Should Arbitrators Live on Mars? Challenge of Arbitrators in Investment Arbitration

Article excerpt

Legitimacy of investment arbitration is becoming one of the main concerns of all the institutions and persons involved in the process. There is no doubt that the perception by the parties in investment disputes of the independence and impartiality of arbitrators is a conditio sine qua non of such legitimacy. (1)

Under the existing arbitral regimes, the tool that parties have to address the lack of independence or impartiality of an arbitrator is essentially the challenge procedure. (2) That is why effective and transparent challenge mechanisms are fundamental for the integrity of international investment arbitration. (3)

Even the first case brought before the International Centre for Settlement of Investment Disputes (ICSID), Holiday Inns S.A. v. Morocco, (4) involved a circumstance affecting the independence of one of the arbitrators. (5) In another of the first ICSID cases, Amco Asia Corp v. Indonesia, (6) a challenge was actually presented, although it was rejected. (7) The literature on disqualification of arbitrators is however relatively scarce and, more importantly, reported decisions on challenges in investment arbitration are very few.

It has been rightly noted that "[t]he process of disqualification is often shrouded in secrecy, thus hindering the development of known, consistent standards." (8) As for arbitration in general, transparency is fundamental for challenge procedures. Publication of a higher number of reasoned decisions on challenges to arbitrators could be an important contribution to the functioning of investment arbitration, by signaling to prospective arbitrators and parties what kind of circumstances could affect the integrity of the Tribunal.

Part I of this Article briefly describes the provisions regarding challenges of arbitrators contained in the arbitration rules most widely used in the investment context. Part II discusses some of the most important challenge decisions in investment arbitration where reasons have been provided. It is suggested that a few of them have made important contributions to the theoretical development of the law on challenge of arbitrators, although the application of the principles to the facts is not always shared. This article concludes by stressing the need to further develop standards of independence and impartiality of arbitrators in order to make them more exacting, while suggesting that there might be some structural limitations in the existing arbitral systems to fulfill the growing aspirations of legitimacy of the international community.

I. RULES AND STANDARDS ON CHALLENGE OF ARBITRATORS

A. The ICSID Rules

Chapter V of the ICSID Convention contains the provisions on replacement and disqualification of conciliators and arbitrators. (9) In particular, Article 57 establishes the following:

   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. (10)

In turn, Article 14(1) 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." (11) It should be noted, as to the last part of the sentence, that the Spanish version refers to persons "inspiring full confidence in their impartiality of judgment" ("inspirar plena confianza en su imparcialidad de juicio"), and the French version to persons "offering all guarantee of independence in the exercise of their functions" ("offrir toute garantie d'independance dans l'exercice de leurs fonctions").

It has been noted that while the English text refers to independence, the Spanish text refers to impartiality. …