It is an undeniable fact that the number of challenges on arbitrators has been raising for decades, and alongside the trend is the increase in successful disqualification. Judging from the movement, it is reasonable to say that arbitrators’ attitudes toward disqualification have shifted from being heavily reluctant to accepting. One can imagine the threshold of a successful disqualification would keep decreasing and the number of successful disqualifications would keep rising. With more and more precedents being set, conditions for disqualification would be clearer and clearer.
Circumstances that have not been explicitly included under the ICSID Convention and other related rules and legal documents might have been acknowledged as legit grounds. However, breakthroughs like this, although greatly beneficial to the systematic development of international investment arbitration under the framework of the ICSID Convention, cannot be accepted without due caution.
Building a direct link between non-compliance with disclosure duty and disqualification is no simple task, not because it is theoretically challenging due to the lack of applicable law, precedents, and theories from academia, whose existence has been addressed previously, but because it is too easy to consider non-disclosure as a legit ground for disqualification and can be misused if not careful with the application.
From non-disclosure to disqualification is a long rope bridge in the jungle with some wooden planks less stable than others. It is easy to imagine oneself going through the bridge and reaching the other side, but the hard part is knowing which step to take and when to stop. If a party wishes to challenge an arbitrator based on their non-disclosure, the only reliance they have is the manifest lack of independent or impartial judgment. Things get tricky from here. The way forward is only possible when the term manifest is given a broad explanation, which includes not just substantial evidence but also the mere appearance of being lacking impartial judgment. Not every tribunal agrees with this broad explanation, and it is only a few recent decisions that are leading to the acceptance of the lowered threshold. Even if the appearance is sufficient to be qualified as the manifest lack of impartial judgment, the lack of clear indication of what can be seen as the appearance is still in the way. The majority of the commentators and even adjudicators suggest that
33 / 37
it is plausible to adopt the standard called “justifiable doubts”, meaning that if the arbitrators’
behaviors raise questions about their required qualities such as independence and impartiality, and the questions are justifiable in the view to a third person, the appearance of manifest lack of the said quality can be referred.
Then there is the question that is perhaps most concerning, that is, does non-conformality with the disclosure automatically lead to the appearance of manifest lack of impartiality? To answer that question, one discussed the existence of the disclosure duty and exemptions. One concludes that the duty to disclose does exist in the ICSID Convention and ICSID Rules of Procedure for Arbitration Proceedings but given its lack of further interpretation, one argues that it is helpful to consider the relevant rules laid down by others that cover the same subjects. Among those rules, the IBA Guidelines on Conflicts of Interest in International Arbitration is perhaps the one that is most commonly relied on, not only by parties of dispute but also sometimes by adjudicators, although the latter group always claims that the IBA Guidelines are at most considered as soft law and has no binding power as the ICSID Convention, it is nothing but a, as suggested by its name, guidelines on conflicts of interest in international arbitration.
One continued the observation on disclosure duty on its exemption. As shown in the precedence, there are situations where the challenged arbitrators failed to comply with their disclosure duties yet were exempted from bearing legal consequences such as disqualification. These exemptions mainly cover two situations.
Firstly, if the challenged arbitrator is not aware of the situation, non-disclosure would not lead to disqualification. Secondly, if the situation is already known to the parties, non-disclosure would not lead to disqualification. If the arbitrators decide not to comply with their disclosure duty when such non-compliance cannot be exempted by the mentioned situations, it is reasonable to question the intention behind the hiding and dishonesty, which can make the doubts about the lack of impartial judgment justifiable. Under ICSID rules, this link is not evident, but it does not mean that it cannot and will not. In fact, some other jurisdictions have supported such a link in precedents and reenforced them in legislation.
In the U.S., non-disclosure has been seen as an appearance of impartiality by the Supreme Court of the United States, and the same, if not harsher, attitude has been codified by California code of civil procedure, where the non-disclosure itself can do the legal ground for disqualification
34 / 37
by law. However, one argues that building a direct link between non-disclosure and disqualification is although feasible, not desirable.
It should always be borne in mind that the automatic linkage would highly restrain the arbitrator’s discretionary power, which is what made arbitration more preferable, for its flexibility.
What’s more, a lowered threshold of disqualification can be used as a method to disrupt the procedure. Disqualification has always been a strategy to slow down arbitral procedures, but the mechanism hasn’t been abused yet because the threshold for disqualification has been traditionally high. With the formation of the direct link between non-disclosure and disqualification, the mechanism can be manipulated and abused more easily as standards are lowered.
35 / 37