This Code is an important step towards uniformity as arbitral tribunals and each of their members could generally be bound by diverse ethical standards depending on the nationality of the arbitrators, affiliation with bar associations, as well as the place of arbitration. Therefore, multiple, and possibly contradictory, norms may apply at the same time, without any clear indication on which shall prevail in case of conflict. In addition, increased regulation of the arbitral procedure and increased transparency of the process also have an impact on parties’ expectations in relation to the conduct of arbitrators. This is notwithstanding the fact that while there is a general agreement about the fundamental standards on the conduct of arbitrators, in practice, the assessment of compliance with such standards may be carried out quite differently depending on the prescripts deemed applicable and depending on whether assessment is made by the arbitrators themselves, the parties, the arbitral institutions or national courts.
It is therefore unsurprising that arguably two of the most influential arbitration institutions, ICSID and UNCITRAL are collaborating on the Code. The Code is intended to provide applicable principles and provisions addressing matters such as independence and impartiality, and the duty to conduct proceedings with integrity, fairness, efficiency and civility. It is based on a comparative review of standards found in codes of conduct in investment treaties, arbitration rules applicable to investor-state dispute settlement, and international courts. Such a uniform code of conduct is especially essential in investor-state dispute settlement, being a hybrid legal construct uniquely placed at the crossroads of domestic and international law and of private and public law. It has, over the years, become a reliable avenue to which aggrieved investors turn when host states fail to honour obligations owed to them.
The first version of the Code was published on 1 May 2020. ICSID and UNCITRAL received extensive input on the draft through consultation with state delegates and other interested stakeholders. Based on the feedback received, a second version of the Code was published on 19 April 2021, a third version was published on 22 September 2021, and a fourth version was published on 25 July 2022. A draft commentary to the Code was published on 25 August 2022.
The Code in particular seeks to clarify the content of the standards for Adjudicators in International Investment Disputes, thereby furthering harmonization and clarification of the different existing requirements. It aims to ensure that all stakeholders understand the thresholds for when independence, impartiality and integrity would be impaired; develop requirements for qualification; and determine the mechanisms for disclosure, and the sanctions in case of non-compliance. As far as arbitrators are concerned, the Code provides clarity on their roles, in particular regarding the question of double-hatting and repeat appointments, and as far as adjudicators (i.e. full-time adjudicators in a standing mechanism) are concerned, establishes requirements in a fashion that would be consistent with those of international courts, taking into account requirements found in the existing investor-state dispute settlement regime. Notable features of the fourth version are outlined below.
Definition of international investment dispute
An international Investment Dispute is defined as any dispute between an investor and a state, a regional economic integration organisation (REIO) or any constituent subdivision or agency of a state or a REIO submitted for resolution pursuant to a treaty providing for the protection of investments or investors; legislation governing foreign investments; or an investment contract.
This covers all types of international investment disputes regardless of the legal basis of consent to adjudicate the dispute and whether the proceedings are conducted under the auspices of a standing mechanism, administered by an arbitral institution, or ad hoc. By contrast, it does not cover disputes between states or disputes arising out of commercial contracts that do not arise out of an investment.
Definition of an adjudicator
An adjudicator is defined to mean a judge, being a person who is a member of a standing mechanism for the resolution of an international investment dispute or an arbitrator, being a person who is a member of an arbitral tribunal or an ICSID ad hoc committee who is appointed to resolve an international investment dispute.
A candidate, is any person being considered for appointment as an arbitrator or a judge. With respect to an arbitrator, an individual effectively becomes a candidate immediately upon being contacted by a disputing party or an arbitral institution about the possibility of an appointment to a specific case.
A person ceases to be a candidate and becomes an arbitrator upon appointment as an arbitrator and upon accepting the appointment as an arbitrator. A person who has been appointed but has not yet accepted the appointment will be a candidate. This is to reflect the practice of certain arbitral institutions. Under the ICSID framework, for instance, such person would have 20 days to accept the appointment, at which time he or she becomes an arbitrator. A person who declines an appointment or is eventually not appointed by a party or institution, ceases to be a candidate.
Scope of the Code
The Code applies to individuals in an international investment dispute, namely an adjudicator or a candidate.
Disputing parties may also agree to apply the Code to individuals involved in other types of disputes or other means of dispute resolution. Examples could include an adjudicator appointed to resolve a state-to-state dispute, or an arbitrator appointed to resolve a commercial arbitration dispute. Such agreement between the disputing parties should be express and in writing, as there is no presumption that the Code applies in any dispute other than an international investment dispute.
If the investment treaty or legislation governing foreign investments or an investment contract upon which consent to adjudicate is based contains provisions regulating the conduct of an adjudicator or a candidate in an international investment dispute proceeding, such provisions would continue to apply and the Code would complement such provisions. This means that those provisions as well as the Code apply concurrently and hence an adjudicator must comply with all such obligations at once. In the event of any inconsistency between the Code and such provisions, the latter shall prevail to the extent of the inconsistency.
Independence and impartiality
An adjudicator shall be independent and impartial. This obligation to be independent and impartial is a continuous one. Independence refers to the absence of any external control, in particular the absence of relations with a party that might influence an adjudicator’s decision. Impartiality means the absence of bias or predisposition of an adjudicator towards a disputing party or issues raised in the proceedings.
The Code stresses the fact that an adjudicator must remain vigilant and be proactive in ensuring that he or she does not create any impression of bias. The standard of appearance of a lack of independence or impartiality is an objective one, based on a reasonable evaluation of the evidence by a third party. It is akin to the notion of justifiable doubts. A non-exhaustive list of examples of independence and impartiality listed are, the adjudicator’s obligation not to:
- be influenced by loyalty to a disputing party, a non-disputing party, a non-disputing treaty party, or any of their legal representatives;
- take instruction from any organisation, government, or individual regarding any matter addressed in the international investment dispute proceeding;
- allow any past or present financial, business, professional or personal relationship to influence their conduct or judgment;
- use their position to advance any significant financial or personal interest they might have in one of the disputing parties or in the outcome of the international investment dispute proceeding;
- assume a function or accept a benefit that would interfere with the performance of their duties; or
- take any action that creates the appearance of a lack of independence or impartiality.
Duty of diligence
Adjudicators have a duty of diligence. This means that an arbitrator shall perform their duties diligently throughout the international investment dispute proceeding; devote sufficient time to the international investment dispute proceeding; render all decisions in a timely manner; refuse concurrent obligations that may impede their ability to perform the duties under the international investment dispute proceeding in a diligent manner; and not delegate their decision-making function.
Decision-making is the core function of an arbitrator in an international investment dispute proceeding. However, an arbitrator is not precluded from having their assistant prepare a preliminary draft of a decision, provided that all relevant elements pertaining to that decision have been effectively reviewed and determined by the arbitrator. It is also without prejudice to applicable arbitral rules or procedural orders issued in the course of an international investment dispute proceeding which may stipulate that those certain decision-making functions can be delegated, for example, to the presiding arbitrator.
Integrity and competence
Adjudicators are required to act with integrity, fairness, civility, competence and make best efforts to maintain and enhance the knowledge, skills and qualities necessary to perform their duties.
An adjudicator must treat all participants in the proceeding with civility. All participants include not only the disputing parties and their legal representatives but also other adjudicators, witnesses, experts, non-disputing parties, clerks and interpreters. Civility means being polite and respectful when interacting with those participants and is associated with the adjudicator’s demonstration of professionalism.
A candidate shall accept an appointment only if they have the necessary competence and skills and are available to perform the duties of an adjudicator. This is a self-assessment to be conducted by the candidate. As a judge is not appointed by the disputing parties, it is usually the appointing authority within the standing mechanism that would assess such skills and competence. In the selection process, particular consideration should usually be given to a candidate’s previous experience in handling international investment disputes, as well as their knowledge of public international law or international investment law.
Ex parte communication
The Code proposes a general prohibition on ex parte communication, being communication by a candidate or an adjudicator with a disputing party, its legal representative, affiliate, subsidiary or other related person; concerning the international investment dispute; and without the presence or knowledge of the other disputing party or parties.
Adjudicators have a general prohibition not to disclose or use any information relating to the international investment dispute proceeding. The Code does not regulate the disclosure or use of such information for the purposes of the international investment dispute proceeding. For example, adjudicators would be able to freely discuss among themselves information provided by the disputing parties. The confidentiality obligation does not apply if the information is already publicly available but only in accordance with the applicable rules or treaty. For example, if the information was made public in violation of the applicable rules or somehow “leaked”, the candidate or the adjudicator would be bound by the confidentiality obligation. Another exception to the confidentiality obligation would be if the disclosure is expressly allowed for in the applicable rules or treaty or by the agreement of all the disputing parties. An adjudicator cannot disclose the contents of the deliberations in the international investment dispute proceeding including views expressed by other adjudicators. Adjudicators are prohibited from disclosing earlier drafts of decisions and commenting on a decision which is not publicly available. The confidentiality obligation is a continuing one and an adjudicator must abide by the obligation even after the proceedings. The same would apply to former judges after their term of office. The obligation does not apply where the adjudicator is legally required to disclose the information in domestic courts or requested to do so (for example, in a set aside or an enforcement proceeding) or any other competent body, and where the adjudicator must disclose the information in a court or other competent body to protect their rights.
A candidate and an arbitrator are required to disclose any circumstances likely to give rise to justifiable doubts including in the eyes of the disputing parties, as to their independence or impartiality including:
- any financial, business, professional, or personal relationship in the past five years with any disputing party or an entity identified by a disputing party; the legal representative(s) of a disputing party in the international investment dispute proceeding; other arbitrators and expert witnesses in the international investment dispute proceeding; and any entity identified by a disputing party as having a direct or indirect interest in the outcome of the international investment dispute proceeding, including a third-party funder;
- any financial or personal interest in the outcome of the international investment dispute proceeding; any other international investment dispute proceeding involving the same measure(s); and any other proceeding involving a disputing party or an entity identified by a disputing party;
- all international investment dispute and related proceedings in which the candidate or the arbitrator is currently or has been involved in the past five years as an arbitrator, a legal representative or an expert witness; and
- any appointment as an arbitrator, a legal representative, or an expert witness by a disputing party or its legal representative(s) in an international investment dispute or any other proceeding in the past five years.
The above disclosure obligations are central to the Code as they assist in identifying conflicts of interest and compliance with other obligations in the Code, mainly, the possible lack of independence and impartiality. The standard of disclosure is a broad one that covers any circumstances, including any past or present interest, relationship or other relevant matter, likely to give rise to justifiable doubts regarding the independence or impartiality of the arbitrator or arbitrator candidate. The circumstances to be disclosed are not limited in time, meaning that a circumstance which arose more than five years before the candidate was contacted about the appointment would need to be disclosed if it is likely to give rise to justifiable doubts. A candidate or arbitrator must be proactive, to the best of their ability, in identifying the existence of circumstances, interests and relationships. The disclosure obligation is a continuing duty. If new relevant information falling within the ambit of this provision emerges or is brought to the knowledge of an arbitrator during the course of the international investment dispute proceeding, they must disclose such information promptly and without delay. Arbitrators should therefore remain proactive and vigilant with regard to their disclosure obligations during the entire course of the international investment dispute proceeding.
A failure to disclose does not in itself establish a lack of impartiality or independence. It is rather the content of the undisclosed or omitted information that determines whether there is a breach of impartiality or independence. Even though it is not in and of itself a ground for disqualification, it could nonetheless be factually relevant to establishing a breach of a candidate or adjudicator’s duty of independence and impartiality.
Disputing parties may waive their respective rights to raise an objection with respect to circumstances that were disclosed.
A waiver would preclude that disputing party from raising the objection at a later stage. Each disputing party can waive their respective rights and it need not be done jointly.
It should be understood that the waiver would only relate to the circumstances that were disclosed. In practice, this would mean that the disputing party would not challenge an arbitrator based on the disclosed circumstances at a later stage.
For instance, if a candidate informs the disputing parties that they have, within the past five years, worked as a counsel in the same law firm as the current legal representative of a disputing party, and both disputing parties agree nonetheless to the appointment of that candidate, it would not be possible for any of the disputing parties to challenge that arbitrator on the basis of the disclosed circumstance. However, as to circumstances that were not disclosed, for example, that they have maintained a close professional relationship with the law firm or the current legal representative, the waiver would not prevent a disputing party from raising a challenge.
Over the last few years, growing criticism over investor-state dispute settlement has triggered demands for reform of the existing framework from states, international organisations, and civil society groups. One of the main concerns identified has been the supposed lack of independence, impartiality, and neutrality of adjudicators. The Code should hopefully in some fashion allay the perceived lack of independence, impartiality, and neutrality of adjudicators. The efforts to create a unform code of conduct for Code of Conduct for Adjudicators in international investment disputes should therefore be commended and supported as part of an ongoing effort to reform the framework for investor-state dispute settlement.
The fourth version draft Code was considered at the 43rd session of Working Group III held in Vienna from 5 to 16 September 2022. States and stakeholders have until 14 October 2022 to provide comments on the draft Code. Based on the deliberations at the 43rd session and reflecting decisions taken by the Working Group, the Commentary will be updated and presented to the 44th session of the Working Group scheduled for January 2023.