Investment Arbitration Reporter

By Luke Eric Peterson

A well-known London-based barrister and professor has renewed his call for lawyers involved in investment treaty disputes to choose between serving as counsel or arbitrator.

Philippe Sands QC, used a keynote lecture at a recent University of Sydney conference to argue that lawyers should reflect upon the “propriety” of a system of “revolving doors”, whereby they serve in one or more case as advocates, whilst serving in parallel matters in the quasi-judicial capacity of arbitrators.

According to Sands, he ceased taking on new investment treaty cases as counsel in mid-2007 so that he could begin to accept arbitrator appointments. Although he resolved to see out a small number of ongoing cases, he says that these arguments would be “in the hands of the arbitrators” before he would have to make any significant rulings in the cases where he had accepted to sit as arbitrator.*

The London-based arbitrator says that his decision to serve only as arbitrator owes to the special nature of investment treaty-based arbitrations, which raise repeatedly a core set of essentially “public law” questions, such as the definition of “fair and equitable treatment” or the proper construction of a so-called “umbrella clause”.

In addition, Sands says that he has been influenced by the sensitive political and economic nature of many investment treaty disputes, and the consequent need for the system to appear legitimate in the eyes of the wider community – not just the narrow community of lawyers who practice regularly in international dispute resolution.

Alluding to the decision of several governments to withdraw from the International Centre for Settlement of Investment Disputes (ICSID), Sands noted that some governments, from a broad range of perspectives, have expressed growing disquiet with certain aspects of the arbitral system. While declining to comment on the full range of these concerns, Sands reiterated his view that it appears inappropriate for individuals to keep one foot in the advocacy camp and another in the adjudicative camp.

In this regard, he cited the particular concern that individuals serving as arbitrators run the risk of being influenced, consciously or unconsciously, by their other duties such as advocacy on particular legal points for other clients.

He welcomed the recent decision of the Lausanne based Court of Arbitration for Sport to adopt a formal rule preventing the same person from acting as counsel and arbitrator in CAS proceedings, as well as similar reforms at the International Court of Justice (ICJ) which limit the ability of persons serving as so-called Ad hoc Judges to also argue cases before the Court at the same time.

In his lecture, Sands also pointed to a recent law review article** by another lawyer and professor who sits as arbitrator in a number of investment treaty disputes. In the piece Prof. William W. Park of Boston University, writes:

“On occasion, an arbitrator must address, in the context of an arbitration, the very same issue presented to him or his law firm as advocate in another case, or to himself as scholar in academic writings. It is not difficult to see why such situations might compromise the integrity of the arbitral process.”

“The arbitrator might be tempted, even subconsciously, to add a sentence to an award that could later be cited in another case. Such an arrière pensée might lead to disparaging or approving some legal authority or argument regularly presented in similar disputes, and thus intended to persuade in a different matter where the arbitrator‘s firm acts as counsel. The flip side of the coin might also present itself, with an arbitrator influenced by his or her position while acting as counsel in another case.”

In a subsequent series of email exchanges, Prof. Park indicated that he has decided to focus on serving as arbitrator in investor-state cases – although he did perform a small amount of unpaid advisory work on one long-running ICSID case, Pey Casado v. Chile.

At the same time, Prof. Park stressed that his writings, while raising certain concerns, should not be construed as calling for an across-the-board prohibition of individuals serving contemporaneously as arbitrator and counsel in BIT matters.

More generally, while some arbitrators of BIT disputes are known to eschew work as counsel in BIT cases, the reasons vary (see this separate sidebar article).

Views differ sharply as to need for lawyers to choose one path

The call by Philippe Sands for lawyers to choose one type of practice over the other comes several months after he raised the same arguments during a conference of the International Bar Association (IBA) in Madrid. Sands noted in his more recent Sydney remarks that the debate at that earlier IBA session was “heated”, and that many lawyers took exception to his views.

Indeed, it remains commonplace for lawyers to take on both types of work contemporaneously and the ICSID docket is replete with arbitrators who also represent clients in other BIT cases.

In a series of interviews, lawyers who disagree with the need to choose one role over the other tend to cite several basic arguments.

First, it is stressed that effective arbitrators require some sort of prior training either as counsel in BIT cases or as an assistant to a prominent arbitrator. (However, this argument is not, in and of itself, an argument for individuals needing to serve contemporaneously as counsel and arbitrator; rather, it appears to be an argument that individuals should come to the role of arbitrator with significant arbitration experience on their c.v.)

Second, supporters of the current system cite the impracticality of individuals transitioning in one fell swoop from counsel to arbitrator. Because lawyers may not see a second appointment as arbitrator in a BIT case for several years (if ever), many deem it economically unviable to expect practicing lawyers to give up their parallel work as counsel in BIT cases.

Barton Legum, a Paris-based Partner with the law firm Salans, and himself involved as counsel and arbitrator in BIT cases, says that he is sympathetic to some of the concerns raised by Prof. Sands, however he thinks that stricter ethical standards and disclosure rules should be sufficient to deal with any problems that arise from time to time.

Legum echoes the oft-heard concern that many BIT law practitioners would have difficulty abandoning their practice as counsel upon receipt of their first (and perhaps only) appointment as arbitrator in a BIT matter. Moreover, he notes that the pool of qualified arbitrators is already “vanishingly small” and that it would be problematic for the users of the arbitration system if efforts were made to exclude all practicing BIT counsel from this pool.

While many practitioners appear sympathetic to Legum’s views, Prof. Sands argues that the economic impact upon lawyers or law firms of his proposed performs should be irrelevant to the discussion. He adds that there no evidence has been tendered as support the view that the size of the pool of lawyers experienced in investment treaty law was too small to prohibit a dual role.

“If the sports lawyers can do it, and if the ICJ lawyers can do it, there is no reason the investment treaty lawyers can’t do it”, he says.

By contrast, Noah Rubins, a Paris-based Counsel with the law firm Freshfields, contends that any conflicts that may arise in BIT arbitration can be managed without needing to bar lawyers from working as counsel and arbitrators contemporaneously.

Moreover, he points to the fundamental importance of parties to an arbitration being able to select whom they wish to sit in the matter:

“Arbitral autonomy and party choice is an overriding value of the arbitration process.”

Indeed, the sharp disagreement seen within the field reflects a broader debate as to the extent to which BIT disputes are a qualitatively different type of dispute, which require that additional steps and safeguards be introduced in deference to the sensitive public policy questions that arise in such cases.

In his recent written overview of emerging arbitrator ethics issues, Prof. Park offers the following measured observation:

“(a)rbitration‘s broader impact raises propositions of whether an arbitrator‘s ethical obligations flow to society at large rather than simply to the litigants. The answer, perhaps unsatisfying to ideologues, remains ―sometimes.”


* Not all of Philippe Sands’ arbitral appointments are known, however IAReporter is aware of his sitting in the following cases as an appointee of a state: Nova Scotia Power v. Venezuela (UNCITRAL); EuroTelecom International v. Bolivia (ICSID); Mobil and Murphy v. Canada (ICSID); Adem Dogen v. Turkmenistan (ICSID); Bureau Veritas v. Paraguay (ICSID). He has also been appointed by an investor in the Bosh International v. Ukraine case at ICSID.

** William W. Park, “Arbitrator Integrity: The Transient and the Permanent”, 46 San Diego Law Review 2009

Investment Arbitration Reporter is a specialized news publication tracking developments in the area of international investment law and policy.

The publication does not offer legal or financial advice or recommendations of any kind.
 
To offer news-tips or comments, email the Editor, Luke Eric Peterson, at: editor@iareporter.com