Draft code of conduct for adjudicators in investment treaty disputes released

Out-Law News | 20 May 2020 | 9:50 am | 3 min. read

A new draft code of conduct for adjudicators in investment treaty disputes, aimed at providing guidance on issues relating to disclosure obligations, limitations on the number of cases that can be heard simultaneously and sanctions for unethical behaviour, has been published.

The code has been drawn up by the International Centre for Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL), based on a comparative review of the standards found in codes of conduct in investment treaties, arbitration rules applicable to investor-state dispute settlements (ISDS), and codes of conduct of international courts.

The draft code (24 page / 323KB PDF) provides an overview of key ethical issues identified by UNCITRAL Working Group III and suggests various means to regulate and enforce adjudicators’ obligations. The code requires all adjudicators to apply “the highest standards of integrity and diligence, including fairness, competence, civility and efficiency”.

Dispute resolution expert Dean Lewis of Pinsent Masons, the law firm behind Out-Law, said: “The draft code is a welcome codification of many rules that are usually recognised and incorporated in international commercial arbitrations. That this document is needed might suggest that such rules are not always recognised in investment treaty cases and it should contribute to a more acceptable framework for the arbitrations, particularly for sovereign states.”

Lewis Dean

Dr. Dean Lewis

Partner, Co-head of International Arbitration

That this document is needed might suggest that such rules are not always recognised in investment treaty cases and it should contribute to a more acceptable framework for the arbitrations, particularly for sovereign states.

The draft code includes 12 articles that cover anyone serving as an 'adjudicator' in ISDS proceedings from the time they are notified about a possible appointment. The comprehensive term 'adjudicator' is used in the code to ensure its application to all those who adjudicate ISDS cases, regardless of whether they are arbitrators, members of annulment committees, members of an appeal mechanism or judges on a bilateral or multilateral standing mechanism (permanent court).

The code mandates extensive disclosure requirements as a proactive aid to avoid instances of any direct or indirect conflict of interest, and says that adjudicators should err in favour of disclosing a conflict if they have any doubt about whether to make a disclosure.

Article 5 obliges adjudicators to disclose any interest, relationship or matter that could reasonably be considered to affect their independence or impartiality, which in turn constitute the core elements of an adjudicator's ethical conduct.

The fact of disclosure does not mean a conflict exists, but allows for a full assessment by all parties to the dispute.

The duty of disclosure is a continuous one and includes relevant relationships which have existed in the previous five years, or which could affect the adjudicator's independence or impartiality. This includes relationships with third-party funders, addressing concerns about actual or perceived bias. “The rules require extensive disclosure obligations, including of any relationship with ‘any third party that has a direct or indirect financial interest in the outcome of the case’. This makes express an obligation of disclosure in respect of a relationship with any third-party funder in investment arbitration. This is an important requirement given the concerns that many state parties have raised about third-party funding in investment arbitration,” Pinsent Masons' Lewis said.

Another significant issue addressed by the draft code is so-called 'double hatting', which refers to the practice of an adjudicator simultaneously acting as counsel, expert or adjudicator in other ISDS or international proceedings. The draft code proposes that adjudicators should be prevented from acting on two matters involving the same party, facts or treaty at the same time.

"Regulating double hatting raises various interconnected questions and is a complex policy proposal that will require careful consideration of conflicting and in-depth discussions," said Lewis. "Recognising the sensitivity linked to this issue the working party behind the code said there was a need to better delineate its scope, and that it was necessary to decide whether to create an outright ban on double-hatting or create an obligation to disclose it was happening."

The draft code also sets out rules on adjudicators’ time management of a case, and how to agree and document fees for the adjudicator and any assistants.

It remains unclear what sanctions will be imposed for breaching the code, and how it will be implemented. The draft code said voluntary compliance could be a primary method of implementation.

Potential sanctions could be linked to remuneration, disciplinary measures, reputational sanctions or notifications to professional associations, although the working group acknowledged monetary or reputational sanctions could be difficult to implement.

The relationship of the code with existing codes of conduct in investment treaties and other instruments that could simultaneously apply to adjudicators in the same dispute could also need consideration, according to the draft document.