This page provides an outline of the role and powers of international investment arbitrators. It also offers comments on the stark lack of independence, fairness, openness, and public accountability in the system.
Investment arbitration tribunals are unique in international adjudication. For example, they typically decide cases without prior involvement by domestic courts and their decisions are insulated from judicial review at the domestic and international level. Also, investment treaties allow investors to bring claims against states but do not allow states to sue investors for an alleged breach of an international obligation.
[IIAPP comment: The system provides a very high level of protection to those foreign investors who can bring claims or make a credible threat to do so. It is probably the closest that states have come to establishing an international constitutional or administrative court to protect property rights and other economic interests. However, the adjudicative model is based on commercial arbitration rather than a court and does not incorporate safeguards of independence and openness that are conventionally present in judicial decision-making. This has prompted concerns about:
- the high level of confidentiality in many investment arbitrations, such as in arbitrations under the rules of the International Chamber of Commerce, the UN Commission on International Trade Law (UNCITRAL), the Stockholm Chamber of Commerce, and the London Court of International Arbitration;
- the multiple roles played by individuals who earn income as arbitrators, lawyers, and experts in the system;
- the lack of an overarching judicial mechanism to resolve conflict of interest claims against arbitrators;
- the potential role of the commercialized arbitration industry in influencing arbitrator appointments;
- the potential role of arbitrators in influencing policy decisions about investment treaties and investment arbitration;
- the lucrative remuneration of arbitrators and lawyers and the high cost of some arbitrations to investors and states; and
- the control exercised over arbitrator appointments, on a case-by-case basis, by executive officials at the World Bank, the International Chamber of Commerce, the Permanent Court of Arbitration, and other appointing bodies.]
What are the powers and functions of investment arbitrators?
In their role to protect investors, investment arbitrators have been been granted a unique combination of powers, relative to other international courts and tribunals. These include the powers to determine the legality of sovereign conduct, order states to carry out or refrain from regulatory activity, order states to pay substantial compensation to investors, and issue binding and widely-enforceable awards.
These distinctive powers and functions are discussed here.
[IIAPP comment: From a domestic perspective, investment arbitration is more akin to proceedings brought against governments in public law than to classical commercial arbitration. As a result, the decisions of investment arbitrators often involve broad questions of public policy.]
How are the arbitrators appointed?
Most investment arbitration tribunals have three members. Typically, the claimant (investor) appoints one member, the respondent (state) appoints another, and both parties then negotiate on who to appoint as the presiding arbitrator. If they do not agree, an external appointing body, usually designated in the arbitration rules, will choose the presiding arbitrator. The appointing bodies also usually have the power to appoint an arbitrator on behalf of a disputing party where the party has not done so, to decide conflict of interest claims against arbitrators, and to conduct reviews of the arbitration rules.
The most important appointing bodies are the World Bank, the International Centre for Settlement of Investment Disputes (a division of the World Bank), the International Chamber of Commerce, the Permanent Court of Arbitration, and the Stockholm Chamber of Commerce. In specific cases, ultimate appointing authority is exercisable by a designated official (such as the World Bank President) or group of officials in the appointing body, although lawyers and other staff at the organization may play an important role by supporting the decision-making and recommending candidates for appointment.
The role of various appointing bodies is discussed here.
Who should be appointed as an arbitrator?
While the purpose of this website is not to recommend or advise on the appointment of any individual as an arbitrator, some general principles are suggested below:
- an arbitrator should ideally be an eminent jurist who is not career-dependent on investment arbitration;
- an arbitrator should have expertise both in the area(s) of policy-making in which a challenged government measure was initiated and in international law;
- an arbitrator who acts regularly as a lawyer or expert in other investment arbitrations may be perceived to have a conflict of interest, such as with respect to general legal issues that he or she resolves as an arbitrator;
- a state should review the decision-making record of an individual, and any policy commentary by the individual, before appointing him or her as an arbitrator;
- appointment recommendations by outside legal counsel, especially from firms that act regularly in investment arbitration, should be scrutinized by independent advisors;
- those appointed as investment arbitrators should reflect the wider population that is affected by decisions of investment tribunals, including by the appointment of women, persons of colour, and persons with developing country backgrounds. To date, these groups are often not well-represented among arbitrators in known cases. For example, of the 247 individuals appointed as arbitrators in cases tracked in the IIAPP data, only ten (4%) were women.]
For more information on procedural and institutional aspeccts of the system, please see the Responses & Alternatives page of this website.
Who has been appointed as an arbitrator?
Several hundred persons have served as arbitrators in known investment treaty cases. Some have been appointed more often than others. See below for information on the appointment records of the ten most frequently-appointed arbitrators in the IIAPP data. (Note that the data may not capture all appointments of an individual arbitrator.)
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Access the texts of awards in specific cases here.