In a recent ESIL Reflection, Malcolm Langford, Daniel Behn and Runar Hilleren Lie examine “The Ethics and Empirics of Double Hatting” in investor-state arbitration. (For the full article, see the Journal of International Economic Law). They found that a total of 47% of the cases they studied involved at least one arbitrator simultaneously acting as legal counsel. They also showed that the practice of double hatting is dominated by many of the most powerful and influential arbitrators in the system (who are often referred to as forming the system’s “core”). In some cases, double hatting occurs as a younger counsel transitions into being an arbitrator. But, “empirically, double hatting is more a norm than transition,” they conclude.
To me, there is a difference between the argument against double hatting in the core and in the periphery of the system. In the core of the most well established arbitrators, I think that the argument against double hatting in investor-state arbitration is strong. But in the periphery, when dealing with relatively new arbitrators or those with few appointments who are transitioning within the system, I think that a more nuanced approach is required. Why? If we adopt too stringent an approach against double hatting in the periphery, we are going to make it harder to develop the next generation of arbitrators (generational renewal) and increase the diversity of the existing pool (diversity). To the extent that the existing pool is largely ‘pale, male and stale,’ adopting a strict approach against double hatting has the potential to reinforce the pool’s narrowness.
So my question is whether one could craft an effective rule that would prevent double hatting in the core but allow transitional double hatting in the periphery. I am thinking of something along the lines of new arbitrators being permitted to double hat within X years from their first appointment in an investor-state case or Y number of investor-state cases in which they have been appointed as an arbitrator, whichever comes first. At then end of that period, lawyers might need to choose which way they go. Do they switch over into exclusive work as an arbitrator? Or do they continue work as an advocate and turn down future arbitral appointments? I am not sure if this would be a good rule, but I am curious to get reactions from others. I am also interested in people’s views about what the right numbers for X and Y would be. Five cases or five years? More, less?
In the ESIL Reflection, Langford, Behn and Lie accept that “it may be possible to defend double hatting when it truly is a graduated and transparent transition between roles,” but they argue that:
From an economic perspective, it may be fair to permit legal counsel seeking to become full-time arbitrators space to carry on their legal counsel practice until there is some guarantee that arbitral appointments will come in the future. This argument, however, probably only holds for a short period of time: once a counsel obtained their first or even second arbitrator appointment, they could desist from accepting future counsel appointments as they ease into a new role.
My sense is that a 1 year or a 1-2 case rule is too strict and does not reflect the reality of how arbitrators build effective reputations and practices or the basis upon which investors and states select arbitrators. The strictness of this approach could unduly harm generational renewal and diversity. But if one is persuaded that double hatting in the core is a problem, and yet one wants to permit transitions in order to encourage generational renewal and diversity, what should be the parameters of the rule or ethical code of conduct? Langford, Behn and Lie have the statistics to be able to check how this rule would play out based on adopting a years/cases rule, but I invite readers to comment on (1) whether such a rule would be workable and wise and (2) what the relevant numbers for X and Y should be.
Two other asides are worth noting. The first is that one could adopt a graduated approach with respect to investment treaty arbitration while also adopting a stricter, no double hatting rule in the context of the movement toward investment courts, as suggested by CETA and the EU/Canada’s proposals for a multilateral investment court. The stricter rule is easier to justify when one is identifying a smaller pool of permanent or quasi-permanent arbitrators or judges, though states should then be attentive to issues of generational renewal and diversity in the way they select, and construct the selection criteria and voting rules for selecting, those arbitrators/judges.
The second is that we should be grateful to scholars like Langford, Behn and Lie (as well as others like Wolfgang Alschner, Joost Pauwelyn and Sergio Puig) who are pioneering data driven approaches to the investment treaty field. The scholarly field benefits from many different approaches and this is surely one of them. These scholars are allowing those working within the system to get a much better handle on the trends and nuances that make up this disaggregated field. They permit us to test our intuitions and observations against concrete data and to model what impact different rules might have. This is important as we strive to better understand our field and to craft reforms that might help to improve it.