Key Duties of International Investment Arbitrators: A Transnational Study of Legal and Ethical Dilemmas

230 Pages·2019·3.44 MB·English

by  Katia Fach Gómez

Katia Fach Gómez
Key Duties of
International
Investment
Arbitrators
A Transnational Study of Legal and
Ethical Dilemmas
Key Duties of International Investment Arbitrators
Katia Fach Gómez
Key Duties of International
Investment Arbitrators
A Transnational Study of Legal
and Ethical Dilemmas
KatiaFachGómez
TenuredProfessor(ProfesoraTitular)attheLawSchool
UniversityofZaragoza
Zaragoza,Spain
ThisbookispartofaresearchprojectfinancedbytheHumboldtStiftung,andhasalsobeen
published by Springer with a financial subsidy from the former scientific institution. Addi-
tionally,theeditingofthebookhasbeenkindlyfundedbyLegMIBIOS12_17RDGA.
TheauthorisalsomemberoftheInstituteofEuropeanLawandRegionalIntegration(IDEIR)
attheComplutenseUnivesityofMadrid(Spain)aswellasmemberofthefollowingSpanish
ResearchProjects:LegMIBIOS12_17RDGA,DER2016-80568-RandDER2017-85585-P.
ISBN978-3-319-98127-7 ISBN978-3-319-98128-4 (eBook)
https://doi.org/10.1007/978-3-319-98128-4
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Foreword
In the aftermath of World War II, the United States and other Western countries
made considerable intellectual efforts to establish minimum standards for the pro-
tection of private property against expropriation as customary principles under
international law. These efforts were doomed to failure at a time when socialist
ideas and decolonization prevailed in large parts of the world. However, it soon
became clear that the national development in many countries of the Third World
dependsoncapitalinflowsfromabroadandthatforeigninvestorsneedsomekindof
assurance that the terms of the agreements underlying their investment would be
honoured in the future. As a result, more and more bilateral investment treaties
(BITs) were concluded between capital-exporting and capital-importing countries.
Alongside substantive principles on the protection of the foreign investment they
providefordisputesettlementmechanisms,nowadaysmoreandmoreintheformof
investorstatearbitration.
Overmanyyears,theproceedingsbetweenforeigninvestorsandhoststateshave
attractedlittleattentionoutsidethegroupofthoseinvolved.Thecaseshavenotbeen
numerousandfromtheclosedclubofthelawyersandarbitratorsparticipatinginthe
systemlittleinsiderinformationtranspired.Thepublicinterestgrewwhenthecapital
flows changed direction. When the industrialized countries of the Western world
becamedestinationsofforeigninvestment,itturnedoutthatregulatoryinterventions
in the host states could be challenged under the investment protection treaties.
Investor state arbitration now became a tool allowing private business to contest
legislationthathadbeenapprovedindemocraticproceduresofthehoststates.The
number of such cases is still small, but they have aroused the interest of a wider
publicforinvestorstatearbitration,inparticularfortherecruitmentofarbitrators,for
theirpowersandobligationsandforpossibleconflictsofinterest.
This isthepolitical environment ofthis book.It ismeant to shed light onsome
key duties of investment arbitrators and, by their analysis, contribute to a rational-
ization of the debate. Caught between the duty of impartiality, the loyalty to the
appointing party and their own interests, arbitrators will invariably have to take
difficultethicaldecisions,relatingbothtotheprocedureandtothesubstanceofthe
v
vi Foreword
litigation. Various intergovernmental and private bodies have tried to stake out a
clearpathforarbitrators’conduct,butthedilemmaunderlyingthisbookisinherent
and inevitable. In the light of the existing literature, the author does not tackle the
fundamental issues of independence and impartiality but rather focuses on more
specific duties which are of central significance nevertheless: the duties of disclo-
sure,ofconfidentialityandofpersonaldiligenceandintegrity.
Thereaderwhoislessfamiliarwithinvestmentarbitrationwillbesurprisedabout
the multiple sources which give evidence of a broad discussion in arbitral circles
abouttheseissues.Notonlyhastheauthordrawnfromvariousinstrumentsadopted
inrecentyearsandfromabroadliterature;shehasalsoanalysedalargenumberof
arbitrations which give evidence of the frequent occurrence of, and the broad
discussionson,theissuestreatedinthisinvestigation.
Theenquiryleadstotheproposalofacodeofconductforarbitratorsthatwould
establishanumberofrulesanddutiesconcerningtheiractioninparticularphasesof
the proceedings. This code may also help to improve the competitive position of
investment state arbitration as compared with the multilateral investment tribunal
that is currently negotiated. The author’s proposal to require for example truthful
information on the arbitrators’ availability at the appointment stage relates to a
problem that will be common to both investor state arbitration and the multilateral
investment tribunal. Just like an investment arbitration panel, such a tribunal will
have to deal with few cases only. As a consequence, it will likely be composed of
part-timejudgeswhowillfacethesamedifficultyasarbitrators,i.e.toreconciletheir
variousotheractivitieswiththeirjudicialoffice.Theexampleshowsthatthechoice
between investment arbitration and an international arbitration tribunal depends,
beyond the ethical dilemma outlined above, on a number of issues which will be
discussed in the future. The author’s enquiry provides an excellent basis for such
comparison and thereby for the future development of investment dispute settle-
ments,bothinarbitrationandbyafuturemultilateraltribunal.
ProfessorDr.Dr.h.c.mult.JürgenBasedow, 1July2018
LL.M.(HarvardUniv.);Directorem.ofthe
MaxPlanckInstituteforComparative
andInternationalPrivateLaw;
MemberoftheInstitutdedroitinternational
Preface and Acknowledgements
Giventhetitleofthisbook,IfeelIhaveanethicaldutytobeginbyrecountingsome
of the events that have been taking place around me as my work on this book
progressedoverthelast2years.
At the risk of crossing the line of what the academic establishment would
consider appropriate, I feel compelled tounderline thefact that this book has been
developedduringtherecentproblemsthathaveshakentheacademiccommunityin
Spain. The project has unfolded and come to fruition in the midst of a devastating
economic and financial crisis, which has weakened the state university system in
Spaintoashockingextent.
In addition to what has become a classic debate about the lack of funding for
researchinSpainandtheabsenceofanygenuinecommitmenttoeducationandresearch
fromthepoliticalclass,1anewbattlefronthasrecentlybeenopenedregardinghigher
education.Followingaseriesofeventsinnationalpolitics,partofSpanishsocietyhas
accusedstateuniversitiesofturningtheirbackontheprincipleofequality,ofignoring
transparencyandofquashingmeritocracy.Thismaybeanewfrontforpublicopinion,
buttothoseofuswhoformpartoftheuniversitysystem,itcertainlyisnot.
Contrary to the approach taken by some of the media and part of social debate,
thereisnothingneweitheraboutthereasonsthatsparkedanotherrecentevent:the
women’sstrikeonInternationalWomen’sDayin2018,whichwassupportedona
massive scale and with particular intensity in Spain. In spite of the indisputable
progressthathasbeenmadeinrecentyears,wheregenderissuesareconcerned,my
countrystilllagsbehindatbothgeneralandacademiclevel.
Asaresultofthesefactors,thisbookcouldnothavebeenwrittenhadInotbeen
granted a Humboldt Research Fellowship for Experienced Researchers. This has
undoubtedly been one of the most outstanding milestones in my academic career.
BecomingaHumboldtSeniorResearchFellowenabledmetovisitGermanyseveral
1FachGómezK(2014)EuropeandtheLegalLostGeneration:Spain’sDysfunctionalUniversity
SystemisAlsotoBlame.GermanLawJournal15(6):1209–1222.
vii
viii PrefaceandAcknowledgements
timesforresearchpurposesinthebestpossibleconditionsandalsototakeadvantage
of the countless academic resources to which Humboldt Stiftung scholars have
access. I am particularly indebted to the individual mentoring scheme run by two
engagedandgenerousGermanacademicsofworldrenown,Prof.Dr.Dr.h.c.mult.
Jürgen Basedow, LL.M. (Harvard Univ.), at the Max-Planck-Institut für
ausländisches und internationales Privatrecht in Hamburg, and Prof. Dr. Dr.
h.c. Matthias Herdegen attheUniversität Bonn.They haveleft theirtacitfootprint
oneverypageofthebook,andmyenormousdebtofgratitudetothemfarexceeds
thespaceavailableinthisshortpreface.Iamalsogratefultotheacademicauthorities
attheUniversityofZaragoza,theLawFacultyandthePrivateLawDepartment,to
whomit wasnotnecessarytoexplain thataresearchstay abroad, far frombearing
anyresemblancetoaholiday,isinfactaperiodofintenseworkandsacrifice.Such
visitsare,moreover,anabsolutenecessityforthoseofuswhowishtocarryouthigh-
qualityresearchbutunfortunatelylacktheresourcesweneedatouralmamaters.
TheseriesofresearchperiodsinGermanygavemeaccesstobibliographicsources
thatwereessentialforwritingthisbook.Theyalsoenabledmetoenjoythegreatpleasure
ofrigorousacademicconversationwithnumerousuniversitycolleagues.Iamespecially
gratefultoProf.Dr.KarstenNowrotforhisintensepersonalinvolvementinthemany
research-relatedprojects(internationalconferences,specialissuesofjournalsandedited
volumes)thatarosefromtheHumboldtscholarship.Allthisservestohighlightthegreat
honourofbeingafellowofafoundationthatfullyunderstandsthatresearchprojectsthat
aspiretoqualityneedtobeallowedtodevelopslowlyandalsorequiresuitablephysical
andintellectualsurroundingsiftheyaretobecarriedoutproperly.
However,mygratitudetotheHumboldtStiftungincreasesevenmoreifpersonal
and family circumstances are taken into account—circumstances which, nonethe-
less,arenothingoutoftheordinary.Thefamilyandparentalsupportsectioninthe
HumboldtGuidelinesandInformationforResearchFellowswasakeyfactorinthe
successful completion of the research project presented in this book. I wish to
express my most sincere thanks for the Humboldt Stiftung’s unwavering support
inthedifficulttaskofcombiningmyacademicandresearchworkwithbringingup
mybeloveddaughterInés.Thankstothissupport,Inéswasabletocomewithmeon
myresearchvisitstoGermanyandgotoschoolthere.Becauseofthisexperience,the
seedofloveforGermanlanguageandculturethatwasplantedinmemanyyearsago
has now taken root in her, and as it is still alive in me, I am deeply grateful to the
HumboldtStiftungforhelpingmetocultivateitinmydaughter.
Unfortunately, a set of family and parental means such as that provided by the
Humboldt Stiftung is still entirely alien to many national research schemes. I
therefore wish to take advantage of this excellent opportunity to commend all the
research contexts that take the human dimension into account, with all the conse-
quences,andregardlessofgender.2Agreatdealhasbeenwrittenaboutthelife-work
2RegardingtheEUresearchframework,FachGómezK(2014)LanuevapolíticadeInvestigacióne
innovación de la Unión Europea: Horizonte 2020 y el tratamiento de las Ciencias Sociales y
Humanidades.RevistaGeneraldeDerechoEuropeo33:1-36.
PrefaceandAcknowledgements ix
balance from many different angles, but I feel that the reality requires still more
reflectionandespeciallymoreresolutedecision-making.
IwouldalsoliketoexpressmygratitudetoJesús,mypartnerandInés’father,for
hissupportthroughoutthelengthyandintenseprocessofwritingthisbook.Iwould
be lying if I did not say that being the absent mother at many school, social and
familyeventswasafranklypainfulexperience.Iwanttobelievethattheseabsences
havetheirpositivesideandthatthroughthemourbeloveddaughterhasunderstood
the real implications of notions such as responsibility, effort and discipline. I also
wanttobelieve,inmanydifferentways,thatthebestisyettocome.
I could not bring this final section of acknowledgements to a close without
mentioningmydearparents.Allmypreviousacademicworkshavebeendedicated
tothem,anddeservedlyso;however,duringthelongprocessofwritingthisbook,I
haverealizedthatwhatIreallyneedtodedicatetothemfromnowonismoretime.It
issometimesimpossibletoachievetherightbalancebetweenthemanylivesthatwe
areobligedtomanageonaday-to-daybasis.Unfortunately,itisoftenthosewhose
love we know we have won that bear the brunt of this. In spite of everything, my
parentscontinuetoprovetheirgenerosityandunswervingloyaltytome.
Finishingtheresearchcomponentofthisbookinlatespring2018meantthatmy
familyandpersonallifebegantomakemoredemandsonmethanpreviously.This
preventedmefromcontinuingtoprocrastinateoverwritingthispreface,whichisa
veryemotionalactforme.Itrustthatsomeoftheissuesmentionedheremanageto
capture not only my personal circumstances, but also the reality and sentiments of
other academics, whether female or otherwise. We are living in an era in which
publicvisibility seemstobeawakeningsleepingconsciencesandinspiringarange
ofpositiveactionsandIwishthisprefacetobemycontribution.Itisacontribution
from an extremely shy person in this sense, but one who understands that it is her
academic duty to publish her reflections on the professional and human circum-
stancessurroundingherresearchwork.
Hamburg,Germany KatiaFachGómez
25June2018
Contents
1 Introduction.ATransnationalStudyofLegalandEthical
Dilemmas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 TheISDSinFlux. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 InvestmentAdjudicatorsandTheirDuties:PresentandFuture. . . . 6
1.3 KeyDutiesofInternationalInvestmentAdjudicators:Some
TransversalUncertaintiesandChallenges. . . . . . . . . . . . . . . . . . . 11
1.3.1 PluralityofSources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.3.2 SanctionsandEnforcement. . . . . . . . . . . . . . . . . . . . . . . 14
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
LegalandArbitrationReferences. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2 TheDutyofDisclosure:AnOverview. . . . . . . . . . . . . . . . . . . . . . . . 25
2.1 TheDutyofDisclosureinICSID:PreliminaryComments. . . . . . . 27
2.2 FormalAspectsoftheStatementofImpartiality
andIndependence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3 TheContentoftheStatementofImpartiality
andIndependence,andDisclosureStandards. . . . . . . . . . . . . . . . 36
2.4 Timing,Celerity,DurationandAddresseesoftheDuty
ofDisclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.5 TheScopeoftheDutyofDisclosure. . . . . . . . . . . . . . . . . . . . . . 50
2.6 Arbitrators’CurriculaVitae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.7 Arbitrators’DutytoInvestigate. . . . . . . . . . . . . . . . . . . . . . . . . . 60
2.8 TheRoleofArbitralInstitutionsRegardingtheDisclosureDuty. . . . 67
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
LegalandArbitrationReferences. . . . . . . . . . . . . . . . . . . . . . . . . . . 74
xi