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Part II Arbitral Procedures to Control the Selection and Conduct of Arbitrators, Ch.8 The Institution of the Appointing Authority

From: The UNCITRAL Arbitration Rules: A Commentary (2nd Edition)

David D Caron, Lee M Caplan

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Settlement of disputes — UNCITRAL Arbitration Rules — Appointment of arbitrator

(p. 336) (p. 337) Chapter 8  The Institution of the Appointing Authority

1. Evolution of the UNCITRAL Approach?

A fundamental dimension of the UNCITRAL approach to its 1976 Rules is that those rules allow for unadministered arbitration, that is, that there need not be a supervising institution such as the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA). However, that choice created the need for some third party to take the place of a supervising institution for a minimum set of situations where the parties themselves are unable to resolve a question. Examples include selection of an arbitrator where one side fails to so appoint or decision on a challenge to an arbitrator. This third party under the 1976 UNCITRAL Rules is the appointing authority. In the case of the Iran–US Claims Tribunal, the model of the appointing authority was the naming of individuals, one after another, to fulfill the functions specified in the 1976 Rules. This chapter comments briefly on the office of the appointing authority, its evolution in practice and in the 2010 Rules.

Two major observations are in order. First, the 2010 Rules increase the number of possible questions that may be referred to the appointing authority, review of the reasonableness of fees requested by the arbitration tribunal being a major example.1 Many of these questions newly referred to the appointing authority reflect not a concern with the failure of the parties to agree or act as obliged, but rather a concern with the capacity of the arbitrators to self-regulate. Several delegates involved in the drafting of the 2010 UNCITRAL Rules indicated to the authors that one subtle theme—not supported through empirical evidence but rather stoked through anecdotes—was a distrust of some arbitrators to do the right thing. The important point to recognize is that the more questions and functions given to the appointing authority, the more the office of the appointing authority resembles that of a supervising institution. Second, it is important to recognize that in practice, many UNCITRAL investor–state arbitrations are in fact lodged within institutions rather than being non-administered. These two observations suggest a trend to fundamentally move away both in structure and in practice from non-administered arbitration and also suggest that the Iran–US Claims Tribunal model of an individual designated as the appointing authority is giving way to institutions taking on the role of appointing authority.

(p. 338) 2. The Appointing Authority and Composition Generally

The rules concerning appointment, disclosure and challenge of any tribunal must be evaluated as a system. This evaluation has three dimensions: respect for the rights of parties, furtherance of the particular arbitration, and promotion of the arbitral process generally.

Respect for the rights of the parties and furtherance of the particular arbitration are, to a large degree, competing objectives. The UNCITRAL Rules clearly indicate that the parties, by agreeing to arbitration, have waived any right they had to be free of such a consensual process. In this sense, the UNCITRAL Rules undoubtedly lead to the formation of the arbitral panel, and respect for the rights of the parties is limited to the interests of those parties in the constituted panel.

The UNCITRAL Rules recognize several interests of the parties in the arbitral panel. Particularly pervasive is recognition of the interests of the parties in having a say in the formation of the tribunal, their choice as to a sole arbitrator or panel of three, and their choice of a particular appointing authority. Likewise, there is a general acknowledgment of the right of each party to have their case decided by an impartial and independent panel. Thus all arbitrators are required to disclose circumstances that are likely to give rise to justifiable doubts as to impartiality or independence. Arbitrators may be removed if the circumstances do in fact give rise to such doubts. Finally, there is the recognized interest of each party in having a competent and dedicated panel, a particularly important interest, given that the award is final. This interest manifests itself in the right of each party to an arbitrator appointed by it in any panel of three. This right to a party-appointed arbitrator is obviously somewhat paradoxical. On the one hand, it runs quite contrary to the interest in an impartial panel, while, on the other hand, to a degree it ensures a more thorough and exacting deliberative process.

The Rules also recognize that if such interests are regarded as absolute, then an avenue for sabotage of the formation of the panel exists. Thus, a party might refuse to agree to either the use of a sole arbitrator or panel of three, might delay the raising of a challenge until a later crucial moment in the proceedings, or fail to name its arbitrator in a panel of three.

To avoid such delays, a reasonable limit is placed on the time a party has to exercise its rights. A party must choose to use a sole arbitrator or panel of three within thirty days of receipt of the notice of arbitration.2 A challenge must be raised within fifteen days of the party learning of the circumstances on which a challenge is based.3 Parties must reach agreement on appointment of a solo arbitrator within thirty days after receipt by all parties of a proposal for such appointment, where parties have agreed for a sole arbitrator to be appointed.4 Alternatively, a party must appoint its arbitrator to a panel of three within thirty days after the other party's appointment.5 And finally, where the parties have agreed upon a panel of three, the two appointed arbitrators must agree on a choice of presiding arbitrator within thirty days after the appointment of the second arbitrator.6

These temporal limits are mitigated in two ways. First, the right in a practical sense is generally not immediately or permanently lost when the time limit is passed, but rather (p. 339) continues at the discretion of the other party who must give the limit substance by requesting a third party, namely the appointing authority, to act in place of the reluctant party. Second, although once past the time limit the reluctant party may lose its choice in the matter, generally the Rules provide for the choice to be made for that party in a manner that protects its interest in having an impartial, independent and competent panel. Thus, if a party refuses to choose whether a sole arbitrator or panel of three should be used, the Rules themselves dictate that a panel of three shall be used, thus ensuring greater competence.7 If a party fails to appoint its arbitrator on a panel, then an appointing authority makes that choice for the party.8 Indeed, where agreement on a sole or presiding arbitrator is not possible, the appointing authority through the stipulated list procedure9 also gives limited effect to the interests of the parties in personally choosing the arbitrators of their dispute. The one exception to such mitigating factors is the challenge; it must be raised within fifteen days or it is lost.

There is an apparent weakness both in the Rules’ respect for the rights of the parties and in its furtherance of the arbitration. The disclosure provision relies only on the good faith of the arbitrator and the party that appointed the arbitrator. This problem is avoided, however, if the failure to disclose or respond to reasonable inquiries is treated as some evidence of a lack of impartiality and independence thereby abbreviating any challenge procedure.

Although the Rules clearly further the arbitration by ultimately allowing formation of a panel, one must ask whether the envisioned process is so costly and lengthy that in fact the attempt to arbitrate is defeated. As to appointment, the Rules present neither a costly nor a lengthy process. For example, in the case of a party opposing at every step the formation of a three-person panel, the other party would have to make only three requests: (1) that the Secretary-General of the Permanent Court of Arbitration (PCA) designate an appointing authority;10 (2) that the appointing authority choose the other party's arbitrator;11 and (3) that the appointing authority choose the presiding arbitrator.12 The periods of time involved do not seem burdensome compared to, for example, the time a party might have to wait on the docket of many municipal courts.

The challenge process, however, is another matter. Although the challenge must be initiated in fifteen days, the Rules are otherwise silent as to the details or speed of the process by which the challenge is decided. Notably, the scheme of the Rules properly regards the objective of resuming the arbitration as quickly and cheaply as possible as more important than ascertaining with certainty through a formal and lengthy process the truth of a challenge. This choice is most graphically evidenced by the provisions allowing for either party to agree to the challenge without prejudice. Thus the challenge is not a device policing the arbitration world, but is rather a mechanism for getting the particular arbitration back on track. Therefore, the appointing authority should act quickly to declare inadmissible a late-filed challenge or an unsubstantiated challenge; should quickly deny patently frivolous or vexatious challenges, and otherwise should conduct the investigation of the challenge in an expeditious manner, treating the parties with equality but not inflating the process, for example, by granting the parties or the arbitrator the right to a formal hearing.

(p. 340) The ability of an arbitration under the UNCITRAL Rules to proceed despite a resisting party does much to promote international arbitration. That the provisions choose to continue the practice of party-appointed arbitrators is more problematic. The practice has a long tradition and an equally long list of critics. On the positive side, the presence of party-appointed arbitrators makes the deliberative process more thorough and exacting by ensuring that views of the party that appointed them arefully considered. It also reduces the likelihood of an aberrant decision. Such arbitrators also bring to the panel a knowledge of the local law of both parties. On the negative side, party arbitrators can exceed the appropriate bounds and become aggressive advocates for the party that appointed them. Thus holding party-appointed arbitrators under the Rules to the same standards of impartiality and independence applicable to a presiding arbitrator is problematic, but also welcome.

3. Lessons from the Iran–US Claims Tribunal for the Office of the Appointing Authority

Ultimately, the appointing authority ensures that a party cannot block or frustrate the composition of an impartial and independent arbitral panel.13 Yet it is an office on which little has been written.14

This area of arbitral procedure has a language of its own and deserves some preliminary remarks. The title “appointing authority” as used in the UNCITRAL Rules is somewhat of a misnomer. There are appointing authorities who do only what their name implies: appoint. However, an appointing authority under the UNCITRAL Rules is also called upon to decide challenges to arbitrators. The broader functions of the UNCITRAL appointing authority has important consequences, particularly as to his or her qualifications. The Secretary-General of the PCA referenced in the UNCITRAL Rules is not the appointing authority (although the parties could agree that he should be). Rather the Rules provide that that high office designates the appointing authority. The Secretary-General of the PCA designates an appointing authority while the parties agree to (and one could say thereby designate) an appointing authority. Thus the right to agree on an appointing authority resides with the parties; as part of this right, the parties under the Rules and under certain circumstances delegate the task of designating the appointing authority to the PCA Secretary-General. Although the Rules do not consistently adhere to this distinction in terminology, we find the distinction useful and employ it in the following text.

The UNCITRAL Rules provide that the parties may agree upon the person or the institution to serve as appointing authority. If there is no such agreed authority or if the previously designated authority refuses to make an appointment, then either party may request (p. 341) the PCA Secretary-General to designate an appointing authority. Unusually, the Rules do not contain a provision stating that “if after fifteen days the parties are unable to agree upon an appointing authority then either party may request ….” Instead either party may immediately request the designation of an appointing authority. Thus, for example, in the case of the January 1, 1982 Iranian challenge of Judge Mangård,15 the Agent of the United States requested the Secretary-General of the PCA on January 8, 1982 to designate an appointing authority. The Secretary-General did so on January 13, 1982. In this sense, the parties may only have time to agree to an appointing authority before the need for such an authority arises.

The functions of an appointing authority under the UNCITRAL Rules involve either the appointment of an arbitrator or decision on the challenge of an arbitrator. A former President of the International Court of Justice (ICJ) in discussing that office's responsibility for the appointment of arbitrators asserts that “the function is non-judicial [because] it is a function of selection and not of decision.”16 This observation on the administrative, rather than judicial nature, of the appointment function has clear implications for the qualifications required of an appointing authority under UNCITRAL Rules where there is also the challenge decision function.17

In addition to judicial training or experience, other selection criteria can be seen in the choice of Judge Moons, Chief Justice of the Hoge Raad, as the Appointing Authority for the Tribunal. In particular Judge Moons was immediately available to take up his duties, was ordinarily located at the site of the Tribunal and therefore was accessible to the parties and was knowledgeable as to the law of the forum to the extent that such law might bear on his duties.

Several Iranian arbitrators objected strenuously, however, to the Dutch nationality of Judge Moons. In this vein, Mr Kashani in a letter to Judge Moons wrote:

“The Netherlands, which has agreed to become the Host Country to this international arbitral Tribunal, must maintain a strict neutrality towards the States party to the disputes. Such a neutrality, requires, as a minimum, that the Netherlands authorities avoid intervening in the work of this Tribunal in any way which works to the manifest interest of one of the two States and to the injury of the other.

… [I]f you wish to know just how illogical and inequitable it is for you to act in the sensitive capacity of Appointing Authority, … you should reflect a bit on the long-standing ties between the Royal Dutch Government and the United States …

… [T]he special, friendly and highly sentimental political-economic-military-security ties between the Netherlands and the United States, and these two countries’ mutual interests, definitely and categorically make it impossible for authorities of the Netherlands to play an impartial and independent role with respect to the relations between the Iranian and American Governments … Furthermore, Mr. Moons, as a high-ranking figure in the Dutch Government, you will never be able to ignore your nation's interests or the identity of interests between Holland and the United States. In fact, … you have a conflict of interests vis-à-vis the Government of the Islamic Republic of Iran and should never be able to intervene in the slightest in Iran's relations with the United States. Even if the Iranian Government (p. 342) had not expressed its lack of consent, you … ought personally to have announced your incompetence to take any manner of action in this regard, in order to comply with the standards of independence and impartiality and to avoid any possible misgivings as to your having interests in common with one of the Parties, criteria which are prerequisite to service as the Appointing Authority.”18

Independence and impartiality are important criteria in the selection of an appointing authority and the nationality of the appointing authority could be regarded as a circumstance potentially giving rise to justifiable doubts as to the impartiality of that authority. One method that would give adequate consideration to the nationality issue would be to designate an appointing authority in accordance with the apparent will of the parties. The experience of the Tribunal is again noteworthy.

Iran and the United States showed trust in the Netherlands through their designation of that country as the site of the litigation in the Algiers Accords19 and in their subsequent confirmation of that choice without objection. The state parties also chose the Netherlands as the site for the depositary bank. In doing so Iran and the United States presumably felt that Netherlands was a nation which through its nationals could serve independently and impartially. The will of the state parties, to the extent ascertainable, thus evidences indeed a preference for the Netherlands. Given that the state parties no doubt also intended to have as an appointing authority someone readily available and accessible, the appointment of Judge Moons, a Dutch national, was both wise and proper.

Mr Kashani argued in his letter that the President of the ICJ should serve as the appointing authority. Douglas Johnson has observed that “[i]n theory there could be no more appropriate choice for this task—which may sometimes be a delicate one—than the President of the Court, who may be relied upon to be an international official of the highest integrity and impartiality.”20 However, it is the sensitivity of the President of the Court to delicacies that in the past has been most criticized.21 More importantly, the President of the Court has no express authority to serve as an appointing authority. While past practice condones such service, the President's function should not be so extensive as to interfere with his duties to the Court. In this regard, it should be noted that designation as appointing authority for a single ad hoc arbitration is significantly less of a commitment than service in such a capacity for a claims commission with thousands of claims, or the ICJ during a busy period. As Simpson and Fox wrote in their 1959 study:

There is … sufficient doubt whether, when the need arises, [the President of the ICJ] will in fact be able and willing to act, to make it advisable to explore whether the parties to an arbitral engagement cannot agree to entrust the delicate task of appointing “neutral” arbitrators to some other impartial authority.22

There is a possibility that an appointing authority operating under the UNCITRAL Rules may be called upon later to decide a challenge to one of his appointments or, if the (p. 343) challenge is sustained, to appoint a substitute arbitrator. This possibility strengthens the natural tendency for one appointing authority to take care of all the respective tasks for such authority for a given tribunal.

Finally, because a party may hope for a negotiated settlement with a friendly continuation of business relations, he may be reluctant to take the “unfriendly” step of reference to the appointing authority. Settlements are always to be encouraged.23 But the experience of the Tribunal teaches that nothing encourages settlement more than progress in the arbitration and that the reluctant party is not dismayed but rather only surprised at his success and thus encouraged to seek further delays when the claiming party agrees to actions such as extension of the reasonable period provided by the UNCITRAL Rules for appointment.


1  See Chapter 27 discussing, among other Rules, Article 41.

2  2010 UNCITRAL Rules, art 7 (1).

3  2010 UNCITRAL Rules, art 13(1).

4  2010 UNCITRAL Rules, art 8(1).

5  2010 UNCITRAL Rules, art 9(1).

6  2010 UNCITRAL Rules, art 9(2).

7  2010 UNCITRAL Rules, art 7(1).

8  2010 UNCITRAL Rules, art 7(2).

9  2010 UNCITRAL Rules, art 8(2).

10  2010 UNCITRAL Rules, art 6(1).

11  2010 UNCITRAL Rules, art 9(2).

12  2010 UNCITRAL Rules, art 9(3).

13  It may be argued that the parties in undertaking to arbitrate have a legal duty to cooperate in the constitution of the arbitral panel. As a practical matter, however, it is the appointing authority that ensures such constitution. For one view on the theoretical question, see D Johnson, “The Constitution of an Arbitral Panel,” (1953) 30 BYIL 152, 164 (“It is submitted that this question could be answered in the affirmative [for States] only if it could be proved that there is a rule of customary law, or an established rule of interpretation, that a pure undertaking to arbitrate necessarily implies an obligation to take some specific step [other than negotiating in good faith] in the matter of constituting a tribunal. It is believed that the existence of no such rule can be proved.”) See also J Simpson and H Fox, International Arbitration (1959) 82–3.

14  For the most extensive article known to the authors, see, M Khan, “The Appointment of Arbitrators by the President of the International Court of Justice,” (1975) 14 Comunicazioni e Studi 1021.

15  See Chapter 5, section B(1) for a more detailed commentary.

16  M Khan, “The Appointment of Arbitrators,” n 14, 1027.

17  “The fact that the President [of the ICJ] is a judicial officer is irrelevant: no more is expected of him than is expected of, for example, the United Nations Secretary-General, when he is requested to appoint arbitrators under analogous treaty-provision.” M Khan, “The Appointment of Arbitrators,” at 1027–8. As to the power of the Secretary-General of the United Nations to act as an appointing authority, see “Interpretation of Peace Treaties with Bulgaria, Hungary and Romania,” (1950) ICJ Rep 65, 221.

18  Letter of Mahmoud Kashani to the Appointing Authority, Ch M J A Moons, July 17, 1984, reprinted in (Sep 28, 1984) Iranian Assets Litigation Reporter 9362.

19  Article VI(I) of the Claims Settlement Declaration provides: “The seat of the Tribunal shall be the Hague, The Netherlands, or any other place agreed by Iran and the United States.” See also n 332 in Chapter 2 of this volume (a German arbitral institution designated as appointing authority for an arbitration in Germany).

20  D Johnson, “The Constitution of an Arbitral Panel,” n 13, 155.

21  D Johnson, “The Constitution of an Arbitral Panel,” n 13, 153–8 (discussion of the refusal of the President and Vice-President of the Court to appoint a party arbitrator for Iran as requested by the Anglo-American Oil Company in 1951 on the basis of Article 22 of a Concession Agreement between that Company and Iran).

22  J Simpson and H Fox, International Arbitration, n 13, 85.

23  See Chapter 25 on settlements.