UNCITRAL and ISDS Reforms: Concerns about Arbitral Appointments, Incentives and Legitimacy

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As explained in a previous post, we have put together four posts that compile the most relevant quotes from the first two meetings of the UNCITRAL Working Group sessions on states’ concerns about investor-state dispute settlement. To facilitate discussions about the desirability of reforms and their potential nature, we have organized these quotes into key themes that emerged during the meetings. This blog sets out quotes about arbitral appointments, incentives and legitimacy. The other blogs deal with concerns about:

  1. Facts versus Perceptions and Systemic Problems or Solutions
  2. Consistency, Predictability and Correctness
  3. Costs, Transparency, Third Party Funding and Counterclaims

We avoid editorializing because we think that it is important for other stakeholders to hear states’ concerns expressed in their own words. We have grouped states’ concerns under headings but otherwise have kept the interventions on each sub-topic in the order in which they were made. For an analytical framework for understanding these reform dynamics, see Anthea Roberts, Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration, 112 AJIL _ (2018) (forthcoming).

  1. General observations: the lack of independence and impartiality of adjudicators

INDIA – on the problem of pro-investor and pro-state arbitrators for impartiality and independence: “The very fact that there are investors arbitrators and there are states arbitrators is a testimony that impartiality and independence is lacking in the system. The system is lacking in adequate ethical requirements. And there’s a lot of conflict of interest in this system which needs to be corrected. Third party funding is a problem as well. The mix of third party funding, multiple hatting and lack of adequate ethical standards has the potential to derail the system.”

AUSTRALIA – on the relevance of perception regarding the lack of sufficient guarantees of independence and impartiality of individual arbitrators: “does consider that both real and perceived problems with arbitrator independence, neutrality and accountability must be considered particularly as governments are accountable to the public and we do consider the perceptions to be relevant in this regard. And on that it’s true that there does seem to be a perception at least that arbitrators are at least partially motivated by a desire to be appointed or reappointed by the states or the investors and a perception that there are divisions between state-friendly and investor-friendly arbitrators.”

CANADA – on perceptions of bias and the problem of needing balance for permanent tribunals: “We need to look at numbers and facts and we can’t necessarily conclude from those numbers that there is bias. It could be that certain arbitrators have certain views about investment law – that may be a broader interpretation of the FET standard – and this is really not very different from domestic courts. If we look at Supreme Courts in many of our countries, our judges are identified with certain views and we can’t deny that. So what is the difference? The difference really comes back to this idea that arbitrators benefit from the views that they express and they have an interest in being reappointed and that the remuneration in some way influences the procedure, for example that they have no incentive to reject frivolous claims and that it may also influence the outcome. And so we are dealing very much with a perception problem perhaps more so than a true bias. And I say that while being very mindful of the challenges that any alternatives to the current system. The challenges that would be tied to for example developing a permanent tribunal, including difficulties in composition of a balanced tribunal that need representativeness and other criteria. I think Professor Brower, the USCIB, risks of politicization of such a system are real.”

SUDAN – on insufficient standards to guarantee the independence and impartiality of arbitrators: “Despite the efforts being made to update the standards of conduct for arbitrators, there is still a challenge before us. There are not enough guarantees to ensure the independence of arbitrators completely. First of all the arbitrators must preserve their integrity and the fairness of the arbitration tribunals. If there are allegations against the arbitrators’ work or their lack of independence, these doubts must be cleared. Standards of behavior must also be put into place for communication with the parties. The arbitrator must also manage the process in a fair equitable fashion. When decisions are taken the arbitrator must be fair and must ensure that fairness is guaranteed. Arbitrators should also respect the confidentiality rules and standards. The arbitrator must also make sure that the parties recover their costs and that their fees are covered. Regarding judges, magistrates and courts the costs and practices are known to all. Can we have this same kind of standards and agreements with the arbitrators? As for the arbitration centers, either on an institutional or an individual level can the standards be guaranteed? These are the questions that we must seek answers to. Independently of UNCITRAL’s rules, we need an agreement which is part of the convention regulating standards of conduct and the ethics of arbitrators.”

ECUADOR – on the inherent partiality of ad hoc appointments: “If an arbitrator is appointed by a state or if an arbitrator is appointed by an investor when the investor appoints the arbitrator they will look into their background to see that this arbitrator has not already worked or may reach decisions that favor states. The same thing goes for states. So how can we talk about impartiality if the way in which arbitrators are appointed is already based on a search for partiality. This quest for partiality has an impact on arbitrators as well so much so that there are arbitrators catalogued or classified as state friendly and others who are classified as investor friendly.”

ROMANIA – on the importance of perceptions about impartiality and the possible establishment of a court: “In our view the parties’ perception of the system is a key element for well-functioning. The distinguished delegate of the US has noted this morning that perceptions of the parties relating to the impartiality of the arbitrators or rather the lack thereof do not necessarily reflect the reality in each individual case. However in this delegation’s opinion, even the recurrence of instances where there is a mere perception of a lack of impartiality which does not necessarily correspond to reality is sufficient to undermine the legitimacy of the system. As it is generally acknowledged, perceptions of fairness of adjudication systems are capable of promoting better compliance, cooperation and deference even in the face of unfavorable decisions. It is this delegation’s submission that the perception of a lack of impartiality in the system and ultimately of a lack of fairness affects its overall efficiency. Should this working group reach the conclusion under its mandate that reform is indeed needed, and we believe it is, then the reform should address these concerns in order to ensure neutrality and impartiality of adjudicators in ISDS procedures. In this sense, a potential sensible approach would be in our view the creation of a judicial body which would guarantee neutrality similar to other fora dealing with international disputes and whose overall impartiality and independence is generally not questioned.”

  1. Process of selection of adjudicators and lack of diversity

COLOMBIA – on lack of diversity in arbitral appointments: “We would like to report a series of figures, of statistical data that were compiled from different sources. The delegate of Mauritius has already told us that the idea that there were state arbitrators and perhaps pro-party appointed arbitrators existed, and this in itself already is striking. It makes it possible to understand that there’s a deep seated problem that might arise in the characteristics of the adjudicators in these particular cases. However, there is cause for greater concern when we look at the statistics in particular of the 372 individuals appointed to ICSID tribunals since 1972 until 2011. Of these, 37 were appointed to around 50% of the cases. In other words, 10% of these people were appointed in 50% of the cases handled by ICSID over a time period of close to 40 years. Of these ICSID-appointed arbitrators, one third (something like 33 %) are from only five universities: Cambridge, Harvard, Oxford, Stanford and Yale. 47% of the arbitrators are nationals of Western European countries and 22% of them are citizens of North American countries. Almost 100% of the arbitrators come from these two geographical regions. 93% of the arbitrators are men. Only 7% are women. Of these 7%, two thirds are just two people, two women. We were also told at one point that 84% of the arbitrators are party-appointed, to bring to light the fact that the parties are the cause of the situation. And going back to the comment on the delegate of Mauritius regarding the fact that there are arbitrators seen as either state arbitrators or investor arbitrators, we see that in 95% of cases when the decision is made in favor of one of the parties, the arbitrator named by the other gets a vote that breaks the tie. It does not appear to this delegation that the situation we have just described is a normal one. We don’t think that it is an acceptable one either. If we simply look at the immense and wonderful diversity represented here in this conference room, we can see that the universe from which the arbitrators are being selected does not appear to be representative.”

UNITED KINGDOM – on the need to clarify the role of party-appointed arbitrators: “Party appointment is an issue that goes to the very heart of investor-state dispute settlement and there is unsurprisingly a broad range of views as to the benefits and drawbacks of this approach to arbitrator appointments. Our concern is that there is currently no job description for party-appointed arbitrators. The lack of guidance for party appointed arbitrators as to what their role in the tribunal is meant to be has the potential to create an imbalance between parties and inconsistency amongst tribunals. While some arbitrators may see their party of appointment as no different from being appointed chair, in that they must be completely neutral, others may distinguish the special nature of their appointment. They perhaps approach their role in an analogous way to ad hoc judges in the International Court of Justice, seeing themselves as having a duty to ensure that their party’s views are heard and understood by the rest of the tribunal. We think that clarity is therefore needed as to what is expected from a party appointed arbitrator.”

EUROPEAN UNION – on the ability of governments to select neutral adjudicators for international courts: “When governments or international institutions can appoint adjudicators in a more long term perspective, then they will have to appoint those adjudicators that best respect the balance of interest that has been struck during the negotiations of the substantive rules of the underlying treaties, meaning adjudicators that are neutral and respect the treaty as it stands and not be in favor of one or a particular party. We need to overcome the idea that governments would be incapable of selecting neutral and independent adjudicators.”

BAHRAIN – on the problem of repeat appointments, pro-investor and pro-state appointments and the need for arbitral institutions to play a greater role in appointments: “The appointment system of arbitrators no doubt has a number of imperfections. It’s undeniable that some arbitrators are qualified as pro-investors, and some others are pro-state. These classifications are sometimes hasty though. They could be misleading and might not be realistic. I support the proposal to allow arbitral institutions to play a greater role in the selection of arbitrators. In terms of those arbitrators who are repeatedly appointed, I think that the institutions can issue some guidelines, the goal of which would be to prevent the same individuals from being appointed arbitrator beyond a certain number of times for a certain period.”

ARGENTINA – on the need for more transparency in the arbitral appointment process: “We wanted to highlight the lack of transparency in some appointments, and this problem is related to a lack of information about the appointment and selection process, as well as limited accountability at least in the public eye. The process of appointing arbitrators should be conducted in a transparent fashion with more information about potential candidates, with more consultation of the parties, with published selection criteria and with an explanation of the decisions taken. And we believe that this is aggravated when it comes to the discussion of background. There is also an issue of lack of transparency in appointments made through appointing authorities. Among other aspects that are problematic are the costs associated to the appointment of arbitrators. In light of the inconsistent decisions, you need to conduct a background check of each one of them in order to know what their views are and this is a more systemic problem we’re facing. Also the search for people who’ve already participated in the system leads to a recurrent appointment of a limited number of arbitrators, and they are not sufficiently gender or geographically representative although this already has been amply stated by several of the previous speakers. Other problems with the current ad hoc appointment of arbitrators means that the same people act as counsel and as arbitrators in different cases. The wish of arbitrators to be appointed and third party financing also condition the impartiality of arbitrators. These must be complemented with a clear simplified efficient system to recuse arbitrators with a standard of conduct which should be applied if their removal is required. These measures could be complemented with the establishment of a single code of ethics for all arbitrators by establishing a continued duty to report by arbitrators about their positions, their work and other circumstances that either directly or indirectly could impact dispute settlement as well as standards that limit the activities that arbitrators are permitted to conduct. The lack of standards lead to difficulties in the work of arbitrators and it is therefore necessary to harmonize ethical codes, promote a clear code of conduct of the members of an arbitration tribunal in order to check whether their actions have been impartial and independent.”

INDONESIA – on the need for greater representation of developing states in arbitral appointments: “The number of arbitrators appointed from low level of income is still very low. The majority of them are coming from Western Europe and America which is approximately 69% percent of the numbers even though 83 percent of cases are filed against developing countries. My delegation is of the view that our consideration on the issues of arbitrators, in order to make the arbitrators more cognizant of public interest, we may also address the representation of developing countries’ arbitrators as well as the knowledge of arbitrators on host country domestic laws and policy regulation in investment.”

AUSTRALIA – on the importance of gender and regional diversity and the need to balance this against the need for expertise and experience: “We definitely have noted the limited diversity among the frequently appointed arbitrators and we support the goal of seeking more balanced gender and regional representation of arbitrators. And we know that there is some work going on in that regard already amongst some of the institutions. Having said that I do think we do consider that it’s important there be an appropriate balance between encouraging new entrants and ensuring that parties have confidence in the expertise and the experience of the new entrants.”

CHINA – on the fundamental difference between commercial and investment arbitration and its impact on the appointment of arbitrators: “In our view, the fundamental difference between investment and commercial arbitration is not really the facts. The difference really resides in the fact that investment arbitration deals with the government. Commercial arbitration only concerns the protection of private rights. Investment Treaties are different from commercial contracts all of the provisions have different applications, different responsibilities that must be assumed by the governments. In one case, the investors are looking at rights. So in this context, the interests of the host country in the case of litigation must be respected and protected. As a result, our opinion is that investment arbitration is very particular in nature and it requires that arbitrators be appointed who have a background in public international law or legal knowledge regarding investment treaties. We need to appoint arbitrators who have international public law backgrounds or treaty knowledge, investment treaty knowledge. It doesn’t mean that we need pro-government arbitrator because China itself is a large country investing abroad. And so the business investments of China abroad must also be protected. What the arbitration tribunal must do first of all is to ensure independence and impartiality. And secondly, it must protect the legitimate rights and interests of investors in strict compliance with treaties during recent negotiations on investment treaties to resolve this type of problem.”

CANADA – on state appointments contributing to the small number of arbitrators who are deciding disputes: “Perhaps the states who choose these arbitrators and may pick the same arbitrators over and over again have some responsibility in the numbers that we are seeing in the repeat appointments. The arbitral institutions like the PCA and ICSID have over the last few years made an effort in coming up with new names and more diversity when they are making their own appointments.”

USA – on state appointments contributing to the small number of arbitrators who are deciding disputes: “States share some of the responsibility for the limited pool of arbitrators and agree that this is a problem that the states can take the first steps through their own practice.”

POLAND – on lack of diversity in arbitral appointments: “Firstly, the pool of arbitrators is relatively narrow and tends to change slowly. Secondly there is a significant number of arbitrators who are appointed almost exclusively either by investors or by states. This results in the common perception that arbitrators are less impartial than adjudicators in other legal systems. Thirdly, the pool of arbitrators is relatively homogenous when it comes to regions of origin, education, professional experience and gender. There should be no doubt that the lack of diversity affects the legitimacy of the ISDS system. In the opinion of this delegation, the lack of geographical diversity among arbitrators is particularly troubling. Many regions of the world are not represented or are heavily under-represented in arbitrators’ community. This lack of diversity concerns us not only from my perspective over the legitimacy of the system but because it may affect the correctness of the awards. Not only actual bias of Arbitrators but also perceived bias are a serious threat to the legitimacy.”

USA – on transparency in the selection of arbitrators: “With respect to party-appointed arbitrators, there needs to be a balance in the question of transparency in that process and the need to have certain amount of discretion for states and claimants to assess candidates. But even there we also think that at least from the state perspective it may be possible for states to consider making available general criteria that they use to identify candidates. We would also note and want to emphasize that as perceptions of concerns about transparency have arisen, that the arbitral institutions have been moving in a positive and general direction to improve transparency by explaining their processes for selection as well as making available more information about who is sitting as an arbitrator and civil society groups have also contributed to this process by further distributing this information and also making available for appropriate CVs of who the arbitrators are. And as awards become more available we also become more familiar with who is sitting as arbitrators and what their views are. We think that these steps towards transparency more generally will help further transparency in the process of selection of arbitrators as well. We recognize however that some of these issues are still viewed as being somewhat opaque but we welcome the trend towards moving towards greater publication of this information and dissemination of it as well.”

CHINA – on the need to select arbitrators with the appropriate background to interpret international investment treaties: “When we negotiate the letter of the agreements, I will listen to the opinions of the government. I would also listen to the opinions of the private investors. And therefore, I agree with this viewpoint that is every letter of the convention of the law should fully reflect the policies of the government and the consideration of protecting the private investors. And now we go back to how should we select arbitrators. Just now, observer from EFILA mentioned that the government can select people who have background of international law to be arbitrators. However, in practice, investors would often select individuals who are in commercial arbitration to be their arbitrators. Another point: a very important person is the chief arbitrator. We do not have any special arrangements here. Whether this chief arbitrator should have a background of international law, we are not very clear on this. I believe people who are present here who participate in negotiations will agree to this viewpoint that is when we come to arbitrations, they do not want to see the court to make a decision which contravenes the original intent. Yesterday I mentioned if an individual in commercial arbitration, he may not understand the policies of the government and the way the government conducts their business and their public interests. Therefore I believe we do have this kind of risks. It might be that the majority of the arbitrators do not know the considerations of the government and they do not know the policy background behind the letters. Therefore I think the backgrounds of the arbitrators are a very important element to be considered. Through this working group, we need to find a good, appropriate solution.” 

  1. Double hatting and the credibility of the regime

TURKEY – on double hatting affecting the credibility of the system: “The appointment of a very limited number of individuals, the same individuals serving as arbitrators in one case and as a counsel in another case and the emergence of the third party funding because of high fees of arbitrators are the most important ones that damage the credibility of both the arbitrators and the current ISDS system. Independence and impartiality of the arbitrators are very important. . Arbitrators must be impartial and independent and shouldn’t represent any party. it’s evident that we need a new procedure for the selection of the arbitrators and discuss how to adopt some compulsory code of conduct for the arbitrators.”

PHILIPPINES – on double hatting and a code of conduct for arbitrators: “The Philippines does share the concern that systemic issues should be addressed with respect to the lack of a uniform and enforceable code of ethics for arbitrators in investment disputes. And such concern involves instances where the same set of arbitrators act as counsel or experts in different arbitrations, against a fine set of respondent states. The issue of multiple roles of arbitrators should indeed be addressed for the obvious reason that an arbitrator should not only be independent but must also be perceived as independent for his awards to be legitimate and credible before the eyes of the state party and its constituency to whom a state party is accountable. In most domestic jurisdictions, those who sit in judgment would not be allowed to engage in legal practice that could generate situations of conflict of interest or integrity issues. We wish to consider the expectation that this could be demanded of arbitrators who sit in judgment over matters that are vital to the economic and political life of sovereign states. The Philippines therefore looks upon this body to possibly formulate a potential agreed and binding code of conduct for investment arbitrators.”

BELGIUM – on the need to regulate double hatting: “The issue of ethics and independence and impartiality should be remedied within the framework of a broader, more fundamental reform. Regarding the issue of the double hatting, the delegation of Belgium observed that the current framework does not properly address this issue, in the sense of regulating this phenomenon in a clear and transparent way.”

USA – on the need to identify actual concerns about double hatting: “We recognize that the practice of double hatting can raise concerns about the appearance of impropriety in particular situations. We think it’s important for the working group to note however that we need to focus on what the problem actually is. For example we agree that it’s important to avoid instances where an individual is sitting both as an arbitrator in one case and counsel in another, and maybe appearing before that same arbitrator that he’s sitting with or she is sitting with. We do think though that it’s important to have a better understanding of the nature and extent of the double hatting to ensure that as we move forward in this process that we are addressing actual concerns because we are also seeing changes in the practice of practitioners themselves where we’re seeing counsel who want to be arbitrators leave their practices and establish themselves as sole arbitrators.”

EL SALVADOR – on double hatting being a serious issue and not about mere perceptions: “We believe that the fact that a member of one arbitration tribunal also acts as counsel in other cases is one of the major factors that has contributed to the problem of substance here. The underlying issue, that is of incorrect interpretation of the treaty, despite the fact that at this present juncture it is not the purpose of this working group to talk of the substance of arbitration in the international sphere. We do think that double hatting contributes to that problem of substance. So the additional contribution that we’d like to make is to the effect that we would say we don’t believe this to be only a problem of perception but a real and serious problem.”

BAHRAIN – on double hatting not being a sufficient concern to justify abandoning the current system: “The double hatting is raising very serious issues of bias and impropriety in investment arbitration. It is already very problematic in the field of commercial arbitration in some situations. It is even more serious in investment arbitration as the chances of encountering overlapping issues and fact patterns in such a field are even greater. I am not convinced however that the issue justifies abandoning the system of investment arbitration altogether. Solutions can be devised that would not jeopardize the quest for greater diversity in investment arbitration.”

  1. Compensation of arbitrators, ethical rules and the question of a code of conduct

UNITED KINGDOM – on the need for uniform ethical standards: “On the issue of independence and impartiality, the UK delegation considers that ensuring clarity in ethical standards by arbitrators is vital. While arbitrators are often guided by ethical rules in domestic legislation, arbitration rules and voluntary guidelines, our concern is that there are no uniform ethical rules for arbitrations. And a great approach to things like the content and ethical standards disclosure of patients and dealing with conflicts between different ethical rules is especially important in the field of investor state arbitration because of the public nature of disputes, negative perceptions associated with the process and the fact that arbitrators and counsel in investment arbitration come from a vast array of legal traditions.”

UGANDA – on the need for a code of conduct for arbitrators and counsel: “There is a case to be made for the consideration of a code of conduct that applies equally to counsel.”

MOROCCO – on the rules governing the conduct of arbitrators: “Any reform cannot be successful and effective unless there is a reform of the rules relevant to the arbitrators, including their appointment. We believe that the rules for the appointment should not only be conditioned on competence and integrity but they should be fully cognizant of the concerns and trends of states and also should be knowledgeable of the new principles experienced by development on the world, w is which is adopted by states whether in the context of the UN or in the context of UN organizations, such as the principles relative to comprehensive development and sustainable development and protection of the environment and others. The arbitrators should also take into account in their verdicts these principles and these concerns.”

MOROCCO – on the compensation of arbitrators: “As regards the compensation of the arbitrators, we believe that there must be transparent and rational criteria, especially since such compensation burdens state budgets, especially poorer states. Sometimes these compensations provoke major criticism by the public opinion in those states. As regards the time for appointing, it must be reviewed and we believe this period is rather long, and hence must be reduced and the parties must think of finding arbitrators in a preemptive manner in the process of reconciliation. If the two parties are not successful in any reconciliation, they would have a preconceived idea about the arbitrators who would be chosen to make up the tribunals in order to reduce the term for the appointment of arbitration and to use the term of arbitration in general. As concerning the challenge of the arbitrators we believe that the current system is open throughout the period of arbitration which would prolong the term of arbitration. Arbitrators can be challenged at any time and take the arbitration to square one. Therefore we believe the term must be set during which the arbitrators can be challenged so it will not remain open. In any case, the term for challenging the arbitrators should not exceed the beginning of the work of the tribunal. One last point which is the final point in my intervention regarding the nationality of arbitrators. If the current system of international arbitration makes it a condition that the arbitrator or the chairman does not have the nationality of the other party there is ambiguity there vacuum regarding who has this capacity with these states hosting the investment. We believe that this question that is the status of the resident deserves further thinking and discussion because it also affects the integrity and objectivity of the arbitrators.”

  1. A systemic issue

CHINA – on the need for systemic solutions to deal with the independence and impartiality of arbitrators: “We need an approach that is integral, comprehensive in order to systematically deal with the question of independence and impartiality of arbitrators. As a result to ensure the independence and impartiality of arbitrators is a systematic issue one which requires an integral approach in order to resolve the issues.”

CYPRUS – on the need for systemic reform: “Cyprus echoes the concerns expressed by many of the delegates during the proceedings regarding systematic issues with ISDS, including with respect to the arbitrator appointment process. These concerns include the appointment of repeat players, lack of diversity both in terms of region and gender diversity, and lack of transparency in the appointment process. Slight adjustments to the current arbitrator selection process will continue to be insufficient to address these issues fully. Indeed the parties could be at a disadvantage if they don’t appoint these same repeat players. Promoting increased impartiality and independence of arbitrators can be better achieved through systematic reform, while not compromising on the experience and reputation and competence of the adjudicators.”

GERMANY – on systemic reform being needed to increase diversity: “If you want to increase diversity in the judicial system responsible for settling investment disputes and you likewise want to fight the double hatting problem, then the only solution that you quite have is fundamental systematic reform and that is for the following reasons. If you increase the number of arbitrators or if you limit the number of cases an arbitrator can sit on, that means that this arbitrator has to look for different sources of income to pay for his livelihood. And that usually means, because they have to be experts in their fields, that they have to work as counsels or somewhere in the field of investment arbitration. Increasing diversity without reforming the system as such will increase the double hatting necessarily because otherwise you will not find any people that voluntarily would want to sit as arbitrators.”

SPAIN – on the inherent characteristics of the current system creating nefarious incentives and the need for a systemic response: “What is key here and this is evident from an economic point of view is a matter of incentives. The same person, if you give him incentives of one sort will function in one way and if he has incentives of another sort he’ll function in a different way. The problem facing us is that the existing mechanism, the existing incentives, inter alia compensation and fees. But that’s not the only incentive. I would like to emphasize the fact that the mechanism determining the conduct of those who have to take decisions is of vital importance and here it must be stated clearly that the current incentives current fees foster dependency and bias. It’s a matter of the remuneration. So I think here we are up against a systemic problem, a structural one. As clearly emerges from the documents submitted by the EU and as this is a systemic issue, we can’t improve it to just incrementally. For us, the matter of codes of conduct is identical to an incremental improvement. It’s necessary it’s there but it’s manifestly inadequate.”

SPAIN – on the inadequacy of establishing an appellate mechanism alone: “We do think it’s very important to underscore the economic factors analyzed in establishing any appellate mechanism. Establishing an appellate mechanism which would be juxtaposed on what we already have would be like having an elephant and an ant together. In economic terms, the transaction costs, the operating costs of the system would be vast and the system would fail to be efficient.”

CHILE – on the dangers of appointments being made by states only: “If you wish to completely change the system and allow states to have more power over the appointment such as through the establishment of roasters, we have to be mindful that one of the important features of biases today is the political neutrality of arbitral tribunals. Some of the views expressed in this room are dangerously approaching a preference for states to have more powers on the appointment of arbitrators. Of course the system that provides more attributions for the states in appointment will lead to less criticisms of certain stakeholders. But it is safe to say that it would just create new criticisms of other stakeholders such as investors who we should also take into account in considering several possible reforms to the system. We have to be extremely cautious of avoiding any risk of creating a negative impressions on the States as having exclusive prerogatives over the appointment system.”

PAKISTAN – on the need for systemic reform, not just increasing the pool of potential arbitrators: “Is it the smallness of number that is the cause of problem? I dare say not. It is the design of the system, the way the system is designed, the way arbitrators work, the culture that that design breeds that affects the ultimate outcome of proceedings. So yes by all means, smallness of pool and diversity is a desirable ambition that we should pursue with all the rigor we could muster. But at the same time, without addressing the key fundamental systemic concerns, without addressing the culture of the way the system works it would not affect the ultimate outcome by merely increasing the pool of arbitrators, by merely raising the number of arbitrators. And so I urge this House to consider the deeper systemic questions as we are then merely the cosmetic effect of increasing numbers.”

ECUADOR – on arbitration not producing depoliticization of disputes: “The dispute settlement system or investor state apparently, and I do say apparently because I don’t actually believe that this was the case, was created to depoliticize conflicts. But in reality, our experience forces us to draw the conclusion that there has been absolutely no depoliticization of anything or rather an additional problem has become attached to state-state relations.”

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