arguments for and against standing panels of arbitrators in investor-state arbitration

36 Pages·2016·0.4 MB·English

by  Dave Mu

ARGUMENTS FOR AND AGAINST STANDING PANELS OF
ARBITRATORS IN INVESTOR-STATE ARBITRATION: EVIDENCE AND
REALITY

LEON E. TRAKMAN∗ AND DAVID MUSAYELYAN∗∗
Due to the recent dissatisfaction with investor-state arbitration (‘ISA’), scholars have proposed greater
reliance on standing panels as a possible reform pathway. While significant benefits are often associated
with rosters of dispute resolvers, limited evidence is available supporting these assertions. Furthermore,
standing panels are exceedingly rare in the investor-state context. The absence of strong evidence in
support of standing panels and the current trends in state practice suggest that standing panels should
be introduced gradually and with caution. However, in order to reap the benefits associated with this
form of dispute resolution, a moderate degree of institutionalization in appointing and managing such
panels will be required.

Keywords: Roster of Arbitrators, Standing Panels, Panels, Selection of Arbitrators, Investor-State
Arbitration

∗ B Com LLB (Cape Town), LLM, SJD (Harvard), Professor of Law and Former Dean, Faculty of Law, University of New South
Wales, Sydney, Australia. Email: [email protected]; Arbitrator and Mediator, Trakman and Associates,
http://trakmanassociates.com.
∗∗ Hons B Arts (University of Toronto), LLM (National Taiwan University), JD Candidate (University of Ottawa). Email:
[email protected].

1
CONTENTS
I Introduction …………………………………………………................................................................................3

II Policy context and Arguments in Support of Standing Panels in
ISA ……………………………………………..4
A Policy
Context ………………………………………………………………………………………………………………..4
B Arguments in Support of Standing Panels under
ISA ………………………………………………………7 1
Impartiality ……………………………………………………………………………………………………….7
2 Accountability …………………………………………………………………………………………………..9
3 Efficient Resource
Utilization …………………………………………………………………………..10
4 Equity Considerations ……………………………………………………………………………………..10

III Analysis of Available Research on Standing
Panels …………………………………………………………………….11
A Summary of the
Research …………………………………………………………………………………………….11
1 What is a ‘standing
panel’? ………………………………………………………………………………11
2 Prevalence of Standing
Panels …………………………………………………………………………12
3 Evidence on the Benefits Associated with Standing
Panels ……………………………….14
B Synthesis of the
Findings ………………………………………………………………………………………………18

IV Survey of Recent Bilateral Investment
Treaties ………………………………………………………………………….19
A Survey Methodology ……………………………………………………………………………………………………19
B Findings …………………………………………………………………………………………………………………….…20
1 Arbitrator Challenges ………………………………………………………………………………………21
2 Arbitrator Qualifications and Code of
Conduct ………………………………………………...21
3 Standing
Panels ……………………………………………………………………………………………….22
4 Indirect Influence of Standing
Panels ……………………………………………………………….23

V Recommendations and
Conclusions ………………………………………………………………………………………….25

VI Appendix: Table of Investment
Agreements …………………………………………………………..…………………28

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I INTRODUCTION
Article 13 of Convention on the Settlement of Investment Disputes between States and Nationals of
Other States (‘ICSID Convention’)1 provides for state parties to nominate up to four arbitrators to be
placed on a list of dispute resolvers. These individuals remain on that list for a renewable term of six
years.2 The Convention does not oblige the disputants to make their selection from the list constituted
by the member states.3 Although a large number of states nominated individuals to these lists,
disputants usually rely on ad-hoc appointments for the resolution of investor-state disputes.
Due to the recent dissatisfaction with investor-state arbitration (‘ISA’), a number of reform proposals
have been put forward by the academic community. Standing panels of arbitrators4 are highlighted as a
possible reform option. Supporters of this reform proposal argue that standing arbitral panels enhance
transparency, expedite appointments and promote greater quality and consistency of decisions.5 Thus,
the rules of institutions administering ISA can be improved by adopting standing panels for the
resolution of investor-state disputes.
This proposal is also appealing because standing panels function as a halfway house between a fully-
fledged investment court and a system of ad-hoc arbitration. It is arguable that standing panels of
arbitrators can be used as an alternative pathway to promote global investment governance. Arbitrators
on these standing panels would be akin to a roster of career judges in domestic legal systems. These
arbitrator-judges could form a community that would standardize legal norms and practices, paving the
way for future institutionalization of the ICSID Convention and the eventual creation of a world
investment court.

1 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18
March 1965, entered into force 14 October 1966) (‘ICSID Convention’).
2 Ibid, art 15(1).
3 Ibid, art 40(1).
4 Scholars use different terminology to describe this dispute resolution format. For the purpose of consistency, we refer to the
term ‘standing panels’ when discussing a dispute resolution mechanism where dispute resolvers are selected from a list drawn
up by an institutional authority in charge of maintaining that list. As will be highlighted below, scholars refer to standing panels
in general terms and do not recognize the institutional underpinning of such system. See, Section III (A) below.
5 See Section II (A) and (B) below.
3
Although there is some support for standing panels, only a limited body of research is available on the
subject. Somewhat ironically, while significant benefits are often associated with standing panels, these
commonly cited benefits are not explored in the few studies written on the subject. On the contrary, the
research involving standing panels tends to be polarized over the question of whether party appointed
arbitrators are actually capable of exercising impartiality and independence. Furthermore, no
quantitative research on standing panels has been conducted in the context of investor-state arbitration,
raising questions over whether the advantages of standing panels are applicable in this context.
The narrow and somewhat anecdotal focus of available research on standing panels poses challenges in
assessing their viability and desirability in the context of ISA. Policy makers have to weight major claims
in support of standing panels against the limited evidence supporting or refuting these claims.
In our attempt to overcome these challenges, we consulted a broad range of sources on standing panels
and located a number of empirical studies that examined the operation of standing panels in various
commercial contexts, not restricting our analysis to ISA. Our research leads us to draw the following
conclusions. Although there are a number of qualitative virtues associated with standing panels, the
quantitative research does not support these qualitative claims. One reason why standing panels are
understudied is likely due to the confidential nature of ISA and the difficulties associated in arranging a
suitable research environment.
Furthermore, our study of academic and professional literature and of BITs demonstrates that state
practice is generally averse to standing panels in the context of ISA. Sates are also generally hesitant to
surrender their right to appoint arbitrators. Nevertheless, standing panels are found in a number of
interstate dispute resolution mechanisms and also in international commercial arbitration. We also note
states do delegate their sovereign rights to appoint arbitrators in a number of narrow circumstances in
ISA context.
We conclude by suggesting that standing panels have viability in ISA dispute resolution, provided they
are supported by a sophisticated institutional framework.
The paper begins by outlining the arguments in support of standing panels. Second, we summarize
available research on the subject and make preliminary assessments based on the available studies.
Third, we examine all bilateral investment treaties (‘BITs’) concluded between 2014 and 2016 to
highlight the use of standing panels by states. Drawing on our observations, we discuss the future of
standing panels in the context of ISA and outline possible reform avenues.

II POLICY CONTEXT AND ARGUMENTS IN SUPPORT OF STANDING PANELS IN ISA
A Policy Context
Much of the analysis on standing panels is linked to broader debate over reform of key global trade
institutions, in particular the NAFTA, the WTO, and the ICSID. As indicated below, the context in which
inquiries about standing panels were made has promoted a particularly analytical approach to standing
panels. Specifically, there is a strong assumption that standing panels are generally beneficial. Thus, this
format of dispute resolution is assumed to be an appropriate remedial measure against the perceived
lawless, arbitrary and unregulated nature of arbitration.
4
However, in historical terms, standing panels of arbitrators was an obscure topic until the United States,
Canada and Mexico concluded the NAFTA. The unique cross-appointment of panelists from a roster of
arbitrators by each side represented an innovation in dispute resolution and a minority of studies were
devoted to the analysis of standing panels under the NAFTA.6
Although the NAFTA sparked some interest in standing panels, the topic did not receive further
academic coverage until the international community launched the WTO Dispute Settlement
Understanding (‘DSU’) reform discussions in 2002. At that time, scholars and policy makers engaged in
fierce debates over the DSU’s future direction. The broader question surrounding these debates was
whether the DSU was evolving into a highly legalized world trade court, or whether it should retain its
ad-hoc character.7
As part of its reform proposals to the DSU, the European Community proposed establishing a permanent
roster of panelists who would be randomly assigned to hear disputes, just as was done by the WTO
Appellate Body (‘AB’).8 Following this submission an entire issue of the Journal of International
Economic Law was devoted to a discussion of the EC proposals with contributions from practitioners and
scholars.9
The topic of standing panels was revitalized more recently in the context of the recent backlash against
ISA.10 In 2007, Bolivia withdrew from the ICSID Convention.11 A number of other regional economies—
Cuba, Nicaragua, Ecuador and Venezuela pledged to terminate their memberships in the ICSID, citing
the unfair nature of the system, its bias in favour of foreign investors and the promotion of regulatory
chill.12 Not long after Ecuador’s withdrawal from the ICSID Convention, the Australian Government
issued its 2011 Policy Statement, stating that it would no longer agree to the adoption of international

6 See, eg, Sidney Picker Jr., ‘The NAFTA Chapter 20 Dispute Resolution Process: A View from the Inside’ (1997) 23 Canada-
United States Law Journal 525, 529 (comparing selection of panelists from a roster versus on ad-hoc basis); 0. Thomas Johnson
Jr., ‘Alternative Dispute Resolution in the International Context: The North American Free Trade Agreement’ (1992) 46 SMU
Law Review 2175 (discussing standing panels in general and exploring how they operate in the context of the NAFTA); J.C.
Thomas, ‘Investor-State Arbitration Under NAFTA Chapter 11’ (1999) 37 The Canadian Yearbook of International Law 98; David
A. Gantz, ‘Dispute Settlement Under the NAFTA and the WTO: Choice of Forum Opportunities and Risks for the NAFTA Parties’
(1998) 14 American University International Law Review 1025.
7 See, eg, John H. Jackson, ‘Dispute Settlement and the WTO - Emerging Problems’ (1998) 1(3) Journal of International Economic
Law 329 (arguing that the Appellate Body of the WTO should not be relied on extensively in situations concerning regulatory
matters) and Giorgio Sacerdoti, ‘The Dispute Settlement System of the WTO: Structure and Function in the Perspective of the
First 10 Years’ (2006) 5 The Law and Practice of International Courts and Tribunals 49 (discussing the Appellate Body’s role as a
judicial body, commonly cited reform proposals and exploring the resistance to these proposals).
8 Communication from the European Communities, Contribution of the European Communities and Its Member States to the
Improvement of the WTO Dispute Settlement Understanding, TN/DS/W/1 (2002) 1, 2-4.
9 William J. Davey, ‘Mini-Symposium on the Desirability of WTO Permanent Panel Body’ (2003) 6(1) Journal of International
Economic Law 175.
10 For the coverage of these events see Leon E. Trakman and David Musayelyan, ‘The Repudiation of Investor–State Arbitration
and Subsequent Treaty Practice: The Resurgence of Qualified Investor–State Arbitration’ (2016) 43(1) ICSID Review Foreign
Investment Law Journal 194.
11 On Bolivia’s denunciation and withdrawal from the ICSID, see International Centre for Settlement of Investment Disputes,
‘Bolivia Submits a Notice under Article 71 of the ICSID Convention’ (News Release, 16 May 2007)
<http://documents.worldbank.org/curated/en/2007/01/9467340/news-icsid-vol-24-no-2> .
12 International Institute for Sustainable Development, ‘South American Alternative to ICSID in the Works as Governments
Create an Energy Treaty’, (6 August 2008) <https://www.iisd.org/itn/2008/08/06/south-american-alternative-to-icsid-in-the-
works-as-governments-create-an-energy-treaty/>.
5
investment arbitration in its bilateral and regional trade agreements.13 Australia’s policy position was
accentuated by the ensuing claim lodged by Phillip Morrison over the plain tobacco packaging initiative
of the Australian government. While Australia eventually backed down from its categorical rejection of
ISA,14 its initial actions pushed ISA into the mainstream media.15 Subsequent repudiations of ISA by
South Africa16 and Indonesia17 and the accompanied negative media coverage of ISA sparked multiple
publications over its legitimacy and possible future reforms.
A common criticism of ISA was that proceedings ordinarily took place behind closed doors and often
concerned sensitive government policies. Academics and government officials questioned the
desirability of having unelected and unaccountable arbitrators deciding matters of national importance
without any system of oversight or appeals. A number of decisions involving challenges over highly
questionable behaviour of commercial arbitrators were cited18 to further question the underlying
assumptions about the fairness of ISA.

13 Australian Government, Department of Foreign Affairs and Trade, ‘Gillard Government Trade Policy Statement: Trading Our
Way to More Jobs and Prosperity’ (April 2011)
<http://blogs.usyd.edu.au/japaneselaw/2011_Gillard%20Govt%20Trade%20Policy%20Statement.pdf>. Also see Jürgen Kurtz,
‘Australia’s Rejection of Investor–State Arbitration: Causation, Omission and Implication’ (2012) 27 ICSID Review Foreign
Investment Law Journal 65; Leon E. Trakman, ‘Investor-State Arbitration or Local Courts: Will Australia Set a New Trend?’ (2012)
46(1) Journal of World Trade 83.
14 Australia has announced that it will negotiate ISA on case-by-case basis. See Australian Government, Department of Foreign
Affairs and Trade, ‘Trade and Investment Topics–State Dispute Settlement’ <http://dfat.gov.au/trade/topics/pages/isds.aspx>.
See Leon Trakman, ‘Deciding Investor States Disputes: Australia's Evolving Position’ (2014) 15 Journal of World Investment and
Trade 152. Australia’s subsequent agreements with Malaysia and Japan did not provide for ISA, however FTAs with Korea and
China contain ISA dispute resolution clauses and allow investors to lodge claims under the ICSID rules.
15 For a representative sample of media responses see the Economist, ‘The Arbitration Game’, 11 October 2014
<http://www.economist.com/news/financeand-economics/21623756-governments-are-souring-treaties-protect-foreign-
investors-arbitration>; Sierra Club of Canada, ‘Multiple Countries Reject Investor-State’ (25 January 2014)
<http://www.sierraclub.ca/en/main-page/multiple-countries-reject-investor-State-2013-update>.
16 Luke Eric Peterson, ‘South Africa Pushes Phase-out of Early Bilateral Investment Treaties after at Least Two Separate Brushes
with Investor-State Arbitration’, Investment Arbitration Reporter (online), 23 September 2012
<http://www.iareporter.com/articles/20120924_1>. Herbert Smith Freehills Dispute Resolution, ‘South Africa Terminates its
Bilateral Investment Treaty with Spain: Second BIT terminated, as Part of South Africa’s Planned Review of its Investment
Treaties’, Arbitration Notes (online) 21 August 2013 <http://hsfnotes.com/arbitration/2013/08/21/south-africa-terminates-its-
bilateral-investment-treaty-withspain-second-bit-terminated-as-part-of-south-africas-planned-review-of-its-investment-
treaties>. The list of active South African BITs is available at the UNCTAD, Investment Instruments Online Database: South Africa
<http://investmentpolicyhub.unctad.org/IIA/CountryBits/195#iiaInnerMenu>. In its 2015 World Investment Report, UNCTAD
noted that South Africa has continued to enforce its anti-ISA policies and terminated more of its investment treaties. See
UNCTAD, ‘2015 World Investment Report: Reforming International Investment Governance’, 110, available at
<unctad.org/en/PublicationsLibrary/wir2015_en.pdf> (‘2015 Investment Report’).
17Kingdom of the Netherlands, Netherlands Embassy in Jakarta, ‘Termination Bilateral Investment Treaty’ (News Release)
<http://indonesia.nlembassy.org/organization/departments/economic-affairs/termination-bilateral-investment-treaty.html>.
Also see Leon Trakman and Kunal Sharma, ‘Indonesia’s Termination of the Netherlands–Indonesia BIT: Broader Implications in
the Asia-Pacific?’, Kluwer Arbitration Blog (online), 21 August 2014
<http://kluwerarbitrationblog.com/blog/2014/08/21/indonesias-termination-of-the-netherlands-indonesia-bit-broader-
implications-in-the-asia-pacific/>. 2015 UNCTAD Investment Report notes that Indonesia continues terminating its BITs and has
discontinued 18 of its 64 BITs. See, World investment Report, above n 16, at 110.
18 Studies suggest that there is a noticeable increase of challenges to arbitrators. See Lars Markert, ‘Challenging Arbitrators in
Investment Arbitration: the Challenging Search for Relevant Standards and Ethical Guidelines’ (2010) 3 Contemporary Asia
Arbitration Journal 237; Christopher Harris, ‘Arbitrator Challenges in Investment Arbitration’ (2008) 4 Translational Dispute
Management 1.
6
In order to promote greater transparency, accountability and social responsibility in ISA proceedings, a
standing roster of arbitrators was thus advocated by a number of academics.19 Reflecting this recent
interest in standing panels in the context of ISA, the 2015 UNCTAD World Investment Report suggested
a ‘roster of qualified arbitrators agreed upon by the contracting parties and determining by lot the
arbitrators who sit on a specific case’ as one of the options to improve the overall arbitration process in
investor-state proceedings.20
Most recently, debate concerning standing panels in ISA spilled over to the negotiations over major
trade agreements. For example, a number of EU states expressed reservations over the ICSID provisions
in the TTIP, currently under negotiations with the United States.21 In its negotiation position paper, the
EU argued that the TTIP should allow for a roster of arbitrators.22 The proposal encourages ‘steps that
can be taken to transform the system towards one which functions more like traditional courts systems,
by making appointment to serve as arbitrators permanent, [and] to move towards assimilating their
qualifications to those of national judges’. Furthermore, ‘this option would not present technical
difficulties’ and ‘would break the link between the parties to the dispute and the arbitrators, …
mean[ing] that all arbitrators have been vetted by the Parties’.23

The environment in which the debates over standing panels took place has been instrumental in shaping
the focus of the research arising arose from it. First, academic interest in the subject has evolved largely
out of debates over the WTO DSU reforms, and to some extent the NAFTA. Thus, discussions of standing
panels have not generally taken into account different institutional contexts.

Second, the subject of standing panels is frequently invoked as a response to concerns with
international arbitration. In almost all academic literature on the subject, standing panels are treated as
a cure to problems commonly associated with arbitration.24 Hence, the vast majority of research on the
subject analyzes whether or not standing panels should be used as a formal response to perceived
limitations associated with unregulated arbitration, and not whether or not standing panels actually
have functional utility in regulating arbitration proceedings. In other words, there is a strong
presumption that standing panels are beneficial to the resolution of disputes, but without substantiation.

19 See, eg, Hans Smit, ‘The Pernicious Institution of the Party-Appointed Arbitrator’ (2010) 33 Columbia FDI Perspectives 1, 2,
available at <ccsi.columbia.edu/files/2014/01/FDI_33.pdf> (arguing that party appointed arbitrators should be banned unless
their role as advocates is fully disclosed and accepted); Jan Paulsson, ‘Moral Hazard in International Dispute Resolution’ (2010)
25 ICSID Review Foreign Investment Jaw Journal 339, 352 (arguing that ad-hoc appointments should be abolished in all types of
commercial arbitration); Gus, Van Harten, ‘Reform of Investor-State Arbitration: A Perspective from Canada’ Unpublished Draft
(2011) 1, 8, available at <http://ssrn.com/abstract=1960729>; Ingo Venzke, ‘Investor-State Dispute Settlement in TTIP from the
Perspective of a Public Law Theory of International Adjudication’ (Forthcoming 2016) 17 Journal of World Investment & Trade 1,
24; Sam Luttrell, ‘Bias Challenges in Investor – State Arbitration: Lessons from International Commercial Arbitration’ in Chester
Brown and Kate Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge University Press, 2011) 445, 481
(arguing that structural problems of ISA may be addressed by establishing a ‘standing corps of arbitrators’). Gus Van Harten,
‘The (lack of) Women Arbitrators in Investment Treaty Arbitration’ (2012) 59 Vale Columbia Center on Sustainable International
Investment 1, 2 (arguing that a mandatory roster of arbitrators will contribute to greater involvement of women arbitrators in
investment treaty arbitration).
20 Investment Report above n 16, 148.
21 At the time of writing, the parties concluded 13th round of negotiation talks. See Ignacio García Bercero ‘Conclusion of the
13th TTIP Negotiation Round’ (news release, 29 April 2016) <http://trade.ec.europa.eu/doclib/html/154480.htm>.
22 The European Council – Trade, ‘Investment in TTIP and Beyond – the Path for Reform: Enhancing the Right to Regulate and
Moving from Current Ad-hoc Arbitration towards an Investment Court’ (news release)
<trade.ec.europa.eu/doclib/html/153408.htm>.
23 Ibid, 7-8.
24 See generally above n 19 and the accompanying text.
7
Thus, it is not surprising that the World Investment Report merely lists standings panels as a possible
option to improve proceedings, without actually raising any arguments in support of that claim.

B Arguments in Support of Standing Panels under ISA
Even though arguments supporting standing panels made in relation to international commercial
arbitration [‘ICA’] are not equally applicable to ISA, scholars have invoked ICA to justify standing panels
in relation to investor-state arbitration. Broadly, arguments in support of standing panels in ISA can be
divided into four categories: impartiality, accountability, efficient resource allocation, and equity
considerations. While these are not clearly distinguishable categories, they are helpful for the purpose
of the analysis.
1 Impartiality
Impartiality remains the most commonly cited reason in support of standing panels. Scholars supporting
a move toward standing panels argue that party appointed arbitrators are fundamentally unable to
remain neutral throughout the proceedings because they are directly appointed by the disputing
parties.25 Furthermore, even if these arbitrators choose to rule against the parties appointing them, they
still have multiple ways to indirectly support their appointees.26 Finally, according the report by the
International Institute for Sustainable Development, even if a party appointed arbitrator is determined
to be impartial and, in fact, acts impartially, there may still be the perceived presence of partiality in the
proceedings due to the manner in which disputants appoint arbitrators.27
Accordingly, partiality is difficult to detect. It also has a substantially damaging effect on the institution
of arbitration as a whole. After all, decisions of arbitrators will never be accepted as legitimate unless
the individuals rendering these decisions appear to do so in an impartial manner.28
The independence and impartiality of arbitrators is also viewed to be of paramount importance to
future ISA reforms. For example, Ghouri argues that arbitrators should be empowered to interpret
investment treaties broadly in order to incorporate policy concerns of nation states.29 Arguably,
arbitrators who are influenced by their appointing authorities will be unable to act in such a manner.
According to Ghouri, encouraging arbitrator activism is the most practical and feasible way to reform the
ISA system.30

25 Leif Cocq-Rasmussen, ‘An Analysis of Geopolitical Considerations of Investor State Dispute Settlement and the Pursuit of
Impartial Justice’, (2015) 7(1) Amsterdam Law Forum 36, 47; Jan Paulsson, above n 19, 348.
26 Hans Smit notes that arbitrators could reduce an award or rule only partially in favour of the other side. See Smit above n 19,
2.
27 Nathalie Bernasconi-Osterwalder and Diana Rosert, ‘Investment Treaty Arbitration: Opportunities to Reform Arbitral Rules
and Processes’ (2014) The International Institute for Sustainable Development 1, 12
<www.iisd.org/pdf/2014/investment_treaty_arbitration.pdf>.
28 Charles N. Brower and Charles B. Rosenberg, ‘The Death of the Two-Headed Nightingale: Why the Paulsson—van den Berg
Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded’ (2013) 29(1) Arbitration International 7, 8;
Bruno Manzanares Bastida, ‘The Independence and Impartiality of Arbitrators in International Commercial Arbitration’ (2007)
6(1) Review of E-Mercatoria 1, 5-6.
29 Ahmad Ali Ghouri, ‘On Genealogy of Proposals to Reform Investor-State Arbitration’ (2014) 11(1) Transnational Dispute
Management 1, 9-10.
30 Ibid, 4.
8
Highlighting these concerns, critics of ISA argue that its legitimacy crisis is related to the manner in
which the disputants select arbitrators. Accordingly, the question of partiality can be effectively
addressed by establishing a roster of arbitrators that will be vetted by all participants. This view is most
famously promoted by Paulsson, who argues for the abolition of unilateral appointments. According to
Paulsson, arbitrators should be selected either jointly or from a panel of standing arbitrators.31 Paulsson
notes that arbitrators are chosen for their perceived loyalty to the appointing authority, cultural
affinities and specialized skills and knowledge, and not for their potential to be impartial.32 Thus, the
bias of these individuals is tied directly to the manner in which they are appointed. In fact, one scholar
advocated renaming arbitrators as ‘party appointed advocates’ in order to accurately capture their true
loyalties and to adjust expectations of all participants in the proceedings.33
Concerns over impartiality have been voiced repeatedly by the EU in its reform proposals to the DSU
and in its TTIP negotiation platform. In the case of the WTO, the EC noted that standing panels ‘would
enhance the legitimacy and credibility of the panel process in the eyes of the public, as the possibility of
conflicts of interests would be eliminated and the independence of the panelists would be protected.’34
More recently, the EU noted that ‘[t]he current system does not preclude the same individuals from
acting as lawyers (e.g. preparing the investor’s claims) in other ICSID cases … [and] … this situation can
give rise to conflicts of interest – real or perceived’.35 In both instances, the EU advocated for the
adoption of standing panels to break the link between disputing parties and the arbitrators they appoint.

In summary, standing panels are viewed to be beneficial because they have the potential to alleviate
concerns over the partiality of arbitrators. Since arbitrators are traditionally appointed by disputants, it
is difficult for them to remain impartial, consciously or otherwise. Furthermore, even if arbitrators will
act in a genuinely impartial matter, the appearance of bias will impact upon the legitimacy of arbitral
proceedings.
2 Accountability
Another commonly cited argument in support of standing panels is that they create a mechanism for
accountability. Specifically, individuals must meet the relevant qualifications in order to be placed on a
roster of arbitrators.
According to Maida, rosters of dispute resolvers serve as a basic form of membership control.36 They are
an efficient way to address concerns for competency in a particular industry. Furthermore, rosters serve
a signaling function to clients and can also be used as an informal accrediting mechanism.37 Finally, if an
arbitrator is suspected of misconducted, the individual in question can be reported to the accrediting
authority and conceivably, removed.

31 Jan Paulsson, above n 19, 352.
32 Ibid, 349-51.
33 Seth H. Lieberman, ‘Something's Rotten In The State Of Party-appointed Arbitration: Healing Adr's Black Eye That Is
“Nonneutral Neutrals”’ (2004) 5(2) Cardozo Journal of Conflict Resolution 215, 217.
34 Above n 8, 2-3.
35 Above n 22, 6-7.
36 Peter R. Maida, ‘Rosters and Mediator Quality: What questions should we ask?’ (2001) 8 Dispute Resolution Magazine 17, 18.
37 Ibid.
9
Issues of misconduct are becoming a major source of discussion in ISA reforms. Some scholars argue
that abuse of the arbitral process is a major rising trend in arbitration.38 Aggravating these issues is the
fact that it is very difficult to challenge an arbitrator because the party raising the challenge must
establish evidence of manifest lack of qualities such as independence or impartiality.39 Furthermore,
ICSID arbitrator challenges are heard by the very same panel on which the arbitrator suspected of
misconduct presides. Thus, in a three member panel, the two remaining arbitrators must rule on the
validity of the challenge to the third arbitrator.40
Due to the challenges associated with removing arbitrators under the ICSID rules, standing panels of
arbitrators provide an alternative mechanism to sanction wrongful conduct of arbitrators. Although it is
very difficult to remove an arbitrator presiding over a panel under the ICSID rules, the presence of a
roster would allow a party to petition the managing authority for the removal of that individual from the
roster. Furthermore, the desire of arbitrators to remain on a roster will encourage them to show greater
deference to their professional obligations as opposed to situations where they act on a purely ad-hoc
basis.

3 Efficient Resource Utilization
Supporters of standing panels also cite various practical advantages to having standing panels. For
example, standing panels can improve efficiency in selecting arbitrators. According to the reasoning,
investors facing their first arbitral claim need to spend considerable time locating an appropriate
arbitrator. A roster of arbitrators can expedite appointments and ensure that investors are able to select
qualified individuals.41 Furthermore, a sophisticated roster allows disputing parties to select arbitrators
who specialize in the area that is pertinent to the dispute in question.
The issue of delays in establishing arbitral panels and the quality of arbitral reports was a major
consideration in the EC’s reform proposals to the WTO. According to the EC, the WTO panels took too
long to form and there was a shortage of qualified arbitrators due to the ever increasing list of cases.
Thus, the EC argued that a standing roster of panelists would alleviate these challenges and improve the
quality of reports.42
Finally, although, the vast majority of studies provide that standing panels contribute to improving
quality panel decisions, most scholarly literature is silent on how this is achieved in practice. Bourgeois
provides some insights into this issue and argues that experienced panelists lead to standardized panels

38 See generally above n 18 (discussing recent trends in arbitrator challenges).
39 ICSID Convention, above n 1, art 57. Also see Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios
Integrates de Agua S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Suez, Sociedad General de Aguas de Barcelona S.A.
and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 (noting that ‘[t]he challenging party must prove not
only facts indicating the lack of independence, but also that the lack is 'manifest' or 'highly probable,' not just 'possible' or
'quasi-certain’). For an in-depth discussion of the arbitrator challenges in the context of the ICSID rules, see Lars Markert, above
n 18.
40 ICSID Convention, above n 1, art 58.
41 Maida, above n 36, 17-19. Ank Santens and Heather Clark, ‘The Move Away from Closed-List Arbitrator Appointments: Happy
Ending or a Trend to Be Reversed?’ (2011) Kluwer Arbitration Blog <http://kluwerarbitrationblog.com/2011/06/28/the-move-
away-from-closed-list-arbitrator-appointments-happy-ending-or-a-trend-to-be-reversed/>.
42 Above n 8, 2.
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