arbitrator challenges at icsid: why a different standard? audley sheppard 11 september 09 biicl 13...
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Arbitrator Challenges at ICSID: Why a Different Standard?
Audley Sheppard
11 September 09
BIICL 13th Investment Treaty Forum Conference
Summary
Procedure for challenging an ICSID arbitrator
Time limits
ICSID test for arbitrator conflict of interests
Notable ICSID challenges
Recommended changes
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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.
Procedure for challenging an ICSID arbitrator (cont.)
Contrast:
UNCITRAL: Appointing AuthorityICC: ICC CourtLCIA: LCIA Court
With right to challenge under national law
ICJ: unanimous decision of other Judges
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)
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
factsICC: 30 daysLCIA: 15 days
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.”
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
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)”
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.”
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
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”
Non-ICSID test (cont.)
Test:ECHR/English law:
– “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”
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 Challenge rejected
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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 Challenge rejected
EDF v. Argentina Same grounds Failure to disclose did not indicate manifest lack of independence Challenge rejected
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
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 Challenge rejected
Azurix v. Argentina Arbitrator’s law firm appointed counsel as arbitrator in other arbitrations Challenge rejected
Hrvatska Electroprivreda v. Slovenia Chairman and counsel from same barristers’ Chambers Counsel not allowed to appear
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 Challenge rejected
Saba Fakes v. Turkey Arbitrator appointed by Turkey in another arbitration raising similar issues Challenge rejected
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
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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)
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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
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
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
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BIICL 13th Investment Treaty Forum Conference
Audley Sheppard