In July 2023, the United Nations Commission on International Trade Law (UNCITRAL) adopted a Code of Conduct for Arbitrators in International Investment Dispute Resolution (the "Code").
This marks a significant step for the reform of Investor-State Dispute Settlement (ISDS). It also concludes nearly six years of work since UNCITRAL entrusted its Working Group III (WGIII) with the task of discussing and developing potential ISDS reform solutions in 2017.
History and background
One of the concerns identified by WGIII as part of its mandate to consider reform was the lack (or apparent lack) of independence and impartiality of ISDS tribunal members, which has often given rise to criticism about the legitimacy of the ISDS system.
In order to address this concern, WGIII undertook to prepare a code of conduct for "adjudicators". The term "adjudicators" was initially used to encompass all those who adjudicate international investment disputes (IID) cases. This would include both arbitrators and judges of a yet to be established standing "multilateral investment court" (MIC) – another of WGIII's reform proposals, which is strongly backed by the EU.
In 2020, on this basis, the Secretariats of the International Centre for Settlement of Investment Disputes (ICSID) and UNCITRAL jointly prepared a first draft. Further updated drafts were issued in 2021 and 2022.
However, deliberations on the MIC continue, and a decision is yet to be made. Doubts were also expressed about the extent to which the Code could address the conduct of judges when it was not clear how the MIC would operate. In 2022, WGIII therefore agreed to present two separate texts: a code of conduct for judges; and the recently adopted code of conduct for arbitrators (which we consider further below).
The Code – key provisions
The Code contains 12 articles and accompanying commentary which apply to:
- an "Arbitrator", i.e. members of an arbitral tribunal or members of an ICSID ad hoc Committee appointed to resolve an IID; and
- a "Candidate", i.e. individuals contacted regarding a potential appointment as an arbitrator, but who have not yet been appointed.
The Code applies to an arbitrator irrespective of whether the arbitration is ad hoc or administered by an institution, and irrespective of how the arbitrator is appointed, i.e. sole arbitrator, presiding arbitrator, party-appointed, appointed by an institution, etc.
The Code is not intended to operate in isolation, but rather to complement any provisions governing conduct that may be set out in the "instrument of consent", i.e. the instrument or agreement that contains the consent of the disputing parties to submit their dispute to arbitration. If there is any incompatibility, then the provisions of the instrument of consent will prevail.
Independence and impartiality
Article 3(1) requires arbitrators to be independent and impartial. Article 3(2) sets out a non-exhaustive list of negative examples that are encompassed by this. This includes the obligation not to:
- Be influenced by "loyalty" to any disputing party or any other person / entity, i.e. an arbitrator should not allow any "obligation or alignment" towards a person or entity, which might arise from a number of external factors, to influence his or her conduct or judgement;
- Take instruction from any organization, government or individual regarding any matter addressed in the IID proceeding. "Instruction" refers to "any order, direction, recommendation or guidance", which may be implicit, and originate from a range of private or public sources including ministries, agencies, State-owned entities, etc.;
- 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, e.g. becoming a board member of an entity closely affiliated with a disputing entity; and
- Take any action that creates the appearance of a lack of independence or impartiality.
The commentary refers to the 2014 International Bar Association Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines) as useful guidance as to what will / will not breach the obligation of independence and impartiality.
The IBA Guidelines are a "soft law" instrument which is often invoked by parties and their counsel as the basis for challenges to arbitral appointments. They include a "traffic light" list of indicative situations which may give rise to justifiable doubts, and guidance on disclosure that arbitrators should make in order to avoid the appearance of bias. The "Non-Waivable" Red List, for example, describes circumstances that necessarily raise justifiable doubts as to the arbitrator's impartiality or independence, and where the conflict of interest is so serious that it cannot be waived by the disputing parties.
Disclosure
Article 11 sets out disclosure obligations which apply to both a candidate and an arbitrator. These are broad obligations which are not limited in time, and require disclosure of "any circumstances likely to give rise to justifiable doubts as to his or her independence or impartiality." The IBA Guidelines are again referred to as "useful practical guidance" which may assist in reaching decisions as to when disclosure is required.
Double-hatting
One of the provisions which generated the most debate during negotiations was Article 4 ("Limit on multiple roles" – also known as "double-hatting"). A wide range of views was advanced: at one end of the scale, in support of a full prohibition of double-hatting, and at the other, of imposing "robust and extensive" disclosure obligations only.
It was eventually agreed that the Code would regulate double-hatting, however it stops short of prohibiting double-hatting altogether. Instead – and in each case, "unless the disputing parties agree otherwise" – arbitrators are prohibited from acting as a legal representative or an expert witness:
- concurrently in proceedings involving:
- the same "measure" (i.e. any law, regulation, procedure, requirement, conduct or practice of a State or a regional economic integration organization (REIO) that gave rise to the alleged breach)
- the same or related parties; or
- the same provision(s) of the same instrument of consent;
- for a period of three years in proceedings involving the same measure, or the same or related party / parties;
- for a period of one year in proceedings involving the same provision(s) of the same instrument of consent.
As noted, the disputing parties (i.e. the parties to the original dispute, where the individual served as an arbitrator), may waive both the concurrent ban, and the one / three year cooling off periods set out above.
Enforcement
Whilst earlier negotiations had envisaged that an enforcement mechanism would be a key component of the Code, WGIII postponed the discussions regarding its implementation and enforcement.
Article 12 provides simply that "an Arbitrator and a Candidate shall comply with the Code". The commentary offers up possible ways to promote adherence, such as requiring a Candidate to sign a declaration of independence and impartiality upon appointment. Annex 1 to the Code contains a template for such declaration.
It therefore remains to be seen how the Code will be enforced. Possible options include:
- application on a voluntary basis by parties / arbitrators;
- agreement of disputing parties on a case-by-case basis;
- incorporation on a treaty-by-treaty basis;
- incorporation into the procedural rules of arbitral institutions (e.g. proposals have been made for it to be added as an appendix to the UNCITRAL Arbitration Rules and ISCID Rules – although clarifications or amendments to those rules may be needed to address possible discrepancies); or
- incorporation, at a later stage, in a multilateral instrument on ISDS reform – which is one of the other potential reform solutions subject to ongoing discussion within WGIII.
Unless and until an enforcement framework is established, it will be interesting to see how the Code interacts with, and is used by parties alongside existing soft law such as the IBA Guidelines.
It will also be interesting to see the extent to which the Code is applied by agreement of the parties outside of the IID context, for example in international commercial arbitration proceedings.
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