Background
In 2017, Working Group III of UNCITRAL was entrusted with the broad mandate of working on the possible reform of investor-state dispute settlement. One area of this reform included defining a code of conduct for arbitrators, which was led jointly by ICSID’s and UNCITRAL’s Secretariats. Following years of discussion, the draft Code was agreed by UNCITRAL in its 56th session in July 2023. Although the final version of the Code as adopted by the UNCITRAL is yet to be issued, this article discusses the latest version of the document as agreed by Working Group III.
After first clarifying the Code’s scope of applicability, this article will also discuss four of the key provisions, specifically: the requirements of independence, impartiality and disclosure; the guidelines on “double-hatting”; arbitrators’ obligation of confidentiality; and guidelines on the administration of a dispute. Finally, we provide some brief thoughts on the implications of the Code on future investor-state disputes.
The Code’s scope of applicability
The Code states that it applies to all arbitrators involved in investor-state disputes, and even beyond this, to potential arbitrators (candidates), and former arbitrators. However, it is not clear, as yet, how the Code will be implemented in arbitrations under various procedural rules. The Secretariat has laid out a number of options regarding the implementation of the Code in a detailed note.
It includes provisions on arbitrators’ and candidates’ obligations in respect of their independence and impartiality and guidelines on undertaking multiple roles during an arbitration. The Code also addresses arbitrators’ duties of diligence, integrity and competence, confidentiality obligations, guidelines on ex parte communications, arbitrators’ assistants, and fees and expenses.
Further, the Code specifies that when an international investment agreement (IIA) contains similar provisions regulating the conduct of arbitrators, or candidates, the provisions in the Code would apply alongside the provisions in the IIA. In cases where these sets of provisions conflict, the IIA will prevail to the extent of the incompatibility. The Code may also be applied to disputes that are not strictly investor-state disputes (for instance, inter-state disputes, or disputes that might not relate to “investments”), but only if the parties to the dispute agree to this.
Independence, impartiality, and disclosure
The Code, in Article 3, reiterates the well-known and accepted requirements that arbitrators must be independent and impartial, and in Article 11, that candidates and arbitrators have the continuing obligation to disclose any circumstances likely to give rise to “justifiable doubts” as to their independence or impartiality. Importantly, however, the Code clarifies that the fact that something has not been disclosed does not, in and of itself, establish a lack of independence or impartiality on the arbitrator’s or candidate’s part.
The draft commentary to the Code (Commentary), in paragraph 19, helpfully clarifies the terms “independence” and “impartiality”, specifying that “independence” refers particularly to the absence of relations with a party to the dispute which could influence an arbitrator’s decision, while “impartiality” refers to the absence of bias or predisposition of an arbitrator towards either a party or to issues raised in the course of the proceedings.
The Commentary also suggests that standards prepared by international organizations, such as the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines), may provide useful guidance on these terms. At this stage, however, it is unclear to what extent the IBA Guidelines and the finalised version of the Code will directly interrelate. It is also worth noting that the IBA has established a task force to review specific areas of the IBA Guidelines, which notably include third-party funding, issue conflicts, organizational models for legal professionals in different jurisdictions, and non-lawyer arbitrators. Developments on this front will also be important to watch as they might provide helpful insight into the interpretation of the Code.
Restrictions on “double-hatting”
Article 4 of the Code prevents arbitrators from acting concurrently as counsel or expert witness in other proceedings that involve the same law, regulation, or conduct of a State at issue in a given dispute (so-called “measures”), the same or related parties, or the same provisions of the same IIA unless the parties in both sets of proceedings agree.
Further, for three years following an investor-state dispute, former arbitrators of the dispute are prevented from acting as counsel or as an expert witness in any investor-state dispute or related proceedings that either involve the same measures, or the same or related parties, for a period of three years, unless the disputing parties in the past proceedings agree. Likewise, former arbitrators cannot act as counsel or expert witness in a subsequent investor-state dispute or related proceedings if it involves the same provisions of the same IIA as in a previous investor-state dispute that the arbitrator has acted in for a period of one year, unless the disputing parties in the past proceedings agree to this. This test of “same measures” is novel, and goes further than the IBA Guidelines do to regulate issues of substance that the arbitrators might have to deal with.
As it may be difficult for arbitrators to obtain an express agreement of all previously disputing parties, the Commentary to the draft Code suggested that the UNCITRAL could consider the insertion of a provision to limit the arbitrator’s obligation to take all reasonable steps to obtain the disputing parties’ agreement, and provided no objections were received within a reasonable period of time. Whether this proposal was accepted by UNCITRAL will not be clear until the final version of the Code is released.
Obligations of confidentiality
Under Article 8 of the Code, arbitrators are prevented from disclosing or using any information or draft decision concerning an investor-state dispute he or she is acting in, as well as relating to the contents of the deliberations in that dispute, unless the IIA, the applicable rules, or the parties provide for this. This obligation survives the termination of the dispute. Further, the Code clarifies that while arbitrators are allowed to comment on a decision if it has become publicly available, they cannot do this while the proceedings remain pending, or if the decision is subject to post-award proceedings.
An exception is available for arbitrators, candidates, and former arbitrators if they are legally compelled to disclose any information in a court or other competent body, or if they need to disclose such information to protect their legal rights or in relation to legal proceedings.
Administration of a dispute: assistants and fees
The Code in Article 10 also requires arbitrators to make reasonable efforts to ensure that his or her “assistant” acts in accordance with the Code. The Commentary describes an “assistant” as an individual who is assigned specific tasks by the Arbitrator to assist with the investor-state proceeding and uses the example of an associate in the arbitrator’s firm or chamber. This provision should be read along with the arbitrator’s general obligation not to delegate his or her decision-making function in Article 6.
Notably, the term “assistant” specifically excludes staff members of arbitral institutions, including tribunal secretaries, who would be bound by institution-specific ethical obligations or by their terms of employment.
As regards an arbitrator’s fees and expenses, Article 9 of the Code requires that they be “reasonable”. Arbitrators should also keep accurate records of their time and expenses and make these available when requesting the disbursement of funds or when a party so requests.
What this may mean for the future of investor-state disputes
Largely, the Code appears to reflect best practices and although in many cases these are already prevalent in the investor-state disputes field, both through conduct and also other soft-law instruments such as the IBA Guidelines, however, some provisions included do help clarify certain grey areas.
For instance, the provisions limiting multiple roles for arbitrators are a significant innovation and clarify an area that has seen much discourse but was not yet subject to any guidelines. This said the requirement for arbitrators to obtain the express agreement of disputing parties in former cases might be onerous and the finalised version of the Code will perhaps account for this possible difficulty.
Further, the Code’s stance on arbitrators’ obligations to maintain confidentiality, for example specifically allowing arbitrators to comment on publicly available decisions, might allow for some useful additions to scholarship in the field of international investment law.
Finally, the provision requiring arbitrators to make efforts to have their assistants comply with the Code provides an element of “light-touch” regulation to an area that was previously unregulated, while reiterating the fundamental idea that arbitrators should not delegate their decision-making functions.
Some areas of uncertainty remain, however. For one, the Code does not address the very controversial area of issue conflict. Further, it remains unclear how the Code will eventually be made enforceable. In November 2021, Working Group III suggested a few routes to make the Code operational, including, for example, entering into a multilateral instrument incorporating the Code, using the Code as a template for individual IIAs, by having disputing parties in individual cases agreeing to apply the Code, by incorporating it into the procedural rules of arbitral institutions, or by having arbitrators add the Code to their declarations of independence and impartiality when accepting appointments. To gauge the ultimate impact of the Code, it remains to be seen which of these options, and to what extent, is ultimately retained.
Authored by Thomas Kendra, Lédéa Sawadogo-Lewis, and Trishna Menon.
