Originally from Investment Treaty Arbitration and International Law - Volume 8

I. INTRODUCTION

Investment arbitration is increasingly becoming a more complex and difficult process since every case involves significant interests and reviewing a state’s fundamental sovereign decisions (such as environmental, tax or regulatory measures). But it would be naïve to assume that in investment arbitration the issues dictate the outcome. Every litigant in this field knows that a great part of his chances for success in a given case rests upon the composition of the arbitral tribunal. In fact, it is undeniable that two different tribunals could arrive at divergent conclusions when confronted with an identical or very similar fact pattern. Thus, the composition of the arbitral tribunal should not be taken lightly and is a key part of the investment arbitration process.

The appointment of arbitrators in international arbitration presents certain difficulties. As opposed to tenured judges in domestic judicial courts, who are appointed for indefinite periods of time and whose positions are not threatened or influenced by their rulings, all arbitrators have at least an indirect interest in any dispute that they adjudicate, since their prospects of future appointments depend in great part on their past performance and track record. Arbitrators’ decisions can even have an impact on the success of their future cases as counsel. Thus, the system conceptually presents an intrinsic lack of independence and impartiality. This readily recognizable problem has been summarized by Sundaresh Menon, then Attorney-General of Singapore:

It is undeniable that the typical conditions that assure impartiality in the judicial sphere are lacking in arbitration. Whereas judges are segregated from the rest of the legal professional community, arbitrators are largely drawn from precisely the same pool of professionals. The “usual suspects” in the industry may be arbitrator in one case and lawyer in the very next, often trading places in the process with another in the same select groups. And while forum shopping is frowned upon in the judicial context, parties actively seek out arbitrators whom they believe would be pre-disposed to rule in their favor.2