Disqualification standards in international investment arbitration

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Disqualification standards in international investment arbitration, 国际投资仲裁中仲裁员独立性与公正性认定标准

Ensuring the independence and impartiality of arbitrators is one of the key elements safeguarding due process and the fair outcome of arbitration proceedings, as is the case in international investment arbitration. Independence and impartiality are two distinct but closely related concepts. Independence requires the lack of relations with any party that might influence an arbitrator’s decision. Impartiality requires the absence of any bias or predisposition towards one of the parties, which is a more subjective and abstract concept.

The arbitration mechanism under the International Centre for Settlement of Investment Disputes (ICSID), established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, plays an important role in resolving investor-state disputes. Most of the international investment arbitration cases are governed by the above-mentioned convention.

Under article 57 of the convention, a party proposing the disqualification of an arbitrator shall prove a “manifest lack” of the arbitrator’s qualities and competence required by article 14 (1). The English and French versions of article 14 refer only to “independent”, but the Spanish version refers to “impartiality”. It is thus deemed that both requirements of an arbitrator’s independence and impartiality are implicitly embodied in this provision. According to the above two provisions, in ICSID cases, the standard for determining whether an arbitrator has an issue of independence or impartiality sufficient to cause his or her disqualification is “manifest lack”.

Determining ‘manifest lack’

The standard under article 57 has been changing, in legal practice, since the interpretations of “manifest lack” by ICSID tribunals in different cases are inconsistent and contradictory. The most ground-breaking related ICSID case is Blue Bank v Venezuela. Its 2013 decision divides the disqualification standard for determining “manifest lack” into two phases.

During the first phase, before this case happened, the most representative standard was the “highly probable” standard adopted in 2008 in the Suez v Argentina case, following the stringent standard from the first disqualification case, Amco v Indonesia, in 1982, which imposes a heavy burden on the challenging party to prove an almost certain lack of independence and impartiality of the arbitrator. The challenging parties in these two cases were not supported. In fact, only one of more than 40 challenges during this phase had been upheld. The high threshold of this standard is thus notorious.

The Blue Bank v Venezuela case rejected such a stringent standard, and for the first time adopted an objective standard based on a reasonable evaluation of the evidence by a third party, applying a lower threshold than in the previous cases. The standard applied in this case confirmed that proof of actual dependence or bias is not required, and the challenging party merely needs to demonstrate that the arbitrator has an appearance of dependence or bias.

During the second phase, since this case until now, subsequent cases have basically followed this standard, which is also regarded as bringing back the “reasonable doubt” standard adopted in 2001 in the Vivendi v Argentina case.

Comparing non-ICSID cases

For non-ICSID cases, without the convention applied, the generally adopted standard is the “justifiable doubt” standard. Article 12 of the UN Commission on International Trade Law (UNCITRAL) Arbitration Rules, and relevant institutional rules, provide that an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to independence or impartiality. Moreover, the International Bar Association Guidelines on Conflicts of Interest in International Arbitration, which is the soft law complementing applicable rules, contains similar provisions.

Nowadays, the disqualification standard adopted in ICSID cases is highly consistent with the above-mentioned standard, which indicates a unified attitude in the field of international investment arbitration, i.e., a challenging party should not be imposed with an excessive burden of proof, so as to better safeguard the independence and impartiality of arbitrators. For this reason, the ICSID and UNCITRAL jointly published a draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement, aiming for more detailed provisions on relevant issues.

The Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) has been closely following this international trend. Article 15 of the BAC/BIAC Rules for International Investment Arbitration, effective from 1 October 2019, precisely adopts the “justifiable doubt” standard.

On 22 December 2020, BAC/BIAC published the draft Code of Conduct for Arbitrators in International Investment Disputes. Articles 4 and 5 put forward higher requirements upon the independence, impartiality and disclosure obligation of arbitrators, so as to respond to calls for reform of investment arbitration from the international community, and to provide high-quality international investment arbitration services for the parties concerned.

Li Yejing is a case manager of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC)