The issue of repeat appointments has been news in International Centre for Settlement of Investment Disputes (ICSID) cases in recent times, but what’s the concern? The independence of the arbitrator is one of the cornerstones of arbitration. An independent arbitrator is one who has no close relationship with a party in the arbitration or its counsel, be it of a financial, professional or personal nature. It is crucial that an arbitrator has no such relationships because they might induce the arbitrator to decide in favour of one of the parties, irrespective of the merits of the case.
The fact that the same arbitrator is repeatedly appointed by the same party in arbitrations or the same law firm that is acting for one of the parties to an arbitration is a potential cause of concern over that arbitrator’s independence. It may of course well be that the appointing parties or counsel were satisfied with the arbitrator’s performance in the earlier arbitrations and have turned again to the same individual. However, there may also be a justified concern that an arbitrator may favour the party or law firm that has repeatedly appointed them to secure the flow of future appointments.
A second concern, which is more of an issue of impartiality than independence, is that the arbitrator does not come to the case with a clear mind but is influenced by the factual or legal issues raised by their appointing party in the other cases to which they have been appointed.
Is this issue limited to just ICSID arbitration?
No. All the major arbitration institutions conducting commercial arbitrations, including the Court of Arbitration of the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Arbitration Institute of the Swedish Chamber of Commerce (SCC), have already disqualified arbitrators or refused to appoint arbitrators on the grounds of repeat appointments.
Also the IBA Guidelines on Conflicts of Interest, which apply to both investor-state arbitrations and commercial arbitrations, contain provisions on repeat appointments. Section 3.1.3 of the guidelines’ Orange List covers the situation where the arbitrator has, within the past three years, been appointed as arbitrator on two or more occasions by a party (or by an affiliate thereof). Section 3.3.8 covers the situation where the arbitrator has within the past three years received more than three appointments by the same counsel or law firm acting for one of the parties.
If it is happening in commercial arbitration ‘behind closed doors’, is it necessarily a problem?
Whether the doors are open or closed does not make a difference. Obviously where the doors are open in the sense that the appointments of arbitrators are in the public domain, it is easier for the non-appointing party to verify the number of appointments an arbitrator has received from a particular party or law firm. However, even where this type of information is not publicly available, such as in commercial arbitration, the arbitrator still has a duty to spontaneously disclose any information that may give rise to justifiable doubts over their independence or impartiality. Under a number of commercial arbitration rules, the parties themselves also have a duty to disclose information that may affect the arbitrator’s independence or impartiality. In other words, even in commercial arbitration proceedings where the non-appointing party may not necessarily be aware of the fact that the appointment is a repeat one, the arbitrator or the appointing party have a duty to disclose this.
Is there a solution to this problem (if there is a problem)?
On a macro level, the solution is to widen the pool of arbitrators so that parties and law firms have a wider choice of arbitrators available to them and can spread their appointments over a greater number of individuals.
On a micro level, parties and law firms have to keep a record of the appointments they have made in the past so that they can determine whether by appointing the same arbitrator again, they enter into the danger zone. As indicated earlier, the marker set by the IBA Guidelines on Conflicts of Interest is more than two appointments by the same party and more than three appointments by the same law firm within three years. It is prudent to stay below these thresholds, although they are by no means absolute in the sense that there may not be a problem even where an arbitrator has been appointed more frequently or, inversely, there is a real problem although the arbitrator has been appointed less frequently.
In assessing whether a repeat appointment is a ground to disqualify and remove an arbitrator, the sheer number of appointments is inconclusive.
In assessing whether a repeat appointment is a ground to disqualify and remove an arbitrator, the sheer number of appointments is indeed inconclusive. In determining a challenge, other factors are frequently taken into account as well, including (1) the number of appointments received from other parties and law firms; (2) the outcome of the cases in which the arbitrator was previously appointed by the appointing party or law firm; (3) the arbitrator’s other professional activities; (4) the number of appointments turned down by the arbitrator in the relevant period; (5) the overlap of factual and legal issues between the cases to which the arbitrator has been appointed and the status of those cases; (6) the arbitrator’s independent income sources unrelated to the fees derived from their appointments as arbitrator; and (7) the arbitrator’s forthcoming disclosure of their earlier appointments.
Does this issue impact how you choose your arbitrators/think about your opponent’s appointments?
Absolutely. It will impact the selection of arbitrators in the sense that an appointing party will want to trigger the other party to make a good faith challenge based on a repeat appointment. One way of doing this is simply by diversifying your appointments or, when you do want to turn to the same arbitrator again, by at least carefully assessing the criteria listed above. It will also impact the assessment of the appointment made by the other side. Based on the number of appointments and, again, the above-mentioned criteria, the non-appointing party will decide either to challenge the arbitrator concerned or accept the appointment.
As a final thought, parties opposing a repeat appointment challenge frequently refer to the fact that in domestic litigation it is not unusual that the same judge deals with a number of disputes involving the same party. This argument ignores, however, the fact that a judge is appointed for a set tenure, receives a fixed judicial salary and does not control their caseload. A judge has therefore no incentive to favour this or that party to secure future benefits, be it future appointments or the income derived from these appointments. This may well be different for a full-time arbitrator.
Karel is a partner and head of Mishcon de Reya’s arbitration practice. He started his career as a civil law litigator in Belgium, before moving to Tanzania where he devoted most of his time to representing African states and state-owned companies in a number of investor-state disputes under the ICSID and UNCITRAL Rules in the water and the energy sector. He has worked internationally, advising multinationals on investing in Africa’s mining, infrastructure, telecom and energy sector.