I recently spoke at a conference co-sponsored by the Milan Chamber of Arbitration and the ICC on the occasion of the publication of the new Italian arbitration treatise entitled Commentario Breve al Diritto Dell’Arbitrato Nazionale ed Internazionale (CEDAM 2010) by my colleague Massimo Benedettelli, along with co-authors Claudio Consolo and Luca Radicati di Brozolo. The topic of my panel was general trends in international arbitration.

Although I would have liked to have spoken on a substantive trend in international arbitration, I decided I could not ignore a much bigger, procedural trend that has been the topic of conferences in both the United States and Latin America – that is the growing discontent of corporate users with international arbitration.

The criticisms regarding international arbitration center around cost and efficiency. A recent study of the Corporate Counsel International Arbitration Group (CCIAG) found that 100% of the corporate counsel participants believe that international arbitration “takes too long” (with 56% of those surveyed strongly agreeing) and “costs too much” (with 69% strongly agreeing).

Three main questions arise from these criticisms. The first is whether these criticisms are justified? The second is, if so, then what (or who) is to blame? The third and final question is what can the arbitration community do about these critiques? The answers to the first two questions depend on where one sits. But I am increasingly impatient with our responses to the third, as I think there are relatively simple solutions if we are willing to be creative and proactive.

First, much of the criticism regarding cost and efficiency in international arbitration is targeted at investor-state arbitration. These by their nature involve a more transparent and political process than international commercial arbitration, and the problems and solutions are, in part, different in each.

Second, there is plenty of blame to go around. Many blame complaints on outside counsel – especially those from the United States – for requesting too many documents, making too many motions, and generally filing too many pages. Others blame in-house counsel for not using their authority to rein in practices they criticize as inefficient or wasteful. And some blame the arbitral institutions themselves for not constructing a system that reins in everyone.

My most negative experiences recently, however, have been with arbitrators – and especially chairs – who are oftentimes overscheduled, unprepared, disorganized, reactive, timid and slow. Without suggesting I am blameless as a chair, there is no way to defend arbitrators who cannot schedule hearings for months or produce awards for years. But don’t take it from me. The CCIAG survey lists the following factors as contributing to the rising inefficiency of international arbitration: (i) 100% of those surveyed identified arbitrator availability and excessive document disclosure; (ii) 95% identified the “failure of tribunals to narrow issues, evidence and argument leading parties/counsel to feel need to cover all bases” and (iii) 90% identified excessive concern for due process over efficiency, leading to a free-for-all on timing.

So, then, what are the solutions? Fortunately several have already been identified and implemented. The CEDR and ICC have published rules and techniques for controlling time and costs. The ICC has revised its Arbitrator Statement of Independence to include information on availability, in the form of data about other cases in which an arbitrator candidate is serving. Despite the many complaints regarding the “Americanization” of document discovery, it is the AAA that has issued international guidelines calling for arbitrators to manage document disclosure strictly, using cost assessment as a control mechanism.

We can go farther. Institutions should require more than the ICC’s disclosure on availability. Why not require a simple calendar with black-out dates for scheduled hearings and deliberations as arbitrator, teaching commitments, hearings and major filings as counsel? No disclosure of details, of course, but just calendar dates – based on then-available information – on when an arbitrator is and is not available for hearings.
As for efficiency in issuing awards, why not require arbitrator candidates to disclose not just how many prior cases they have handled as arbitrator, but also, for each case, how much time passed between the close of the record and the issuance of the award? Provided there is a field for an explanation, i.e., delay caused by suspension, or illness, this is simply objective ‘data’ helpful to the parties.

How about building into the procedural calendar a one or two day private (and paid) meeting of the tribunal to allow (and in some cases, force), the arbitrators to study the record together, prepare focused hearing directions, and (ideally) issue (neutral) questions to parties to prioritize use of witnesses and hearing time. (This is the “Reed Schedule” I mentioned in prior talks and blogs.)

Finally, if these proposals seem radical, consider that the CCIAG has proposed a far more radical solution: linking arbitrator remuneration to achieving milestones in the procedural calendar.

Whether or not concerns about international arbitral efficiency are exaggerated, the international arbitration community must face this discontent and, more importantly, take steps to fix these problems if it is to maintain legitimacy with its users.

When it comes time to identify an arbitrator candidate, be it in the investor-state context or in an international commercial arbitration, there are many factors to consider. One such factor, however, that has been the focus of much attention recently by arbitration institutions, practitioners and commentators alike, is arbitrator availability. It is clearly a sore subject.

In August 2009 the ICC took a major step towards transparency with respect to arbitrators’ availability and workload. As a result of these measures, the ICC now requires ICC arbitrators to complete an ICC Arbitrator Statement of Acceptance, Availability and Independence listing their “currently pending” cases, and confirming their ability to devote the necessary amount of time to the arbitration and to conduct the process “diligently, efficiently and in accordance with the time limits in the Rules”.
While the ICC’s measures to increase transparency about arbitrator availability are certainly welcomed and commendable, they are only a first step. Aside from ascertaining the number of “currently pending” cases in which an arbitrator candidate is involved, either as tribunal chair, co-arbitrator or counsel, other objective data is relevant and ought to be available. This kind of data includes details about the calendar of an arbitrator candidate, and details about an arbitrator candidate’s record for award drafting in past cases.

Calendar of an Arbitrator Candidate. Arbitral institutions should not be afraid to ask an arbitrator candidate for a calendar of his/her professional responsibilities for the upcoming 12 – 18 months. We obviously do not mean a calendar with case (or personal) details, but rather a calendar showing dates blacked-out for existing commitments: hearings, deadlines for the drafting of awards and time blocked for drafting (particularly if the candidate is acting as tribunal chair), and responsibilities as counsel.

An Arbitrator Candidate’s Record on Awards. As we have said publicly before, why shouldn’t institutions – and parties – ask arbitrator candidates to indicate on their disclosure statements information, from past cases as arbitrator, about the length of time (i) from the final hearing to the close of the proceedings, and (ii) from the close of the proceedings to the issuance of the award. Arbitrators would, of course, be able to explain any particularly long delay, for instance, due to suspension of the proceedings by the parties for settlement purposes or illness of a tribunal member.

Although the number and type of arbitrations an arbitrator candidate has done is perhaps the most important piece of information for appointing parties and institutions, surely it would help those parties and institutions also to have information about the candidate’s availability – real availability – and pattern of award issuance. If the first type of objective date is required on disclosure statements, why not the second?

By Lucy Reed and Noiana Marigo

In recent years, there has been increasing concern about court orders aimed at preventing a party from initiating, continuing or participating in arbitration proceedings (see notably, IAI Series on International Arbitration, no 2, Anti-Suit Injunction in International Arbitration, E. Gaillard ed., 2005; ICCA Congress Series, No 13 International Arbitration 2006, Back to Basics?, A. J. Van Den Berg, Kluwer Law Int 2007).

The Paris court of first instance (Tribunal de Grande Instance) has in recent months rendered two interesting decisions in this respect. These two decisions address the issue whether and to what extent French courts can interfere with the arbitral proceedings, in particular when relief is sought in summary proceedings on the basis of an alleged risk of imminent or irreparable harm. In both sets of proceedings, the arbitrators were directly sued.

The first of these two cases led to an order of the Paris court of 6 January 2010 (S.A. Elf Aquitaine and Total v. Mattei, Lai. Kamara and Reiner). The claim amounted to an aggressive attempt to derail an ongoing arbitration by requesting the court to enjoin the arbitrators from pursuing the proceedings. The underlying dispute in the arbitration was concerned with a cooperation contract concluded between Elf Neftgaz, a subsidiary of Elf Aquitaine, and certain Russian parties. The basis for the request was that a shareholders’ assembly of Elf Neftgaz had decided the liquidation of said company. The Russian parties subsequently made an application to the president of the Paris tribunal of commerce to appoint an ad hoc representative for Elf Neftgaz to the effects of the arbitration they were about to commence against such company. The court accepted such request and appointed an ad hoc representative for Elf Neftgaz. The arbitration commenced with its seat in Paris, and the court appointed representative nominated an arbitrator on behalf of Elf Neftgaz. However, the judgment having designated the ad hoc representative was thereafter retracted upon request of Elf Aquitaine. Although such decision was appealed by the Russian parties, Elf Aquitaine and Total seized the court in summary proceedings (référé) against the three arbitrators (who were the only named defendants) to obtain an injunction to interrupt the arbitration. The request was based on the contention that Elf Neftgaz’s arbitrator had been appointed by a representative deprived of powers and that the continuance of the arbitration in spite of the withdrawal of the court decision having nominated Elf Neftgaz’s representative would be such as to cause irreparable harm.

The case leading to the Paris First Instance Tribunal decision of 29 March 2010 (Republic of Equatorial Guinea v Fitzpatrick Equatorial Guinea, de Ly, Owen and Leboulanger) was concerned with a contract for the construction of a highway. A dispute arose between the parties, and Fitzpatrick initiated ICC arbitration. Like in the Elf case, the seat of the arbitration was in Paris. The Republic challenged the Arbitral Tribunal’s jurisdiction on the basis that the arbitral agreement and the laws of Equatorial Guinea imposed to exhaust local judicial remedies before arbitration could be initiated. The Republic also submitted that Fitzpatrick had been placed in insolvency proceedings in Equatorial Guinea and that only the receiver appointed by the local court had powers to represent it. The arbitral tribunal rendered a partial award upholding its jurisdiction, and proceeded to instruct the merits in the second phase of the arbitration. Meanwhile, the partial award was challenged before the Paris Court of Appeal. Based upon such challenge, the Republic made an application before the Arbitral Tribunal to stay the arbitration. The Arbitral Tribunal rejected such application and the Republic started summary proceedings to enjoin the arbitrators from continuing the arbitration until the Court of appeal decision in the setting aside proceedings.

Both sets of proceedings were initiated pursuant to article 809 of the Code of Civil Procedure, which provides that “The president [of the Tribunal of First Instance] may always, even if the request is subject to serious objections, order in summary proceedings such conservatory or protective measures that may be necessary to prevent imminent harm or to put an end to a manifestly illegal trouble”.

In the Elf case, the claimants alleged that the arbitration should not proceed for the judgment having designated the representative of a party had been retracted. As a consequence, the nomination of an arbitrator by such party was invalid, thus jeopardizing the entire constitution of the arbitral tribunal. The respondents objected that French law does not permit courts to deliver injunctions to an arbitral tribunal, and that based upon the negative aspect of Kompetenz-Kompetenz, arbitrators have exclusive jurisdiction to rule upon their own jurisdiction, the courts’ assessment being postponed until a possible challenge against the award, with the consequence that courts are deprived of any power to assess the arbitrators’ jurisdiction once the arbitral tribunal is constituted.

The court endorsed such arguments and decided that, once the arbitral tribunal is constituted, it is only for it to decide on its own jurisdiction, and that it is as a consequence for the arbitral tribunal to decide the consequences of the withdrawal of the court nomination of a party representative on the regularity of its own constitution: “notwithstanding the effect of the withdrawal of the order having designating the [party representative] and the irregular designation of two or three of the arbitrators, the question of the existence of this arbitral tribunal or of the regularity of its constitution falls exclusively within the jurisdiction of the arbitral tribunal, which excludes that the court be seized in summary proceedings”.

The court adopted the same principles in the Republic of Equatorial Guinea case.

The Republic argued that the arbitral tribunal manifestly lacked jurisdiction because the arbitral agreement and the local law requested exhaustion of local remedies. Based on such contention, it developed several arguments. First, it argued that it would suffer an imminent and irreparable harm if the arbitration were to proceed for the award on the merits would be rendered before the Court of Appeal has a chance to rule on the challenge against the interim award on jurisdiction. Although the claimant conceded that the award on the merits could not be enforced in France until such challenge is decided (in particular because the challenge stays the enforcement of the award under French law), it would nevertheless be faced with the risk of enforcement abroad. In addition, the ICC Court of Arbitration had requested the Republic to pay an additional advance on costs, which the Republic might not be able to recoup would the award be ultimately quashed. Finally, the Republic had lodged a criminal complaint on the ground of an alleged forgery, and it submitted that all proceedings should be stayed pending the criminal proceedings. The respondent raised a number of objections. First, the claim supposed that the court would express a view on the arbitral tribunal’s alleged lack of jurisdiction which had already been decided in the partial award, thus violating the res judicata of said award (awards have in France res judicata since they are rendered – Article 1476 of the Code of Civil Proceedings). Second, like in the Elf case, it submitted that the arbitral tribunal enjoys an absolute priority to decide issues relating to its jurisdiction. In addition, French courts are deprived of any jurisdiction to interfere with the arbitral proceedings and cannot give injunctions to an arbitral tribunal, even though it sits in France. Third, French law clearly sets the principle that a challenge against a partial award on jurisdiction does not stay the arbitral proceedings and the arbitral tribunal can therefore proceed to instruct the merits even though setting aside proceedings are pending (notably, Cass. 19 March 2002). Finally, the criminal proceedings that the Republic had instrumentally started do not have the effect of staying the arbitral proceedings (Cass. 25 October 2005).

The court rejected the application. It admitted that: “Article 809 of the Code of Civil Proceedings may be the basis for an order in summary proceedings [to prevent imminent harm or to put an end to a manifestly illegal trouble] even if the arbitral tribunal is already constituted and courts are deprived of jurisdiction to decide the dispute”. But such an order can only be taken “to secure the enforcement of the arbitral award” and the court can therefore not “order the arbitrators to stay the proceedings” as “to order such a measure would constitute an interference with the arbitral proceedings which does not fall within the jurisdiction of national courts, even in summary proceedings”.

These two decisions confirm in very clearly terms that in no circumstance is the court authorized to interfere in any manner with arbitral proceedings (in an earlier order dated 24 June 2004, the Court of Paris had already decided that “in no circumstance”, and “whatever the legal grounds invoked”, has the court any power to order an arbitral tribunal to stay its proceedings – TGI Paris, 24 June 2004, LV Finance Group, Rev. Arb. 2005, p. 1037).

In sum, French courts may only intervene in support of the arbitration and in the limited cases provided by the law. In no circumstance can they entertain instrumental claims aimed at staying or disrupting the arbitration.

A bon entendeur…

Alexis Mourre/Alexandre Vagenheim

In 2007, the Russian Supreme Arbitrazh (State Commercial) Court in OAO NK Rosneft v. Yukos Capital S.a.r.l ruled that arbitrators must disclose their connection to the legal counsel of the other party at the time of their appointment. The facts of the case suggested that one of the arbitrators spoke at a conference organized and sponsored by the law firm representing Yukos Capital S.a.r.l. in the arbitral proceedings.

Russian law stipulates that an arbitrator must disclose any circumstances which may give rise to justifiable doubts as to his impartiality or independence. Based on such disclosure, a party to the arbitration may decide whether to challenge the arbitrator. The arbitrator’s failure to provide such information at the time of his appointment may serve as grounds for appealing an arbitral award in the future.

Departing from the law and the facts of the case, the court set aside the arbitral award. However, the court did not explicitly rule whether the participation in the conferences may per se speak for the partiality of the arbitrators. This led to a vivid discussion regarding whether the arbitrators are biased if they appear at academic events organized and sponsored by the opposite party’s counsel (law firm).

There was no subsequent case law regarding this matter until the Court of Cassation of the Moscow Federal Circuit recently rejected the claim of the partiality of an arbitrator based on a similar set of facts. In Erick van Egeraat Associated Architects B.V. (Netherlands) v Capital Croup LLC (Russia) (Case No. А40-51596/09-68-437), Capital Group LLC alleged that a co-arbitrator once spoke at a conference organized and sponsored by the law firm of the opposite party’s counsel. In addition, Capital Group LLC reported that the counsel representing Erick van Egeraat also spoke at the same conference.

The court rejected Capital Group LLC’s claim and based its ruling on two specific arguments. Firstly, it was established that the law firm acted only as a so-called ‘information sponsor’ (promoting the conference among its clients and partners) and certainly had no influence on either the program of the conference or on the speakers’ list. Secondly, the participation of the co-arbitrator in the conference did not create any dependence or commercial interest with the counsel (law firm). Therefore, the arbitrator fulfilled the impartiality criteria set forth by international laws and the SCC Arbitration Rules.

The decision of the Court of Cassation of the Moscow Federal Circuit is timely and welcomed as it brings some clarity to the issues of arbitrators’ impartiality.

Russian courts adopted the position that an arbitrator’s involvement in academic events must be made known to the other party, otherwise this is a ground for setting aside awards. Yet, the courts did not answer the main question of whether the mere participation in a conference biases an arbitrator.

The recent decision illustrates that the impartiality test is based on establishing whether or not any interaction creates dependence or commercial interest between the counsel (law firm) and the arbitrator. Therefore, it is at the court’s discretion whether or not to define in each individual case whether any form of sponsorship may speak for an arbitrator’s partiality. In this particular case, the court ruled that ‘information sponsorship’ does not create any special relationship between the counsel (law firm) and arbitrator.

Furthermore, the court held that the fact that the arbitrator and counsel spoke at the same conference does not necessarily lead to the partiality of the arbitrator.

The court also underlined another important aspect in that the standards of impartiality should also be found in the applicable arbitration rules. In our opinion, any relevant guidelines by arbitration institutes on the impartiality of arbitrators would be of a significant value in cases concerning setting aside awards or in enforcement procedures in Russia.

I have always found the submission of expert legal opinions on matters of international law to investment treaty tribunals rather odd.  Why are expert opinions needed and what is their status?  To begin, the opinion is submitted to an international arbitration tribunal often comprising leading public international lawyers (and sometimes current or former judges of the International Court of Justice).  This tribunal’s role is to interpret and apply the international investment agreement in question in accordance with public international law.  Further, an international tribunal operating under public international law is deemed to know the law (jura novit curia).  Next, we have the counsel for the claimant or respondent who submits the expert opinion, eminent international arbitration practitioners often with substantial academic and practical experience in public international law.  Then we have the the opinion, written by the expert in public international law, typically a professor or long-standing practitioner.

The practice is rather strange given the usual allocation of roles in dispute settlement: witnesses provided evidence; experts opine on technical issues or facts; and counsel make legal submissions based on the applicable law.  Yet, many of the expert legal opinions on international law that parties have submitted to tribunals in investment treaty arbitrations (see here) are used by counsel as legal submission in everything but name.

The Interim Awards on Jurisdiction and Admissibility in the Yukos cases (PCA Case Nos. AA 226, 227 and 228) present rather striking examples of this phenomenon.  The awards present a veritable battle of international law experts on issues that, based on the summaries of the expert opinions in the awards, involve legal analysis of matters of pure public international law (i.e. matter for legal submission).  Yet, at points in the awards, expert opinions are referred to as “evidence”, an expert statement as “testimony” and experts are included under the heading of “witnesses”.

This terminological blurring is probably harmless and, given the difficulty of the issues addressed in the awards, it would be petty to criticize the tribunal or counsel.  Indeed, in the Yukos cases, the parties submitted a veritable cornucopia of 23 different witness statements and expert legal opinions, which addressed a range of issues—factual statements with respects to the travaux préparatoires of the Energy Charter Treaty, statements of national law, opinions on the implementation of treaties within national legal systems and opinions more generally on the application of the Energy Charter Treaty.  Given this overlapping mélange, it is understandable there was some blurring of distinctions.

More generally, what objection can there be if a party, wishing to ensure that its legal submissions have more gravitas, chooses to support them by relying on an expert legal opinion, rather than bringing on the expert as co-counsel in the case?  Further, not all counsel and not all arbitrators are experts in public international law.  Expert legal opinions can serve an important function in ensuring that relevant legal principles are fully briefed.

Although there may be no principled objection to the use of expert legal opinions, as investment treaty jurisprudence develops and matures, I think we can expect less reliance on the expert legal opinion on international law. With the exception of the Yukos case, it may be that trend has already begun (and, in any event, the expert legal opinion on international law only appears in a minority of cases). In the future, counsel in investment treaty arbitrations will presumably do what counsel in most legal systems do—brief the law and make legal submissions without submitting opinions from legal experts.

By Federico Campolieti* and Nicholas Lawn**

Introduction

In a recent decision related to the ICSID case Perenco Ecuador Limited v. The Republic of Ecuador [1], the Secretary-General of the Permanent Court of Arbitration at The Hague (“PCA”) has upheld a challenge against a leading arbitrator, Judge Charles N. Brower, on the basis that from the point of view of “a reasonable third person having knowledge of the relevant facts”, the comments made by the arbitrator in a published interview constituted circumstances giving rise to justifiable doubts as to the arbitrator’s impartiality or independence [2].

The PCA accepted jurisdiction to decide upon the challenge made by Ecuador, based on a previous agreement executed by the parties in dispute, thereby seeking to side-step the regular disqualification procedure established in Articles 57 and 58 of the ICSID Convention. On the basis of the same agreement, the PCA also applied the test set out in the IBA Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines”), rather than the standard provided for in Article 14 of the ICSID Convention [3].

However, this is to overlook the fact that the provisions of the ICSID Convention regarding the challenge of an arbitrator are, by nature, mandatory international law and parties are not free to resile from those provisions even by agreement. From the point of view of ICSID procedure, the PCA’s decision has no effect. Indeed, arguably there was never a valid challenge to Judge Brower in this arbitration.

The PCA’s Decision

In September 2009, Ecuador challenged Judge Brower (the arbitrator appointed by the investor Perenco Ecuador Limited), alleging that his statements during an interview later published in the Metropolitan Corporate Counsel in August 2009 gave rise to a strong appearance of bias. The two main arguments were that the interview gave rise to doubts both as to the arbitrator’s impartiality and as to whether he had prejudged the case.

The PCA considered that the combination of words used by Judge Brower in the article and the context in which they were used had the “overall effect of painting an unfavourable view of Ecuador in such a way as to give a reasonable and informed third party justifiable doubts as to Judge Brower’s impartiality”. The reference in the article to “recalcitrant host countries”, which was to be considered pejorative, should reasonably be taken to be referring to Ecuador. Further, the comments which followed in relation to Libya, suggested an unfavourable view of Ecuador. In particular, if investors in Ecuador are considered to be in the same position as investors in Libya in the 1970s, they are considered to be investors subject to expropriation.

In response to Ecuador’s argument that the comments made give rise to justifiable doubts that the arbitrator had prejudged the case, the PCA did not accept that Judge Brower had prejudged the binding nature of the tribunal’s requests for provisional measures: “Rather than prejudging the question, Judge Brower was merely repeating what the Tribunal has already judged”. However, the PCA was not convinced that a distinction could be drawn between an analogy as to liability for expropriation and an analogy based on possible investor reaction, such that the juxtaposed references to Ecuador and Libya would lead to justifiable doubts as to the arbitrator’s pre-judgment on the issue of expropriation.

Leaving aside any comments on the reasoning of the decision, there are two important points which should be noted.

(1) The procedure that the challenge should have followed

According to Articles 57 and 58 of the ICSID Convention, a proposal for disqualification should be made to the tribunal itself and it is for the remaining members of the tribunal to decide on such proposal. Where, however, they are equally divided or in the case of a proposal to disqualify the majority of the arbitrators or a sole arbitrator, the Chairman of the Administrative Council shall decide on the proposal.

The PCA has been involved in a number of previous ICSID arbitrator challenges. For example, in cases where the unchallenged arbitrators submit separate and dissenting opinions concerning a proposal for disqualification, the practice has developed that the Chairman of the ICSID Administrative Council may, in cases where there may be a conflict of interest, ask the PCA to provide an independent opinion on the disqualification. Such decisions are in the form of non-binding “recommendations” to the Chairman, whose ultimate responsibility it still is to decide requests for disqualification. In some cases, the PCA has not even provided reasons for its decision.

The decision in Perenco is, however, not simply a recommendation. It is a decision made by the Secretary-General acting in his own capacity on the basis of an agreement between the parties.

While the parties can make any agreement which they wish, it should be clear that the mechanism for challenging an arbitrator under ICSID cannot be side-stepped by agreement. Unless otherwise stated, the express provisions of the Convention are mandatory. The proposal to disqualify Judge Brower should therefore, in the first instance, have been submitted to and heard by Lord Bingham and J. Christopher Thomas. To the extent that the PCA became involved, it should only have been, after arbitrator disagreement, to offer a recommendation to the Chairman, if so required.

(2) The Standard that should have been applied to the challenge

The parties also agreed to apply the IBA Guidelines to any arbitrator challenge and the PCA followed this agreement in making its decision.

According to the second general standard contained in the IBA Guidelines, conflicts of interest arise when “…facts or circumstances exist, or have arisen since the appointment, that, from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrator’s impartiality or independence” or when “a reasonable person 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” [4].

In interpreting these Guidelines, the IBA Working Group decided that the proper standard to be met for disqualifying an arbitrator, as reflected in the Guidelines, is an “objective appearance of bias”. Accordingly, a challenge to the impartiality and independence of an arbitrator depends on the appearance of bias and not actual bias.

This does not, however, precisely reflect the test under the ICSID Convention. Article 57 requires a “manifest lack” of the qualities required for an arbitrator in order for the challenge to be successful. Such qualities under Article 14 of the Convention include that the arbitrator “…may be relied upon to exercise independent judgment” [5].

Thus although, under the ICSID Convention, the test is also objective, the mere appearance of bias is not the standard. It is qualified. The lack of reliability as to the arbitrator’s independence must be “manifest”, not just “possible”, “quasi-certain” or “apparent”.

As the unchallenged arbitrators of the Tribunal in SGS v. Pakistan [6] and the remaining annulment Committee members in Vivendi v. Argentina [7] decided, mere speculation as to bias is not sufficient to meet the ICSID test. Facts must be established which give rise to a real risk of a lack of impartiality.

The requirement that the lack of qualities must be “manifest” imposes a relatively heavy burden of proof on the party making the proposal [8]. Obviously, there is no need to prove a “manifest” lack of independence because, the mere lack of independence is sufficient to remove the challenged arbitrator, whether it is manifest or not. What should be “manifest” is the lack of reliability as to the independent judgement, not that the arbitrator is actually or partially dependent. The manifest absence of reliability should be discernible from the facts.

This standard contrasts with the arguably lower standard under the IBA Guidelines which provide only that there must be “facts or circumstances” giving rise to “justifiable doubts as to the arbitrator’s impartiality or independence”. Arguably therefore a challenge under the IBA Guidelines may be successful if based on circumstantial inferences. Further, the Working Group’s explanation that “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…” suggests a lower standard than a “real risk”.

Thus, the challenge to Judge Brower was not only decided by an authority different from the competent one (i.e. the unchallenged arbitrators or ultimately the Chairman of ICSID Administrative Council) but also by substituting the ICSID standard on disqualification for a lower one.

Conclusions

It is clear that the challenge to Judge Brower was not a proper one under the ICSID Convention. From an ICSID perspective, the decision of the PCA is a nullity. Indeed, the fact that Judge Brower had to resign voluntarily from his appointment as arbitrator after the PCA’s decision was rendered speaks volumes as to the validity of such proceedings. In fact, to the extent that Judge Brower had refused to resign, it is difficult to see how Ecuador would have had any remedy other than to start again and to propose his disqualification in accordance with Articles 57 and 58 of the Convention, which in turn would have provided a higher hurdle to overcome.

While this decision highlights that parties can make whatever agreements they want as to arbitrator challenges, and that such agreements may in practice be effective, it does not set a precedent for an alternative procedure and standard to that under the Convention. In terms of ICSID procedure, Articles 14, 57 and 58 of the ICSID Convention (together with the relevant Rules) alone set the standard and the procedure to seek to disqualify an arbitrator. In terms of the ICSID procedural history of this case, the Claimant’s appointed arbitrator has simply resigned [9]; there has been no valid challenge in these proceedings.

* Federico Campolieti is an Associate at M.&M. Bomchil, Buenos Aires.

** Nicholas Lawn is an Associate at Simmons & Simmons, London.

[1] Perenco Ecuador Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador, ICSID Case No. ARB/08/6. While the Tribunal is yet to rule on jurisdiction, it has already issued two preliminary decisions as to provisional measures which Ecuador has ignored claiming that they are not binding as a matter of international law. The original tribunal consisted of Lord Bingham, Judge Charles N. Brower, J. Christopher Thomas Q.C.

[2] PCA Case No. IR-2009/1, Decision dated December 8, 2009.

[3] On October 2008, Perenco and Ecuador had agreed that any arbitrator challenges would be resolved by the PCA, applying the International Bar Association Guidelines.

[4] The first general standard of the IBA Guidelines provides “Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated”.

[5] English version of Article 14 of the ICSID Convention. The Spanish version states “inspirar plena confianza en su imparcialidad de juicio” (Inspire full confidence in their impartiality of judgement) and the French version demands “offrir toute garantie d’indépendance dans l’exercice de leurs fonctions” (Offer every guarantee of independence in the exercise of their functions), both of which versions are equally authentic. While the language used in the three versions of the text is different, it is accepted that no difference in meaning was intended.

[6] SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision on Claimant’s Proposal to Disqualify Arbitrator (December 19, 2002) 8 ICSID Rep. 398, 402 (2005), “…The party challenging an arbitrator must establish facts, of a kind or character as reasonably to give rise to the inference that the person challenged clearly may not be relied upon to exercise independent judgment in the particular case where the challenge is made. The first requisite that facts must be established by the party proposing disqualification is in effect a prescription that mere speculation or inference cannot be a substitute for such facts.1 The second requisite of course essentially consists of an inference, but that inference must rest upon, or be anchored to, the facts established. An arbitrator cannot, under Article 57 of the Convention, be successfully challenged as a result of inferences which themselves rest merely on other inferences”.

[7] Compañia de Aguas del Aconquija S.A. & Vivendi Universal v. Argentina, ICSID Case No. ARB/97/3, Decision on the Challenge to the President of the Committee (October 3, 2001), at paragraph 25: “…The term [manifest] must exclude reliance on speculative assumptions or arguments… But in cases where (as here) the facts are established and no further inference of impropriety is sought to be derived from them, the question seems to us to be whether a real risk of lack of impartiality based upon those facts (and not on any mere speculation or inference) could reasonably be apprehended by either party. If (and only if) the answer is yes can it be said that the arbitrator may not be relied on to exercise independent judgment. 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…”.

[8] Christoph H. Schreuer, The ICSID Convention: A Commentary, Cambridge University Press, Second Edition, at page 1202. See, also, Suez, Sociedad General de Aguas de Barcelona S.A. and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal, (May 12, 2008), at paragraph 41.

[9] Following the resignation of Judge Brower, the Tribunal was reconstituted and Neil Kaplan was appointed as arbitrator.

This blog note reflects the authors’ personal opinions alone and not those of YIAG, their firms or their firms’ clients.

Handicapping investor-state arbitration cases is a tough business. Indeed, it’s difficult to predict when decisions will come down – much less what they will say.

The following somewhat-hastily-cobbled-together list constitutes my best guess as to the 10 most notable awards which may come down in 2010. I won’t hazard a guess as to what’s in these rulings.

Happy New Years to all readers of this blog.

Suez, Anglian Water Group, Agbar, Vivendi et.al. v. Argentina

It hasn’t been 15 years, so we aren’t in Chinese Democracy territory yet. But, the wait for the arbitral awards in these ICSID cases is starting to feel as protracted as that for the long-promised Guns n Roses album. Here’s hoping it is not as anti-climactic.

Merits hearings were held in the cases in May and June of 2007. Even allowing for the 8 months taken up with successive arbitrator challenges lodged by Argentina, and the fact that several separate concessions are at issue, the awards are starting to feel overdue.

When the verdicts do materialize it will be fascinating to see what arbitrators make of Argentina’s extensive reliance on international human rights law. Will arbitrators find that Argentina clamped down on foreign-owned water utility investments out of a genuine concern to meet its human rights obligations. And, if so, so what? In other words, does a compelling human rights rationale excuse breaches of bilateral investment treaties? Hopefully, we will find out in 2010.

Fraport v. Philippines
A divided tribunal declined jurisdiction over Fraport’s BIT claim in 2007, having concluded that the claimant quietly circumvented local laws designed to limit foreign control. Dissenting arbitrator Bernardo Cremades’ separate opinion offered something of a road map for annulment, and Fraport headed off down that path in late 2007. Final hearings in that annulment proceeding wrapped up earlier this year, and we should see an ICSID ad-hoc committee weigh in some time next year with their view as to whether the original tribunal should have upheld jurisdiction and weighed the claimant’s failings as part of the merits phase.

Brandes Investment Partners v. Venezuela
With President Hugo Chavez seemingly bent on nationalizing anything that moves, it’s easy to lose track of the myriad resulting arbitrations. However, the Brandes case is worth watching because the claimant seeks to ground a claim for expropriation not on some contract or treaty, but on a domestic statute that purported to protect foreign investors.

Although the Venezuelan government, and its courts, have disavowed Brande’s reading of the statute in question, it falls to a panel of three ICSID arbitrators to have their say – most likely next year – on a claim arising out of the nationalization of the country’s largest telecoms company.

El Paso v. Argentina
Another contender for the Chinese Democracy award – merits hearings in this financial crisis claim were held in June of 2007. The long-running El Paso case – which was initiated in 2003, gives the appearance of dragging on past its due-date. I’m betting on a 2010 birth date. However, when you tack on the now de rigeur annulment challenge, don’t expect a final resolution of this dispute before 2012.

AES v. Hungary
Hungary finds itself caught between foreign power producers, who insist that the country live up to the terms of earlier-signed Power Purchase Agreements, and European Union bureaucrats, who have ordered the country to tear up these sweetheart pacts. While several similar arbitrations have arisen against Hungary, the AES case at ICSID is the furthest advanced and should see an award in 2010.

Much to the consternation of many investment treaty purists, the European Commission argues that bilateral investment treaties should yield to the dictates of EU law. It will be fascinating to see what arbitrators make of this argument, and whether any such holding is embraced by subsequent tribunals to grapple with the same dilemmas.

Foresti and others v. South Africa
It remains to be seen whether arbitrators in this much-publicized ICSID arbitration will need to weigh in with an award of their own. However , if they do so, it is likely to come in 2010.

Although the claimants insist that elements of South Africa’s new mining regime – including so-called Black Economic Empowerment obligations – have breached foreign investment treaty protections, they have recently signaled their desire to withdraw their case and to carry on with their investments in South Africa.

There is, however, the small matter of some 5 Million Euros expended thus far by South Africa in the defence of this landmark international claim.

Under ICSID rules, South Africa must give its assent to any withdrawal of the claim. Unless the parties can agree how to apportion the government’s legal costs, it could fall to arbitrators decide – and to draw a line under this case.

RosInvestCo v. Russian Federation
You need a Let’s Go guide to disentangle the flurry of lawsuits and arbitrations filed around the world by shareholders in the bankrupted Yukos oil company. However, of several treaty-based arbitrations pursued by blocs of Yukos Spanish, UK and Cypriot shareholders, the claim by UK-based RosInvestCo Ltd appears closest to generating an award on the merits. Arbitrators took jurisdiction over the case in October of 2007, and in 2010 we may see a tribunal at the Stockholm Arbitration Institute weigh in on the question of Russia’s liability for breach of the UK-Russia bilateral investment treaty.

Chemtura v. Canada
Hearings in this North American Free Trade Agreement (NAFTA) claim were held in September of 2009, so we may see an award before the new year is out. Canada’s phase-out of a controversial agro-chemical, lindane, is at issue in the Chemtura arbitration, with a US chemical company contending that Canadian regulators denied them due process.

The award is sure to be closely watched as arbitrators may weigh in on the conservative interpretations taken in another prominent NAFTA case, Glamis Gold v. United States, where arbitrators were asked to elucidate the so-called minimum standard of treatment owing to foreign investors under customary international law. Indeed, the fate of another stalled NAFTA claim against Canada – this one filed by Dow Chemicals following provincial bans on certain lawn pesticides – could hinge on the outcome of the Chemtura case. More generally, depending upon the tribunal’s ruling, the Chemtura award could encourage – or discourage – other companies looking for a way to challenge more stringent health or environmental regulation.

Chevron v. Ecuador (Round One)
Ostensibly a fight over a series of antiquated contract disputes, the BIT arbitration filed by Chevron in 2006 for denial of justice could loom large in the context of a much-broader fight over environmental pollution in the Ecuadorian Amazon. Indeed, Ecuador insists that any arbitral finding of denial of justice would be used by Chevron as ammunition against the enforcement of a forthcoming Ecuadorian court ruling in a multi-Billion Dollar environmental clean-up suit against Chevron.

If you’re confused, so are most of the journalists covering this drama. But stay tuned for the American Lawyer magazine’s astute International Correspondent Michael Goldhaber to bring some clarity to the murk in a forthcoming issue of the American Lawyer. In the mean time, keep your eyes out for the Chevron v. Ecuador arbitral ruling, which may emerge from the Permanent Court of Arbitration in 2010.

(The arbitration is the first of two treaty arbitrations filed by Chevron against Ecuador; the other was discussed earlier this year on this blog.)

Libananco v. Turkey
Of the various claims filed against Turkey by members (or surrogates) of the embattled Uzan family, the Libananco case is the one that really matters. Turkey has beat back several claims by entities which claimed to have owned shareholdings in a pair of contested electricity companies, however Libananco, a Cyprus-based entity controlled by an Uzan family member, claims that its shareholding bona fides are unimpeachable. Forensic experts have pored over the claimant’s ownership documents, and arbitrators have heard from both sides. In 2010, the ICSID tribunal is expected to weigh in.

Giovanna a Beccara v. Argentina (Wild Card Pick: #11 for 2010, or #1 for 2011?):
Anyone holding sovereign debt in this uncertain new world may be interested to see how a group of Italian bondholders fare in their efforts to sue Argentina for losses arising out of that country’s bond default earlier this decade. This class-action style claim is one of three brought by blocs of foreign bondholders, who claim that their investments enjoy protection under Argentina’s foreign investment treaties. The Beccara case is the largest of the three pending claims at ICSID, with at least $4.4 Billion at stake. Arbitrators will convene in 2010 to hear jurisdictional arguments, so there’s an outside chance that we’ll see a jurisdictional verdict before year’s end. If not, put this one on your 2011 reading list.

Luke Eric Peterson
http://www.InvestmentArbitrationReporter.com

The 9.10.2009 session of the New York Convention subcommittee of the IBA in Madrid saw a lively discussion on the topic of enforcement of annulled arbitral awards.

The discussion related to the “Yukos Capital” decision issued by the Amsterdam Court of Appeals in April 2009. The Amsterdam Court of First Instance had previously upheld the decision of the Russian courts setting aside four awards related to a dispute between Yukos Capital and Rosneft (initially Yuganskneftegaz which later merged with Rosneft). The dispute related to the shares in Yuganskneftegaz which were held by Yukos Capital and subsequently seized by the Russian Ministry of Finance. In an auction, such shares were sold first to the newly established company Baikal Finance Group and a few days later to Rosneft, the shares of which were held in the majority by the Russian State.

Yukos was awarded 7 billion Euros in arbitrations under the Rules of the International Court of Commercial Arbitration (ICAC) with the place of arbitration in Moscow. Rosneft’s request that the four awards be set aside was upheld on three occasions by the Russian courts: the Arbitrazh Court of the Russian Federation, the Federal Arbitrazh Court of the Moscow Region and the Supreme Arbitrazh Court of the Russian Federation.

The courts set aside the awards for three main reasons:

• Rosneft was not granted a postponement of the hearing, leading the Russian courts to conclude that Rosneft had been denied its right to present its case.

• Yukos Capital had submitted new claims, which is not allowed under the applicable ICAC Rules.

• The Arbitral Tribunal had not been properly constituted since the arbitrators failed to disclose that they had spoken at conferences co-sponsored by the firm representing Yukos.

During the Russian annulment proceedings Yukos had applied to the Amsterdam courts for enforcement. The Court of First Instance denied leave of enforcement on the grounds that the Russian court decisions were to be respected as Russian courts in this case are the competent authority under Art. V(1)(e) of the New York Convention. The Court of First Instance did recognize the possibility of deviating from this principle in exceptional circumstances, namely in case of a violation of generally accepted principles of due process and a lack of independence of the courts. In this specific case, however, the court concluded that Yukos failed to submit sufficient evidence.

The Amsterdam Court of Appeals reached a different conclusion. It reviewed in depth the evidence submitted and held that the Russian courts in this case had lacked impartiality and independence and that its decisions were politically motivated. The court stated in particular that proving such a lack of impartiality and independence is difficult since there is usually no direct evidence. As a consequence, the court relied on external evidence indicating possible partiality and dependence, including reports of Transparency International, the EU-Russian Centre and Freedom House, as well as court decisions from the UK and Switzerland related to the criminal prosecutions in Russia of Yukos officers.

The IBA session on the New York Convention discussed the background and consequences of this decision and discussed its potential impact on the practice of recognition and enforcement. It was pointed out that the case is exceptional and that the decision must be viewed as taking into account the exceptional circumstances. It is in any event path breaking since it applies and enforces international standards of the New York Convention and will thus contribute to its harmonized interpretation and application.

By Patricia Nacimiento

In 2006, I conducted a review of the most frequently selected arbitrators in the then-pending 103 ICSID cases. (See “Precedent in Investment Treaty Arbitration: A Citation Analysis of a Developing Jurisprudence” (2007), 24 J. Int’l Arb 129). My 2006 review of the 103 pending ICSID cases (ranging from cases registered in February 1997 to November 2006) revealed that 137 arbitrators accounted for the possible 284 appointments in pending cases. Of these 137 arbitrators, 32 of them accounted for 153 of the possible 284 appointments (54 percent). In fact, of the 32 arbitrators most frequently selected, the top 19 accounted for 114 of the 284 appointments (40 percent).

Now more than three years on, a review of the 126 pending cases at ICSID, as of 3 September 2009, reveals similar trends.

2. Overview of Pending Cases

As of 3 September 2009, the ICSID registry lists 126 pending cases. Of these 126 pending cases, there are 108 original arbitration proceedings, 17 annulment proceedings (2 of which also include revision proceedings), and 1 interpretation proceeding.

In light of the different appointment mechanisms under the ICSID Convention for these proceedings, each is considered separately below.

3. Original Arbitration Proceedings

A review of the 108 pending original arbitration proceedings reveals that tribunals have been constituted in 93 of the cases, while in 15 of the cases tribunals are not yet constituted. Three-member tribunals predominate amongst the 93 pending cases, as only 2 of the 93 cases are being heard by a sole arbitrator.

Turning now to the arbitrator appointments in these cases, in total, there are 275 possible appointments across the 93 pending cases where tribunals have been constituted. The appointments as Tribunal President and the arbitrator appointments made by parties in the 93 pending cases are each considered in turn below.

a. Appointment of Tribunal Presidents

As to the appointment of Tribunal Presidents in pending ICSID cases, there are 56 different arbitrators acting as Tribunal President, and 24 of these arbitrators are acting as Tribunal President in multiple pending cases. A breakdown of the top 24 arbitrators presently serving as Tribunal President in pending ICSID cases is as follows:

Name of Arbitrator Number of Appointments as Tribunal President in Pending ICSID Cases
Fortier (Canadian) 4
Lowe (British) 4
Tercier (Swiss) 4
Briner (Swiss)* 3
Kaufmann-Kohler (Swiss) 3
Danelius (Swedish) 3
Fernández-Armesto (Spanish) 3
Park (US) 3
van Houtte (Belgian) 3
Veeder (British) 3
Alexandrov (Bulgarian) 2
Berman (British) 2
Böckstiegel (German) 2
Dupuy (French) 2
Guillaume (French) 2
Kessler (US) 2
Kettani (Moroccan) 2
Lalonde (Canadian) 2
Möller (Finnish) 2
Oreamuno (Costa Rican) 2
Orrego Vicuña (Chilean) 2
Sacerdoti (Italian) 2
Salacuse (US) 2
Simma (German) 2

* Robert Briner has recently resigned from his role in all three pending cases, but new Tribunal Presidents have not yet been appointed in these cases.

b. Party-Appointed Arbitrators

In terms of arbitrators appointed by the parties, there are 91 different individuals acting as party-appointed arbitrators across the pending ICSID cases. Again, unsurprisingly, a number of these individuals, 36 in total, are acting as party-appointed arbitrator in multiple pending ICSID cases. A breakdown of the top 36 arbitrators presently serving as party-appointed arbitrator in pending ICSID cases is as follows:

Name of Arbitrator Number of Appointments as Party-Appointed Arbitrator in Pending ICSID Cases
Stern (French) 17
Brower (US) 10
Kaufmann-Kohler (Swiss) 7
Lalonde (Canadian) 6
Orrego Vicuña (Chilean) 6
Böckstiegel (German) 4
Bernardini (Italian) 4
Cremades (Spanish) 4
Fortier (Canadian) 4
Sands (British/French) 4
Thomas (Canadian) 4
Berman (British) 3
Abi Saab (Egyptian) 3
Álvarez (Canadian) 3
El-Kosheri (Egyptian) 3
Grigera Naón (Argentine) 3
Nikken (Venezuelan) 3
Vinuesa (Argentine) 3
Alexandrov (Bulgarian) 2
Bello Janeiro (Spanish) 2
Cancado Trindade (Brazilian) 2
Crawford (Australian) 2
Derains (French) 2
Donovan (US) 2
Hanotiau (Belgian) 2
Herrera Marcano (Venezuelan) 2
Hobér (Swedish) 2
Hossain (Bangladeshi) 2
Landau (British) 2
Lowe (British) 2
Magallon Gomez (Mexican) 2
McRae (Canadian) 2
Paulsson (French) 2
Reisman (US) 2
van den Berg (Dutch) 2
Williams (New Zealand) 2
4. Annulment, Revision and Interpretation Proceedings

Pursuant to Article 52 of ICSID Convention, ad hoc annulment committees are three-member tribunals appointed by ICSID to hear applications for annulment of ICSID arbitration awards. A review of the 17 pending annulment proceedings reveals that 16 ad hoc committees have been constituted, while 1 committee has yet to be constituted. As to the lone interpretation proceeding, it is being heard by the same arbitrators from the original proceeding, as contemplated in Article 50 of the ICSID Convention.

In pending annulment proceedings, a review of ICSID’s appointments to the ad hoc committees reveals that 26 different arbitrators are presenting serving on ad hoc committees and 12 of these arbitrators are serving on more than one ad hoc committee. The top 12 arbitrators appointed to ad hoc committees by ICSID in pending annulment proceedings are as follows:

Name of Arbitrator Number of Ad Hoc Ctee Appointments in Pending ICSID Annulment Proceedings
Tomka (Slovak) 5
McLachlan (New Zealand) 5
Hascher (French) 3
Schwebel (U.S.) 3
Söderlund (Swedish) 3
Griffith (Australian) 3
Ajibola (Nigerian) 2
Bernardini (Italian) 2
El-Kosheri (Egyptian) 2
Jacovides (Cypriot) 2
Kettani (Moroccan) 2
Silva Romero (Colombian) 2

One can observe two rather opposing trends. On the one hand there is a steady (and more recently significant) increase in the number of arbitration cases; one the other hand there is a rather systematic criticism expressed by certain voices, predominately in the corporate world.Most well established institutions have recorded a 10% increase in their number of case with the exception of LCIA that recorded an increase of cases of 60%. Several arbitration organisations, which operate regionally, in Latin America and in Central Asia also report very good numbers. Indications so far are clear that 2009 will be another very good year. In addition and, despite the recession, which hit many global law firms, more and more firms set up specialist arbitration groups or enhance their arbitration capabilities in respect of two regions, namely Latin America and Asia. We can also observe an unmanageable wealth of information and publications, yet with fairly few empirical studies that occupy the space between black letter analyses and anecdotal evidence. There is also a proliferation of arbitration courses for students and/or practitioners.

The corporate world, more than ever, voices its concerns about efficiency of the arbitration services, value for money and quality of services rendered by arbitrators, arbitration lawyers and arbitration institutions. The lion share of criticism is directed at arbitrators, their availability and the quality (and length) of their awards. Indeed some of the modern “great and good” who will feature in the top ten list of arbitrators will have more than a dozen cases at the time, often two dozen cases at the time and that sometimes in addition to their main job as partners of law firms, full time academics. The second major concern relates to enforceability of awards. Finally there is occasional whingeing about the fees arbitration institutions and law firms charge.

After all arbitration is a services industry. For the major part of the second half of the 20th century the industry was dominated by few cosmopolitan lawyers (practitioners or academics), which in the 1950 through the 1990s meant that they spoke French or have lived abroad for a significant amount of time. That was also the period for mega-stars in arbitration. Many of these names are very well recognisable and have been in everyone’s top ten or top twenty lists for the last twenty odd years. In the 1990s and the first years of the 21st century, arbitration has been “democratised” or “popularised”. Many lawyers, who feature as main arbitration players, still possess the international pedigree (speaking French alone is not sufficient these days – lawyers who feature well here are of Austrian, Belgian, Canadian, Dutch, Egyptian, French, German, Greek, Italian, Lebanese, Swiss, Swedish, as well as a new group emerging from Latin America); these cosmopolitan lawyers are now joined by litigators (predominately from the Anglo-American tradition, but also from the common law Asian world and Australia and New Zealand) with an interest in international work.

Most certainly there are more persons involved in arbitration work now than twenty years ago. It will be, however, very difficult, if not impossible to substantiate a claim, that arbitration work now is not conducted as well as in the past. If this is the case, then why are there complaints about arbitration?

Let us have a closer look at some of the complaints. Two are the main concerns of the corporate world that the service providers, arbitrators, counsel and institutions can address. These are cost of arbitration and delays in the process. There is a third concern (enforcement), which is not yet empirically substantiated. Enforcement is ultimately the test of the success of arbitration and hence is the Damocles sword over each and every arbitration proceedings. The good news is that as it was been shown in the 2008 School of International and PwC Arbitration Survey overall the vast majority (92%) of arbitration awards is complied with voluntarily and in the remainder 8% of arbitration awards enforcement is effected via involvement of courts.

Cost is and should be a concern. At times of global recession, pursuing a claim in arbitration should not cost disproportionately much. Arbitration institutions, starting from ICC, have looked into that and how proceedings can be managed to reduce costs. Such initiatives are indeed very welcome. Working groups amongst counsel are also looking into such issues. It appears that law firms have started looking into fee structure departing from age-old traditions. In-house counsel are managing arbitrations very closely and contribute their part in cost saving. Institutions, both with ad valorem fees and hourly rates negotiate with arbitrators how to best remunerate efficiency. Ad hoc proceedings are also selected when use of an institution is not considered advantageous.

As far as delays are concerned, in most cases arbitration proceedings can be as fast as the parties want them to be. In certain very high profile or high volume cases parties often consider that they best manage their risk by appointing the biggest names in arbitration. Coordinating diaries of busy lawyers and busy arbitrators can only equal slow down or even delays. On a more positive note, of course, it seems that more newish arbitrators are being appointed by arbitration institutions and parties. This is not only expected but also mandated by the increase in the number of cases and geographical expansion of arbitration proceedings and arbitral seats.

The improvement of efficiency of arbitrators is not dependent on a single group of actors but rather a collective effort. The advantages of arbitration remain in tact. Let us all do our bit to keep arbitration blossoming.

Prof Loukas Mistelis
Director, School of International Arbitration
Queen Mary University of London