1. Arbitrator Challenges at ICSID: Why a Different Standard?
Audley Sheppard
11 September 09
BIICL 13th Investment Treaty Forum Conference

2. Summary Procedure for challenging an ICSID arbitrator Time limits
ICSID test for arbitrator conflict of interests
Notable ICSID challenges
Recommended changes
BIICL 13th Investment Treaty Forum Conference
September 09

3. Procedure for challenging an ICSID arbitrator
Article 58 ICSID Convention:
The decision on any proposal to disqualify a[n] arbitrator shall be taken by the other members of the Tribunal
Provided that where those members are equally divided, or in the case of a proposal to disqualify a sole arbitrator, or a majority of the arbitrators, the Chairman of the ICSID Administrative Council shall take that decision.

4. Procedure for challenging an ICSID arbitrator (cont.)
Contrast:
UNCITRAL: Appointing Authority
ICC: ICC Court
LCIA: LCIA Court
With right to challenge under national law
ICJ: unanimous decision of other Judges

5. Comment
“It’s the remaining arbitrators on the tribunal who generally have to decide whether the challenged colleague lacks independence or impartiality.  This is not the way it is done in the ICC or the AAA.  It is not the way it is done in the LCIA.  There is, I think, an understandable fear of cronyism.  I am not saying that there is cronyism, but there is a perception of cronyism.”
(Rusty Park, Fordham University Law School, 2009)

6. Time limit for challenge
Rule 9(1) Arbitration Rules:
Challenge must be brought “promptly and in any event before the proceedings are closed”
Contrast:
UNCITRAL: 15 days from appointment or discovery of facts
ICC: 30 days
LCIA: 15 days

7. ICSID test for arbitrator conflict of interests
Article 14(1) ICSID 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. …”
Article 40(2) of the Convention states:
“Arbitrators appointed from outside the Panel of Arbitrators shall possess the qualities stated in paragraph (1) of Article 14.”

8. ICSID test (cont.) Rule 6(2) Arbitration Rules:
Arbitrator declaration disclosing:
past and present professional, business and other relationships (if any) with the parties
any other circumstances which might cause the arbitrator’s reliability for independent judgment to be questioned by a party

9. ICSID test (cont.) Article 57 ICSID Convention
Party may propose that an arbitrator is disqualified on the basis “of any fact indicating a manifest lack of the qualities required by Article 14(1)”

10. ICSID test (cont.) Articulation of test: Vivendi v Argentina
Manifest “imposes a relatively heavy burden of proof on the party making the proposal”
The test is “whether a real risk of lack of impartiality based upon those facts (and not upon any mere speculation of inference) could reasonably be apprehended by either party [...] That is to say, the circumstances actually established (and not merely supposed or inferred) must negate or place in clear doubt the appearance of impartiality.”
Suez v Argentina
“It is important to emphasise that the language of Article 57 places a heavy burden of proof on the Respondent to establish facts that make it obvious and highly probable, not just possible, that Professor Kaufmann-Kohler is a person who may not be relied upon to exercise independent and impartial judgement.”

11. Non-ICSID test
Contrast disclosure requirements and grounds for challenge:
UNCITRAL: “circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence”
ICC: “lack of independence or otherwise”
LCIA: same as UNCITRAL

12. Non-ICSID test (cont.)
Contrast disclosure requirements and grounds for challenge:
ICJ: “independent judges, elected .. from among persons of high moral character”
ECHR: “independent and impartial tribunal”
IBA Guidelines: “impartial and independent of the parties”

13. Non-ICSID test (cont.) Test: ECHR/English law: IBA Guidelines:
“question is whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased” (Porter v Magill)
IBA Guidelines:
“doubts are justifiable if a reasonable and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision”

14. Notable ICSID challenges: 1. Arbitrator and a Party
Holiday Inn SA/ Occidental Petroleum v. Morocco
Arbitrator appointed non-exec director of Occidental
Permitted to resign
Amco Asia Corp v. Indonesia
Arbitrator given tax advice to controlling claimant
Test included impartiality
Part appointment assumes some acquaintance
Appearance of partiality must be manifest = highly probable
Challenge rejected
Zhinvali Development Ltd v. Republic of Georgia
Occasional social contacts
Suggestion that judgement affected purely speculative
BIICL 13th Investment Treaty Forum Conference
September 09

15. Notable ICSID challenges: 1. Arbitrator and a Party (cont.)
Vivendi v. Argentina
Arbitrator’s firm instructed on tax matter by party connected to Vivendi
Work unrelated and arbitrator not involved
Challenge rejected
Suez v. Argentina
Arbitrator non-exec director of UBS, minor shareholder in Suez
Spanish version of Art. 14(1) refers to person “who inspires full confidence in his impartiality of judgement”
Considered four criteria: proximity; intensity; dependence; materiality
EDF v. Argentina
Same grounds
Failure to disclose did not indicate manifest lack of independence

16. Notable ICSID challenges: 1. Arbitrator and a Party (cont.)
Lemire v. Ukraine
Arbitrator’s law firm instructed by Ukraine in unrelated investment arbitration
Challenge rejected

17. Notable ICSID challenges: 2. Arbitrator and Counsel
Amco Asia Corp v. Indonesia
Arbitrator’s firm and claimant’s counsel had had joint office and profit sharing arrangements
Continued to share premises and administrative services
Lack of independence must be manifest
Challenge rejected
SGS v. Pakistan
Arbitrator has appointed/agreed counsel to be arbitrator in other cases
Must establish facts, inference from facts must be reasonable
Azurix v. Argentina
Arbitrator’s law firm appointed counsel as arbitrator in other arbitrations
Hrvatska Electroprivreda v. Slovenia
Chairman and counsel from same barristers’ Chambers
Counsel not allowed to appear

18. Notable ICSID challenges: 3. Issue and subject matter conflict
Suez v. Argentina
Arbitrator’s involvement in Vivendi
Award “so flawed”
Must show fact indicating manifest lack of impartiality or independence
Challenge rejected
Electrabel v. Hungary
Arbitrator appointed by Hungary in parallel arbitration against Hungary raising same issues
Saba Fakes v. Turkey
Arbitrator appointed by Turkey in another arbitration raising similar issues

19. Most recent ICSID Cases
S & T Oil Equipment v. Romania
Arbitrator’s firm was representing an investor in a case against Romania
Arbitrator resigned
PIP SARL v. Gabon
Arbitrator previously chairman of an ICSID tribunal which made award against Gabon
Awaiting decision
Azurix Corp v. Argentina – annulment
Improper constitution of the Tribunal (Art 52(1)(a))
Challenge had been heard in accordance with procedures and rejected, tribunal properly constituted
Only annul if did not comply with procedure for challenge 19
BIICL 13th Investment Treaty Forum Conference
September 09

20. Some non-ICSID (BIT) cases
AWG v. Argentina (UNCITRAL)
National Grid Plc v. Argentina (UNCITRAL)
Eureko v. Poland (UNCITRAL)
Canfor Corporation v. United States (UNCITRAL)
Grand River Enterprises v. United States of America (UNCITRAL)
Ghana v. Telekom Malaysia Berhad (UNCITRAL, heard by Dutch courts)
BG Group v. Argentina (ICC)
BIICL 13th Investment Treaty Forum Conference
September 09

21. Reform? 2006 proposed amendment:
Amend Rule 6(2), disclosure requirement, to include –
“any circumstances likely to give rise to justifiable doubts as to the arbitrator’s reliability for independent judgment”
Not adopted
Note approach to appointments to annulment committees

22. Recommendations Challenges decided by an independent ad hoc committee
Time limit of 30 days from appointment or discovery of facts
Requirement of independence and impartiality

23. Recommendations (cont.)
Test for disqualification: justifiable doubts as to independence and impartiality
Doubts justified if a fair-minded and informed observer, if having considered the facts, would conclude that there was a real possibility that the arbitrator was not independent or not impartial

24. BIICL 13th Investment Treaty Forum Conference Audley Sheppard