Originally from Investment Treaty Arbitration and International Law - Volume 8

I. INTRODUCTION

In recent years, there has been an uptick in arbitrator challenges in investment arbitration, with more and more challenges being successful. Indeed, in the last quarter of 2013, it was publicly reported that an unprecedented three separate challenges were upheld.1 Such increases have been accompanied by criticisms more generally of the challenge mechanism in investment arbitration and calls for its reform.2 A close examination of the statistics and relevant challenge procedures, however, demonstrates that a complete overhaul of the challenge mechanism in investment arbitration is not warranted.

Any meaningful discussion of the implications of an “increase” in arbitrator challenges must, by definition, be based not merely on theory, but also on statistics. This article focuses on the arbitrator challenge mechanism in ICSID Convention arbitrations for two reasons: quantity and transparency.3 First, the majority of known treaty arbitrations are conducted under the ICSID Convention.4 Second, ICSID either publishes challenge decisions with the consent of the parties5 or at least identifies on its website (for more recent cases) the fact that a challenge has been made and the ultimate result of the challenge,6 as required by the ICSID Administrative and Financial Regulations.7

By contrast, the second largest number of known treaty arbitrations are ad hoc arbitrations conducted under the UNCITRAL Arbitration Rules, which account for 26% of all known treaty arbitrations.8 Because these arbitrations usually remain completely confidential, unlike ICSID Convention arbitrations, “there is no reliable information available on the number of challenges made under the UNCITRAL Rules.”9 It also is questionable what conclusions, if any, can be drawn from publicly reported challenges in UNCITRAL arbitrations because the UNCITRAL Arbitration Rules further diverge from the ICSID Convention by expressly permitting the parties to modify the rules upon agreement,10 including the provisions governing arbitrator challenges11 and the designation of an appointing authority that will decide a challenge.12

This article argues that the increase in challenges in ICSID Convention arbitrations and the criticisms leveled at the system more generally do not warrant - and indeed will not result in -  a complete overhaul of the ICSID challenge mechanism. There are less extreme alternatives that arguably would enhance the functioning and perceived legitimacy of the ICSID challenge procedure. In other words, to paraphrase Confucius, we should not use a cannon to kill a mosiquito.13