Tag Archives: Impartiality

Arbitrators’ Independence and Impartiality

ArbitratorsBlogThe parties in an ISDS case select the arbitrators that resolve their dispute. Arbitration law and institutional rules provide layers of control mechanisms to ensure the impartiality and independence of these arbitrators.

The SCC Arbitration Rules require that every arbitrator must be impartial and independent. This requirement extends from the outset and throughout the proceeding. Prior to appointment, an arbitrator must disclose any circumstances which may give rise to justifiable doubts as to his or her impartiality or independence. Further, a party to a dispute may challenge an arbitrator during the course of the proceedings, if new circumstances arise or facts come to light that lead the party to doubt the arbitrator’s independence or impartiality.

Most institutions, including the SCC, evaluate challenges to arbitrators under an objective standard – that is, the arbitrator is disqualified if the circumstances, from the point of view of a reasonable third person, give rise to a conflict of interest. In other words, it is not necessary to show that the challenged arbitrator in fact lacks independence and impartiality, but rather that there is an appearance of partiality.

In arbitrations administered by the SCC, the SCC Board makes the final decision on arbitrator challenges. In evaluating challenges, the Board may refer to the International Bar Association Guidelines on Conflict of Interest in International Arbitration (“IBA Guidelines”). The IBA Guidelines list specific situations in which an arbitrator should decline an appointment, or step down if already appointed.

For example, the SCC Board sustained a respondent’s challenge to an arbitrator appointed by claimant because the arbitrator’s firm had been involved in matters both for and against the respondent. The arbitrator was released from the appointment. Read this article for more information on challenges in SCC cases.

The ICSID Convention, developed by States, provides that an arbitrator can be dismissed if he or she manifests a lack of the qualities required to sit as an arbitrator. A proposal to disqualify an arbitrator was upheld in Bluebank v. Venezuela, on the ground that the arbitrator appointed by claimant worked in a law firm that represented other claimants in unrelated ICSID cases against Venezuela.

Under the ICSID Convention, an ISDS award may be annulled if the tribunal was not properly constituted. This may include situations where an arbitrator failed to disclose potential conflicts of interest before or during the arbitration.

Who are the arbitrators?

One of the salient features of ISDS is the use of independent arbitrators. This begs the question, who they are and how they are appointed.

As the main function of ISDS is to have investment disputes resolved in a neutral international forum, neutrality should underpin the whole arbitration proceeding, starting from the appointment of arbitrators by both investors and States.

The first and most important consideration in the arbitrators’ appointment is that parties have to choose an arbitrator whose independency and impartiality cannot be second-guessed. Second, they are free to appoint individuals whom they trust to have the expertise in the area of the dispute.

In the event parties or arbitrators appointed by parties failed to appoint the chairperson of a tribunal, a third party can make the appointment. For instance, in SCC arbitration, the SCC Board, which consists of arbitration experts, makes the appointment.

Arbitrators are not beyond the law and there are strict consequences if they fail to maintain their independency and impartiality. An arbitrator may be challenged if there is a reasonable doubt about their competence or impartiality and when this is proven, he or she can be dismissed. Further, an arbitral award may be annulled for reasons of, among others; the Tribunal has exceeded its powers or has committed corruption.

ISDS has a greater transparency compared to commercial arbitration. Transparency allows parties and arbitration institute to access and peruse the awards rendered by potential arbitrators, which will guide them in assessing their independency and impartiality.

To prevent bias, the ICSID Convention provides that the majority of arbitrators should not be the nationals of the parties having dispute. According to a recent article, while mostly lawyers act as arbitrators in ICSID arbitration, non-lawyers, including architects, maritime experts and an economist have been appointed in some instances. ICSID’s appointed arbitrators come from more than seventy different nationalities.

The SCC does not maintain a panel of arbitrator and this allows the SCC to choose arbitrators from different geographic areas, from younger generation as well as to provide more gender balance. The SCC has appointed not only lawyers but also law professors. For more information on the SCC arbitration procedure, see this link.