ISSUE CONFLICTS IN INVESTMENT TREATY ARBITRATION: A MOVE TOWARDS STRICTER APPLICATION OF IMPARTIALITY STANDARDS? (Part 1 of a 3-Part Series)

by Kuda Tshiamo [1]

 

PART 1 :: PART 2 :: PART 3

 

This three-part series investigates whether the international investment arbitration tribunals have introduced a new standard and, hence, have moved towards stricter application of impartiality standards with regard to issue conflicts in international investment treaty arbitration. Issue conflicts in investment arbitration are primarily concerned with the (in)ability of the arbitrators to be independent and impartial in the arbitration cases in which they are engaged. It involves an inquiry as to whether arbitrators will tend to be more biased towards one position as opposed to the other based on a number of factors.

Factors that have been put forward to challenge the suitability of certain arbitrators include, among others, previous academic publications, involvement in other proceedings either as counsel or arbitrator which could be deemed likely to affect the current proceedings, having heard similar arbitration cases several times, and lack of experience in investment arbitration.

The paper will be divided into three parts. This first part is concerned with providing a brief description of what issue conflicts in investment arbitration entails. In so doing, it alludes to UNCITRAL Rules, the ICC Rules and the ICSID provisions on issue conflicts, as well as the IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines). The second part shall look at the tests on issue conflicts as laid down in the abovementioned instruments and notes how they have been articulated by the international investment arbitration tribunals.

The third paper examines recent cases on issue conflict in an attempt to determine if the tribunals have raised the standards required of arbitrators higher. In light of the latest decisions, the paper concludes by observing that indeed the tribunals seem to have introduced a new requirement over and above what the prevailing provisions on issue conflict stipulates which has the effect of raising the bar too high.

The argument in these publications is not whether a third party test is wrong. Nor is this paper concerned with the rightfulness or wrongfulness of the standard. It merely investigates whether there has been a new move towards stricter application of impartiality standards in investment arbitration.

 

 

  1. INTRODUCTION

It is well settled that parties submitting their investment dispute have a legitimate expectation that their dispute will be resolved in a transparent and impartial manner. As a result, there is a standard required of the arbitrators to exercise their duties with due diligence and outmost impartiality, without conflict of interest. Hence the saying that justice should be done, it should also be seen to be done.[2]

 

  1. WHAT ARE ISSUE CONFLICTS?

Issue conflicts have been aptly described by Sinclair et al as follows:

“an ‘issue conflict’ in arbitration describes the existence of actual or apparent bias on the part of the arbitrator stemming from his or her previously expressed views on a question that goes to the very outcome of the case to be decided. It denotes the arbitrator’s relationship to the subject matter of the dispute, and his or her perceived capacity to adjudicate with an open mind.”[3]

Issue conflicts thus focus on the likelihood of bias on the part of the arbitrator presiding on a particular matter at the material time. This is usually a pre-judgment of legal issues anchored on the previous opinions, writings and/or judgments of an arbitrator which is deemed a hindrance to offer fresh perspective on the matter at hand. This is one of the major concerns in international investment arbitration. Several international treaties on investment arbitration contain provisions aimed at curbing such pre-judgment. In fact, the IBA Guidelines were designed in light of the concerns which appeared to be causing discomfort in the investment arbitration circles.

Under the UNCITRAL Rules, the standard is that the arbitrators may be disqualified if there are circumstances which give rise to justifiable doubts as to their impartiality or independence.[4] Furthermore, the International Chamber of Commerce Rules (“ICC Rules”) stipulate that the parties should be independent of the parties involved in the arbitration.[5] The IBA also provides guidance on this issue in that they provide for instances where an arbitrator may be replaced. It specifically postulates that an arbitrator may be replaced for publicly advocating for a particular position in a case which is being arbitrated. It states, however, that an arbitrator cannot be replaced just because he or she previously published articles on arbitration in law journals.[6] The IBA thus provides a balanced approach to the issue. Independence and impartiality is not only a requirement in investment arbitration tribunals. The courts such as the International Court of Justice (ICJ) and the International Criminal Tribunal for the former Yugoslavia (ICTY) are also required to ensure that the judges display some level of impartiality and independence.[7] Judges are normally asked to recuse themselves from cases if there is a reasonable likelihood or probability that they will not be impartial in their judgments.

The ICSID Convention provides that arbitrators “shall 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.”[8] Furthermore, it is possible for a party to call for disqualification of an arbitrator to the commission or tribunal if there is likelihood that the said arbitrator lack the qualities stipulated in Article 14(1).[9] In addition, the arbitrators are required to append their signatures on declaration forms. In those declaration statements, they are expected to set out any circumstances which could preclude their judgment from being reliable and thus questionable to the parties.[10]

It would appear, therefore, that the ICSID Convention has a higher threshold to be met as it not only requires the arbitrators to be of high moral standards but to be reliable in making independent judgment as well as submitting a declaration form. This is so in comparison to the other two arbitration institutions mentioned above where the criteria would be satisfied if the arbitrators can be said to be able to be impartial and independent in their appointments.

Having discussed the various standards employed by the different investment arbitration institutions it is necessary to look at some of the cases in which issue conflicts as a ground for arbitrator challenge in investment treaty arbitration was invoked. This shall be done in the second part of this Blog.

 

  1. CONCLUSIONS

This first part of the blog concerned itself with the examination of the concept of issue conflicts in international arbitration. In so doing, it alluded to the UNCITRAL, ICC, and ICSID provisions and rules on issue conflicts as well the IBA Guidelines. The primary objective was to assess the level of standards employed and adopted by the abovementioned international arbitration institutions on issue conflicts.

An in-depth and closer analysis of the various standards adopted in assessing an arbitrator’s suitability to be appointed as an arbitrator revealed that the ICSID Convention, unlike, the other rules and provisions contained in other instruments adopts a higher threshold. This is so because unlike the ICC and the UNCITRAL rules, over and above the required satisfaction that the arbitrators appointed will be able to be impartial and independent, arbitrators should be of high moral standards and should also be reliable in making independent judgments as well as require them to submit a declaration form.

 

[1] A practising attorney at Rantao Kewagamang Attorneys, Gaborone, Botswana; LLB (University of Botswana); LLM – International Trade and Investment Law (University of Pretoria, South Africa & University of Amsterdam, Netherlands); MBA Candidate (Amity University, India).

[2] R v Sussex, Ex parte McCathy (1924) 1 KB 256.

[3] Anthony Sinclair and Matthew Gearing, “Partiality and Issue Conflicts,” Transnational Dispute Management, Vol. 5, Issue 4 (July 2008).

[4] UNCITRAL Rules, Article 10 (1).

[5] ICC Arbitration Rules, Article 7 (1).

[6] See clauses 3.5.2 and 4.1.1 respectively.

[7] See article s 17(2) of the ICJ Statute and Article 13 (1) ICTY Statute as read with Rule 15 A of the ICTY Rules of Procedure and Evidence.

[8] ICSID Convention, Article 14 (1).

[9] ICSID Convention, Article 57.

[10] ICSID Rule 6(2).

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