ICSID – repeat appointments potentially relevant to applications for disqualification of an arbitrator

In OPIC Karimum v Venezuela the claimant, OPIC, requested the disqualification of the arbitrator appointed by Venezuela, Professor Philippe Sands, on the basis that his multiple appointments by both Venezuela and Venezuela's counsel, Curtis Mallet-Prevost Colt & Mosle ("Curtis") tainted his independence and indicated a manifest lack of ability to exercise independent judgment.  The remaining members of the tribunal rejected the challenge, but in doing so highlighted that multiple appointments by the same party or law firm "must be carefully considered in the context of a challenge", disagreeing with the approach taken recently in Tidewater v Venezuela and Universal Compression v Venezuela.

Background

In the previous three years Professor Sands had been appointed to two ICSID tribunals by another client of Curtis (Turkmenistan) and had separately been appointed by Venezuela in two related cases – one a commercial arbitration taking place in Nova Scotia, and the other an investment treaty claim brought under the UNCITRAL rules and the auspices of the Permanent Court of Arbitration ("PCA").

OPIC's challenge

Pursuant to Article 57 of the ICSID Convention (the "Convention"), a party may propose the disqualification of a member of the tribunal on account of any fact indicating a manifest lack of the qualities required by Article 14, which provides that an arbitrator must be a person of "high moral character and recognised competence (…) who may be relied upon to exercise independent judgment".

OPIC argued that his previous appointments tainted Professor Sand's independence and "indicate a manifest lack of [his] ability to be relied on for independent judgment", and that Sands appeared to rely on Venezuela and Curtis for a substantial number of appointments and hence there was an "appearance of dependence as well as (…) a financial incentive" to rule in Venezuela's favour.

OPIC sought to rely on the inclusion in the orange list appended to the IBA Guidelines on Conflicts of Interest in International Arbitration (situations which, in the eyes of the parties, may give rise to justifiable doubts as to an arbitrators' impartiality or independence) of circumstances where the arbitrator has been appointed (i) more than three times in the last three years by the same counsel or law firm, and (ii) two or more times in the last three years by one of the parties.  OPIC argued that although not binding, the IBA Guidelines have persuasive authority.  Professor Sands' appointment would be on the threshold of exceeding both provisions in the orange list on an individual basis, and that viewed in combination the proposed appointment in effect exceeded the orange list, giving rise to justifiable doubts that would lead an informed, reasonable person to conclude that the appointment was inappropriate in the circumstances.

Decision

The remaining members of the tribunal called upon to consider the application noted that the test under the Convention imposed a relatively high burden, requiring that the lack of independence be "manifest", and that this lack of independence be clearly and objectively established.  They concluded that it is not enough to show an appearance of a lack of impartiality or independence.

They considered the approach taken in earlier ICSID proceedings in Tidewater v Venezuela and Universal Compression v Venezuela.  In Tidewater it was held that multiple appointments as arbitrator by the same party in unrelated cases were neutral since in each case the arbitrator exercises the same independent function, while the limits advocated by the orange list could be no more than a rule of thumb.  In Universal Compression, Robert Zoellick, president of the World Bank (acting as a president of the ICSID's administrative council) rejected arguments that Professor Brigitte Stern's repeated appointments by Curtis and Venezuela were a cause for concern, since "such appointments [did] not create a professional business relationship that could endanger her independence".

The remaining members declined to follow this approach, concluding that multiple appointments of an arbitrator are an objective indication of the view of parties and their counsel that the outcome of the dispute is more likely to be successful with the multiple appointee as a member of the tribunal than would otherwise be the case.  Further, they concluded that the "orange list" of the IBA Guidelines correctly indicates that repeated appointments constitute an issue relevant to impartiality and independence of an arbitrator.

They therefore approached the disqualification application on the basis that multiple appointments by a party or its counsel may lead to the conclusion that the arbitrator cannot be relied upon to exercise independent judgment, as required by the Convention.

As regards the examples and time limits concerning multiple appointments in the "orange list" in the IBA Guidelines, the remaining members noted that they were neither binding nor decisive of themselves in determining impartiality or independence under the guidelines.

On the facts, the remaining members of the tribunal dismissed the application, finding that OPIC had failed to establish a manifest lack of independence on the part of Professor Sands. As such, on this occasion the "relatively high burden" for disqualifying an arbitrator under Article 57 of the ICSID Convention was not satisfied.

Comment

This judgment highlights the importance for both parties and counsel of keeping track of the number of times they appoint the same arbitrator, as multiple appointments of the same arbitrator may lead to questions of their independence or impartiality, and to the bringing of challenges against that arbitrator.  It also demonstrates the widespread recognition of the IBA Guidelines in the conflict field – which are not binding, but nevertheless are often persuasive in challenges.