Party autonomy is a cherished feature of international arbitration, particularly in the selection of arbitrators. Parties in international arbitration value the ability to select arbitrators with the requisite experience and subject-matter expertise, especially in complex and sensitive cases. This applies both in commercial and investment arbitration.
The conduct of investment arbitrators is generally regulated by the institutional rules and national laws applicable in the relevant dispute, but there is no oversight body or sanctions for possible ethical breaches. Arbitrators are subject to the obligation of independence and impartiality, and an ongoing duty to disclose possible conflicts of interest. If there are justifiable doubts of an arbitrator's independence and impartiality, they can be challenged and removed in accordance with the applicable rules.
In the broader context of the reform of investor-State dispute settlement (“ISDS”), States have expressed significant concerns with some practices that are characteristic for investment arbitration, such as double-hatting (arbitrators appearing simultaneously as arbitrators and counsel in different cases) and repeat appointments of arbitrators by the same parties or counsel. To address these issues, the Secretariats of UNCITRAL and the International Centre for Settlement of Investment Disputes (“ICSID”) developed the first draft Code of Conduct for Adjudicators in International Investment Disputes, that would apply to arbitrators and judges in a possible standing investment court.
The draft Code addresses the well-established duties of independence, impartiality, and proactive disclosures for adjudicators, limits double-hatting and provides a broad disclosure obligation to help identify possible personal and professional conflicts of interest. The draft Code does not provide a specific enforcement mechanism, referring to the existing rules for arbitrator challenges. After several revisions, the draft Code was separated into two instruments, distinguishing the rules for arbitrators and judges of a standing mechanism.
The development of the draft Code is an important step in the reform of ISDS. The multilateral, transparent and iterative process highlighted the importance of this topic for public and private stakeholders alike. It also revealed the complexity of defining ethical rules for decision-makers in investment disputes, although the task was initially viewed as „low-hanging fruit.“ The draft Code will be submitted for adoption by the UN Commission in July 2023, and it remains to be seen how it will fit into the existing treaty-based system of ISDS. In any case, it can only be tested in practice, and its effective application will require a suitable enforcement mechanism which will hopefully be added to the reform agenda.
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