Muchlinski, Federico Ortino & Christoph Schreuer (eds.), The Oxford Handbook of International Investment Law, Oxford University Press, 2008, p.

789.

462 Nathalie Bernasconi-Osterwalder, Lise Johnson & Fiona Marshall, Arbitrator Independence and Impartiality:

Examining the dual role of arbitrator and counsel, IV Annual Forum for Developing Country Investment Negotiators Background Papers, New Delhi, October 2010.

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that “arbitrators shall comply with the International Bar Association Guidelines on Conflicts of Interest in International Arbitration or any supplemental rules adopted pursuant to Article X.42(2)(b) (Committee on Services and Investment).” According to Article X.42(2)(b), the Committee “shall, on agreement of the Parties, adopt a code of conduct for arbitrators to be applied in disputes arising out of this Chapter, which may replace or supplement the rules in application, and that may address topics including: (i) disclosure obligations; (ii) the independence and impartiality of arbitrators; and (iii) confidentiality.” Therefore, the Parties, Canada and European Union, may adopt a precisely designed code of conduct for arbitrators to prevent arbitrators’ potential conflict of interest.