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Challenges to Arbitrators Under the Proposed New ICSID Rules

On March 15, 2019, the International Centre for the Settlement of Disputes released Working Paper # 2 with comments and proposals for amendment of the ICSID Arbitration Rules.

Among other things, WP #2 continues to tinker with changes to the procedure for disqualification of arbitrators. 

Attention is being paid to reducing the number of challenges, lowering the delay and cost of the procedures and improving fairness in challenge decisions.

Of late, the conversation concerning disqualification of arbitrators has been enlivened  in light of a proposal to disqualify  the entire Tribunal in Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12.  In this case, the Acting Chairman of the Administrative Council took the extraordinary step of obtaining a recommendation from the Secretary-General of the Permanent Court of Arbitration at The Hague to make this proposal.

The latest iteration of the amendment proposals aims to work towards a greater balance between fairness and efficiency. WP#2 provides that:

  • proposals for disqualification be filed within 21 days of the constitution of the Tribunal or notice/knowledge of disqualifying circumstances;
  • the Tribunal has the power to award costs for arbitrator challenges; and
  • the filing of a challenge suspends the proceeding, unless otherwise agreed by the parties; clawing back the elimination of automatic suspension proposed in WP#1.

These proposals are in keeping with the Amendments’ overall strategy of expediting procedures by providing more specific time limits for each subset of procedure (timing of a proposal for disqualification, response by responding party, arbitrator’s statement, parties’ final submissions, and decision on proposal).

Increased disclosures, especially at the beginning of a case, are another area of focus for the Amendments. While arguably increasing costs and delay, the proposals provide for enhanced declaration of arbitrator independence and third-party funding disclosures, which could impact the prevalence of challenges.

Additionally, fairness questions continue to be raised with the procedures for deciding ICSID Tribunal challenges: currently, challenges are decided by co-arbitrators instead of by an institution as under most other institutional arbitration rules. Arguably, this has prompted more challenges to entire tribunals under the ICSID Rules—as in Vattenfall. This procedure, however, will not change in the latest round of amendment to the Rules, and any change would require amendment to Article 58 of the ICSID Convention by proposal of the Member States and ratification.

ICSID is soliciting further comments and recommendations and will hold a meeting with State experts on April 7-9. The Centre hopes to gain approval for the amendments to the ICSID Arbitration Rules by two thirds vote of the Member States in October 2019.

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