This panel was convened at 9:00 am, Saturday, April 12, by its moderator, Chiara Giorgetti of the University of Richmond, who introduced the panelists: Charles N. Brower of 20 Essex Street Chambers; Judith Levine of the Permanent Court of Arbitration; Meg Kinnear of the International Centre for Settlement of Investment Disputes; and Luke Sobota of Three Crowns LLP.
INTRODUCTORY REMARKS BY CHIARA GIORGETTI *
The selection of international arbitrators is a fundamental part of the international arbitration process and should provide comfort and trust to users. However, the standards for arbitrators' independence and impartiality are often unclear and translate into difficult disqualification decisions. Do these threaten the legitimacy and effectiveness of international adjudication?
This panel, which includes a renowned arbitrator, a practitioner, and two institutional representatives, will discuss various aspects of challenges of arbitrators and the independence standards necessary under different international arbitration systems, assessing how, when, and if they work. Panelists will also address the impact of tactical challenges and discuss whether we are moving towards common challenge standards.
Over the last five years, we have witnessed a steady increase in the number of proposals to disqualify arbitrators, both for arbitrations conducted under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention) and for disputes administered by the Permanent Court of Arbitration (PCA). Indeed, reports of challenge proceedings are almost a weekly occurrence in the specialized press. (1)
The increasing number of challenges by itself raises important systemic questions. First, generally, are challenges becoming part of the regular arbitration proceedings? Are the parties using it as just another one of their tools in their international investment dispute toolbox? Second and more specifically, are challenges being used strategically by counsel to prolong proceedings, cause an arbitrator's departure, and antagonize the adversary? What, if anything, should be done about tactical or bad faith challenges?
Additionally, of late, we are also witnessing an increasing number of successful challenges. (2) This raises another set of interesting questions: What is the standard to challenge an arbitrator? Should there be a common standard among all the different systems? Who should decide the challenge? Should the decision be made by the remaining arbitrators, the appointing authority, the secretariat that administers the proceeding, or a neutral third party?
In our increasingly active but still rather small community, how should we deal with multiple appointments of the same arbitrators in different proceedings? And how should we respond when those appointments tend to come from the same client or counsel? As we know, arbitrators are often practitioners in international firms who have many diverse clients.
Is it acceptable for them to act as both counsel and arbitrators in different cases? Generally, how should we approach the counsel/arbitrator relationship? Do we need stricter and more common ethics rules to guide arbitrators' behavior?
As a community, we value academic freedom and encourage the free exchange of views, so how should we approach the issue of conflicts and the issue of prior stated positions? Should they become reasons for challenges? If so, how can we continue to encourage public discourse while at the same time protecting the parties' legitimate concerns?
* Assistant Professor of Law, Richmond University Law School; co-founder and co-chair, International Courts and Tribunals Interest Group. This panel was organized by the ASIL's International Courts and Tribunals Interest Group, which I have had the privilege of co-chairing with Brooks Daly, Deputy Secretary General of the Permanent Court of Arbitration, since the group's creation four years ago.
(1) See, for example, the reports published by the Global Arbitration Review (http://globalarbitrationreview.com) and the Investment Arbitration Reporter (http://www.iareporter.com).
(2) See, for example, Caratube Int 7 Oil Co. LLP v. Republic of Kazakhstan, Decision on the Proposal for Disqualification of Mr. Bruno Boesch, ICSID Case No. ARB/13/13 (Mar. 20, 2014) (upholding the challenge of Bruno Boesch caused by his participation as an arbitrator in a related case).
CHALLENGE OF ARBITRATORS AT ICSID--AN OVERVIEW
By Meg Kinnear *
In its almost 50 years of operation, the International Centre for Settlement of Investment Disputes (ICSID or the Centre) has received 83 applications for the disqualification of arbitrators in 57 of the over 470 cases registered by the Centre.
NUMBER OF APPLICATIONS FILED
The first challenge was filed in Amco v. Indonesia in 1982, (1) and it was not until 16 years later that the next one was filed. (2) In recent years the number of challenge applications filed has increased. Indeed, between 2010 and May 2014, forty-four arbitrator challenges were initiated at ICSID. The increased number of challenges is not limited to ICSID and has been seen generally in both investment and commercial arbitration. About 68% percent of the challenges at ICSID have been made to a single member of the tribunal, but we have been increasingly receiving challenges to the majority of the tribunal or to the full tribunal. There have also been cases in which more than one challenge was initiated--sometimes with respect to the same arbitrator. (3)
The procedure for the disqualification of an arbitrator in an ICSID proceeding is straightforward and is outlined in ICSID Arbitration Rule 9.
ICSID will only address a disqualification proposal after the tribunal is constituted. Under ICSID Arbitration Rule 9(1), the disqualification proposal must be submitted promptly and, in any event, before the proceeding is declared closed. A proposal for disqualification that is not filed "promptly" will be rejected. (4) As soon as the tribunal is constituted and ICSID receives the proposal to disqualify, the proceedings are suspended and remain so until the challenge is decided or the resulting vacancy on the tribunal is filled. (5)
The party proposing the disqualification must file the proposal with the Secretary-General. (6) The Secretary-General immediately transmits the proposal to the tribunal. If the challenge is to be decided by the Chairman of the ICSID Administrative Council, it is also transmitted to him or her. (7) While the Rules do not require a copy of the proposal to be sent to the other party to the dispute, (8) in practice it is also transmitted to the other party with a schedule for the filing of observations by both sides and explanations by the challenged arbitrator. The provision of explanations by an arbitrator is optional, but should be provided "without delay" (9) if submitted.
Under Article 58 of the ICSID Convention and under ICSID Arbitration Rule 9(4), the challenge is considered by the non-challenged arbitrators in the absence of the challenged arbitrator. This is based on practice in various international courts and tribunals, including the International Court of Justice. However, if the challenge is to a sole arbitrator or to the majority of the tribunal, or if the non-challenged arbitrators are equally divided on how to determine the challenge, it is decided by the Chairman of the ICSID Administrative Council. Recently, the number of challenges decided by the Chairman has increased--either because the non-challenged arbitrators are equally divided, or because the challenge is to the majority or all of the tribunal. Indeed, all but five of the 20 proposed disqualifications on challenges issued between 2012 and mid-May 2014 were decided by the ICSID Chairman.
The ICSID Arbitration Rules do not impose a time limit for the co-arbitrators to decide a challenge, except to state that it must be done "promptly." (10) When the ICSID Chairman is seized of a challenge, he is expected to use his best efforts to decide the challenge within thirty days of receiving the file. (11) ICSID is very conscious of the need to ensure that challenges are resolved expeditiously, as the proceeding remains suspended until the challenge is resolved. Presently, the entire challenge process at ICSID is resolved within three months or less. This includes the briefing period and, where applicable, the time the proposal is before the non-challenged arbitrator prior to review by the ICSID Chairman.
BASES FOR CHALLENGE
There are three main grounds for the challenge of arbitrators in ICSID proceedings, namely nationality, capacity, and independence.
The effect of Article 39 of the ICSID Convention is that an arbitrator cannot be a national of the same state as either disputing party without the consent of both parties. To date, there has not been a successful proposal for the disqualification of an arbitrator at ICSID on nationality grounds. However, a few arbitrators have stepped down when they realized that their nationality put them at risk of a challenge on this basis.
On capacity, Article 56 of the ICSID Convention and ICSID Arbitration Rule 8(1) state that if an arbitrator becomes incapacitated or unable to perform the duties of office, the usual procedure in respect of the disqualification of arbitrators in ICSID Arbitration Rule 9 shall apply. Again, this basis for challenge has rarely been invoked, and no arbitrator has been disqualified on this basis to date.
The most usual ground relied upon in proposals for disqualification of arbitrators at ICSID is an alleged absence of impartiality or independence.
Standard for Challenges Based on Lack of Impartiality or Independence
The legal standard at ICSID for challenges based on alleged lack of impartiality or independence is set out in Article 57 of the ICSID Convention. It provides that a party may propose the...