Executive Summary

This chapter discusses (i) the selection of arbitrators, one of the most important phases in an arbitral proceeding, and (ii) challenges by a party to the appointment of an arbitrator. Knowledge of the arbitrator is the most important element when nominating and deciding when to challenge an arbitrator. Parties should look to the arbitrator’s qualifications, experience, nationality, language ability, academic writings, presentations, present and past clients, previous awards, on-going arbitrations, and his or her business relationships, including if relevant those of the arbitrator’s present law firm.

1.0 Introduction

In international arbitration selection of the arbitrator is perhaps the most important decision in which a party can participate. To state the obvious, it is the arbitrators who decide the case. And, with rights of appeal either non-existent or severely circumscribed in most proceedings (see Chapter 24), the decision of the arbitrators is usually final. Choosing an arbitrator that maximises the chances of getting it right the first time is therefore essential. Likewise, making sure that the arbitrator selected by the other party or the arbitral institution is properly qualified and free from conflicts-ofinterest is essential to fair proceedings. This chapter discusses two key phases of constituting a tribunal: selection and challenge.

2.0 Selection

2.1 Mechanics

Most arbitration agreements and/or institutional rules give the parties some autonomy in selecting the arbitral tribunal.1 The manner of arbitrator selection may either be prescribed in the arbitration agreement, e.g., in the relevant IIA or investment contract, or agreed by the parties ad hoc after the dispute arises. If the manner is not otherwise agreed by the parties, it will, except in unusual circumstances, be set forth within the rules chosen by the parties for the administration of the arbitration. Failing that, the law of the “seat” of the arbitration may provide default provisions.2

The first step in arbitrator selection is to understand the applicable mechanism for constitution of the tribunal and arbitrator selection.

The classic formula is a three-person panel, with each party appointing one “wing” arbitrator and the chair (or President) then selected by the two party-appointed arbitrators.3 Alternatively, the administering institution, with or without input from the parties and their appointees, may in certain circumstances select the chair.4 A third alternative is that provided for under the ICSID rules where, if the parties have not agreed upon the number of arbitrators and the method of their appointment, the Tribunal consists of three arbitrators, one appointed by each party and the third, who shall be president of the Tribunal, appointed by agreement of the parties.5

Another mechanism for selection of the tribunal is the “list system”. For example, under the UNCITRAL Rules,6 when the parties have agreed that a sole arbitrator is to be appointed but cannot agree on a selection, or when the two party-appointed

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arbitrators cannot agree on the chair, the appointing authority, which could be an institutional body,7 will make the appointment, usually by using the following list system: (1) an identical list will be communicated to each party containing at least three names; (2) each party returns the list after having deleted any name(s) to which it objects and numbered the remaining names in the order of its preference; and (3) the arbitrator is appointed from the approved names in accordance with the order of preference indicated by the parties.

Sometimes a party refuses to nominate an arbitrator as required by the arbitral agreement or applicable rules. In that instance, or in the case of a sole arbitrator if the parties cannot agree, the applicable rules will set out default procedures. Typically, the task falls upon the appointing authority.

2.2 Qualifications

Once the mechanism of arbitrator selection is understood, a party should turn to identifying ideal candidates for the arbitration. Knowledge is the key. Qualifications and experience are the starting point in considering any candidates. This is particularly the case where the arbitration agreement specifies that the arbitrator have certain qualifications: “no less than ten years’ experience” or “experience with transnational investment” — the possibilities are endless. Knowing the arbitrator’s approach to potential issues in the case — substantive and procedural — as well as the arbitrator’s temperament and style, is critical, as can be first-hand experience in investment arbitrations.

A party should gather as much information as possible, including but not limited to reviewing a prospective arbitrator’s rulings (to the extent available) and published works, with a focus on the issues in the case.

The nationality of an arbitrator can be a criterion. For example, under the ICSID Rules, absent agreement of the parties, the majority of the arbitrators are required to be nationals of states other than the investor’s home state and that of the respondent Contracting State.8 Another factor that is often considered is whether the candidate has a civil or common law background, and how that might translate to the issues in the case. Language ability may also be a factor.

Pre-existing panels of arbitrators are maintained by many arbitral institutions. For example, under the ICSID Convention,9 a Panel of Arbitrators exists, to which each Contracting State may designate four persons who may, but need not be its nationals. Also on the Panel are ten persons designated by the Chairman, each with a different nationality. When appointing an ICSID arbitrator, parties are not required to select from the Panel. However, any arbitrators appointed from outside the Panel of Arbitrators are required to meet the general qualification to be on the panel, i.e., that they are:

“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.”

3.0 Challenges

The arbitral rules of all of the major institutions require that arbitrators be both independent and impartial. For example, ICSID Rules require that all arbitrators, before or at the first session of the tribunal, sign a declaration confirming their independence and impartiality, and disclosing any past or present relationships with the parties.10

In the last several years, the number of arbitrations between foreign investors and states has increased for a variety of reasons, including the proliferation of bilateral and multilateral investment treaties. Most of these arbitrations are complex and require highly experienced arbitrators. With the pool of such arbitrators relatively small (or perceived to be small), a limited number of individuals are being chosen as arbitrators in an increasing number of arbitrations.

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Appointments from this limited pool have raised concerns about potential conflicts of interest; specifically, whether arbitrators are independent and impartial, i.e., have no relationship with the disputing parties and no actual or apparent bias towards the parties or the issues in dispute. As described below, both claimants and respondents have raised such challenges. However, some assert that such challenges are raised simply to delay proceedings. For example, in one case, a prominent arbitrator survived six attempts by a respondent state to disqualify him from the panel. All challenges were dismissed.11

3.1 Challenges — Developments in Arbitration Rules

Almost all arbitral rules require prospective arbitrators to disclose any circumstance that would give rise to doubts as to their impartiality or independence. The purpose of such disclosure requirements is to give the parties an opportunity to challenge the arbitrator’s appointment.

Useful, specific guidance on potential grounds for challenging arbitrators is set out in the International Bar Association Guidelines on Conflict of Interest in International Arbitration (IBA Guidelines).12 The IBA Guidelines offer a “traffic light” approach to situations that may create a conflict of interest. The Guidelines contain GREEN, ORANGE and RED lists that, respectively, list relationships that do not create a conflict, may create a conflict, and certainly create a conflict (non-waivable/ waivable). Arbitral tribunals in recent years have, even without the parties’ agreement, sometimes relied on these guidelines to determine whether a conflict exists. The IBA Guidelines therefore should be reviewed carefully in any challenge situation.

The following sections illustrate examples of common issues that have arisen in recent years in challenge proceedings.

3.2 Press Comments Made by Arbitrator Concerning Party

In considering whether to challenge the other party’s appointed arbitrator, researching the public record for statements made by the arbitrator is critical

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3.3 Law Firm Partners as Arbitrators and Cross-Office Conflicts

The standard for disqualification under the ICSID and UNCITRAL rules focuses on whether there is an “appearance” of lack of impartiality or independence. A showing of actual bias is not required.

3.4 Views Expressed in Academic Publications by an Arbitrator

Arbitrators with recognised knowledge on the issues in the case often have published academic (or professional) texts. This is one reason they may be nominated; but it can be a double-edged sword, and may give rise to a challenge proceeding. Again, knowledge is the key when nominating and deciding when to challenge an arbitrator.

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Notes

1
1. See, e.g., ICSID Rules of Procedure for Arbitration Proceedings, Chapter I — Establishment of the Tribunal; UNCITRAL Rules Section II — Composition of the Arbitral Tribunal.

2
2. The designation of the “seat” of the arbitration determines the procedural law applicable to an arbitration.

3
3. See, e.g., UNCITRAL Rules 7 and 9.

4
4. See, e.g., ICC Arbitration Rules, Article 12.

5
5. ICSID Convention, Chapter IV, Section 2, Article 37(2)(a)-(b).

6
6. UNCITRAL Rules, Article 8.

7
7. An example of an appointing authority is the ICC International Court of Arbitration (see Rules of ICC as Appointing Authority in UNCITRAL or Other Arbitration Proceedings, Articles 8 and 9). An appointing authority may also be an individual designated by the arbitral institution administering the proceedings or a third party designee (see, e.g., UNCITRAL Rules, Article 6).

8
8. ICSID Convention, Chapter IV, Section 2, Article 39; ICSID Rule 1 — General Obligations.

9
9. ICSID Convention, Chapter I, Section 4, Article 13.

10
10. ICSID Rule 6, Constitution of the Tribunal.

11
11. ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30. The case is available at: https://www.italaw.com/cases/321.

12
12. See IBA Guidelines on Conflicts of Interest in International Arbitration (October 2014), https://www.ibanet.org/ENews_Archive/IBA_July_2008_ENews_ArbitrationMultipleLang.aspx.

13
13. ICSID Case No ARB/08/6, IIC 402 (2009).

14
14. ICSID Case No. ARB/12/20), November 2013.