This article is an extract from The Investment Treaty Arbitration Review, 7th Edition. Click here for the full guide.
Following a record year in 2020, during which there were at least 12 decisions on proposals to disqualify arbitrators and ad hoc committee members within the International Centre for Settlement of Investment Disputes (ICSID) context (beating the previous record in 2018),2 there were just three decision in 2021,3 only one of which is in the public domain.4 Having regard to the public availability of decisions and this flurry of activity, this chapter focuses on challenges to arbitrators (and committee members) brought under the ICSID Convention. The chapter first sets out the grounds for disqualification under the ICSID Convention and Rules, then briefly details the prevailing legal standard as developed through ICSID jurisprudence. The majority of the chapter is devoted to a discussion of three categories of alleged conflict,5 concentrating on the reasoning of publicly available decisions published between 2018 and 2021.
II The Rules
The main grounds for disqualification of arbitrators under the ICSID Convention are prescribed by Article 57, which provides that:
[a] party may propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14. A party to arbitration proceedings may, in addition, propose the disqualification of an arbitrator on the ground that he was ineligible for appointment to the Tribunal under Section 2 of Chapter IV.
Reference to Section 2 of Chapter IV is to the nationality requirements for appointment under Articles 38 and 39 of the ICSID Convention. A third ground for disqualification is found in Rule 8 of the ICSID Arbitration Rules, which provides for a situation in which an arbitrator becomes incapacitated or unable to perform the duties of his or her office.
The most commonly invoked ground for disqualification is a manifest lack of the qualities required by Article 14(1) of the Convention:
Persons designated to serve on the Panels 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. Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators.
It is well settled that although the English text of Article 14(1) refers only to 'independent judgment', this provision also contains a requirement of 'impartiality' (deriving from the equally authentic Spanish text).
In practice, applications for disqualification under Article 14(1) are almost always premised on an alleged lack of independence or impartiality, and it is on these types of challenges that this chapter is focused.
Article 57 of the Convention is supplemented by ICSID Rule 9(1), which requires that a proposal for disqualification be filed promptly.6 The ICSID Convention and Rules do not specify the number of days within which a proposal for disqualification must be filed. Accordingly, the timeliness of a proposal must be determined in each case. In 2020, the disqualification proposal in Kazimin v. Latvia was dismissed in its entirety for a delay in filing of 87 to 90 days,7 and in Landesbank v. Spain,8 one ground for challenge that arose out of facts that occurred in 2017–2019 was likewise dismissed.9
III The legal standard under the ICSID Convention
The legal standard for disqualification in the ICSID context has been closely considered in decisions on disqualification proposals and scholarly commentary. The authors do not propose to rehearse that commentary here in full but rather note that recent decisions suggest a welcome shift in the direction of a consistent and predictable standard.
i The applicable legal standard is objective
In determining whether an arbitrator lacks impartiality or independence, it is well established that the test is objective. As put by the chair of the ICSID Administrative Council in Blue Bank and Burlington:
[t]he applicable legal standard is an “objective standard based on a reasonable evaluation of the evidence by a third party”. As a consequence, the subjective belief of the party requesting the disqualification is not enough to satisfy the requirements of the Convention.10
ii It is sufficient to establish the appearance of dependence or bias
In the case of Amco,15 the very first challenge to an arbitrator brought under the ICSID Convention in 1982, Indonesia sought the disqualification of the claimants' appointed arbitrator on a number of grounds, including that he had provided tax advice to a principal shareholder in the claimants' company after the commencement of the arbitration. Prior to this, his law firm also had a profit-sharing arrangement with the claimants' counsel.16 The unchallenged arbitrators are reported to have dismissed the proposal, noting that proof of the existence of facts that indicated a lack of independence was insufficient without strict proof of actual bias.17 The standard of proof imposed in Amco was, accordingly, significantly higher than the 'justifiable doubts' standard typically adopted by other arbitral institutions18 and rules.19
This decision was heavily criticised,20 and a majority of subsequent decisions have confirmed that Articles 57 and 14(1) do not require proof of actual dependence or bias; rather, it will be sufficient for a party to establish the appearance of dependence and bias. The next challenge, some 20 years later, was to the president of the ad hoc committee in the annulment proceedings in Vivendi I.21 In that case, the unchallenged committee members rejected the findings in the Amco decision, noting a proper interpretation of the standard of proof was analogous to that in Rule 3.2 of the International Bar Association (IBA) Code of Ethics, which refers to an 'appearance of bias'.22
The rationale for this lower standard was neatly summarised in the 2010 Urbaser decision:
[t]he requirements of independence and impartiality serve the purpose of protecting the parties against arbitrators being influenced by factors other than those related to the merits of the case. In order to be effective this protection does not require that actual bias demonstrate a lack of independence or impartiality. An appearance of such bias from a reasonable and informed third person's point of view is sufficient to justify doubts about an arbitrator's independence or impartiality.23
This was also espoused by the chair of the ICSID Administrative Council in the Blue Bank, Burlington and Interocean decisions,24 and in the Raiffeisen decision, in which the chair relatedly noted that '[a]ll relevant facts shall be taken into account in establishing the appearance of dependence or bias'.25
iii Requirements of impartiality or independence, or both, must be manifestly lacking
The nature of these requirements has twice been summarised by the chair of the ICSID Administrative Council in the following terms: 'Impartiality refers to the absence of bias or predisposition towards a party. Independence is characterised by the absence of external control.'26
The requirement that these must be manifestly lacking is found in Article 57. As Professor Schreuer observed in his commentary: 'The requirement that the lack of qualities must be 'manifest' imposes a relatively heavy burden of proof on the party making the proposal.'27 The meaning of 'manifest' has been the subject of interpretation through ICSID jurisprudence.
Karel Daele's monograph, Challenge and Disqualification of Arbitrators in International Arbitration, suggests the existence of three generations of decisions on this matter:28
- The first comes from Amco, in which the unchallenged arbitrators interpreted 'manifest' to mean that a lack of the qualities required pursuant to Article 14(1) must be 'quasi-certain or highly probable'.29
- Daele's second generation of decisions, starting with Vivendi I, refocused the discussion in this context on a requirement that the circumstances giving rise to the challenge must be established.30 In this regard, the unchallenged arbitrators noted that the term 'manifest' in Article 57 'must exclude reliance on speculative assumptions or arguments'. Instead, 'the circumstances actually established (and not merely supposed or inferred) must negate or place in clear doubt the appearance of impartiality'.31 Without further discussion of the specific meaning of 'manifest', the unchallenged arbitrators concluded that any deficiency of the qualities in Article 14(1) so proven would be manifest.
- The third and most recent generation of decisions, starting with Blue Bank in 2013, preferred a more focused and specific interpretation of 'manifest' as meaning 'evident' or 'obvious'.32
This interpretation was recently affirmed in the 2019 Canepa decision,33 in which the unchallenged arbitrators rejected the respondent's submissions that Articles 57 and 14(1) of the ICSID Convention must be interpreted as an obligation to disqualify an arbitrator if there is 'any indication' of a lack of independence or impartiality or 'any doubt' of bias. At the other end of the spectrum, in the 2021 Meijer decision, the chair of the ICSID Administrative Council rejected the respondent's attempt to import a higher standard requiring 'established facts which place in clear doubt the appearance of impartiality'.34
In its 2019 recommendation to ICSID on Germany's proposal to disqualify the entire tribunal in Vattenfall, the Permanent Court of Arbitration (PCA) summarised the applicable legal principles as follows:35
Pursuant to Article 57 of the ICSID Convention, the challenging party carries the burden to establish, first, the existence of facts on the basis of which a 'manifest' lack of the qualities of an arbitrator can be inferred. Second, the challenging party must establish that such inference is reasonable, considering the circumstances of the case. Article 57 of the ICSID Convention contains an objective standard. Subjective perceptions or beliefs of the challenging party are insufficient to disqualify an arbitrator.36
IV Circumstances giving rise to challenge under the ICSID Convention: a selection of decisions
In establishing the circumstances giving rise to an alleged lack of independence or impartiality, parties have often relied on the IBA Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines). They are a non-binding source of guidance that represent an international consensus on minimum standards in relation to conflicts of interest in international arbitration. As such, it is often argued that they can be equated with the view that a reasonable and informed third party would take of a set of circumstances, and that they would form a part of the analysis of a reasonable third party when assessing a conflict situation. Notwithstanding their non-binding nature, previous ICSID decisions have referred to them as 'useful references',37 'instructive'38 and 'a most valuable source of inspiration'.39
i Multiple appointments by (or against) the same party
Challenges based on multiple appointments by the same party, or its affiliates, have a long history in ICSID arbitration.
The 2010 Tidewater decision remains highly relevant to challenges of this nature. In finding that 'the question whether multiple appointments to arbitral tribunals may impugn the independence or impartiality of an arbitrator is a matter of substance, not of mere mathematical calculation',40 the unchallenged arbitrators noted that '[t]he starting‐point is that multiple appointments as arbitrator by the same party in unrelated cases are neutral, since in each case the arbitrator exercises the same independent arbitral function'.41 Either or both of the following factors may give rise to an appearance of a manifest lack of independence or impartiality: (1) the prospect of continued and regular appointment, with attendant financial benefits that might create a relationship of dependence or otherwise influence the arbitrator's judgement; or (2) a material risk that the arbitrator may be influenced by factors outside the record as a result of his or her knowledge derived from the other cases.42
In Caratube II, the only successful challenge in this category, the claimants challenged Kazakhstan's appointed arbitrator, Mr Bruno Boesch, on two main grounds: (1) his three prior appointments by Kazakhstan's counsel, Curtis Mallet-Prevost Colt & Mosle; and (2) his appointment by Kazakhstan (also represented by Curtis Mallet-Prevost Colt & Mosle) in the Ruby Roz UNCITRAL arbitration, said to have been premised on the same legal grounds and factual allegations as the claims in Caratube II.
In relation to point (1), above, the unchallenged arbitrators noted that the claimants had not made any allegations of Mr Boesch's financial dependency on either Curtis Mallet-Prevost Colt & Mosle or Kazakhstan and, following the proposition in Tidewater, the mere fact of his appointments (without more) could not suffice to indicate a manifest lack of independence or impartiality.45 As to point (2), above, the unchallenged arbitrators concluded that there was a significant overlap in the underlying facts between the two arbitrations,46 which satisfied the objective test for disqualification. In particular, Mr Boesch would be privy to information and facts from the Ruby Roz proceedings (outside the record of the instant proceedings) leading a reasonable third party to find it highly likely that Mr Boesch would prejudge legal issues in the present arbitration based on the facts underlying the Ruby Roz case.47 The claimants in each case were relying on the same fact witnesses.48 Relatedly, the same was held to give rise to an appearance of imbalance within the tribunal.49 The unchallenged arbitrators left it open as to whether this constituted an aggravating factor or a stand-alone ground for disqualification.50
In February 2018, the claimants in Elitech submitted an application to disqualify Croatia's appointed arbitrator, Professor Brigitte Stern, on the basis that her repeat appointments by Croatia and Croatia's counsel, Latham & Watkins,51 raised doubts as to her ability to exercise the qualities enshrined in Article 14(1) of the ICSID Convention.52
In particular, the claimants noted that, between 2014 and 2016, Professor Stern had been appointed by Croatia in three other investor-state arbitrations, all of which were still current; and, including the case in question, Professor Stern had served as Croatia's appointed arbitrator in four of the seven known investor-state proceedings brought against it.53
The claimants relied on the IBA Guidelines, which include, at Clause 3.1.3 of the Orange List,54 whether the arbitrator has been appointed as arbitrator on two or more occasions by one of the parties within the past three years.55 To extend the temporal scope of this guideline, the claimants referred to the decision in Highbury v. Venezuela,56 relating to an (unsuccessful) challenge to Professor Stern three years earlier,57 which stated that it was sometimes appropriate in investment arbitrations to consider the period beyond the three years specified in the IBA Guidelines.58
The claimants also argued that the other current cases in which Professor Stern was appointed by Croatia concerned factual and legal issues that were substantially similar to those to be decided in the proceedings in question.59 Relying on Clause 3.1.5 of the IBA Guidelines,60 the claimants asserted that this fact created 'reasonable or clear doubt or real risk in regard to the exercise of independent judgement' and therefore served as a ground for disqualification.61
Notably, the unchallenged arbitrators (Professors Kaufmann-Kohler and Goatanda) were divided on the issue, and the challenge was accordingly decided by the chair of the ICSID Administrative Council in accordance with ICSID Article 58.62 In a decision dated 23 April 2018, the chair rejected the claimants' disqualification proposal, reaffirming the Tidewater decision and noting that the claimants had failed to set out any circumstance that would call into question Professor Stern's impartiality and independence. The multiplicity of her appointments by Croatia by itself was insufficient,63 and the claimants had failed to discharge the burden of showing that the presence of common issues was 'sufficient to give rise, objectively, to the appearance of dependence or bias'.64 Of relevance to this finding, the chair noted that Professor Stern's other appointments were in cases that did not arise in the same industry as in Elitech. That those disputes arose under the same treaty was insufficient to give rise to any presumption of bias.65
Also, in February 2018, and in another ICSID arbitration involving Croatia, Croatia proposed the disqualification of the claimants' appointed arbitrator, Dr Stanimir Alexandrov, in Raiffeisen. The application was premised on four points that Croatia asserted gave rise to objective and justifiable doubts as to Dr Alexandrov's independence and impartiality, including Dr Alexandrov's multiple appointments in treaty cases against Croatia.
In this regard, pointing to Dr Alexandrov's appointment in three other extant treaty arbitrations against Croatia66 (and a further nomination that was voluntarily declined),67 Croatia stated that the effect of Dr Alexandrov's serving on 45 per cent of current ICSID claims against the state was that he 'possesse[d] significant and unique influence over the Respondent's financial situation and international reputation which no single arbitrator should possess'68 and that he was highly likely to be negatively predisposed against Croatia (albeit if subconsciously) to secure further appointments by future claimants against the state.69 Furthermore, and as a result of Dr Alexandrov having become an independent arbitrator in September 2017, Croatia argued that his own income was heavily dependent on arbitral appointments by claimants in investment treaty arbitrations.70 Dr Alexandrov's multiple appointments in cases against Croatia was stated to be equivalent to multiple appointments of an arbitrator by the same claimant or counsel falling under Clause 3.1.3 of the IBA Guidelines Orange List.71
Croatia stated that the overall circumstances surrounding Dr Alexandrov's repeat appointments and, in particular, 'the prospect of continued and regular appointment, with the attendant financial benefits' gave rise to justifiable doubts as to his ability to exercise independent judgement.72
Croatia also argued that Dr Alexandrov would be required to consider the same legal issues as in the case of Gavrilović, for which he was also sitting as the claimants' arbitrator.73 In this regard, and owing to the more advanced stage of the Gavrilović proceedings, it was contended that Dr Alexandrov would already have formed a view on the compatibility of the Austria–Croatia BIT and EU law, before any opportunity to hear the parties' submissions in the case in question arose.74
More broadly, Croatia also noted that Dr Alexandrov had served as the claimant-investor's appointee in 35 of the 38 known investment treatment arbitrations in which he has sat as arbitrator.75
For reasons that were not disclosed, Croatia's appointed arbitrator, Mr Lazar Tomov, recused himself from deciding the application,76 which was accordingly considered instead by the chair of the ICSID Administrative Council.
In determining Croatia's complaint regarding Dr Alexandrov's multiple appointments in treaty cases against Croatia, and by claimant-investors more generally, the chair relied on the earlier stated proposition from Tidewater and further noted the principle in Vivendi I, stating that circumstances giving rise to a finding that a lack of impartiality of independence is manifest 'must negate or place in clear doubt the appearance of impartiality'.77 In this regard, the chair determined that Croatia had failed to evince an appearance of bias or financial dependence that satisfied this requirement.78
Specific to any overlap of factual or legal issues, the chair noted that 'the mere exposure of an arbitrator to the same legal issue in multiple arbitrations is insufficient to disqualify that arbitrator', and, relying on the unchallenged arbitrators' reasoning in Caratube II, that '[t]here must be an additional – significant – overlap of facts that are specific to the merits and the parties involved'.79
Both challenges made reference to the frequency with which the challenged arbitrators had been appointed by either investors or states: in the case of Dr Alexandrov, appointments by claimant-investors and, in the case of Professor Stern, appointments by respondent-states. So far as the authors are aware, no challenge based on this (relatively commonplace) occurrence in the ICSID context has ever been successful.
The subject of multiple appointments also arose in three separate challenges brought by Venezuela against Mr Alvaro Castellanos Howell.80 These challenges, all of which were decided in 2018, concerned Mr Castellanos Howell's appointment as the president of three ad hoc committees in ICSID annulment proceedings involving Venezuela. All three challenges were reported to have been brought on the same grounds and all were rejected.81 The decision in the Blue Bank annulment proceedings (the only one of the decisions that is publicly available) is considered below.
Venezuela relied on Article 3.1.3 of the Orange List of the IBA Guidelines to argue that the appointment of Mr Castellanos Howell to five ad hoc committees overseeing annulment proceedings involving Venezuela was indicative of Mr Castellanos Howell's reliance and financial dependence on such repeat appointments and his resultant lack of independence.82 In determining the application, the unchallenged committee members noted that the potential risk of conflict identified by Article 3.1.3, which applies to multiple appointments by a party or its affiliate, was not applicable to a recurring professional relationship with ICSID, the appointing authority to ad hoc committees.83
At the same time, relying on Article 3.1.5 of the Orange List of the IBA Guidelines, Venezuela also pointed to an alleged commonality of issues across the proceedings to be determined by the committees on which Mr Castellanos Howell sat as president. This was dismissed on the basis that Venezuela had failed to identify any overlap beyond all proceedings being in respect of the annulment of awards in proceedings involving Venezuela.84
This issue also arose in Spain's challenge to the claimant's appointed arbitrator, Mr Peter Rees QC, in Canepa. The unchallenged arbitrators dismissed this ground of challenge, finding that the fact of Mr Rees QC's two previous appointments by Allen and Overy 'is not, standing alone, a basis for finding either an actual or an appearance of a manifest lack of independence or impartiality when appointed in a third case'.85
In 2020, the chairman of the ICSID Administrative Council rejected Spain's proposal to disqualify Professor Guido Santiago Tawil on the basis of his multiple appointments by investors against Spain alleged to concern similar issues. In doing so, the chairman affirmed the test set out in Tidewater emphasising that the cases involved different (1) investors, (2) law firms representing the claimants, (3) dates of the alleged investment and (4) measures. Thus, the mere existence of these multiple appointments did not rise to the level that would merit questioning the independence and impartiality of an arbitrator.86
These decisions suggest that the test set out in Tidewater is likely to remain persuasive in determining these types of challenges, and that the threshold for establishing an appearance of dependence or partiality remains high.
ii A pre-existing relationship with one of the parties or their affiliates
Pre-existing professional relationships have formed the basis for a number of challenges under the ICSID Convention. It does not define the kinds of relationships that should be disclosed by arbitrators or considered as a bar to appointment. As noted by Professor Christoph Schreuer:
a relationship with a party affecting the eligibility as arbitrator may be of a personal, family or business nature. It would include a permanent attorney/client relationship, any other permanent or recurrent business relationship, employment by a party, including civil service in a State that is a party, substantial participation or shareholding in a company that is a party and any form of relationship in which the arbitrator stands to profit directly or indirectly from the financial gain of a party.87
A pre-existing professional relationship, in this case in the context of a lawyer and client, formed the grounds for challenge in Amco. Although the challenge was dismissed, in noting the subsequent criticism of this decision, the unchallenged arbitrators in Vivendi I stated that any such relationship can only be justified under the de minimis exception.88 In their estimation, anything more would surely be sufficient to establish the appearance of dependence.
In Blue Bank, the respondent challenged the claimant's appointee, Mr José María Alonso, on the basis that the firm at which he was a partner (Baker McKenzie) also represented the claimant in parallel arbitration proceedings. The chair of the ICSID Administrative Council upheld the respondent's request, inter alia, because, in the words of Professor Schreuer, Mr Alonso 'stood to profit directly or indirectly from the financial gain of a party'.89
As the chair observed:
The sharing of a corporate name, the existence of an international arbitration steering committee at a global level, and Mr. Alonso's statement that his remuneration depends “primarily” but not exclusively on the results achieved by the Madrid firm imply a degree of connection or overall coordination between the different firms comprising Baker & McKenzie International.90
In Generation Ukraine,91 the claimant challenged the respondent state's nominee, Dr Jürgen Voss, on the basis that he had been involved in studies and investment policy reviews of Ukraine during his time as Deputy General Counsel of the Multilateral Investment Guarantee Agency. The claimant cited concerns that Dr Voss had developed personal connections with Ukrainian political officials and that these personal connections would deprive him of the capacity for independent judgement.92 On referral by the unchallenged arbitrators, the request was recommended to be dismissed by the Secretary General of the PCA without reasoning. Nevertheless, it must presumably have been considered that previous professional relationships arising out of an arbitrator's participation in a multi-state programme of cooperation, without any resultant financial dependency, was not a basis for disqualification.
The circumstances of the challenge in Generation Ukraine are similar in a number of respects to those raised by the claimant in its challenge to Kazakhstan's appointed arbitrator, Professor Rolf Knieper, in Big Sky.93 The challenge, which was successful, centred on Professor Knieper's previous work as a German-employed consultant on various legal reforms across central Asia. In particular, it was alleged that Professor Knieper's work had brought him into close contact with members of the Kazakh judiciary, whose actions the claimant criticised.94
The successful challenge in Big Sky was distinguished by the co-arbitrators in their 2020 decision on Hope Services's challenge to Cameroon's appointed arbitrator, Professor Pierre Mayer.95 Hope Services's complaint centred on Professor Mayer's role as counsel to Cameroon some 30 years earlier in the ICSID case of Klockner v. Cameroon.96 In rejecting the challenge, the co-arbitrators noted that the fact that an arbitrator previously served as counsel to a party does not create an automatic presumption of partiality. Instead, this required an assessment case by case by reference to three key factors: (1) the time frame of the relationship (when it started and ended); (2) the materiality of the relationship (including consideration of the frequency of contract); and (3) the existence of any dependency. Weighing these factors, the co-arbitrators concluded that Professor Mayer's role in Klockner v. Cameroon did not warrant his disqualification (in particular, this involvement had occurred more than 30 years earlier and Professor Mayer's role in any event was 'limited and circumscribed').97
Although not strictly within the scope of disqualification, on 11 June 2020, an ICSID ad hoc committee granted Spain's application to annul the award in Eiser v. Spain98 in its entirety. The committee found that the failure by Eiser's party-appointed arbitrator, Dr Alexandrov, to disclose connections with Eiser's damages expert, Mr Carlos Lapuerta of The Brattle Group, in the underlying arbitration resulted in an improper constitution of the tribunal and a serious departure from a fundamental rule of procedure. The committee found that a third party would find an evident or obvious appearance of lack of impartiality based on a reasonable evaluation of the facts.99 The committee observed that Dr Alexandrov, in his capacity as counsel in other cases, had appointed The Brattle Group in numerous commercial arbitrations and nine investor-state arbitrations. In four of those cases, two of which were contemporaneous with the Eiser proceedings,100 he had worked closely with Mr Lapuerta. Notably, these facts had also given rise to two challenges to Dr Alexandrov in other cases.101 By not disclosing these facts in the Eiser arbitration, the committee held that Dr Alexandrov did not fulfil his continuing duty of disclosure and thereby created an obvious appearance of lack of independence or impartiality.102 In the committee's view, the duty to disclose was warranted because of the customarily close relationships that develop between counsel and damages experts during a case, noting that they cannot possibly maintain between them the level of professional distance that is required between a party, its counsel and experts on the one hand and a member of the tribunal on the other. The extent of the past and present interactions accordingly triggered Dr Alexandrov's duty of disclosure.103
Eiser marks the first time an ICSID award has been annulled for improper constitution of the tribunal and the committee's reasoning will be highly relevant to future disqualification challenges advanced on similar bases.
These recent decisions confirm that proposals of this nature will be considered in each case. The existence of a personal or professional relationship, without more, will be insufficient but a risk of financial gain or profit arising out of that relationship is not a prerequisite to disqualification.104 The most obvious lesson from Eiser is that the participants in investor-state dispute settlement (ISDS) proceedings – whether out of an abundance of caution or because of evolving standards – should exercise a heightened standard of vigilance when assessing and disclosing potential conflicts that might give rise to the appearance of arbitrator bias.
iii Prejudgment of issues based on previously expressed views
It is often claimed that previously expressed views give rise to an 'issue conflict'. In what has been referred to as 'the leading decision' on this question, an issue conflict was said to be 'based on a concern that an arbitrator will not approach an issue impartially, but rather with a desire to conform to his or her own previously expressed view.'105 Previously expressed opinions have formed the basis for a number of disqualification applications, all of which have been dismissed.
In Urbaser, the claimants sought to disqualify Professor Campbell McLachlan, the respondent-appointed arbitrator, on the basis that Professor McLachlan had expressed views in previous academic writings on a key point of law that was at issue in the case. The claimants' argument was that Professor McLachlan would not be able to find against the respondent without contradicting his previous statements.106 The issue in question was whether a most-favoured nation (MFN) clause could apply in relation to dispute settlement provisions and, according to the claimant, the application of the MFN clause in the Spain–Argentina bilateral investment treaty (BIT) was an 'essential element of the conflict that is the object of this arbitration'.107 Professor McLachlan had previously stated that the protections afforded by the MFN clause 'will not apply to the dispute settlement provisions, unless the parties expressly so provide'.108
In dismissing the claimants' disqualification proposal, the unchallenged arbitrators in Urbaser observed as follows:
What matters is whether the opinions expressed by Prof. McLachlan on the two issues qualified as crucial by Claimants are specific and clear enough that a reasonable and informed third party would find that the arbitrator will rely on such opinions without giving proper consideration to the facts, circumstances, and arguments presented by the Parties in this proceeding.109
In Saipem, Pakistan's proposal to disqualify the claimant-appointed arbitrator was based, in part, on the assertion that the arbitrator had expressed opinions in his writing that, in the respondent's view, showed preconceived positions with regard to some of the central issues of the arbitration. In their decision, the unchallenged arbitrators dismissed the proposal, noting that an arbitrator's doctrinal opinions 'expressed in the abstract without reference to any particular case do not affect the arbitrator's impartiality and independence'.110
This issue also formed the basis for a pair of challenges to Mr Gary Born in 2018, in KS Invest and Mathias Kruck. In each case, Spain's challenge was premised on the ground that Mr Born had prejudged issues relevant to the case, said to be demonstrated by Mr Born's (1) dissenting opinion in JWS Solar,111 (2) questioning of counsel in Masdar112 and (3) questioning of a fact witness presented by Spain during the hearing in KS Invest.113
The unchallenged arbitrators in Mathias Kruck issued their decision in March 2018, rejecting Spain's challenge. Dealing first with Mr Born's dissenting opinion in the JWS Solar case, the unchallenged arbitrators noted that the analysis and opinions contained therein were fact-specific to that particular case and accordingly did not consider that it gave rise to any doubts as to Mr Born's impartiality in Mathias Kruck.114 The unchallenged arbitrators also found that there was nothing improper in Mr Born's questioning of counsel and witnesses in the Masdar and KS Invest cases.115 The reasoning set out in the Mathias Kruck decision was thereafter adopted by the unchallenged arbitrators in rejecting Spain's parallel challenge in KS Invest.116 Notwithstanding the twin decisions of the two sets of unchallenged arbitrators, Mr Born later resigned from both the Mathias Kruck and KS Invest tribunals.
This issue also arose in Venezuela's three separate challenges to Mr Álvaro Castellanos Howell.117 In those cases, Venezuela took issues with an article written by Mr Castellanos Howell and published in a Guatemalan daily newspaper in 2017.118 This article discussed proposed amendments to the Guatemalan Constitution, detractors of which argued would lead 'to a scenario like Venezuela'. Commenting on the debate, Mr Castellanos Howell rejected the suggestion that the proposed amendments to the constitution would result in 'imminent “Venezuelisation”', described as a 'scenario where there is no judicial independency from other branches of government'.119
In rejecting the Blue Bank annulment proposal, the unchallenged committee members held that it was not possible to extrapolate from the article any explicit criticism, or prior judgment, of Venezuela by Mr Castellanos Howell. Rather, the article was intended to reproduce and comment on the views expressed by opponents to constitutional reform, and about which Mr Castellanos Howell did not imply any value judgement.120
In 2020, two further disqualification proposals advanced on this basis were dismissed. In another challenge brought by Spain in the KS Invest arbitration, this time against Professor Born's replacement, Professor Kaj Hobér, Spain contended that Professor Hobér's dissenting opinion in Stadtwerke v. Spain constituted a ground for disqualification.121 In particular, Spain argued that there existed 'substantial similarities' in Stadtwerke 'on essential issues' on which Professor Hobér had already expressed his opinion.122 Rejecting the challenge, the chairman of the Administrative Council first affirmed that the fact that an arbitrator has expressed views on issues of law or fact common to two or more parallel arbitrations in which that arbitrator is involved is not – without more – evidence of partiality or appearance thereof.123 The Chairman went on to note that the two cases involved investments in Spain by unrelated companies, made at different times, and in different sectors that were 'not distinctions without relevance'. Even in cases where issues could be similar, the arguments and the manner in which they are presented by different parties could differ depending on the particularities of each case.124
In its proposal to disqualify all three members of the tribunal in Vattenfall v. Germany, Germany advanced two independent grounds for the disqualification of Judge Charles Brower based on his dissenting opinion in PV Investors v. Spain concerning the right of local Spanish subsidiaries to bring claims as claimants in proceedings under the applicable treaty and UNCITRAL Rules.125 In his recommendation on the proposal, the Secretary General of the PCA, Mr Hugo Siblesz, disagreed that Judge Brower's dissenting opinion amounted to an issue conflict on his part. In particular, Mr Siblesz emphasised the different jurisdictional issues at stake across the arbitrations (which were brought pursuant to different arbitral rules), and that Judge Brower had not made any express finding as to whether controlled local subsidiaries would be entitled to stand as claimants in proceedings under the ICSID Convention. Thus, Judge Brower could not be said to lack an open mind in considering Germany's jurisdictional objections.126
The recent cases confirm that the threshold for this category of challenge remains extremely high. Only in matters in which an independent third party would find circumstances demonstrating the appearance of a firmly held predisposition or prejudgement (and, accordingly, a real risk that the challenged arbitrator would rely on such opinions without giving proper consideration to the facts and evidence put forward by the parties) is such a challenge likely to be successful.
The disqualification decisions between 2018 and 2021, which upheld only one of the 26 proposals, demonstrate that disqualification remains the exception rather than the norm. The threshold for disqualification continues to be extremely high, regardless of the circumstances giving rise to the proposal (as to which, multiple appointments remains the most popular). Notwithstanding this, there is recognition that the increasing number of challenges is representative of growing stakeholder concerns regarding arbitrator independence and impartiality. Recent efforts to address this have seen the creation of a draft code of conduct for adjudicators, jointly prepared by the ICSID and UNCITRAL Secretariats, which contains numerous proposals to address criticisms of ISDS in this context. These include heightened disclosure obligations127 and a proposed limit, or total prohibition, on arbitrators holding multiple roles (sometimes referred to as 'double-hatting').128 It remains to be seen in what form, and how, the draft code will be implemented and enforced. However, it seems likely that 2022 will see more disqualification proposals, lending further support to the growing calls for widespread reform. Moreover, and regardless of the legal position, the resignation of two arbitrators from ICSID tribunals in 2021 suggests that arbitrators are increasingly concerned about stakeholder opinion. Notwithstanding the high threshold for applications of this nature, Claudia Annacker resigned in 2021 from the tribunal in Donatas Aleksandravicius v. Kingdom of Denmark129 because of an alleged issue conflict relating to the Achmea decision on the basis of her disclosure that she is acting as counsel to Greece in a recently filed petition to annul an intra-EU BIT award in favour of Cyprus Popular Bank.130 Professor Jan Paulsson also resigned as Niko's appointee in its claim against Bangladesh131 on the basis of prior and concurrent appointments by an affiliated company.132