On 21 July 2023, as part of its 56th annual session in Vienna, the United Nations Commission on International Trade Law (UNCITRAL) adopted a Code of Conduct for Arbitrators in International Investment Dispute Resolution (the Code). The Code, which has been in development for over six years, is applicable to investment arbitration proceedings by consent of the parties or as required in the instrument of consent (i.e., the relevant investment treaty under which arbitration is commenced) and seeks to address the often vocal criticism levelled against Investor-State Dispute Settlement (ISDS) in recent years concerning transparency and the role and independence of arbitrators. In doing so, the Code introduces various guidelines reinforcing the duties of independence and impartiality incumbent on arbitrators as well as regulating the practice of double-hatting (i.e., of arbitrators also acting as counsel in investor state arbitrations), including via the introduction of specific disclosure requirements. The Code is currently awaiting final publication.
Established in 1966 by the United Nations General Assembly, UNCITRAL is the core legal body of the United Nations. It plays a crucial role in promoting and harmonizing international trade law by formulating and modernizing rules and model laws applicable to cross-border commercial transactions. For example, as relevant to arbitration, the UNCITRAL Model Law on International Commercial Arbitration provides a blueprint for countries to adopt or adapt into their domestic legislation. Of similar prominence are the UNCITRAL Arbitration Rules, which provide a comprehensive set of procedural rules often adopted in international commercial contracts and regularly used in investor-state arbitrations. And, perhaps most significantly, although the convention was prepared by the United Nations prior to the establishment of UNCITRAL, UNCITRAL performs a crucial role in the modern promotion of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
A past lack of transparency?
ISDS is designed to protect private investors and their investments in foreign countries, but public perception is that it overly and unfairly curtails the rights of governments to act in the best interest of the state and its public. These criticisms are compounded by concerns with the transparency of the process. Detractors argue that the proceedings often take place behind closed doors, away from public scrutiny, and are overseen by a closed shop of private arbitrators without proper accountability.
Attempts have been made in the past to address these concerns, including via the 2014 UNCITRAL Mauritius Convention on Transparency. This convention operates on an opt-in basis, allowing countries to choose whether it applies. It sought to address concerns related to a lack of transparency in ISDS by, inter alia, (i) allowing interested third parties such as NGOs to participate in the arbitration process and submit amicus briefs; and (ii) ensuring public hearings and open access to arbitration documents, unless justified on the basis of confidentiality. However, many of the same criticisms of ISDS remained.
One particular concern is the practice of double-hatting where an individual serves as both an arbitrator and legal counsel in different investment arbitration cases. One obvious consequence of this is that arbitrators may appear as counsel before tribunals composed of arbitrators with whom they had previously sat. It is also easy to conceive of a double-hat arbitrator being pre-disposed to a particular line of argument having recently advanced that same argument as counsel. Critics argue that this practice therefore undermines the integrity of ISDS and erodes public trust in the system.
The Code represents the latest of the various initiatives amongst the wider arbitration community aimed at improving transparency. In summary, the Code seeks to address the following areas:
- Independence and Impartiality (Article 3): Arbitrators must act independently and impartially, avoiding any bias or conflict of interest that could affect their decision-making.
- Limit on Multiple Roles (Double-Hatting) (Article 4): Unless the disputing party agrees otherwise, the Arbitrator shall not act concurrently as a legal representative or an expert witness in any other proceedings involving the same measures, parties or treaty. Arbitrators are subsequently prohibited from acting as a legal representative or expert witness in any ISDS case or related proceeding involving the same measure or the same or related parties for three years after serving as arbitrator; and in cases involving the same provisions of the same treaty for one year. It is fair to say that this aspect of the Code was hotly debated. Despite the obvious criticism of double hatting, supporters of the practice argued that it produced arbitrators with broader, more rounded, experience. Article 4 as finally adopted represented something of a compromise, falling short of a full prohibition as was initially proposed. Critics may also note that the impact of these double-hatting provisions is curtailed due to the voluntary nature of the Code.
- Duty of Diligence (Article 5): Arbitrators should perform their duties diligently, including by devoting sufficient time to proceedings and rendering all decisions in a timely manner.
- Integrity and Competence (Article 6): Arbitrators must conduct proceedings in accordance with standards of integrity, fairness, and civility and must not delegate their decision-making function.
- Ex-Parte Communication (Article 7): A general prohibition on ex-parte communication unless permitted by the instrument of consent, applicable rules, or by the agreement of the parties to the dispute.
- Confidentiality (Article 8): Arbitrators must respect the confidentiality of the proceedings and the information disclosed by the parties, ensuring that only necessary parties are privy to the information.
- Fees and Expenses (Article 9): Arbitrators fees and expenses shall be reasonable, discussed with the parties as soon as possible, and recorded accurately.
- Assistant (Tribunal Secretaries) (Article 10): Prior to the engagement of an assistant, arbitrators will agree their scope, duties, fees, and expenses with the parties and will ensure their assistant acts in accordance with the Code.
- Disclosure of Obligations (Article 11): Arbitrators are obligated to disclose any potential conflicts of interest or relationships that could impact their neutrality before accepting an appointment.
To many, the provisions of the Code simply represent a standard of good practice which is already well-established. However, by codifying them (albeit on a voluntary basis), the Code is a vocal statement of, and is therefore likely to reinforce, those standards of good practice. This can only be a good thing.