The regulation of ex parte arbitrator interviews in ICSID: A proposal

INTRODUCTION

International arbitration is the preferred means of settling cross-border disputes. One reason for this phenomenon is the fact that international arbitration grants parties the ability to choose who will preside over their dispute.¹ This empowerment is arguably even more valuable in investment disputes, which typically involve a power imbalance between the disputing parties, with private investors bringing claims against sovereign States. Submitting a dispute to investment arbitration where the claimant has some control over who presides over it is a vastly superior option to filing a case in the host State’s national courts, which cannot be guaranteed to serve as neutral, reliable fora.²

Parties to an arbitration³ take this processual advantage rather seriously, as the choice of arbitrator is arguably the most important determinant of the outcome of a dispute,⁴ and they evaluate several factors before finalizing the decision, including assessing a candidate’s expertise, experience, and soft skills.⁵ Because all information may not be publically available, one tool parties use to make an informed decision is the arbitrator interview.⁶ Arbitrator interviews take place in the pre-arbitration stage, when a party is vetting potential candidates as its nomination to the tribunal. Arbitrator interviews involve a party meeting⁷ with an arbitrator in order to evaluate his/her suitability and availability for the role, and include both participants sharing information with each other (wherein primarily the party asks the arbitrator relevant questions) in order for them to come to a mutual understanding concerning whether or not the potential appointment should be formalized. Interviews may happen either either in the presence of the other party, which is usually the case if there is a sole arbitrator or where a tribunal chair is being interviewed, or they may happen without the presence of the opposing party (ex parte), which is typically where the applicable arbitration rules or laws empower parties to unilaterally appoint at least one arbitrator in a multi-arbitrator tribunal.⁸ Ex parte communications may also occur in a more limited manner when a party and its appointee are trying to decide on a potential chairperson (under rules which allow for such selection by agreement of the party-appointed arbitrators).⁹ The appropriateness of ex parte arbitrator interviews and their impact on impartiality¹⁰ is a hotly debated topic, especially in international commercial arbitration. The general issue of impartiality has attained a renewed focus in investment treaty arbitration, with one study finding that nearly 100% of dissents in ICSID proceedings came from party-appointed arbitrators in favour of their appointing party, sparking concerns about the nature of the selection process.¹¹

Different legal cultures have different attitudes towards ex parte interviews. One study revealed that all surveyed American lawyers had experienced these interviews whereas the majority of Swedish lawyers had never or rarely done so. Additionally, Swedish lawyers were overwhelmingly more likely to find such interviews inappropriate.¹² Such diverging perspectives make it important to have some uniform approach, especially where the perceived integrity of the arbitral process is at stake. The peculiar nature of the International Centre for the Settlement of Investment Disputes (“ICSID”) - where arbitration proceedings exist independently of national jurisdictions - complicates matters, as it must ensure that all legal jurisdictions are treated fairly.¹³

The existing legal framework governing ICSID arbitrations has largely ignored the interview controversy. Therefore, the question arises: What should the proper approach be towards the regulation of ex parte arbitrator interviews in the ICSID context?

This article is primarily concerned with the overarching theoretical debate regarding binding institutional regulations over arbitrator interviews. There will therefore be no serious attempt to analyze the minutiae of any code or make detailed proposals. Instead, it seeks to suggest what the ICSID community’s general approach towards the subject-matter should be, given the peculiarities of investment treaty arbitration. The essential point which will be made is that, instead of ever-expanding regulations over the conduct of interviews, the sweet spot lies in simply tweaking the framework of the process to become more transparent.

Legal status of ex parte interviews under the current ICSID framework¹⁴

The ICSID Convention contains little guidance on appropriate pre-arbitration conduct. Article 14, which lays down the necessary qualifications for ICSID arbitrators, provides simply that arbitrators should be of “high moral character” and “exercise independent judgement.”¹⁵

ICSID’s Arbitration Rules affirm the principle of party autonomy, specifying that parties by agreement may tailor the particular selection method. Therefore, parties can consensually prohibit the use of interviews if they so desire.¹⁶ While the Rules do explain what the selection method will be in the absence of any agreement by parties, they do not make any mention whatsoever regarding pre-appointment communications. The arbitrators are, however, required to sign a declaration that they will judge fairly between the parties, regardless of who appointed them. A failure to sign this declaration by the arbitrator is deemed to mean a resignation from the tribunal.¹⁷

It is important to note, however, that Regulation 24 of ICSID’s Administrative and Financial Regulations prohibits ex parte communications during the pendency of arbitration proceedings.¹⁸

Indeed the ICSID Secretariat acknowledges the existence of pre-appointment interviews in its “Practice Notes for Respondents”, which contain advice for State parties. The Notes state that while some parties do arrange for interviews with potential arbitrator-nominees, these happen for limited, specified purposes and that the merits of the case should never be discussed. The Notes also stress that party-appointed arbitrators are not proponents for appointing parties.¹⁹

There are additionally “soft laws” and guidelines that specifically address the conduct of interviews, albeit mainly in the context of commercial arbitration.²⁰ Most notable among these is CiArb’s Practice Guideline 16, which attempts to lay down the international best practice for arbitrators in conducting interviews.²¹ Some other ethical codes deal with the topic of interviews tangentially. One such example is the IBA’s Guidelines on Party Representation, which expressly permit ex parte pre-appointment interviews as long as they’re limited to certain acceptable topics.²² Soft laws are not binding on any stakeholder unless the parties expressly agree that they will be applicable. However, they still have persuasive value, and have frequently been consulted by tribunals even where they weren’t formally adopted.²³

In the absence of binding rules, arbitrator self-restraint is the most common source of regulating interviews. Some will refuse to be interviewed outright and go no further than providing a CV. Others will accept being interviewed and may even insist on disclosing the details of such communications to the other party and co-arbitrators.²⁴ Since arbitrators have no uniform approach, the question does arise as to whether or not ex parte interviews impact an arbitrator’s impartiality.

Do ex parte interviews affect impartiality?

Two fundamental needs of international arbitration collide in the debate about the appropriateness of ex parte interviews: The need to ensure that parties can freely choose their arbitrators and the need to preserve impartiality.²⁵

Opponents claim that interviews may have a detrimental effect on arbitrator impartiality, as an arbitrator might attempt to “sell” himself to the party.²⁶ Others are concerned that such interviews might offer an opportunity for parties to discuss the merits of the case with their prospective arbitrators. Indeed, soft laws regulating interview conduct strictly limit the contents of interviews to “appropriate topics” like determining the arbitrator’s competence, availability, the selection of a chairperson and disclosure of any potential conflicts of interest. Discussions on the specific merits of the case are expressly prohibited.²⁷ The apprehension here is that a party may attempt to solicit the views of the arbitrator on the issues and predict which way the arbitrator is likely to vote or try to “misrepresent” the other side’s case to the arbitrator.²⁸

The extent to which these criticisms are valid is debatable. It is naive to assume that any investment arbitrator worth his fees would immediately become biased if informed about the specific fact-situation of a dispute. Indeed, in the investment arbitration context, many disputes take a more “public” character (e.g. where sweeping regulatory changes of the host state are under attack). It is possible that the arbitrator has already been exposed to some version of the facts through simple media coverage.²⁹

Given the complex and sensitive nature of investment disputes, parties usually only appoint highly experienced arbitrators to preside over the dispute. In fact, the ICSID Convention expressly stipulates that arbitrators must have “recognized competence” in certain fields.³⁰ It is unreasonable to assume that such candidates would shamelessly appease parties to a dispute or “sell” themselves. They would anyway have to provide reasons in the award, and could end up hurting their careers if they make an evidently biased decision.

Additionally, even if a party “misrepresents” the other side’s case, it is unlikely that a competent arbitrator will allow such claims to colour his decision over the actual evidence and arguments presented at the hearing.³¹

In fact, it could be argued that an arbitrator has a positive obligation to contact a party and obtain the required information to make a decision on the existence of any fact that would make a truly neutral decision impossible.³² Interviews are an indispensable tool for this.

The most compelling criticism is that unregulated interviews might help parties select an arbitrator who is prone to vote a certain way on specific legal issues. An arbitrator must be impartial with respect to both the parties and the subject-matter, and must not have strong preconceived notions about the substance of the dispute. The traditional American perception of arbitration is comfortable with the notion of party-appointed arbitrators acting as partisans for their appointing party. Indeed, this may well be the reason why American lawyers are more open to the idea of arbitrator interviews.³³ However, ICSID expressly distances itself from such a viewpoint and stresses that arbitrators are not meant to be advocates.³⁴

In fact, in one NAFTA arbitration, Canfor Corpn v United States, an arbitrator was compelled to resign after ICSID, his appointing authority, informed him that it would uphold a challenge against him based on certain public comments he made aggressively criticizing the measures of the Respondent in the arbitration he was scheduled to preside over. These measures were the subject-matter of the dispute.³⁵

However, in Saipem v Bangladesh, where an arbitrator’s appointment was challenged on the basis that he had earlier expressed some opinions in writings about certain legal issues which were central in the arbitration, the challenge was rejected on the basis that doctrinal views expressed in the abstract could not be considered to impact an arbitrator’s impartiality.³⁶

Therefore, ICSID arbitrators are not expected to have no stance whatsoever on a legal issue, but they are expected to be neutral as far as the details of the dispute before them is concerned.

Rhetoric can go both ways, but there are so far no empirical or statistical studies that comprehensively explore the impact of interviews on arbitrator decision-making. Given this scenario, it is unfair to assume that the mere existence of an interview can affect partiality. There is, however, the possibility that it might allow a party to “manipulate” the selection process and get a partisan arbitrator on board. But this lacuna can be plugged through complete transparency, which will be discussed below.

Proposal

In light of the above, the ICSID community’s general approach to ex parte arbitrator interviews should involve the following:

1) There should be no detailed rules governing the substance and practical execution of the interview.

2) There should be a complete, transparent record of the interview which should be given to the other party and co-arbitrators.

An absence of elaborate prescriptive guidelines governing the conduct of an interview does not imply an absence of any ethical codes whatsoever. It simply means that the boundaries of acceptability will be defined by ethical obligations that would have existed regardless of whether or not interviews took place.

For instance, if a discussion on the merits of the case takes place during the interview, it can be deemed a violation of the general standard of subject-matter impartiality (depending on what is actually said during the discussion). Indeed, Canfor is an example where ICSID recognized the fact that an arbitrator was partial with respect to the subject-matter without needing any binding guidelines.^37,38

Detailed prescriptive guidelines are problematic because they might fuel the desire to challenge awards or the other side’s nominated arbitrator. An aggressive party might use the opportunity to pore over the guidelines and find one small procedural detail that wasn’t followed rigorously. The debate then devolves into whether or not the guidelines were followed, rather than whether or not the arbitrator actually was biased. This is especially problematic where guidelines prescribe arguably trivial conduct.³⁹ For example, the CiArb Guidelines provide that interviews must be conducted in a professional manner and, if conducted in person, at a neutral business location and not over a meal or drinks.⁴⁰ However, what if appropriate professional conduct in one business culture requires meetings to happen over refreshments? It’s hardly fair to assume that such an occurrence can affect the integrity of the interview.⁴¹ Even regulations that seek to prescribe the appropriate substance of discussions in an interview can be problematic. For instance, discussions on the merits of a case might be prohibited, but what if a party grills an arbitrator on his understanding of the law of force majeure in a dispute which might hinge entirely upon the application of this law? It’s possible that some might argue that this should be a grounds for challenge.⁴²

Perhaps this concern is overblown in the ICSID context. According to Article 57 of the Convention, arbitrators can only be disqualified if the facts indicate “...a manifest lack of the qualities required by... Article 14”⁴³. While the meaning of “manifest lack” is frequently

debated, the dominant understanding is that the words set a much higher threshold for a successful challenge than might otherwise be available in commercial arbitration.⁴⁴

This fact simply makes the existence of any sort of binding regulations governing the interview redundant, for there will be no consequences for breaking them in all but the most extreme of cases. Indeed, the high bar of challenge set by Article 57 makes it inadvisable for parties to even voluntarily adopt any sort of guidelines governing interview conduct as in most cases they are bound to be unenforceable.

However, one major change to the processual framework governing interviews must be made: All communications between a party and an arbitrator, even during the selection stage, must be made completely transparent. If an interview happens in person, then it must be videotaped. If it happens via phone call or instant messaging, then such interactions must be recorded and preserved. All such records must then be made available to the ICSID Secretariat, all other parties, and co-arbitrators. Indeed, the CiArb guidelines originally stipulated that arbitrators should tape-record the interview or take detailed notes and make them available to the other party. However, subsequent amendments subjected any recording of the interview to the interviewing party’s consent.⁴⁵

This level of transparency is controversial, with critics claiming that it’s intrusive, demeaning and likely to provoke more challenges to arbitrator appointments by parties who will nitpick the conversation in an attempt to find any potentially objectionable phrase.⁴⁶

As explained earlier, the majority of challenges are bound to fail simply because Article 57 sets a very high bar for challenging arbitrators. It is true that this fact alone might not deter aggressive parties from trying their luck and raising doomed-to-fail challenges, adding to costs and time, but

it is expected that with the consistent failure of such challenges over time, the willingness of parties to indulge in such tactics will decrease.

In the rare case where there are valid grounds for challenge, such transparency could be indispensable for evidence. But this might be naive assumption, given the fact that if parties and arbitrators truly did want to secretly collude with each other, no institutional regulations could really stop them. That being said, full transparency has an intrinsic positive value attached to it even if there is no successful challenge to an interview ever. In an international context where legal cultures have varying notions of what kind of conduct is appropriate or effective, all parties should have a right to know how their counterparts interact with individuals who will adjudicate their disputes, especially where said individuals are expressly meant to be non-partisan. Full transparency will level the playing field as it will allow participants to observe and learn from each other and therefore be able to make a better-informed choice on what the most effective practice for interviewing and selecting arbitrators is. Only with complete information on how varying interactions between parties and party-appointed arbitrators have an impact upon the ultimate form of the arbitration process can party autonomy and consent truly be said to exist. Indeed, this should be considered the most important reason for ensuring full transparency.

Perhaps a result of full transparency, absence of specific binding rules, and the high bar for challenges will be a “race to the top” where parties of all legal cultures - in order to obtain a competitive edge - take a very liberal approach towards the conduct of interviews and end up with a harmonized practice.⁴⁷ Such a result can only be considered beneficial in the ICSID context, as it diminishes the potential influence that hidden variables such as the pre-arbitration selection process have over the actual proceedings.

Insofar as it is felt that such transparency is “intrusive” and “demeaning,” ICSID arbitrators usually have to preside over issues of immense public interest with far-reaching consequences. Such arbitrators wield great power over sovereign host States, which are expected to

acknowledge the binding nature of ICSID awards.⁴⁸ In such a situation, critics need to understand that the integrity of the process surely should be prioritized over the potential feelings of hurt such recordings might inspire in some individuals.

Implementation challenges

Certain implementation hurdles exist for these proposals. Insofar as a need for mandatory transparency is concerned, this would likely require a change in Regulation 24 of the Administrative and Financial Regulations,⁴⁹ which would now have to stipulate that all communications between a party and an appointed arbitrator - including pre-arbitration communications - would have to be comprehensively recorded and made accessible to the other party and the tribunal. Similarly, it would also be advisable to amend the declaration contained in Rule 6 of the Arbitration Rules⁵⁰ to specify that the arbitrator should supplement the declaration with a comprehensive record of any interview that took place, unless this has already been provided to the Secretariat by the interviewing party.

The Rules and the Regulations can only be amended by a 2/3rds majority vote of the Administrative Council, which consists of all ICSID Contracting States.⁵¹ Execution of such an amendment is impossible if a large number of legal jurisdictions are opposed to the idea of full transparency. The 2012 QMUL International Arbitration Survey found that respondents from different geographical areas had different attitudes towards the disclosure of merely the occurrence of an interview. For example, only a minority of surveyed American respondents supported such disclosure as opposed to a slight majority of Asian respondents.⁵²

Indeed, the biggest implementation hurdle may come from the international arbitration community itself, which in general seems adverse to the idea of detailed disclosure, with a very small fraction of respondents in the Queen Mary survey believing that detailed notes of the interview should be disclosed to the other party either by the arbitrator or the interviewing party.⁵³

It is hoped that, in the ICSID context, the arbitration community will warm up to the benefits of complete and mandatory transparency regarding interviews, considering the benefits it would lead to and the lack of substantial harm.

Conclusion

International arbitration is centred around party autonomy and therefore institutional policies should be so framed so as to mutually maximize the autonomy of all parties and their ability to make an informed decision regarding the arbitral process. Pre-appointment interviews are an indispensable tool available for parties to choose who will judge their dispute and therefore should not be subject to needless, complicated practical hurdles. This is especially true in investment disputes, which can be legally complex and sensitive. Existing norms regarding impartiality can be enforced without the need for imposing specific detailed regulations.

On the same note, however, maximum mutual party autonomy cannot be said to exist if there is secrecy over the process by which an arbitrator was selected. Therefore, the requirement of absolute transparency in all communications with the tribunal should be considered of paramount importance. Any fears about this transparency being grossly abused are exaggerated considering the general legal framework of ICSID and its separate standards for determining the integrity of an arbitral proceeding.

It must be noted that the ICSID Rules and Regulations are - at the time of this writing - undergoing a comprehensive amendment process for the fourth time in history.⁵⁴ However, none of the current proposals take ex parte pre-appointment interviews between the parties and arbitrators into account, and it would indeed be advisable for the drafters to spare some thought about this issue and consider the merits of implementing the proposals contained in this article.^55,56

The matter does not end here. There might be smaller issues that need to be clarified before such policies can be executed. For example, what is the solution if a party or arbitrator submits a record of the interview but it is not comprehensive enough? Should this result in a presumed resignation of the arbitrator? What is the best way to navigate through the implementation hurdles and ensure that the international community accepts the benefits of complete transparency? These questions, while important, are outside the scope of this article, which looks to recommend the general perspective that the ICSID community should ideally adopt towards the regulation of ex parte interviews.