New code of conduct sets standards for arbitrators in investment arbitration

Introduction

In July 2023, the UN Commission on International Trade Law (“UNCITRAL”) adopted a Code of Conduct for Arbitrators in International Investment Dispute Resolution (the “Code”). This monumental step evolved from nearly six years of deliberations initiated in 2017, when UNCITRAL tasked its Working Group III (“WGIII”) with examining and formulating potential solutions for reforming Investor-State Dispute Settlement (“ISDS”).

The Secretariats of the International Centre for Settlement of Investment Disputes (“ICSID”) and UNCITRAL worked together to publish a draft of the Code in 2020.  Throughout the following two years, ICSID and UNCITRAL released several revised versions of the Code.  Because of the long-standing deliberations on the pending Multilateral Investment Court (“MIC”) and the uncertainties regarding its operation, the WGIII in 2022 bifurcated its efforts into two distinct codes: one for judges and one for arbitrators.  This article will cover the code released for arbitrators, including the commentary released in October 2023.  

Key Provisions of the Code

The Scope and Applicability (Articles 1 & 2)

The Code, comprised of 12 articles and accompanying commentary, applies to arbitrators and candidates:

• “Arbitrator” means a person who is a member of an arbitral tribunal or an International Centre for Settlement of Investment Disputes (ICSID) ad hoc Committee, who is appointed to resolve an IID.

• “Candidate” means a person who has been contacted regarding a potential appointment as an Arbitrator, but who has not yet been appointed.

The Code applies to arbitrators whether the arbitration is ad hoc or administered by an institution, and regardless of how the arbitrator is appointed (i.e., sole arbitrator, presiding arbitrator, party-appointed, appointed by an institution).  While the Code serves as standalone guidelines, it is meant to complement any conduct provisions in an instrument of consent to arbitrate. In the case of incompatibility, the provisions of the consent instrument shall preside.

Independence and Impartiality (Article 3)

Arbitrators must be impartial and independent. Sub-clause 2 provides a non-exhaustive list of negative examples, which include the obligation not to:

• Be influenced by loyalty to any disputing party or any other person or entity (i.e., an arbitrator should not allow any “obligation or alignment” with a person or entity. An Arbitrator would not be biased solely because they share some characteristics with another individual, such as being of the same nationality, alumni, or having worked for the same law firm). 

• Take instructions from any organization, government, or individual regarding any topic covered in a case. “Instruction” refers to “any order, direction, recommendation, or guidance,” which can be explicit or implicit, and can come from a variety of private or public sources.

• Be influenced by any past, present or prospective financial, business, professional or personal relationship.

• Use his or her position to advance any financial or personal interest he or she has in any disputing party or in the outcome of the IID proceeding.

• Assume any function or accept any benefit that would interfere with the performance of his or her duties.

• Take any action that creates the appearance of a lack of independence or impartiality.

The commentary cites the 2014 International Bar Association Guidelines on Conflicts of Interest in International Arbitration (the “IBA Guidelines”) as helpful assistance in this regard.

Limit on Multiple Roles – “Double-Hatting” (Article 4)

Article 4 had sparked a lot of debate throughout the discussions; ultimately, it was determined that the Code would allow double-hatting in limited circumstances.  Specifically, absent an agreement from the disputing parties, the Code prohibits arbitrators from concurrently participating as a legal representative or an expert witness in any other proceeding involving:  

a.    The same state measure(s);
b.    The same or related party (parties); or
c.    The same provision(s) of the same instrument of consent.

Additionally, there are cooling-off periods in place: one year for the same provisions and three years for cases involving the same measure(s) or party (parties).

Disclosure Requirements (Article 11)

Both arbitrators and candidates have a duty to disclose any circumstances that might cast doubt on their impartiality or independence. This encompasses financial, business, professional, or personal relationships with disputing parties, legal representatives, and other individuals involved in the arbitration. The Code emphasizes a continuous and proactive approach to disclosure, urging arbitrators to remain vigilant and opt for disclosure in uncertain scenarios. 

Comments

The Code’s establishment heralds a new era for investment arbitration, offering clarity to all stakeholders about expectations and boundaries. However, the enforceability of the Code remains a subject of debate.  One pathway is the voluntary adoption of the Code, while another is the integration of the Code into existing arbitral institutions or consolidation into a future multilateral ISDS reform instrument.

In the interim, the investment arbitration community eagerly anticipates the Code's impact on arbitrator challenges, its impact on existing soft law instruments like the IBA Guidelines, and its potential adoption in international commercial arbitration contexts.