Choosing arbitrators is an important step in any international arbitration. Most treaties are silent in that regard, and selection of arbitrators is governed by the applicable arbitration rules. A few recent treaties have included more specific details about the kinds of characteristics an arbitrator should possess, but this is still the exception rather than the rule.
1. Nomination procedures
The common practice in international arbitration is that disputes are decided by a three-arbitrator panel. Each disputing party appoints an arbitrator and then — depending on the applicable arbitration rules — either the parties (e.g. ICSID Rules) or the party-appointed arbitrators (e.g. UNCITRAL Rules) agree on a presiding arbitrator. In the event the parties cannot agree on the presiding arbitrator, the IIA may name an appointing authority to make the selection, often, but not always, from a specified roster of panelists.
The appointing authority will likely have the authority to appoint a disputing party’s arbitrator in the event the disputing party has not named its own arbitrator within the requisite time period.
The Canada-Panama FTA (2010) contains the following provision, which supplements (and overrides, in case of inconsistency) the applicable arbitration rules:
“Article 9.25: Arbitrators
1. Except in respect of a Tribunal established under Article 9.27 [“Consolidation”], and unless the disputing parties agree otherwise, the Tribunal shall be composed of three arbitrators. One arbitrator shall be appointed by each of the disputing parties and the third, who will be the presiding arbitrator, shall be appointed by agreement of the disputing parties.
[…]
3. If the disputing parties do not agree on the remuneration of the arbitrators before the constitution of the Tribunal, the prevailing ICSID rate for arbitrators shall apply.
4. If a Tribunal, other than a Tribunal established under Article 9.27 [“Consolidation”], has not been constituted within 90 days from the date that a claim is submitted to arbitration, the Secretary-General of ICSID, on the request of either disputing party, shall appoint the arbitrator or arbitrators not yet appointed. The Secretary-General shall make the appointment in its discretion and, to the extent practicable, do so in consultation with the disputing parties.
The Secretary-General may not appoint as presiding arbitrator a national of either Party.”
Paragraph three of the above article is a default provision regarding the arbitrators’ remuneration. Arbitrator fees can be very high. The ICSID Rules cap the arbitrators’ remuneration rate (currently at US$3,000 per day per arbitrator) absent the permission of the Secretary-General to increase the rate. By contrast, the UNCITRAL Rules do not, leaving the issue of remuneration for negotiations between the parties and the arbitrators. Setting a fee schedule that will apply in the absence of party agreement helps avoid prolonged negotiations with the disputing parties or with the arbitrators themselves.
2. Arbitrator qualifications
Most treaties do not specify the desired characteristics of an arbitrator. Article 14(1) of the ICSID Convention requires that arbitrators be “persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment”.
One of the advantages of arbitration has always been that arbitrators can be chosen with an eye to their suitability for deciding a particular case. Investment arbitrations frequently involve matters relating to the public interest — such as the propriety of government regulations — and involve the application of, inter alia, public international law. Thus, a few recent treaties have laid out general qualities that should guide the selection of arbitrators. For example, Article 9.25 of the Canada-Panama FTA (2010) provides:
“2. 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.
They shall be independent of, and not be affiliated with or take instructions from, either Party or the disputing investor.”
Some treaties have laid down particular qualifications — an expertise in financial services law or practice — for arbitrators deciding disputes relating to financial institutions.82
3. Ethical standards of impartiality and independence
Arbitrators, including party-appointed arbitrators, should be independent and impartial. These requirements apply regardless whether they are specifically mentioned in a treaty. In addition, certain rules apply regarding the nationality of the different arbitrators. A frequent requirement is that the presiding arbitrator not be a national of either party. Party-appointed arbitrators can sometimes hold the nationality of the party appointing them depending on the applicable arbitration rules, but must be independent and impartial.
The requirement that arbitrators be independent means that they must not have a relationship with either of the disputing parties or
82 See, for example, Article 29(3) of the Canadian Model BIT (2004).
related persons or entities— whether social, economic or otherwise
— that suggests some dependence. The requirement of impartiality relates to the ability of the arbitrator to come to the case without favouring one of the parties and without preconceptions in relation to the subject-matter of the dispute.
A lack of independence can suggest a lack of impartiality, and even an appearance of bias can be sufficient to disqualify an arbitrator.83 Appearance of bias is impermissible because of the important principle that justice “must not only be done, but must be seen to be done.”84 This does not mean that de minimis contacts between an arbitrator and a party demonstrate an appearance of bias;
the usual concern is whether the contacts are such that a reasonable observer would have justifiable doubts about the arbitrator’s impartiality. Arbitrators ordinarily have an on-going duty to disclose any information or activities that could give rise to justifiable doubts about their independence or impartiality.85
4. Challenges to arbitrators
Most investment agreements do not include specific challenge procedures. Those matters are governed by the applicable arbitral rules. For example, the UNCITRAL Rules (1976 and 2010) provide that arbitrators can be challenged “if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence”.
Challenges must be made within a certain number of days of the arbitrator’s appointment or, in the case of later-acquired knowledge, within a specified period — often 15 or 30 days from the date that the challenging party learns of the facts supporting the challenge. In some cases an arbitrator will resign when faced with a challenge,
83 Park, 2009, pp. 636–38; 670–72.
84 Ibid., p. 684.
85 See generally Malintoppi, 2008, p. 789.
though that resignation does not imply acceptance of the validity of the challenge. If there is no resignation, the applicable rules differ over who decides whether the challenge should succeed. The UNCITRAL Rules (1976 and 2010) provide that the appointing authority decides the challenge; Rule 9(4) of the ICSID Arbitration Rules provides that when there is a three-person tribunal, the other two arbitrators shall decide the challenge. In the event those individuals cannot agree, the Chairman of the ICSID Administrative Council takes the decision.86
A challenge may allege, for example, that an arbitrator has some kind of financial link to an affiliate of one of the parties or that an arbitrator has made public statements that allegedly demonstrate bias. To date, challenges have not often been successful.87
Issue conflicts. Unique characteristics of investment arbitration have given rise to a special category of conflicts of interest known as “issue” conflicts. They involve arbitrators who also act as counsel in other cases or those individuals who sit repeatedly as arbitrators in cases that raise similar issues.88 For instance, one of the first issue-conflict cases involved a claim against a sitting arbitrator who would be deciding an issue related to expropriation; as counsel in an unrelated case he would be taking a strong pro-investor position on a virtually identical issue. Such a situation may be seen as casting doubts on his ability to hear the case impartially and could at the least give rise to the appearance of impropriety.89 One of the reasons behind issue conflicts is that there is a relatively small pool of
86 See ICSID Convention Articles 57–58; ICSID Convention Arbitration Rule 9.
87 For more information about arbitrator ethics and challenges, see C. Rogers, forthcoming.
88 See Levine, 2006, pp. 61–65 (describing various cases involving issue conflicts); Sands, 2011, pp. 19, 22–23.
89 Levine, 2006, pp. 61–65.
lawyers who serve as arbitrators and counsel in IIA-based proceedings. An additional factor is that previous arbitral awards are referred to as persuasive authority in subsequent cases. Hence there could be an incentive to decide a case in a way that would be beneficial to an arbitrator’s client in the second case.
A separate facet of this problem stems from the fact that IIA disputes are governed by a relatively uniform legal field and that a few problematic IIA questions keep arising again and again. By researching the record of a particular arbitrator in earlier cases, one can predict in advance the position he or she is likely to take on a given issue. If arbitrators sit repeatedly in cases that address similar vexing issues, this gives rise to concerns that they have already taken a position on an issue (whether pro-State or pro-investor) and thus might not be in a position to be open-minded. Somewhat similarly, an individual’s expressing an opinion on a particular issue in academic writings may be interpreted as evidence of “pre-judging” that issue. These matters are novel and in the process of development; so far, known attempts to challenge arbitrators on these grounds have been unsuccessful.90
G. Claims by investors on their own behalf and on behalf of an