The ideal judge is a ‘combination of

Justinian, Jesus Christ, and John Marshall’.

Oliver Wendell Holmes

History is a myth that men agree to believe.

Napoleon Bonaparte

8.01  Most accounts of judicial and arbitrator impartiality read like Herodotian histories. Herodotus famously wove mythological accounts of iconic heroes into his depictions of historical events.¹ These mythological heroes elevated relatively mundane happenings into epic stories. They also, however, raised questions about the reliability of Herodotus’ factual assertions.

8.02  In a similar vein, modern accounts of the impartiality of judges and arbitrators are often framed in terms that are absolute, transcendent, superhuman, and even mythological. For example, Ronald Dworkin expressly embraces a heroic myth by naming his ideal judge ‘Hercules’² and imbuing him with superhuman skill, learning, patience, and acumen. The famous US Justice Oliver Wendell Holmes, meanwhile, described the ideal judge as a ‘combination of Justinian, Jesus Christ, and John Marshall’.³

8.03  Like Herodotian myths, these legends of superhuman judges have obscured a clearer understanding of what judges actually do and what can reasonably be expected of them in terms of impartiality. They have also obscured a clear understanding of the impartiality obligations of arbitrators. In the absence of a clear, independent conceptualization, arbitrator impartiality obligations are simply borrowed from, or compared and contrasted with, the idealized non-human judge.⁴ Even with the development of more precise regulation, the empty rhetoric of ‘impartiality’ continues to confuse the debate.(p. 312)

8.04  This chapter seeks to develop a more meaningful and robust concept of impartiality as applied to international arbitrators. Section A begins by debunking the myth of absolute judicial impartiality and the related platitudes that are often used to describe arbitrators’ obligations. The larger project of the chapter is to sort through, using the Functional Thesis from Chapter 7, the pressing open issues relating to international arbitrator impartiality obligations. As will be shown, these ethical issues have arisen because of changes in arbitrators’ role in certain contexts or a more general failure to define their role more precisely. Section B takes up issue conflicts that are currently at the fore with investment arbitrators, while Section C addresses the impartiality obligations of party-appointed arbitrators and makes an affirmative case for assigning them a specialized role distinct from arbitral chairpersons. Section D prescribes market-based reforms to increase transparency and level the playing field among parties through, among other things, the creation of a new Arbitrator Intelligence project.

8.05  Long ago US law professor Jerome Frank sought to debunk ‘the myth of the non-humanness of judges’.⁵ Today scholars still routinely announce that judges are human, as if it were a recent genetic discovery.⁶ Some formalistic accounts of adjudication treat law as a ‘science’ and presume that the ‘right’ outcome in any particular case is simply a matter of proper, clinical application of law to facts. This formalistic view of law still has some purchase in certain circles, particularly in civil law systems.⁷ As examined in Chapter 4, however, even (p. 313) real scientists who make actual genetic discoveries are themselves not objective in an absolute sense.⁸

8.06  Absolute impartiality can only be assured by non-human processes. In one colourful fictional example Francois Rabelais’s Judge Bridlegoose resolved cases by casting dice in his chamber, one on behalf of each party, and deciding in favour of the party whose die had the higher number. Judge Bridlegoose was eventually prosecuted for this practice, and a real-life judge was similarly prosecuted for determining criminal sentences by flipping a coin.⁹

8.07  Bridlegoose’s methodology is objectionable not because it produced the wrong results. In fact, he was ultimately absolved because all his accusers had upheld his decisions.¹⁰ The problem with dice-rolling or coin-flipping and other modes of absolutely impartial decision-making is that they can only be arbitrary. A process can only be absolutely impartial by limiting consideration to a range of inputs so narrow as to render outcomes arbitrary; they cannot involve complex facts or legal issues that imply a deliberative process of interpretation, assessment, and judgment that is inherently human. Adjudication by its nature requires translating competing sources of fact and legal arguments into binding conclusions.¹¹ Like any human process, it is subject to a range of limitations and influences that affect human decision-makers.

8.08  In the United States, the Legal Realist movement mainstreamed this view that judicial decision-making necessarily involves extra-legal factors beyond legal texts, precedents, and procedures. These extra-legal factors are generally understood to include ‘ideology, judicial background, strategic reaction to other institutions, the nature of litigants, or the makeup of [tribunals]’.¹² Today, a vast body of empirical and psychological research has developed regarding judges and arbitrators.¹³ While this insight has long been a topic of intuition and legal theory, in recent years it has become a near-obsession for various social scientists, psychologists, and other empirical researchers documenting the heuristic and cognitive biases that influence human decision-making.¹⁴

(p. 314) 8.09  Notwithstanding scholarly progress in understanding the complexities of adjudicatory decisionmaking, the ethical obligations that are said to apply to adjudicators when they engage in this process are still often framed in overly simplified, often binary terms. There is the absolute moral virtue of ‘impartiality’ and its supposed opposite, the deplorable sin of ‘partiality’ or ‘bias’.¹⁵

8.10  The simplicity of rhetoric denies that the humanness of judges and arbitrators means that they will always be subject to some form of bias. It is neither possible nor desirable to ‘strip’¹⁶ adjudicators of everything that influences or ‘biases’ their decision-making. Stripping them would necessarily remove all the qualities that make them competent and good decision-makers.¹⁷ Ethical regulation of adjudicator impartiality, therefore, is not about prohibiting all forms of partiality or bias. It is instead about selecting what types of partiality or bias are appropriate to the particular system and devising structures and procedures that harness those biases and prevent other undesirable ones.

8.11  While many scholars have acknowledged the incoherence of treating impartiality as a static ideal separate from the humanness of decision-makers,¹⁸ ‘[l]awyers and lawmakers have neither debated these problems openly nor renounced the ideal of impartiality’.¹⁹ They (p. 315) have neither delimited the true meaning of the term ‘impartiality’, nor wrestled with the question of what kinds of bias are acceptable in a particular system of adjudication.²⁰ In the context of judges, procedural devices and rhetorical flourishes are often used to mask infidelity to the unachievable ideal.²¹

8.12  If absolute judicial impartiality is a mirage, it becomes even more distorted when superimposed onto the arbitrator.²² As examined in Chapter 7, the most essential guarantees of judicial impartiality, or at least the myth of impartiality, seem to be missing or openly flouted in the arbitral process.²³ Chapter 7 presented the Functional Thesis as a methodology for developing ethical norms that are suited to the role assigned to arbitrators, as opposed to extrapolating those norms from judicial ethics. For arbitrators, there are three primary touchstones that determine their inter-relational role in a particular arbitral regime or context: 1) the processes by which they obtain and manage evidence and arguments about the case, 2) their decisional methodology, and 3) the process by which they are appointed. The difficulty in applying the Functional Thesis to international arbitration is that the international arbitrator is a chameleon. Parties can, through agreement, alter each of these features.

8.13  When these features of arbitration shift significantly, as has occurred, for example, with the rise of investment arbitration, arbitrators’ functional roles change, and hence their ethical obligations necessarily shift. These shifts, however, are not always immediately recognized or addressed, again for example with investment arbitrators. The next section considers the implications of the shifting role for investment arbitrators.

8.14  Two of the most significant developments that precipitated shifts in the role of investment arbitrators are the introduction of new procedures to increase transparency in investment arbitration and the rise of a system of informal precedent. These developments, and their implications for investment arbitrators’ ethics, are the topic of this Section.(p. 316)

8.15  With investment arbitrators, it is often presumed, without much analysis, that their unique role, and hence their professional responsibilities, are determined by the subject matter of the disputes they resolve²⁴ or the mere presence of States as parties.²⁵ These features of investment disputes might change expectations about investment arbitrators and might constitute reasons to assign investment arbitrators a different interrelational role than commercial arbitrators. Those features, however, do very little to actually change the role of investment arbitrators in managing proceedings or making substantive decisions.²⁶ In the absence of procedures and decisional methodologies that actually redefine their functional role, critiques that investment arbitrators fail to live up to changed expectations are somewhat misplaced. On the other hand, some changes have occurred to alter the functional role of investment arbitrators, making it necessary to reassess their ethical obligations.

Although this rule does not use the language of ethics per se, as the italicized phrase indicates, its mandatory directive suggests that it is a professional ethical duty. Variance from such a professional duty would likely draw criticism that is framed as an ethical judgment. This rule in particular, and other rules that impose obligations on arbitrators to promote transparency, shifted the professional role of investment arbitrators. Their attendant ethical (p. 317) duties are presumed by many to have also shifted, even if those new duties were not formally referred to or debated as ethical duties.

8.17  Another important shift in the role of investment arbitrators has occurred because of changes in the methodology of their decision-making. Today, unlike commercial arbitrators, investment arbitrators are generally acknowledged as having express law-making functions, even if the extent, nature, and desirability of that function is still hotly debated. This law-making function, in turn, is said to imply a professional obligation to follow precedent that is largely absent in international commercial arbitration.²⁹

8.18  For example, Gabrielle Kaufmann-Kohler has argued that investment arbitrators have an obligation to follow precedent ‘so as to foster a normative environment that is predictable’.³⁰ Andrea Bjorklund adds that this obligation is heightened because investment arbitration as ‘a nascent legal system is struggling to develop rules’.³¹ In addition to an obligation to follow precedent, another commentator argues that the extended audience and purpose of investment arbitration awards creates specialized obligations for investment arbitrators in award drafting to:

…provide reasons that will persuade future adjudicators that the decisions that were made are the right ones. Among other things, this means that tribunals should identify where they disagree with earlier tribunals, and provide reasons for siding with one camp when there is already divergence, or for deviating from lines of consistent cases.³²

By suggesting that investment arbitrators are obliged to follow precedent and as a consequence that obligation ‘imposes additional explanatory burdens’ on award drafting, these commentators are identifying normative professional obligations that are implied based on investment arbitrators’ new law-making role. These ethical obligations are essential for arbitrators to fulfil that role. All these commentators are substance discussing ethical obligations, even using the term ‘ethics’. In addition to a generalized professional obligation to follow precedent, the shift in role that arises out of investment arbitrators’ decisional methodology has also introduced other obligations that are generally referred to as ‘issue conflicts’.

8.19  As Chapter 6 demonstrated, international arbitration has provided greater clarity and guidance on what constitutes a conflict of interest for arbitrators, and what arbitrators should disclose in the selection and appointment process.³³ One area where considerable uncertainty and inconsistency still exist is with respect to the arbitrator’s relationship with the subject matter of the dispute, (p. 318) as opposed to the parties and counsel.³⁴ Disagreement over so-called issue conflicts remains so profound that the terminology used to describe the cluster of concerns is itself muddled.

8.20  As a starting point, when the IBA Guidelines on Conflicts were drafted in 2004, these concerns were not particularly pronounced. The Guidelines were written primarily with a view toward conflicts as they arise with respect to the role assigned to arbitrators in commercial arbitration, not investment arbitration.³⁵ Moreover, the practices in investment arbitration that have given rise to concerns about issue conflict have evolved considerably since 2004 as well. Most specifically, as described earlier, a presumption that awards will be published, and a developing ethical obligation or professional norm that previous awards be deferred to (or that deviation be explained and justified), makes their law-making function more explicit. This evolution of a system of precedent and related functions has additional implications for arbitrator conflicts of interest that, to date, have not been dealt with clearly.

8.21  The Guidelines on Conflicts include on the Green List, as matters that do not need to be disclosed, previously expressed opinions in public sources, such as law review articles or public lectures.³⁶ The Guidelines are notably silent, however, about so-called role-switching, except to the extent that the ‘specific issue’ advocated by an arbitrator is implicated.³⁷

8.22  There are at least three distinct areas of concern that are collectively referred to as ‘issue conflicts’. First, there is an issue that is sometimes referred to as the ‘multiple hat’ or ‘hat-switching problem’, what William ‘Rusty’ Park refers to as ‘role confusion’.³⁸ The hat-switching problem arises when an arbitrator sits in a case that may establish precedent for or otherwise affect another case in which the arbitrator acts as counsel. Second, there is the issue of arbitrators sitting in different unrelated cases that involve the same legal issue, for example, interpretation of the same or similar treaty provision. Finally, related to the second issue, there are concerns about an arbitrator serving in related cases, meaning cases that arise out of the same facts or transactions and thus involve related issues of fact and law and the same or related parties. This last issue is at least partially addressed by the IBA Guidelines on Conflicts.³⁹ All three situations have been brought into sharp focus in investment arbitration, even if they are relevant in other forms of arbitration as well.⁴⁰

8.23  Questions about the appropriateness of hat-switching or revolving doors in investment arbitration once again illustrates the impulse toward self-regulation in international arbitration, as examined in Chapter 6.⁴¹ In investment and commercial arbitration, it remains commonplace for lawyers to take on both types of work contemporaneously. As one author notes, ‘the ICSID docket is replete with arbitrators who also represent clients in other BIT cases’.⁴² The increase in challenges based on such role-switching is on the rise. Perhaps not surprisingly, questions about hat-switching in investment arbitration have been raised by both critics⁴³ and leading arbitration specialists.⁴⁴ As Rusty Park explains:

The arbitrator might be tempted, even subconsciously, to add a sentence to an award that could later be cited in another case. Such an arrière pensée might lead to disparaging or approving some legal authority or argument regularly presented in similar disputes, and thus intended to persuade in a different matter where the arbitrator’s firm acts as counsel. The flip side of the coin might also present itself, with an arbitrator influenced by his or her position while acting as counsel in another case.⁴⁵

In practice, advocates necessarily cite relevant awards authored by a tribunal on which the advocate previously served as an arbitrator because, as explained earlier, previous awards on point are treated as guiding precedent.⁴⁶ This role-switching problem has been a particular focus for investment arbitration,⁴⁷ where cases often involve similar legal issues, implicate important State interests and policies, and occur in a highly politicized environment in which arbitrators are accused already of being in one camp or another.

8.24  Despite recent concerns, many decisions by arbitral tribunals and arbitral institutions seemed to give a nod of approval, or at least tolerance, to the prevalence of existing practices. For example, in a ruling on a challenge to an arbitrator in a North American Free Trade Agreement (NAFTA) case regarding a different type of conflict, the International Centre for Settlement of Investment Disputes (ICSID) secretariat made a general observation about hat-switching, that: ‘[a]s things stand today, and irrespective of the advisability of such a situation, one may, as a general matter, be simultaneously an arbitrator in one case and a counsel in another. There is no need to disavow the possibility of assuming either role’.⁴⁸(p. 320)

8.25  Similarly, in perhaps one of the most high-profile cases to address this issue, the Republic of Ghana challenged the arbitrator nominated by the investor-claimant, Telekom Malaysia Berhad in an ad hoc investment arbitration case under the United Nations Commission on International Trade Law (UNCITRAL) Rules. The challenge was based on the arbitrator’s ongoing representation as counsel of a consortium of Italian investors in another case that involved interpretation of an expropriation provision that was similar to a provision at issue in the new arbitration over which the arbitrator was being asked to preside. Notably, the appointing authority followed existing practice in international arbitration, rejected the challenge, and found that there was no issue of partiality.

8.26  Subsequently, the District Court of The Hague, Netherlands saw things differently.⁴⁹ It found that ‘there will be justified doubts about [impartiality], if [the arbitrator] does not resign as attorney in the [other] case’ in which he was acting as counsel.⁵⁰ The District Court reasoned that in his role as attorney, the arbitrator had a ‘duty [in the other case] to put forward all possibly conceivable objections against the [ICSID] award’ and that ‘[t]his attitude is incompatible with the attitude [the attorney] has to adopt as an arbitrator in the present case, for example, to be unbiased and open to all the merits of the RFCC/Moroccan award and to be unbiased when examining these in the present case’.⁵¹ Notably, the court rejected the notion that the role-switching issue was covered under the IBA Guidelines’ treatment of a ‘general opinion…concerning an issue which also arises in the arbitration’ as not subject to disclosure or challenge.

8.27  International arbitration’s response to concerns about so-called hat-switching demonstrate it functioning as a self-regulating regime. When the IBA Guidelines on Conflicts were drafted in 2004, they did not address role-switching. Years later, the number of challenges in investment arbitration (by both investors and States) has increased, and a ‘heated’ debate has emerged about whether it was essential for a formal separation of functions of counsel and arbitrators in investment arbitration. While chronologically the Hague District Court decision was not a tipping point, it did function as a strong signal that if primary regulation within international arbitration did not resolve the issue, national courts might.

8.28  Today, many lawyers continue to oppose prohibitions against individuals serving as both counsel and arbitrators in investment arbitration.⁵² Several prominent arbitrators, however, have independently taken the position that, because they sit as arbitrators in investment cases, they will no longer serve as counsel in investment arbitrations.⁵³ This decision for unilateral withdrawal from the market as counsel carries with it significant financial consequences since earnings are much higher as counsel than as arbitrator.⁵⁴

(p. 321) 8.29  Adding momentum to calls to prohibit hat-switching in investment arbitration, the issue is no longer subject to debate or personal choice in sports arbitration. The Lausanne-based Court of Arbitration for Sport (CAS) has adopted a formal rule preventing the same individual from acting as counsel and arbitrator in CAS proceedings.⁵⁵ The CAS explained that the International Council of Arbitration for Sport (ICAS) supplemented these provisions with the role-switching prohibition ‘to limit the risk of conflicts of interest and to reduce the number of petitions for challenge [to arbitrators] during arbitrations’.

8.30  More difficult than questions relating to hat-switching are questions relating to when an arbitrator’s impartiality may rightly be challenged based on a previously asserted position or rendered a decision in another arbitration on the same or similar issue, or presided in a case in which a similar issue was heard.⁵⁶ Judges in many systems are permitted to sit in related cases, or to preside over cases that raise the same issue. The question becomes why it would be permissible for judges, but not for arbitrators. In analysing this question, it is again helpful to revert to the Functional Thesis rather than to simply conclude that arbitrators should be subject to more or less stringent rules than judges. The key, it turns out, is that judges’ functional role exists within a decisional hierarchy that includes appellate review.

8.31  In contrast to investment arbitration, a judge’s decision in the first case can be, and presumably was, tested on appeal. Once its ‘correctness’ has been confirmed on appeal, the judge’s role, particularly in a system that involves a formal doctrine of stare decisis, is to ensure consistency among precedents.⁵⁷ Given that function, the potential for a judge to apply in the second case the decision from the first case looks more like added competence than an inappropriate bias or a pre-judging of the issues.

8.32  By contrast, after an arbitration decision in a particular case, the prevailing party presumably considers the decision more or less correct, while the opposing, losing party presumably regards it as erroneous. No appellate body confirms the ‘correctness’ of the award. Reappointment of the same arbitrator in a second, related case would mean appointing someone whom one party believes reached an incorrect outcome in the first case and is likely to repeat the same error in the second case. Although a system of soft precedent has now emerged in investment arbitration,⁵⁸ the important missing piece is substantive appeal. Without appeal, even a generalized obligation to follow precedent still allows a party to argue against pre-existing precedent in hopes of persuading a subsequent tribunal not to follow it. If research is correct in discovering that individuals are psychologically committed to (p. 322) conclusions they have already reached and less likely to revisit such conclusions,⁵⁹ arbitrators may be less able to fully reconsider parties’ arguments.⁶⁰

8.33  Another important feature of investment arbitral tribunals’ decisional methodologies is that they decide not only legal issues, but also factual issues. Judicial fact-finding roles in national legal systems affect national rules regarding repeat cases when the new case would involve the same facts, as opposed to the same law. Personal knowledge of disputed facts in a case are grounds for disqualification in various systems.⁶¹ For example, in a Swiss case,⁶² a party challenged the appointment of a Justice of the Supreme Court to hear a challenge to an arbitration award because that same judge had rendered a decision relating to an interim award from the same arbitration. The court rejected the challenge, but only because it found that the earlier decision and the current case involved different factual issues. The court indicated that a problem would indeed exist if the judge had already committed himself to a view on the substantive matters in the current case.

8.34  In a similar vein, in the United States and other systems that rely on juries and specialized fact finders in the court of first instance, a person would be excluded as a juror if that person had any prior knowledge of the parties or facts in the case.⁶³ One of the primary reasons is that jurors are charged with making decisions based exclusively on evidence presented in the present case, and information learned in another case may not be presented in the subsequent case. Similarly, many systems preclude judges from sitting in cases in which they have already participated at another level. Thus, a judge is precluded in Japan from sitting in an appellate case if that judge had previously presided over the same case in lower court proceedings.⁶⁴ The ethical rules against issue conflicts, particularly those involving similar fact-finding, are not only linked to arbitrators’ and judges’ functional role, but are also justified by the cognitive limitations that affect their decision-making.⁶⁵

8.35  For these reasons, as well as related concerns about confidentiality, it is not surprising that the IBA Guidelines on Conflicts already require disclosure and possible disqualification for arbitrators sitting in cases that are factually related.⁶⁶ In most situations, issues conflicts do not present as clear or imminent a concern as hat-switching. Meanwhile, investment arbitrators’ fact-finding function, combined with the absence of a corrective appellate mechanism and the precedential effect of awards, cumulatively suggest that issue conflicts present special (p. 323) problems for investment arbitration that are at least partly distinct similar issues that may affect arbitrators who sit in similar, but unrelated commercial cases.

8.36  As a sign that international arbitration’s self-regulatory machine is fully revving up on this issue, both the International Council for Commercial Arbitration (ICCA) and the IBA Task Force assigned to revising the IBA Guidelines on Conflicts are studying the issue conflicts and undertaking to provide greater guidance. It remains to be seen whether these entities might limit potential prohibitions to concurrent conflicts, like the Hague District Court in Telekom,⁶⁷ or adopt a more structural rule, following the cue from leading arbitrators. Whatever the ultimate recommendations and approach, one thing seems clear—hat-switching and issue conflicts are not issues that international arbitration can refuse to self-regulate if it wants to retain control and legitimacy on these topics.

8.37  The ethical obligations of party-appointed arbitrators is another area where the concept of ‘impartiality’ is poorly understood and conceptual muddiness about their role has led to (sometimes) unwarranted accusations of ethical misconduct. Party-appointed arbitrators have been a staple of the international arbitration process for centuries. As described in Chaper 2, with tripartite tribunals that dominate large commercial cases and investment arbitration, the conventional practice is that each party selects a party-appointed arbitrator and the two together then select the chairperson.⁶⁸ The ability of parties to select arbitrators is often identified as one of international arbitration’s greatest strengths. The popularity of party-appointed arbitrators is consistently reaffirmed in practice and empirical studies regarding party preferences.⁶⁹ It is also confirmed by party rejection of proposed alternatives, for example, for ‘screened’ appointment procedures or institutional appointments.⁷⁰

8.38  Despite their popularity, there is a recurring sense that something might be amiss. Summarizing reactions of various scholars, Fabien Gélinas explains, ‘[c]laiming that the independence of a party-appointed arbitrator can be equated to that of a domestic judge, or that of a presiding arbitrator, has been called “hypocrisy”, an “ideological façade”, a “fiction”, a “mythology”, and a “triumph of rhetoric” for the “naïve”’.⁷¹ Several prominent historical (p. 324) anecdotes of ‘particularly unattractive’ conduct by party-appointed arbitrators seem to justify these critiques.⁷² Even beyond these more outlandish examples, the status and conduct of party-appointed arbitrators is seemingly always subject to some controversy.⁷³ As previewed in Chapter 2, when US law firms and arbitrators first arrived in international arbitrations en masse, they brought with them a unique US tradition from domestic arbitration of highly-partisan, party-appointed arbitrators.⁷⁴ In US domestic arbitration, parties and their counsel often picked over partisans as party-appointed arbitrators and were allowed to communicate throughout arbitral proceedings with their party-appointed arbitrators, even about crucial issues involving strategy.⁷⁵ Such conduct was not only condoned by courts, but affirmatively ratified, as exemplified by the comments of one court that ‘[a]n arbitrator appointed by a party is a partisan only one step removed from the controversy and need not be impartial’.⁷⁶

8.39  Such partisanship, and particularly ex parte communication, is unacceptable in most other systems, and has long been considered unacceptable in international arbitration.⁷⁷ This fundamental clash over the role of party-appointed arbitrators became a pet topic, if not a litmus test, for international arbitration commentators.⁷⁸

8.40  The rise of international investment arbitration has shone a new spotlight on party-appointed arbitrators. Unlike international commercial arbitration, investment arbitration is often viewed as pitting investor interests against defenders of State policy interests. The visibility (p. 325) of investment arbitration cases, and the important policy interests at stake, have turned the original spotlight into a laser-like focus on investment arbitrators. The polarization of investment arbitration has led to allegations that certain arbitrators are ‘ringers’ for one side or the other, and that those who are routinely appointed by investors are biased against States, and particularly States with emerging economies. A number of high-profile challenges to investment arbitrators have added fuel to this fire.⁷⁹ Based on this track record, it is perhaps not surprising that some of international arbitration’s most illustrious practitioners and its most ardent critics are united in questioning the legitimacy of party-appointed arbitrators, and even calling for their elimination.⁸⁰

8.41  As examined in greater detail in Chapter 2,⁸¹ parties use the arbitrator selection process as the ultimate form of forum shopping, even though international arbitration is most often touted as providing an inherently neutral forum. This tension is perhaps best captured in the famous account by leading arbitrator Martin Hunter, when he indicated that selecting the optimal party-nominated arbitrator means finding ‘someone with the maximum predisposition towards my client, but with the minimum appearance of bias’.⁸² The crucial question, for critics and defenders alike, is how does ‘maximum predisposition’ fit with arbitrator ‘impartiality’?

8.42  With his characteristic willingness to shake things up, Jan Paulsson has recently answered this question with a definitive assertion that the two concepts simply do not fit. He characterizes the practice of allowing parties to appoint arbitrators ‘unilaterally’ as ‘ill-conceived’, an ‘unprincipled tradition’, and one that creates a ‘moral hazard’.⁸³ Another leading arbitration practitioner, Albert Jan van den Berg, has expressed a similar view.⁸⁴ Adding fuel to Paulsson’s fire, van den Berg supports his view with an empirical study he conducted that reveals the ‘astonishing fact’ that nearly all dissents by party-appointed arbitrators are written in favour of the party who appointed them.⁸⁵ ‘The root of the problem’ with dissenting opinions by party-appointed arbitrators, van den Berg believes, ‘is the appointment method’.⁸⁶

8.43  While he may not agree with Paulsson and van den Berg on almost anything else, one of investment arbitration’s most ardent critics, Gus Van Harten, has joined the chorus, offering (p. 326) a similar critique. Van Harten hypothesizes that investment arbitrators are more likely to adopt certain substantive positions because of ‘apparent incentives for arbitrators to favour the class of parties (here, investors)’ who are more likely to reappoint them in the future.⁸⁷ Based on these allegedly corrupting influences, Van Harten argues that ad hoc selection of decision-makers, particularly party-appointed arbitrators, makes arbitration inherently unsuitable for resolving investment disputes.

8.44  The purpose of this section is not to defend the practice of party-appointed arbitrators. Several commentators have already done so.⁸⁸ This section, instead, makes an affirmative case for the existence of party-appointed arbitrators. In other words, it argues that if we did not already have a practice of party-appointed arbitrators, we would have to invent them to ensure the proper functioning of international arbitration.

8.45  As described earlier,⁸⁹ extra-legal factors in adjudicatory decision-making are inevitable and, in many respects, a healthy by-product of human decision-making. Even if inevitable, however, tolerance for them in a fair adjudicatory process is limited, both with regard to the nature and extent of such influences. Various features in system design aim to limit the effect of these extra-legal influences, even if (and perhaps especially because) they cannot necessarily be precisely confirmed or measured.

8.46  In national legal systems, judges are most often randomly assigned cases to reduce or at least randomize the systemic influence of extra-legal factors. In a system with random case assignment, a party may by chance benefit from or be disadvantaged by the extra-legal factors that may come into play as a result of assignment of a particular judge or judges to their case. They will not, however, be subject to the potentially compounded effect of extra-legal influences being an express and intentional consideration when the judge or a third party intentionally selects case assignments. It is the difference between a random factor or event that could happen in a fair game, and the results of a skewed game in which adverse changes are intentionally imposed.

8.47  In conceding the resistance to his proposed elimination of unilateral appointment of arbitrators, Paulsson speculates that the primary obstacle to weaning parties away from the practice is that confidence in ‘decent institutions’ is undermined by a ‘constant stream’ (p. 327) of new, unreliable arbitral institutions.⁹⁰ He reasons that the institutions are suspected of either poor judgment, cronyism, or corruption. It may, instead, be that parties are reluctant to trust any third party’s assessment of which extra-legal factors should be brought to bear on their case.

8.48  Van Harten has expressed similar scepticism about extra-legal considerations affecting intentional case assignment by appointing authorities in investment arbitration. Van Harten questions whether the International Chamber of Commerce (ICC), which is designated by some investment treaties as an appointing authority, is particularly well suited to perform that function in a neutral manner. As Van Harten notes, the ICC postures itself as ‘the world business organization’, ‘the voice of world business’, and an organization that ‘speaks for world business whenever governments make decisions that crucially affect corporate strategies and the bottom line’.⁹¹ Under Van Harten’s reasoning, the ICC will be more inclined to regard investor-friendly arbitrators as appropriate for selection, and therefore increase the likelihood that certain, in his view, undesirable extra-legal considerations would play a role in a tribunal’s decision-making.⁹²

8.49  The larger problem, in other words, is not intentional selection by the parties, but intentionality in selection generally. Because extra-legal factors necessarily affect adjudicators’ decision-making, intentional selection by any entity means pre-determining which extra-legal factors are most important. Any intentionality necessarily ‘loads’ the tribunal, and every institution is subject to certain predilections or perceptions. Sometimes those predilections may align with the collective predilections of the parties, in which case, institutional appointment can function well.

8.50  In most instances, however, sophisticated parties have specific preferences about which extra-legal factors they prefer to be brought to bear in a particular case based on their own legal position and case strategy and those preferences contrast with those of the opposing party. This observation provides two reasons why party-appointed arbitrators are traditionally perceived as performing important functions. First, they ensure that those considerations the appointing party thinks are important are represented on and assessed by the tribunal.⁹³ Second, they will ‘serve as an “interpreter” of language, of legal culture, and of law for the benefit of fellow adjudicators’.⁹⁴ In this respect, arbitrator selection directly by the parties resolves the problem of intentional selection by a third party that may, intentionally or unintentionally, select arbitrators that are more advantageous to particular positions or case strategies. These explanations provide some justification for tolerating party-appointed arbitrators, but there is also an affirmative case to be made for party-appointed arbitrators.

8.51  Another, more generalized problem with arbitration tribunals is that, like any decisional body, they are subject to certain limitations that can produce errors in decision-making. (p. 328) As previewed at the beginning of this chapter,⁹⁵ a now well-established body of research by psychologists, behavioural economists, and other experts in a range of fields demonstrates that all human beings necessarily operate in a realm of ‘bounded rationality’. Human judges and human arbitrators ‘have inherently limited memories, computational skills, and other mental tools’.⁹⁶ Like other humans, they are subject to cognitive and heuristic biases that affect their decision-making.⁹⁷

8.52  Some of these heuristic biases may be tied to personal backgrounds and cultural cognitions of individual decision-makers.⁹⁸ Other heuristics tend to occur to some degree across all decision-makers, as well as parties and their counsel. These types include, for example, anchoring,⁹⁹ hindsight bias,¹⁰⁰ and egocentric bias, framing, and representativeness heuristic.¹⁰¹ One specific heuristic that has particular relevance in decision-making by a board or panel of individuals, and therefore may be more acute on arbitral tribunals, is the phenomenon called ‘Groupthink’.¹⁰²

8.53  Groupthink is a phenomenon developed by cognitive psychologist Irving Janis. Through his research, Janis demonstrated that Groupthink is a ‘mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action’. Groupthink ‘occurs when the decision-making capabilities of a panel become affected by subtle peer pressure’.¹⁰³

8.54  The preconditions for Groupthink seem readily observable in international arbitration. Even as it becomes more diverse, the field of international arbitrators continues to be dominated by an elite group of insiders who are often referred to, even amongst themselves, as a ‘cartel’, a ‘fraternity’, a ‘club’,¹⁰⁴ or a ‘mafia’.¹⁰⁵ Collegiality, familiarity, and agreeability are important (p. 329) professional credentials for arbitrators,¹⁰⁶ and important qualities for career advancement as an arbitrator.¹⁰⁷

In his study of dissenting opinions, van den Berg identifies a strong corrollation between party-appointed arbitrators and the party in whose favour dissenting opinions are written. He also identifies, however, that party-appointed arbitrators only dissent in approximately 22% of cases, meaning that 78% of all investment arbitration cases are decided unanimously. From this statistic, it might be characterized as a group that strives for and generally achieves unanimity in decision-making.¹⁰⁸ Paulsson himself seems to describe the existence of this precondition of Groupthink in international arbitration when he notes that leading arbitrators ‘deliberate within an intellectual zone of shared confidence’.¹⁰⁹

8.55  Arbitrators reading the description of heuristic biases and Groupthink have an inner voice that is probably now protesting: ‘Certainly not me!’ It is important to stress that the propensity to engage in Groupthink does not reflect on arbitrators’ intelligence, earnestness, or diligence. It is a by-product of human decision-making in group settings. It is a natural propensity of panels or groups of decision-makers whenever certain factors or preconditions are present. The behavior has been tested in numerous experimental studies¹¹⁰ and has been observed in various decision-making settings, including sophisticated corporate (p. 330) boards of directors, foreign policy panels, administrative agencies,¹¹¹ and attorney work groups.¹¹²

8.56  Trained judges, and by extension skilled arbitrators, may be less subject to some of these heuristic biases than ordinary citizens.¹¹³ Professional training and commitments to the ideal of impartiality may dampen their effect, but these psychological phenomena are not generally a matter of choice. Studies indicate that we are all, to some degree, subject to these various shortcomings and shortcuts to decision-making. In fact, even trained psychiatrists and clinical psychologists, whose job it is to make clinical, scientific assessments about patients, have been demonstrated in studies to project their own preconceptions and assumptions into diagnoses and assessments of their patients.¹¹⁴

8.57  Janis not only identified the problem of Groupthink, he also prescribed a remedy. In response to a problem that is structural and integral to inter-personal group dynamics, the solution he proposes is similarly structural and integral. The most effective ways to reduce the prevalence of Groupthink, according to Janis, is to insert into a tight-knit group certain individuals whose assigned function is to challenge the consensus of that group. The function of this person is to serve as what Janis calls the ‘devil’s advocate’, meaning someone who systematically and intentionally argues for a position contrary to whatever position is being advocated or contemplated within the group. Janis proposes that this role be formally designated and that the position be ‘rotate[d] among group members at each meeting’.¹¹⁵ This is the justification, for example, for shareholder-nominated directors. Proponents of shareholder-nominated directors argue that they can break through Groupthink because they have different interests and alliances than the other corporate officers on the board.¹¹⁶ Similarly, on an arbitral tribunal, arbitrators who are appointed by the parties are essentially identified because of a perceived propensity to look sceptically and question decisions that may have negative consequences for the party who appointed them.

8.58  In addition to the structural idea of a devil’s advocate as a prophylactic against Groupthink, Janis also offers what might be regarded as ‘style tips’ for how devil’s advocates should conduct themselves in order to be most effective. Janis suggests in fulfilling this ‘unambiguous assignment’, the designated devil’s advocate should ‘present arguments as cleverly and (p. 331) convincingly as [the person] can, like a good lawyer, challenging the testimony of those advocating the majority position’.¹¹⁷ The devil’s advocate, according to Janis, should ask tough questions and encourage suggestions in a low-key style, all while withholding his or her own opinion to avoid being too confrontational.¹¹⁸

8.59  These ‘style tips’ from Janis about how to be a good devil’s advocate are remarkably similar to admonitions about how to be a good party-appointed arbitrator. As many commentators have observed, the party-appointed arbitrator who acts overly aggressive or too overtly partisan will end up alienating other members of the tribunal and undermining their own ability to effectively influence the tribunal’s decision-making.¹¹⁹ Anecdotal accounts are replete with stories of overly aggressive, overtly partisan party-appointed arbitrators being ostracized, discounted, or ignored on tribunals. In other words, referring back to Martin Hunter’s prescription at the beginning of this section, the optimal party-nominated arbitrator is ‘someone with the maximum predisposition towards my client, but with the minimum appearance of bias’.¹²⁰

8.60  The ideal party-appointed arbitrator is someone who can argue forcefully to check the majority’s positions that are in opposition to those of the appointing party, but in a ‘low key’ way that does not seem overtly partisan. By systematically but constructively second-guessing the majority, and expressly challenging it when appropriate, party-appointed arbitrators can improve the process, within tribunal deliberations, in the process of drafting the award and by, in some cases, actually writing a dissent. Several commentators have offered anecdotal explanations of how party-appointed arbitrators contribute to deliberative functions on the tribunal. Most such explanations, however, are often offered by way of apology for historical practices or justification for a party’s preferences.¹²¹ These accounts provide important real-world verification of the value of deliberations in which party-appointed arbitrators press against a Groupthink-gravitational pull to the path of least resistance.

8.61  Under this view, party-appointed arbitrators are not a necessary evil that must be tolerated to make parties feel comfortable or because there are no viable alternatives. They are, instead, an important structural feature of international arbitral tribunals. The threat and potential (p. 332) reality of publishing a dissent is part of this process of challenge that promotes accountability. It can also promote party confidence in a process that lacks any form of appellate review, and is regarded as creating some potentially perverse incentives for overly eager agreement by arbitrators with co-panelists in order to secure future appointments.¹²² This last point brings us back to van den Berg’s study.

8.62  As examined in Chapter 7, Albert Jan van den Berg has conducted a study in which he concludes that nearly all publicly available dissenting opinions in investment arbitrations were issued by party-appointed arbitrators in favour of the party who appointed them.¹²³ From this data, he concludes that ‘dissenting opinions [in investment arbitration] barely serve a legitimate purpose in a system with unilateral appointments’ and therefore suggests that investment arbitration would be ‘more credible if party-appointed arbitrators observe the principle nemine dissentiente [i.e., without dissent]’.¹²⁴ He further postulates, as noted earlier, that the problem with dissenting opinions is the appointment process, specifically the practice of party-appointed arbitrators.

8.63  Van den Berg’s data does indeed seem at first blush to be a striking indictment of party-appointed arbitrators. As analysed in Chapter 7, however, the strong correlation is neither entirely surprising, nor a clear impeachment of party-appointed arbitrators.¹²⁵ It does, however, raise questions about the ethics of dissenting opinions by party-appointed arbitrators.

8.64  Consistent with facilitating the devil’s advocate function, dissenting opinions also have a role to play in promoting party confidence in the process. Van den Berg and others reject the notion that separate opinions can enhance party confidence in the process,¹²⁶ and instead (p. 333) raise concerns that dissenting opinions generally undermine the authoritativeness of an award, parties’ willingness to comply, and, in some instances, enhance losing parties’ ability to effectively challenge an award.

8.65  Without diminishing concerns about potential misuse, the availability of dissent and the practice of dissenting only in part instead can promote party confidence in arbitral decisions. For example, in Wena v Egypt, the arbitrator appointed by Egypt issued a two-sentence statement that he ‘concurs in the Tribunal’s entire award’, including the award of compound interest, but was ‘not persuaded’ that ‘interest should be compounded quarterly’.¹²⁷ The separate opinion on a narrow, and seemingly insignificant issue, arguably underscores the arbitrator’s substantive agreement with the rest of the tribunal on the balance of the issues.¹²⁸ In the absence of the separate opinion, the appointing party would not know that the arbitrator affirmatively agreed with the tribunal’s decision, and may well assume the award was effectively a 2-1 decision with acquiescence, but not affirmative agreement, by its party-appointed arbitrator.

8.66  This affirmative case for the party-appointed arbitrator would not be complete without a few final comments. First, although party-appointed arbitrators perform a function similar to Janis’ devil’s advocate, there are important differences. The devil’s advocate is appointed to question and offer scepticism about any position being considered by the board. A party-appointed arbitrator, on the other hand, is selected only to challenge particular positions that may be contemplated by the tribunal—those positions that are harmful to the appointing party’s position.

8.67  A related observation about differences between Janis’ devil’s advocate and party-appointed arbitrators is that it is not an individual party-appointed arbitrator who acts as a devil’s advocate, but rather both party-appointed arbitrators together at different stages depending on the majority position. This observation raises important issues about equality in the appointment process. For this design feature to work similar to Janis’ devil’s advocate, it is necessary that the two party-appointed arbitrators are similarly effective in challenging a majority position. It should be ensured that the processes for selecting party-appointed arbitrators are fair and afford the parties equal opportunities to maximize their preferences. As explored in greater detail in the final section, there is reason to believe that this precondition of equal opportunity is not firmly assured under current standards and practices.¹²⁹ Moreover, having party-appointed arbitrators serving as devil’s advocates puts new stress and premium on selection of the arbitral chairperson.(p. 334)

8.68  Finally, it would violate the ‘style tips’ for party-appointed arbitrators. As a practice, unilateral appointments create the risk of hyper-partisan party-appointed arbitrators, the bogeyman that animates much of van den Berg’s and Paulsson’s analyses. Hyper-partisan arbitrators have certainly made a few appearances over the years, including in some very high-profile cases, as surveyed by Paulsson.¹³⁰ They can undoubtedly be disruptive and even disturbing. This type of party-appointed arbitrator, however, is a relatively rare and self-correcting problem, both within individual cases and over time.

8.69  As parties become more sophisticated in their selection methods and more aware of the potential hazards of an overly partisan party-appointed arbitrator, they are increasingly reluctant to appoint self-defeating hyper-partisan arbitrators. A self-correcting problem does not require radical reforms, especially at the expense of the value that party-appointed arbitrators can bring to tribunal decision-making. Increased transparency and formal feedback about arbitrators, as proposed in the final section, can help deter these practices and enable parties to avoid knowingly appointing such arbitrators.¹³¹

8.70  Making an affirmative case for party-appointed arbitrators, which redefines their functional role, also necessitates re-examining their ethical obligations. Critiques of party-appointed arbitrators are usually framed in ethical terms, such as those used by Paulsson and van den Berg. In accordance with the Functional Thesis, developed in Chapter 7, party-appointed arbitrators have necessarily been assigned a more differentiated functional role than sole arbitrators or arbitral chairpersons. This role differentiation portends at least some differences in their ethical obligations. Despite the need for differentiation, the same terminology (‘impartiality’ or ‘independent’) is consistently applied to both categories of arbitrators.¹³²

8.71  Most national arbitration laws and arbitral rules ostensibly impose on all members of arbitral tribunals identical obligations of impartiality, independence, or neutrality.¹³³ Some commentators attempt to make hair-splitting linguistic distinctions, which tend not to be particularly persuasive. For example, some sources indicate that while all arbitrators must be ‘neutral’, they may have different levels of ‘impartiality’ or ‘predisposition’. Others suggest that while party-appointed arbitrators may be subject to different standards of neutrality, they must all be equally impartial and independent.¹³⁴(p. 335)

Effective ethical obligations of party-appointed arbitrators cannot be formulated simply by playing games with words like ‘neutrality’ or ‘impartiality’. Such abstract, value-laden terms do not provide meaningful guidance.¹³⁶ Their meaning only gains real content by analysing them in context and in light of the specific roles assigned to actors to whom those obligations are applied.¹³⁷

8.73  Chapter 7 established that, even if denied rhetorically, party-appointed arbitrators necessarily have differentiated ethical obligations as a consequence of the differentiated interrelational roles they are assigned. These differentiated roles are established through the different procedures for designated party-appointed arbitrators (most notably the possibility of interviews for party-appointed arbitrators but not for arbitral chairpersons).¹³⁸

8.74  Van den Berg concedes that differences exist, but characterizes them as a ‘few exceptions’ to party-appointed arbitrators’ obligations of impartiality.¹³⁹ This language may be inescapable given the binary terms that are usually invoked to explain impartiality obligations.¹⁴⁰ Characterizing conduct as an ‘exception’ to impartiality obligations, however, makes it sounds like party-appointed arbitrators have a ‘free pass’ to occasionally be naughty. Instead, properly understood, these are not ‘exceptions’ to impartiality obligations, but distinctions in the nature of impartiality obligations that are appropriate given the differentiated role assigned to party-appointed arbitrators.¹⁴¹(p. 336)

8.75  Party-appointed arbitrators’ ethical obliations may also differ in the level of restraint that is properly exercised in issuing dissenting opinions. To the extent that dissents may, under the right conditions, facilitate party-appointed arbitrators’ functional role, including their ability to act as a devil’s advocate, arguably they should have greater ethical latitude than chairpersons to issue dissents. Moreover, dissenting opinions that aim at providing legitmate explanations of outcomes and explaining disagreements on the tribunal to appointing parties may be seen less as a sign of bias, and more as a verification that the devil’s advocate role has been fulfilled.

8.76  Acknowledging that party-appointed arbitrators have different ethical obligations from arbitral chairpersons or sole arbitrators does not mean that they do not have impartiality obligations altogether. It should, however, lead to a more realistic definition of those standards and avoid unfair criticisms of party-appointed arbitrators. Meaningfully differentiated impartiality obligations may also, as proposed in Chapter 7, suggest that party-appointed arbitrators should be subject to somewhat more flexible standards regarding disqualification than arbitral chairpersons.¹⁴² In the meantime, the specialized role assigned to party-appointed arbitrators, particularly the function as a devil’s advocate who counterbalances the opposing party’s devil’s advocate, also puts a premium on fairness in the selection process.

8.77  The differentiated inter-relational role for party-appointed arbitrators developed in Chapter 7 and the affirmative case for the devil’s advocate described earlier necessarily focuses attention on the appointment process. Tribunals can only function fairly if the appointment process is fair and affords equal opportunities for parties to appoint co-arbitrators and influence the appointment of the arbitral chairperson. There are serious questions about whether those preconditions exist under current procedures and in the existing market for arbitrator services.

8.78  Considerable disagreement still exists within the arbitration community regarding critical features of the arbitrator selection process. According to some commentators and sources, it is impermissible or at least unseemly to engage in any pre-appointment communication with party-appointed arbitrators.¹⁴³ Other sources suggest that general inquiries about an arbitrator’s availability and expertise are permissible, but not discussions about prospective chairpersons or conducting joint interviews.¹⁴⁴ This disagreement and resulting divergent practices exist despite the fact that the AAA/ABA Code of Ethics, IBA Rules of Ethics, IBA (p. 337) Guidelines on Conflicts of Interest, and the IBA Guidelines on Party Representaiton all indicate that such communications are permissible as long as the merits of the case are not discussed.¹⁴⁵ The Chartered Institute, meanwhile, has published stringent guidelines about how and under what conditions pre-appointment interviews are appropriate, which include requirements for note-keeping recording the interviews.¹⁴⁶

8.79  Although a trend seems to be emerging toward permitting interviews, reports from the field are that wide variation in practice still exists. Meanwhile, the arrival of parties that are new to international arbitration or are not represented by experienced arbitration counsel means that whatever informal consensus may exist will not necessarily be followed.

8.80  These different perspectives about the process for appointing the tribunal are much more troubling than the oft-noted cultural differences about evidentiary and procedural rules that apply during an arbitration.¹⁴⁷ Whereas disagreements about internal procedures can be submitted to the tribunal to resolve during the normal course of an arbitration (and are therein transparent and subject to fair resolution), disagreements about the arbitrator appointment process, however, often remain masked in opaque phases that precede commencement of an arbitration and appointment of the tribunal. A party may never know whether its opposing party engaged in interviews or exchanged views with its party-appointed arbitrator about appointment of the chairperson.

8.81  Although it seems like a minor point of divergence, appointment of the tribunal is one of the most sensitive moments in the life of an arbitration case. If, as argued earlier, party-appointed arbitrators are to serve as devil’s advocates, it is essential that they be equal counterbalances to each other. This counterbalancing effect cannot be achieved if one party is carefully vetting arbitrators, while the other is assiduously avoiding any communication. In that situation, the selection process may be producing a lopsided tribunal because one side’s arbitrator is selected through a more deliberate process.

8.82  Perhaps even more importantly, one particular area of concern is the extent to which disagreement affects communications about potential chairpersons. If only one party discusses with its party-appointed arbitrator potential chairpersons, and that party’s preferences are effectuated by the party-appointed arbitrator, what might have been an asymmetrical tribunal can become one that is truly skewed.

8.83  One solution for continuing ambiguities and divergent practices is for parties to agree expressly on the extent or limits of interviews. While this approach may seem relatively straightforward, it can be difficult to implement when an arbitrator is identified in a (p. 338) claimant’s request for arbitration, which is filed before the respondent is necessarily aware that the dispute is heading to arbitration. At that point, a claimant may not want to show its hand or concede anything about the process leading up to its arbitrator choice.

8.84  While some procedural asymmetries affect how parties select arbitrators, information asymmetries regarding substantive issues affect who the parties select as arbitrators. For these reasons, information asymmetries are more amorphous than procedural asymmetries, but raise more serious concerns.

8.85  In selecting arbitrators, parties assess an arbitrator’s overall reputation for integrity, intelligence, and acumen, as well as expertise in particular national law, subject area, or industry. As examined in Chapter 2, a party with any degree of sophistication, however, also inevitably considers a range of issues particularly important to that party’s case strategy, including whether an arbitrator’s approach to certain procedures, management skills, approach to contract or statutory interpretation, approach to arbitral jurisdiction including, more recently, willingness to consolidate cases or decide issues relating to non-signatories, and the like.¹⁴⁸ Although an arbitrator’s capabilities in all these respects are critical, anecdotal information about an arbitrators’ decisional history and personal and professional inclinations is not generally available through public sources. Moreover, in-depth questions about such topics are also generally regarded as beyond the scope of permissible interview topics.

8.86  The primary means by which parties and counsel obtain information about prospective arbitrators is personal enquiries and related ad hoc research. This process relies heavily on existing relationships among members of the international arbitration community. As a result, it privileges arbitration insiders and well-financed parties who can retain leading arbitration firms. It distinctly disadvantages State parties from developing countries that either do not have extensive experience with investment arbitration or that cannot afford the services of a leading law firm.¹⁴⁹

8.87  Typically, large law firms and corporations solicit general information from colleagues who have had recent experience with those in the pool of potential arbitrators. So-called ‘in search of’ or ‘ISO’ emails are routine in large-firm litigation and arbitration practices. Information generated from these general enquiries is then followed up on, usually through individualized research and more personal phone calls, to colleagues in the field. Those doing the research hope the individuals they contact can provide the most accurate and specific feedback about arbitrators regarding issues that are most essential to the case at hand.

8.88  This information is supplemented by scouring academic works, judicial opinions that might be authored by (or comment on) an arbitrator, and those rarely published arbitral awards by an arbitrator. The aim of all these efforts is to glean insights about the arbitrator’s decisional history, temperament, or intellectual orientation on particular issues. Given the stakes (and the players), it is a surprisingly low-tech process with an inherently hit-or-miss quality. It can also be quite expensive.(p. 339)

8.89  The nature and accuracy of information generated by any particular enquiry can vary depending on the identity of the person asking the question, the person responding, and the arbitral candidate. Personal opinions about arbitrators are not fail-safe. Memories can be faulty; assessments can be biased or self-interested; information can be outdated. However, arbitration insiders and large, well-funded parties are much less likely to suffer potential misdirection. There are several reasons.

8.90  First, leading arbitration specialists generally have the most and best quality information on arbitrators. As noted in Chapter 2, service as an arbitrator is an important credential for building a practice as counsel.¹⁵⁰ One reason is that such service provides unique insights about how various arbitrators actually operate on tribunals, during deliberations, and in award drafting.

8.91  The willingness to share the most sensitive information about arbitrators will inevitably depend on how well those asked know and trust the person making the enquiry. It is only natural that sensitive and valuable information is more readily shared with friends and close colleagues. But the effect of this individualized and personalized sorting of enquiries among favoured friends and colleagues, however, is that counsel for opposing parties in the same arbitration could pose the same enquiry about the same arbitrator to the same person, but receive different responses! The study of information asymmetries in other markets rarely if ever contemplates a level of disparity that is so precise and systematic.

8.92  Furthermore, some parties can also hedge against imperfect information by casting a broader net. According to one anecdote, a leading practitioner tracked down information about a particular arbitrator by personally contacting both sets of opposing counsel for every case in which the arbitrator was determined, based on extensive research by junior colleagues, to have presided. Given that leading specialists often charge over US$1000 per hour, this type of research is a luxury that can only be afforded by well-funded parties.

8.93  Information and resource asymmetries exist in many adjudicatory contexts and professional settings.¹⁵¹ As one commentator described information asymmetries in the market for professional services:

The theory of information asymmetries posits that wide information disparities exist in professional services markets (which includes… legal services) between providers and purchasers. The theory’s premise is that professional services are highly specialized and highly skilled, and that very little specific information about the quality of professional services is available to the public.¹⁵²

The market for arbitrator services, however, involves uniquely severe asymmetries that have exceptionally important consequences. These consequences relate directly to the real and perceived legitimacy of any particular arbitration, and have already demonstrated to be particularly disruptive for perceptions of legitimacy in investment arbitration.(p. 340)

8.94  This section proposes a new Arbitrator Intelligence (AI). While a full blueprint of the project is beyond the scope of this book, this final section provides a brief sketch of its overall objectives and structure.

8.95  The basic idea is to create an information resource about arbitrators that is equally accessible, comprehensive, substantive, and reliable. Increasing access to information, including categories of information that are currently limited to arbitration insiders, the AI will aim at reducing information asymmetries, levelling the playing field among participants, and promoting greater transparency in the arbitrator selection process. The AI will also promote market-based accountability among arbitrators, and provide opportunities for new arbitrators to establish reputations and increase the likelihood of being selected.

8.96  The AI will aim at three categories of information: public, semi-public, and feedback. It will organize basic biographic information into individualized webpages for international arbitrators based on traditional forms of publicly available information. A second category of information, which might be considered semi-public, is arbitral awards. Whenever an award is sought to be annulled or recognized or enforced, it is filed with a court. In many systems, court files, including their attachments, can be accessed and copied.

8.97  The most innovative, and delicate, aspect of the AI would be a mechanism for providing feedback about arbitrators. The aim of this feature is to replicate that critical information that is currently gathered through ISO emails and accessible only to some parties. The aim will be to solicit and consistently obtain constructive, reliable, and useful feedback. Critics are concerned that AI may simply be a new advertising space for international arbitrators or a ‘good news only’ source.¹⁵³ Others have noted concern that it might be an arbitrator-related version of Wikipedia, or the equivalent of a grocery store ‘comment box’ that acts as a receptacle for all rational and irrational gripes, or a tabloid that collects reckless and scintillating gossip. The challenge will be to provide constructive, reliable feedback.

8.98  To avoid these concerns, feedback will not be ‘open source’, such as on eBay, Amazon, or other online vendor sites. It will instead be solicited as responses to specific questions. Those questions will aim at the types of issues parties currently seek information about through informal inquiries.

8.99  The AI undoubtedly raises a number of important practical and legal questions. Who would provide that feedback—counsel or parties? Should feedback be collected before or after an award is rendered? Could arbitrators themselves or arbitral institutions provide feedback? What about confidentiality? How would feedback avoid distortions by disgruntled losing parties and overly buoyant prevailing parties? Would feedback be publicly attributed to the person providing it? If not, how would contributors be accountable? How would the AI obtain arbitrator-specific information since most conduct is undertaken as a member of a three-person tribunal? How would confidentiality about the parties’ dispute and arbitral proceedings be protected? Could the AI be potentially liable for defamatory or otherwise improper postings?(p. 341)

8.100  While these are difficult questions, they are not absolute impediments. Editorial policies and procedures will be developed to answer these questions. Those policies and procedures, along with the content of the questionnaire for eliciting feedback, will be developed by an editorial board with input from an advisory board composed of various stakeholders.

8.101  In addition to these practical questions, there are also a host of structural challenges to establishing AI. Most obviously, there are collective action and free rider problems. Narrow self-interest in maximizing their own information relative to others may deter parties and counsel from willingly participating. Moreover, some may be sceptical that, as so-called ‘rational actors’, leading arbitration specialists might agree to any mechanism that would threaten their control over the market for arbitrator services. While these are serious challenges, they likewise have solutions.

8.102  The AI would be a ‘regulator’ and targeted collection and dissemination of information would be a form of ‘regulation’, as those terms are defined in Chapter 6.¹⁵⁴ As such, just like other private regulators, the AI would have to establish its legitimacy and develop strategies for cultivating buy-in from various actors. Feedback might be coordinated with arbitral institutions, which are well-placed to administer and collect feedback questionnaires. On the other hand, as explained in Chapter 6, institutions are not necessarily able to make such information publicly available and may welcome an external resource that can act as a buffer. This opportunity may be particularly enticing to regional institutions, whose resources in this regard are more limited, but whose input and contributions will arguably fill information gaps that currently exist for major European and North American institutions.

8.103  Buy-in can also be cultivated by conditioning access to information on an agreement to provide feedback in the case for which information is sought. Organizations that provide collective representation for parties, such as the Corporate Counsel International Arbitration Group, may encourage participation.

8.104  While the AI will aim primarily at assisting in the selection process in individual cases, it has the potential for more structural implications. The mere potential for feedback may be an effective deterrent for arbitrators otherwise inclined to dally at the margin of ethical conduct. Paulsson uses the term ‘moral hazard’ to describe what he believes is the presumed untrustworthiness and bad faith of party-appointed arbitrators.¹⁵⁵ Among economists, the term has a more specific and technical meaning. Most generically, a moral hazard is a situation when an individual has a tendency or incentive to take risks because the costs that could be incurred by the risk will not be felt by the party taking the risk.¹⁵⁶ For international arbitrators, the preconditions of moral hazard seem pretty well established. More generally, arbitral proceedings of the arbitration community are relatively closed, reducing the risk of discovery. There is an absence of any mechanisms for professional discipline, which reduces the risk of punishment. The arguably excessive caseloads and undue delays in rendering awards, discussed in Chapter 6, as presumably examples of arbitrators taking increased professional (p. 342) risks knowing that consequences are attenuated, arbitral institutions have been seeking to reduce.

8.105  Arbitrators are coming under greater pressure from parties and arbitral institutions to demonstrate efficiency and one bad-apple arbitrator can undermine perceptions about the performance of the entire tribunal. However, the antics of bad-apple arbitrators—such as those identified by Paulsson—are generally known to arbitration insiders, but are rarely known outside inner circles. Although highly-partisan party-appointed arbitrators is a self-correcting problem within an individual tribunal, self-correction across cases requires parties in future cases to be able to access the relevant information.

8.106  Feedback that could be made available to future users in the arbitrator selection process would reduce this moral hazard. It may also be a remedy for the other members of a tribunal to differentiate themselves and avoid being collectively impugned. Weeding out ‘bad’ arbitrators may also increase the potential for appointments of ‘good’ arbitrators. Even talented junior arbitrators, women arbitrators, and arbitrators from outside the traditional international arbitration hubs have difficulty establishing strong reputations to increase their chances of appointment.

8.107  Effectively, the AI would reconfigure how information about arbitrators is generated, disseminated, and used in arbitrator selection processes. By levelling the playing field in the arbitrator selection process, making critical information more generally accessible, and increasing arbitrator accountability, the AI can strengthen the legitimacy and functioning of the arbitrator selection process.

8.108  As described in Chapter 6, the professional conduct of international arbitrators illustrates the potential for international arbitration to engage in effective self-regulation. Even if significant strides have been made, however, some efforts remain stalled because the topic gets mired down in rhetorical platitudes such as Herodotian-like myths about absolute impartiality.

8.109  Because arbitrators are intentionally chosen and paid on a per-case basis, arbitrator ethics are instead a perfect example of how grandiloquence undermines rather than promotes confidence and clarity in professional ethics. It illustrates, in other words, a recurring theme of this book—that effective professional ethics do not dictate what should be done in a vacuum sealed off from all real-world influences and particularly from market influences. The overriding question for professional ethics norms in the twenty-first century is: What does it mean to be professionally ethical within, not apart from, an operating marketplace? It is a question that international arbitration must answer for all its participants, but it is also uniquely well-positioned to answer. Chapter 9 takes up some of the most difficult aspects of this question, namely how party autonomy fits with arbitration’s adjudicatory function, and what that relationship implies for the role of the arbitrator.