1. Introduction. A Transnational Study of Legal and Ethical Dilemmas

Unless otherwise noted, the reference to the “investment arbitrator” throughout this book should be understood as replaced by the notion of “member of de tribunal” or “judge” when referring to the EU-MIC framework. Sometimes, the book resorts to the term “investment adjudicator” to cover all these possible realities.

Kahale (2018), p. 5. Taking a more neutral approach, the EU identifies a list of significant concerns with the existing ISDS system. EU (2018).

ICSID has been defined as an “absolute monarchy” where its policy of appointing arbitrators is concerned. Thomson (2016).

The text indicates that one of the main outcomes of the consultation is that: “the collective submissions reflect a widespread opposition to Investor-State Dispute Settlement (ISDS) in TTIP or in general. There is also quite a majority of replies opposing TTIP in general.” European Commission (2015a).

This term, which refers to an improved ISDS system, is used by authors such as Bungenberg (2015).

The Commissioner launched a balloon probe on this subject in her blog on May 5, 2015, following the presentation of the EU concept paper, which dealt with ICS in extenso for the first time. Malmström (2015a).

Malmström (2015b). She proclaimed that: “We want the rule of law, not the rule of lawyers. If we are to continue with investment protection and international arbitration, it will need to be a very different animal. (…)”. Malmström (2015c).

The text goes on to say: “[a new system] where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected, and where private interests cannot undermine public policy objectives”. EP (2015), point (d) xv.

EC (2015b).

EC (2016a).

EC (2015c).

EC (2018a). Likewise, “the EU-Mexico agreement fully implements the new EU approach to investment protection and investment dispute resolution by fundamentally reforming the old-style ISDS system”. EC (2018b).

For instance, regarding Australia and New Zealand: EC (2018c).

More specifically, Belgium is requesting the ECJ to provide an opinion on the compatibility of the ICS with: “1) The exclusive competence of the CJEU to provide the definitive interpretation of European Union law; 2) The general principle of equality and the ‘practical effect’ requirement of European Union law; 3) The right of access to the courts; 4) The right to an independent and impartial judiciary. Regarding the right to an independent and impartial judiciary, the Kingdom of Belgium wishes to obtain an opinion regarding the following aspects: -the conditions regarding the remuneration of the members of the Tribunal and the Appeals Body; -the appointment of members of the Tribunal and the Appeals Body; -the release of members of the Tribunal and the Appeals Body; -the guidelines of the International Bar Association regarding conflicts of interest in international arbitration and the introduction of a Code of Conduct for the members of the Tribunal and the Appeals Body; -the external professional activities related to investment disputes of members of the Tribunal and the Appeals Body”. Kingdom of Belgium (2017).

Malmström stated: “Some have argued that the traditional ISDS model is private justice. What I’m setting out here is a public justice system – just like those we’re familiar with in our own countries, and the international courts which Europe has so actively promoted in the past”. Malmström (2015b).

Howse (last accessed June 2018), pp. 6–7.

Transnational Institute (2012), Jacques Delors Institute (2015) and Seattle to Brussels Network (2013).

Malmström (2015b).

Referring to the political-legislative input of the States, Venzke (2016), p. 391. In this sense, the Government of Thailand recently demanded “ways of implementing the joint interpretation mechanism”. Government of Thailand (2018), 3.

This legislative option may be justified by a policy of “double standards” implemented by the parties: “The fact that “issue conflict” is perceived as a problem may derive, in part, from a sense that the proper balance between party autonomy and impartiality has not yet been adequately identified in investment arbitration. As stated, disputing parties enter the arbitral process with the expectation (not found in litigation) that they can shape the profile of the decision maker through their choice of arbitrator and any participation in the appointment of the chair. Their expectations are thus raised by the hope that they can appoint arbitrators who have displayed past practice sympathetic to their particular case, and perhaps their desired outcome. There is, however, a frequent disparity between a party’s expectations when appointing an arbitrator, and its expectations when considering the other party’s arbitrator appointment. When considering the independence and impartiality of the other party’s arbitrator, a party and its counsel typically apply pronounced scrutiny, leaving the expectation of how the standards of independence and impartiality should protect the process from prejudgment to be arguably asymmetric. This pattern has been accentuated as the pool of investment arbitrators is better known through their decisions”. ASIL-ICCA (2016), pp. 12–13.

EC (2015c).

Article 3.12: “Multilateral Dispute Settlement Mechanism. The Parties shall pursue with each other and other interested trading partners, the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of international investment disputes. Upon establishment of such a multilateral mechanism, the Committee shall consider adopting a decision to provide that investment disputes under this Section will be resolved pursuant to that multilateral mechanism, and to make appropriate transitional arrangements”. EU-Singapore IPA (2018).

Article 15. Kingdom of Netherlands (2018).

UNCITRAL Working Group III (2018).

Council of the EU (2018).

EC (2015c).

The 2017 Public Comments to Amendment of ICSID’s Rules and Regulations offer multiple proposals for improving the current ICSID arbitrator disqualification system. The following proposals, while by no means comprehensive, are noteworthy since they connect to a greater or lesser extent with the subject of arbitrator duties. Among them: (1) Preventing last minute challenges by setting a time limit for filing challenges [N.A. (2017), 6.]; (2) Granting the ICSID Chairman a more active role in the decision to challenge [the option of limiting the power of ICSID co-arbitrators regarding challenges is supported by academia. The innovations implemented by the EU are also an incentive in this respect vis-à-vis the continuity reflected in TTIP and EU-Vietnam FTA texts (Articles 11.3 and 14-3 “the President of the Tribunal or the President of the Appeal Tribunal, respectively, shall (…) issue a decision”). On the other hand, JEFTA, EU-Singapore FTA and 2016 CETA resort to external authorities (the Secretary General of ICSID- Art 8.10 and 9.18-, and the President of the International Court of Justice –Article 8.30. On this issue, see also the ABA Investment Treaty Working Group (2016), 60]; (3) Creating an ICSID Challenge Committee [various proposals have been outlined, depending on whether a reform of the ICSID Convention would be needed or not. Baker McKenzie (2017), pp. 5–6. A further option would be to create a collegial bod, responsible for ruling on challenges to appointments made by the Secretary General. Derains and Gharavi (2017), 6]; (4) Shortening various deadlines in the challenge procedure (the importance of this issue has also been underlined in different texts in the commercial context, such as Rule 20 of CEA Code of Good Arbitration Practices); (5) Not suspending the proceedings when a disqualification proposal is initiated [Law Council of Australia (2017), pp. 7–8. Indirectly, Coleman and Innes (2015)]; (6) Prohibiting second or subsequent challenges except in limited circumstances [Debevoise and Plimpton (2017), p. 3]; (7) Providing detailed reasoning for decisions and always publishing them (N.A. (2017), 6); and (8) charging fees to parties that bring challenges without merit [EFILA (2017). There is a growing tendency in ICSID arbitrations to consider that the party filing the disqualification is responsible for the associated costs if the filing is considered to be improper. For instance, the two other arbitrators in the Fábrica v. Venezuela case stated: “It was legitimate and proper for the respondent to seek [the arbitrator’s] clarification in respect of the employment status of Ms. MN in these circumstances. The same cannot be said for the Respondent’s decision to proceed to file its Third Proposal for Disqualification. For these reasons, the Two Members have decided that the Respondent shall be responsible for the costs associated with this Third Proposal for Disqualification and that an order to that effect will be made in the final award to be issued by the Tribunal in these proceedings”. Fábrica v. Venezuela (2016b), par 62].

A detailed analysis of developments and trends can be found in UNCTAD (2018a, b).

Investment arbitrators are obviously not the only recipients of such reprovals, and other types of international adjudicators have also been and still are in the spotlight. An example of this broader reality is the problem that underpins Lazareff’s enlightening text: “Sur la plupart des arbitres dits “professionnels”, il y a peu à écrire. Fidèles à leur éthique, connaissant et appliquant les procédures choisies par les parties, respectueux de leurs collègues, ils constituent l’immense majorité silencieuse. Mais les autres! On aurait pu peindre l’arbitre absent (qu’il soit ou non présent), l’arbitre muet, l’arbitre partial, le salomonique (dit aussi 50/50), le bon arbitre, le juriste tatillon, celui qui privilégie l’équité sans verser dans l’amiable composition, le président indécis, le président tranchant, le président (ou l’arbitre) maniaque, l’arbitre lièvre et l’arbitre tortue, l’arbitre au compteur, l’arbitre surmené, entre deux (importantes) audiences, l’ensommeillé, le professoral (qu’il soit ou non professeur), le grincheux, le sautillant, l’atrabilaire. La galerie eût été sans limite. Le titre était tout trouvé: des arbitris illustribus ou de la pathologie des arbitres. Pathologie, car, fort heureusement, ils sont encore –pour longtemps, espérons-le- minoritaires”. Lazareff (2005), p. 477.

Reflecting extensively on the profile of investment adjudicators, Fach Gómez (2019).

Summarising the bitter positions adopted on the issue, Brower and Rosenberg (2013).

Paulsson (2013), p. 147.

Supporting a more conservative approach: “while there are clearly tensions between independence and impartiality on the one hand, and other characteristics or objectives of investment arbitration on the other hand, [the book] concludes that there is no irreconcilable contradiction, and that the suggested comprehensive reforms would therefore be unwarranted and unsuitable to resolve existing deficiencies of the system”, Cleis (2017), p. 189. This more static approach should not be underestimated, taking into account the fate of previous proposals for system change. St. John and Chernykh (2018).

The growing need for a Code of ethics for international commercial arbitrators was affirmed as far back as 1985. Hunter and Paulsson (1985).

The Council has recently stated that a Code of Conduct is also required in the MIC setting: “strong rules on ethics and conflict of interests, including a Code of Conduct for the Members of the Court and challenge mechanisms shall be included in the Convention.” Council of the European Union (2018).

Potential Areas for Amendment: “Code of Conduct for Arbitrators: the ICSID rules currently require a declaration that an arbitrator meets the required qualifications in the Convention, however some recent treaties have included more elaborated Codes of conduct outlining expectations. This could be incorporated in the ICSID process”. ICSID (2016).

An example of an initiative that has not yet prospered is Article 32 bis of the UNASUR Draft Constitutive Agreement: “The requirements that must be met by members of the Permanent Court (…) The Code of Conduct contains provisions for ensuring the independence of the members of the Permanent Court from all Parties involved in a dispute, whether they will be States or investors”. Sarmiento (2015).

“Article [15] – Conflict of Interest and Code of Conduct: Members of the Tribunal shall comply with the International Bar Association Guidelines on Conflicts of Interest in International Arbitration and any Code of Conduct adopted by the Joint Committee pursuant to Article [The Joint Committee]”. Draft Model Agreement (2015). This provision does not appear in the 2017 version of this Draft Model Agreement.

Article 22.2: “Code of Conduct. The Committee of the Contracting Parties shall establish a Code of Conduct specifying the conduct of the panel members and the grounds for excusing a Panel member. The Code shall be binding on the members of the Tribunal. In adopting the Code, the Committee shall take the IBA Guidelines on Conflicts of Interest in International Arbitration into consideration.” Krajewski (2014), pp. 17–18.

These values have been very positively viewed in the judicial context. Action 2.3 of the Council of Europe plan of action on strengthening judicial independence and impartiality states: “to shield judges from inducement to corruption, member state must ensure that the remuneration and working conditions of judges are adequate and that standards of professional conduct and judicial ethics are clearly defined and made public”. Council of Europe (2016).

It is stated that: “We have included, for the first time, a Code of Conduct for arbitrators, ensuring the respect of high ethical and professional standards”. EC (2015b).

EP (2017), p. 106.

Kaufmann-Kohler (2016), p. 146.

In Cleis’ opinion: “The Code of Conduct is otherwise rather rudimentary and vague”. Cleis (2017), p. 220.

The NGO milieu affirms that: “loopholes in the proposed ethics code for the arbitrators also give rise to concerns”. Corporate Europe Observatory (2016), p. 5. “The Code of Conduct and ethics provisions of the ICS proposal are not solid enough”. TACD (2016), p. 5.

Although the author does not completely share this approach, it could also be argued that “the existing framework provide[s] adequate mechanisms to ensure independence and impartiality of the arbitrators”. UNCITRAL (2018), par 50.

Cleis (2017).

In this sense, if the UNCITRAL Commission concludes that there is a need for a harmonized and authoritative source of ethics in international arbitration, it is the author’s view that this should cover the entire content of ethical standards (i.e. not be limited to impartiality and independence, but also encompassing other obligations such as those analysed in this book). UNCITRAL (2017), par. 43.

The author has examined some facets of this duty of independence and impartiality in a recent publication: Fach Gómez (2018).

Indicating that there may be tensions between the range of duties falling to arbitrators, Park (2011a). Developing this approach in other scholarly pieces: Park (2011b, c).

There are various works devoted to this area: Shetreet and Forsyth (2011), Langbroek and Fabri (2007). Apart from other English pieces cited throughout this book, there are also noteworthy works in other languages: Ruiz Fabri and Sorel (2010) and van Compernolle and Tarzia (2006).

Pointing out the need to draft revised arbitrator Codes of conduct, see Joint Working Group on Trade & Investment Law Reform (2017).

This was adequately reflected in an extensive Special Issue dealing with the Duties, Rights and Powers of International Arbitrators, jointly coordinated by the author. Álvarez Zárate and Fach Gómez (2018). Other recent works in the field are: Bjorklund and Brosseau (2017) and Jacquet (2015).

The question of the ethical standards applicable to counsels, arbitral secretaries, and expert witnesses involved in international arbitrations (called “micro issues” or “behavioral concerns” by Menkel-Meadow) lies outside the scope of this book. “Macro” or “policy concerns” (institutional or social justice issues) are not covered either. Menkel-Meadow (2002), p. 952. These issues have generated an ever-increasing number of publications in recent years: Rauber (2014), Harris (2013) and Moses (2012), etc.

Rogers (2001), p. 342.

Menon (2013), p. 4.

Sussman and Ebere (2011).

Ng (2016), pp. 24 and 41.

Niedermeyer (2014), p. 496.

This feeling of insecurity has produced conflict of law proposals in favour of applying the strictest ethical requirements to arbitrators from among those potentially applicable to the case, for example. Michaelson (2007–2008).

Menon (2013), p. 18.

For instance, Article 61 of the Code of Conduct for Lawyers. Italian National Bar Council (2014).

Bernasconi-Osterwalder et al. (2010), p. 2.

EC (2016b). Likewise, the UNCITRAL Secretariat has stated with reference to both commercial and investment arbitration that: “Different approaches could be envisaged, for instance, providing guidance to determine whether and when the ethical standards are applicable, while noting the limits of application of such standards, since arbitrators are likely to come from different jurisdictions and would thus be subject to different ethical standards. Work could be undertaken to provide clarity regarding the interrelationship among ethical rules (i) of the arbitrator’s home jurisdiction, (ii) of the jurisdiction in which the arbitration is being held (both the legal seat and physical venue), (iii) provided for in the applicable law, (iv) of the arbitral institutions, and (v) contained in soft law standards agreed to by the parties or set by the arbitral tribunal (…) arbitral tribunals could be bound by more than one ethical standard depending on the nationality of the arbitrators, affiliation with bar associations, as well as the place of arbitration. Therefore, multiple norms may apply at the same time, without any clear indication on which shall prevail in case of conflict.” UNCITRAL (2017), pars 38–39.

Infra, Chap. 3.

As stated in the April 2018 Working Group III Report: “the consideration of the topic by UNCITRAL constituted a unique opportunity to make meaningful reforms in the field, and that active and wide participation by both developing and developed States was essential to ensure the effectiveness and legitimacy of the UNCITRAL process in implementing the mandate”. UNCITRAL (2018), par 15.

The options for future work are currently open, with the choice being between: “Whether there is a need for a harmonized and authoritative source on ethics in international arbitration, or whether guidance on articulation among the possible applicable ethical standards would be more appropriate”. UNCITRAL (2017), par 43.

Article 1.7 and 1.8 of the UNCITRAL Rules: “Applicable instrument in case of conflict. Where the Rules on Transparency apply, they shall supplement any applicable arbitration rules. Where there is a conflict between the Rules on Transparency and the applicable arbitration rules, the Rules on Transparency shall prevail. Notwithstanding any provision in these Rules, where there is a conflict between the Rules on Transparency and the treaty, the provisions of the treaty shall prevail. Where any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the disputing parties cannot derogate, that provision shall prevail.” UNCITRAL (2014).

Article 10 of the Code of Conduct: “Application of the Code. The President of the Court of Justice, assisted by a Consultative Committee, shall be responsible for ensuring the proper application of this Code of Conduct. The Consultative Committee shall be composed of the three Members of the Court of Justice who have been longest in office and the Vice-President of the Court of Justice if he or she is not one of those Members. Should a Member or a former Member of the General Court be the person concerned, the President, the Vice-President and another Member of the General Court shall take part in the deliberations of the Committee. The Committee shall be assisted by the Registrar of the Court of Justice. Without prejudice to the provisions of the Statute of the Court of Justice of the European Union, the Committee may, in an individual case, give its opinion to the Member or the former Member concerned after hearing him or her”. CJEU (2016).

Part III – Accountability of Judges and Judicial Independence in Adjudication. Provisions 25 and 26. OSCE-ODIHR (2010).

Seibert-Fohr (2013) and Clark (n.a).

ASA (2016).

Geisinger (2015).

Focusing on the adequacy of an ex post evaluation of the arbitrators’ performance, and also suggesting that arbitral institutions should be more proactive in other contexts, the 2018 White & Case International Arbitration Survey reveals that: “The overwhelming majority of respondents (80%) indicated that they would [like to be given the option of evaluating arbitrators at the end of proceedings] (…) The overall results show that reporting to an arbitral institution, provided that the arbitration was administered by that institution, would be by far the preferred method of providing an assessment of arbitrators (88%). This longstanding trend adds to the perception that arbitral institutions occupy a central position in the arbitration framework, which also suggests that users’ expectations from them are accordingly high. It seems that the users increasingly expect the role and duties of arbitral institutions to evolve in accordance with changing trends and user needs, such as the desire for more transparency on arbitrator performance, based on both measurable and intangible metrics.” White & Case (2018), pp. 22–23.

Fernández Rozas (2010), p. 449. As Menon states: “As we contemplate these problems of moral hazard, ethics, inadequate supply and conflicts of interest associated with international arbitrators, it seems surprising that there are no controls or regulations to maintain the quality standards and legitimacy of the industry (…) is it time then for us to give up our cherished notions of autonomy and subscribe to an international regulatory regime?”. Menon (2012), pars 43 and 71. Warwas (2017).

Paulsson (2013), p. 147.

CIArb (last accessed June 2018).

Oyre states: “If the Institute is truly to promote arbitration and ADR as a viable alternative to litigation it has a concomitant duty to investigate allegations of members’ inappropriate conduct in a fair and independent manner and to ensure that its practicing members are as up-to-date and competent as they can be. If it fails in this one fundamental aspect, it cannot honestly claim to be one of the foremost and respected international education and training bodies in the field of arbitration and ADR”. Oyre (2002), p. 103.

Reflecting on institutional activism, Nappert (2015).

Hacking (2016), par 13.27.

The latest surveys on the subject indicate that arbitration stakeholders support the imposition of sanctions on international arbitrators in specific cases of breach of their duties. For instance, the 2018 White & Case survey brings out into the open the fact that: “most users would welcome provisions regulating the conduct of arbitrators: a large majority of about 80% of respondents think that arbitration rules should address “standards of independence and impartiality for arbitrators,” “consequences for delay by arbitrators” and “deadlines for issuing awards.” White & Case (2018) pars 34 and 35. Focusing on the dilatory conduct of an arbitrator, the survey indicates that: “Some interviewees argued that inefficient conduct of this kind by arbitrators should not go unsanctioned and that arbitral institutions should entertain with more interest the idea of applying strict sanctions in cases of unreasonable delays. As for the appropriate sanction, various views were expressed. A number of interviewees were of the opinion that pecuniary sanctions should be put in place. Others were reluctant as to their effectiveness, arguing that the busiest, most sought-after arbitrators are likely to be the ones least deterred by such measures. Yet another group of interviewees proposed that arbitrator profiles made available to users by arbitral institutions should include performance indicators such as the average time a certain arbitrator has spent on an arbitration. The counterargument advanced by others was that the relevance of such data is rather limited since every arbitration has its own particularities. That being said, there was a consensus among interviewed respondents that arbitration rules should indeed contemplate a more efficient mechanism for sanctioning delays by arbitrators.” White & Case (2018), 34 y 35.

Tung (2016), p. 57.

It has been recently proclaimed that: “Two possible approaches could be considered for future work on ethics. The first being the preparation of a substantive Code of ethics seeking to provide harmonization and clarity, for instance with regard to the disclosure and challenge procedures; and the second being the preparation of guidelines on relevant and applicable ethical standards”. UNCITRAL (2017), par. 18.

ICSID has recently announced that the organization is working with the UNCITRAL Secretariat on a Code of Conduct for Arbitrators. ICSID Secretariat, Proposals for Amendment of the ICSID Rules—Synopsis, Volume 1, August 2, 2018, par. 33. This document is not going to be analysed in detail in this book, as it was presented after completing the elaboration of the present book.

Paulsson stresses the existing difficulties in the following reflections: “The stakes are too high to leave these matters to be dealt with by self-appraisal, peer pressure, or other forms of self-regulation. It is not clear that all arbitral institutions have adequate structures to meet the challenge. But unless these bodies fully embrace their role in protecting the interests of arbitrants rather than those of arbitrators, it is likely that occasional judicial intervention will not be perceived as enough and pressure will build on political actors to step in and provide stricter regulations notwithstanding their lack of familiarity with the arbitral process. The result might be unwelcome bureaucratization, and a gradual erosion of arbitrations´ advantages”. Paulsson (2013), p. 149. On the other hand, Rogers makes a clear case for ethical self-regulation in international arbitration: “the international arbitration community should explicitly assume primary responsibility for ethical regulation of its participants (…) Taking up the call for ethical self-regulation provides an opportunity to develop collective understanding about what constitutes proper and improper conduct, an understanding that transcends national legal cultures (…)” Rogers (2014), introduction. Although both authors might have commercial arbitration as their first reference in mind, it is understood that their reflections also cover investment arbitration.

Wai (2002).

Kaufmann-Kohler (2016), p. 146.

Article 57 ICSID Convention (1966) and Rule 9 of the ICSID Arbitration Rules. ICSID (2006).

Article 21 of the ICSID Convention states that: “arbitrators (…) shall enjoy immunity from legal process with respect to acts performed by them in the exercise of their functions, except when the Centre waives this immunity”. ICSID (1966). Being in the antipodes of the referred article, it is relevant to point from the perspective of comparative law the existence of the still firmer Article 399 I of the Chinese Criminal Law: “Where anyone who undertakes the duties of arbitration according to law intentionally goes against the facts and law and makes any wrongful ruling in the process of arbitration he shall be sentenced to fix-term imprisonment of not more than three years of detention. If the circumstances are extremely serious, he shall be sentenced to fixed-term imprisonment of not less than three years but no more than seven years”. Ruiping and Xiaosong (2014). Infra Chapter 2.8.

Article 8. 30.4 of CETA; Article 3.11.5 EU-Singapore IPA; Article 14.5 EU-Vietnam FTA, Article 8.5 Ethics-JEFTA and Article 11.5 TTIP.

Article 10 (paragraph 24) of the EU-Singapore IPA Code of Conduct (2018).

It is also remarkable that the recent Code of Conduct contained in the EU Singapore IPA incorporates a procedure in case a former Member had breached his/her ethical obligations referred to in the Code: “If the President of the Tribunal or of the Appeal Tribunal is informed or otherwise becomes aware that a former Member of the Tribunal or of the Appeal Tribunal, respectively, is alleged to have breached the obligations set out in paragraphs 15 through 17, he shall examine the matter, and provide the opportunity to the former Member to be heard. If, after verification, he finds the alleged breach to be confirmed, he shall inform: (a) the professional body or other such institution with which that former Member is affiliated; (b) the Parties; and (c) the president of any other relevant investment tribunal or appeal tribunal. The President of the Tribunal or of the Appeal Tribunal shall make public its findings pursuant to this paragraph.” EU-Singapore IPA (2018).