ARGUMENTS FOR AND AGAINST STANDING PANELS OF …...the rules of institutions administering ISA by adopting can be improvedstanding panels for the resolution of investor-state disputes

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ARGUMENTS FOR AND AGAINST STANDING PANELS OF ARBITRATORS IN INVESTOR-STATE ARBITRATION: EVIDENCE AND

REALITY

LEON E. TRAKMAN∗ AND DAVID MUSAYELYAN∗∗

Due to the recent dissatisfaction with investor-state arbitration (‘ISA’), scholars have proposed greater reliance on standing panels as a possible reform pathway. While significant benefits are often associated with rosters of dispute resolvers, limited evidence is available supporting these assertions. Furthermore, standing panels are exceedingly rare in the investor-state context. The absence of strong evidence in support of standing panels and the current trends in state practice suggest that standing panels should be introduced gradually and with caution. However, in order to reap the benefits associated with this form of dispute resolution, a moderate degree of institutionalization in appointing and managing such panels will be required.

Keywords: Roster of Arbitrators, Standing Panels, Panels, Selection of Arbitrators, Investor-State Arbitration

∗ B Com LLB (Cape Town), LLM, SJD (Harvard), Professor of Law and Former Dean, Faculty of Law, University of New South Wales, Sydney, Australia. Email: [email protected]; Arbitrator and Mediator, Trakman and Associates, http://trakmanassociates.com. ∗∗ Hons B Arts (University of Toronto), LLM (National Taiwan University), JD Candidate (University of Ottawa). Email: [email protected].

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CONTENTS

I Introduction …………………………………………………................................................................................3 II Policy context and Arguments in Support of Standing Panels in ISA ……………………………………………..4 A Policy Context ………………………………………………………………………………………………………………..4 B Arguments in Support of Standing Panels under ISA ………………………………………………………7 1 Impartiality ……………………………………………………………………………………………………….7 2 Accountability …………………………………………………………………………………………………..9 3 Efficient Resource Utilization …………………………………………………………………………..10 4 Equity Considerations ……………………………………………………………………………………..10 III Analysis of Available Research on Standing Panels …………………………………………………………………….11 A Summary of the Research …………………………………………………………………………………………….11 1 What is a ‘standing panel’? ………………………………………………………………………………11 2 Prevalence of Standing Panels …………………………………………………………………………12 3 Evidence on the Benefits Associated with Standing Panels ……………………………….14 B Synthesis of the Findings ………………………………………………………………………………………………18 IV Survey of Recent Bilateral Investment Treaties ………………………………………………………………………….19 A Survey Methodology ……………………………………………………………………………………………………19 B Findings …………………………………………………………………………………………………………………….…20 1 Arbitrator Challenges ………………………………………………………………………………………21 2 Arbitrator Qualifications and Code of Conduct ………………………………………………...21 3 Standing Panels ……………………………………………………………………………………………….22 4 Indirect Influence of Standing Panels ……………………………………………………………….23 V Recommendations and Conclusions ………………………………………………………………………………………….25 VI Appendix: Table of Investment Agreements …………………………………………………………..…………………28

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I INTRODUCTION

Article 13 of Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID Convention’)1 provides for state parties to nominate up to four arbitrators to be placed on a list of dispute resolvers. These individuals remain on that list for a renewable term of six years.2 The Convention does not oblige the disputants to make their selection from the list constituted by the member states.3 Although a large number of states nominated individuals to these lists, disputants usually rely on ad-hoc appointments for the resolution of investor-state disputes.

Due to the recent dissatisfaction with investor-state arbitration (‘ISA’), a number of reform proposals have been put forward by the academic community. Standing panels of arbitrators4 are highlighted as a possible reform option. Supporters of this reform proposal argue that standing arbitral panels enhance transparency, expedite appointments and promote greater quality and consistency of decisions.5 Thus, the rules of institutions administering ISA can be improved by adopting standing panels for the resolution of investor-state disputes.

This proposal is also appealing because standing panels function as a halfway house between a fully-fledged investment court and a system of ad-hoc arbitration. It is arguable that standing panels of arbitrators can be used as an alternative pathway to promote global investment governance. Arbitrators on these standing panels would be akin to a roster of career judges in domestic legal systems. These arbitrator-judges could form a community that would standardize legal norms and practices, paving the way for future institutionalization of the ICSID Convention and the eventual creation of a world investment court.

1 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (‘ICSID Convention’). 2 Ibid, art 15(1). 3 Ibid, art 40(1). 4 Scholars use different terminology to describe this dispute resolution format. For the purpose of consistency, we refer to the term ‘standing panels’ when discussing a dispute resolution mechanism where dispute resolvers are selected from a list drawn up by an institutional authority in charge of maintaining that list. As will be highlighted below, scholars refer to standing panels in general terms and do not recognize the institutional underpinning of such system. See, Section III (A) below. 5 See Section II (A) and (B) below.

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Although there is some support for standing panels, only a limited body of research is available on the subject. Somewhat ironically, while significant benefits are often associated with standing panels, these commonly cited benefits are not explored in the few studies written on the subject. On the contrary, the research involving standing panels tends to be polarized over the question of whether party appointed arbitrators are actually capable of exercising impartiality and independence. Furthermore, no quantitative research on standing panels has been conducted in the context of investor-state arbitration, raising questions over whether the advantages of standing panels are applicable in this context.

The narrow and somewhat anecdotal focus of available research on standing panels poses challenges in assessing their viability and desirability in the context of ISA. Policy makers have to weight major claims in support of standing panels against the limited evidence supporting or refuting these claims.

In our attempt to overcome these challenges, we consulted a broad range of sources on standing panels and located a number of empirical studies that examined the operation of standing panels in various commercial contexts, not restricting our analysis to ISA. Our research leads us to draw the following conclusions. Although there are a number of qualitative virtues associated with standing panels, the quantitative research does not support these qualitative claims. One reason why standing panels are understudied is likely due to the confidential nature of ISA and the difficulties associated in arranging a suitable research environment.

Furthermore, our study of academic and professional literature and of BITs demonstrates that state practice is generally averse to standing panels in the context of ISA. Sates are also generally hesitant to surrender their right to appoint arbitrators. Nevertheless, standing panels are found in a number of interstate dispute resolution mechanisms and also in international commercial arbitration. We also note states do delegate their sovereign rights to appoint arbitrators in a number of narrow circumstances in ISA context.

We conclude by suggesting that standing panels have viability in ISA dispute resolution, provided they are supported by a sophisticated institutional framework.

The paper begins by outlining the arguments in support of standing panels. Second, we summarize available research on the subject and make preliminary assessments based on the available studies. Third, we examine all bilateral investment treaties (‘BITs’) concluded between 2014 and 2016 to highlight the use of standing panels by states. Drawing on our observations, we discuss the future of standing panels in the context of ISA and outline possible reform avenues.

II POLICY CONTEXT AND ARGUMENTS IN SUPPORT OF STANDING PANELS IN ISA

A Policy Context

Much of the analysis on standing panels is linked to broader debate over reform of key global trade institutions, in particular the NAFTA, the WTO, and the ICSID. As indicated below, the context in which inquiries about standing panels were made has promoted a particularly analytical approach to standing panels. Specifically, there is a strong assumption that standing panels are generally beneficial. Thus, this format of dispute resolution is assumed to be an appropriate remedial measure against the perceived lawless, arbitrary and unregulated nature of arbitration.

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However, in historical terms, standing panels of arbitrators was an obscure topic until the United States, Canada and Mexico concluded the NAFTA. The unique cross-appointment of panelists from a roster of arbitrators by each side represented an innovation in dispute resolution and a minority of studies were devoted to the analysis of standing panels under the NAFTA.6

Although the NAFTA sparked some interest in standing panels, the topic did not receive further academic coverage until the international community launched the WTO Dispute Settlement Understanding (‘DSU’) reform discussions in 2002. At that time, scholars and policy makers engaged in fierce debates over the DSU’s future direction. The broader question surrounding these debates was whether the DSU was evolving into a highly legalized world trade court, or whether it should retain its ad-hoc character.7

As part of its reform proposals to the DSU, the European Community proposed establishing a permanent roster of panelists who would be randomly assigned to hear disputes, just as was done by the WTO Appellate Body (‘AB’).8 Following this submission an entire issue of the Journal of International Economic Law was devoted to a discussion of the EC proposals with contributions from practitioners and scholars.9

The topic of standing panels was revitalized more recently in the context of the recent backlash against ISA.10 In 2007, Bolivia withdrew from the ICSID Convention.11 A number of other regional economies—Cuba, Nicaragua, Ecuador and Venezuela pledged to terminate their memberships in the ICSID, citing the unfair nature of the system, its bias in favour of foreign investors and the promotion of regulatory chill.12 Not long after Ecuador’s withdrawal from the ICSID Convention, the Australian Government issued its 2011 Policy Statement, stating that it would no longer agree to the adoption of international

6 See, eg, Sidney Picker Jr., ‘The NAFTA Chapter 20 Dispute Resolution Process: A View from the Inside’ (1997) 23 Canada-United States Law Journal 525, 529 (comparing selection of panelists from a roster versus on ad-hoc basis); 0. Thomas Johnson Jr., ‘Alternative Dispute Resolution in the International Context: The North American Free Trade Agreement’ (1992) 46 SMU Law Review 2175 (discussing standing panels in general and exploring how they operate in the context of the NAFTA); J.C. Thomas, ‘Investor-State Arbitration Under NAFTA Chapter 11’ (1999) 37 The Canadian Yearbook of International Law 98; David A. Gantz, ‘Dispute Settlement Under the NAFTA and the WTO: Choice of Forum Opportunities and Risks for the NAFTA Parties’ (1998) 14 American University International Law Review 1025. 7 See, eg, John H. Jackson, ‘Dispute Settlement and the WTO - Emerging Problems’ (1998) 1(3) Journal of International Economic Law 329 (arguing that the Appellate Body of the WTO should not be relied on extensively in situations concerning regulatory matters) and Giorgio Sacerdoti, ‘The Dispute Settlement System of the WTO: Structure and Function in the Perspective of the First 10 Years’ (2006) 5 The Law and Practice of International Courts and Tribunals 49 (discussing the Appellate Body’s role as a judicial body, commonly cited reform proposals and exploring the resistance to these proposals). 8 Communication from the European Communities, Contribution of the European Communities and Its Member States to the Improvement of the WTO Dispute Settlement Understanding, TN/DS/W/1 (2002) 1, 2-4. 9 William J. Davey, ‘Mini-Symposium on the Desirability of WTO Permanent Panel Body’ (2003) 6(1) Journal of International Economic Law 175. 10 For the coverage of these events see Leon E. Trakman and David Musayelyan, ‘The Repudiation of Investor–State Arbitration and Subsequent Treaty Practice: The Resurgence of Qualified Investor–State Arbitration’ (2016) 43(1) ICSID Review Foreign Investment Law Journal 194. 11 On Bolivia’s denunciation and withdrawal from the ICSID, see International Centre for Settlement of Investment Disputes, ‘Bolivia Submits a Notice under Article 71 of the ICSID Convention’ (News Release, 16 May 2007) <http://documents.worldbank.org/curated/en/2007/01/9467340/news-icsid-vol-24-no-2> . 12 International Institute for Sustainable Development, ‘South American Alternative to ICSID in the Works as Governments Create an Energy Treaty’, (6 August 2008) <https://www.iisd.org/itn/2008/08/06/south-american-alternative-to-icsid-in-the-works-as-governments-create-an-energy-treaty/>.

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investment arbitration in its bilateral and regional trade agreements.13 Australia’s policy position was accentuated by the ensuing claim lodged by Phillip Morrison over the plain tobacco packaging initiative of the Australian government. While Australia eventually backed down from its categorical rejection of ISA,14 its initial actions pushed ISA into the mainstream media.15 Subsequent repudiations of ISA by South Africa16 and Indonesia17 and the accompanied negative media coverage of ISA sparked multiple publications over its legitimacy and possible future reforms.

A common criticism of ISA was that proceedings ordinarily took place behind closed doors and often concerned sensitive government policies. Academics and government officials questioned the desirability of having unelected and unaccountable arbitrators deciding matters of national importance without any system of oversight or appeals. A number of decisions involving challenges over highly questionable behaviour of commercial arbitrators were cited18 to further question the underlying assumptions about the fairness of ISA.

13 Australian Government, Department of Foreign Affairs and Trade, ‘Gillard Government Trade Policy Statement: Trading Our Way to More Jobs and Prosperity’ (April 2011) <http://blogs.usyd.edu.au/japaneselaw/2011_Gillard%20Govt%20Trade%20Policy%20Statement.pdf>. Also see Jürgen Kurtz, ‘Australia’s Rejection of Investor–State Arbitration: Causation, Omission and Implication’ (2012) 27 ICSID Review Foreign Investment Law Journal 65; Leon E. Trakman, ‘Investor-State Arbitration or Local Courts: Will Australia Set a New Trend?’ (2012) 46(1) Journal of World Trade 83. 14 Australia has announced that it will negotiate ISA on case-by-case basis. See Australian Government, Department of Foreign Affairs and Trade, ‘Trade and Investment Topics–State Dispute Settlement’ <http://dfat.gov.au/trade/topics/pages/isds.aspx>. See Leon Trakman, ‘Deciding Investor States Disputes: Australia's Evolving Position’ (2014) 15 Journal of World Investment and Trade 152. Australia’s subsequent agreements with Malaysia and Japan did not provide for ISA, however FTAs with Korea and China contain ISA dispute resolution clauses and allow investors to lodge claims under the ICSID rules. 15 For a representative sample of media responses see the Economist, ‘The Arbitration Game’, 11 October 2014 <http://www.economist.com/news/financeand-economics/21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration>; Sierra Club of Canada, ‘Multiple Countries Reject Investor-State’ (25 January 2014) <http://www.sierraclub.ca/en/main-page/multiple-countries-reject-investor-State-2013-update>. 16 Luke Eric Peterson, ‘South Africa Pushes Phase-out of Early Bilateral Investment Treaties after at Least Two Separate Brushes with Investor-State Arbitration’, Investment Arbitration Reporter (online), 23 September 2012 <http://www.iareporter.com/articles/20120924_1>. Herbert Smith Freehills Dispute Resolution, ‘South Africa Terminates its Bilateral Investment Treaty with Spain: Second BIT terminated, as Part of South Africa’s Planned Review of its Investment Treaties’, Arbitration Notes (online) 21 August 2013 <http://hsfnotes.com/arbitration/2013/08/21/south-africa-terminates-its-bilateral-investment-treaty-withspain-second-bit-terminated-as-part-of-south-africas-planned-review-of-its-investment-treaties>. The list of active South African BITs is available at the UNCTAD, Investment Instruments Online Database: South Africa <http://investmentpolicyhub.unctad.org/IIA/CountryBits/195#iiaInnerMenu>. In its 2015 World Investment Report, UNCTAD noted that South Africa has continued to enforce its anti-ISA policies and terminated more of its investment treaties. See UNCTAD, ‘2015 World Investment Report: Reforming International Investment Governance’, 110, available at <unctad.org/en/PublicationsLibrary/wir2015_en.pdf> (‘2015 Investment Report’). 17Kingdom of the Netherlands, Netherlands Embassy in Jakarta, ‘Termination Bilateral Investment Treaty’ (News Release) <http://indonesia.nlembassy.org/organization/departments/economic-affairs/termination-bilateral-investment-treaty.html>. Also see Leon Trakman and Kunal Sharma, ‘Indonesia’s Termination of the Netherlands–Indonesia BIT: Broader Implications in the Asia-Pacific?’, Kluwer Arbitration Blog (online), 21 August 2014 <http://kluwerarbitrationblog.com/blog/2014/08/21/indonesias-termination-of-the-netherlands-indonesia-bit-broader-implications-in-the-asia-pacific/>. 2015 UNCTAD Investment Report notes that Indonesia continues terminating its BITs and has discontinued 18 of its 64 BITs. See, World investment Report, above n 16, at 110. 18 Studies suggest that there is a noticeable increase of challenges to arbitrators. See Lars Markert, ‘Challenging Arbitrators in Investment Arbitration: the Challenging Search for Relevant Standards and Ethical Guidelines’ (2010) 3 Contemporary Asia Arbitration Journal 237; Christopher Harris, ‘Arbitrator Challenges in Investment Arbitration’ (2008) 4 Translational Dispute Management 1.

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In order to promote greater transparency, accountability and social responsibility in ISA proceedings, a standing roster of arbitrators was thus advocated by a number of academics.19 Reflecting this recent interest in standing panels in the context of ISA, the 2015 UNCTAD World Investment Report suggested a ‘roster of qualified arbitrators agreed upon by the contracting parties and determining by lot the arbitrators who sit on a specific case’ as one of the options to improve the overall arbitration process in investor-state proceedings.20

Most recently, debate concerning standing panels in ISA spilled over to the negotiations over major trade agreements. For example, a number of EU states expressed reservations over the ICSID provisions in the TTIP, currently under negotiations with the United States.21 In its negotiation position paper, the EU argued that the TTIP should allow for a roster of arbitrators.22 The proposal encourages ‘steps that can be taken to transform the system towards one which functions more like traditional courts systems, by making appointment to serve as arbitrators permanent, [and] to move towards assimilating their qualifications to those of national judges’. Furthermore, ‘this option would not present technical difficulties’ and ‘would break the link between the parties to the dispute and the arbitrators, … mean[ing] that all arbitrators have been vetted by the Parties’.23 The environment in which the debates over standing panels took place has been instrumental in shaping the focus of the research arising arose from it. First, academic interest in the subject has evolved largely out of debates over the WTO DSU reforms, and to some extent the NAFTA. Thus, discussions of standing panels have not generally taken into account different institutional contexts. Second, the subject of standing panels is frequently invoked as a response to concerns with international arbitration. In almost all academic literature on the subject, standing panels are treated as a cure to problems commonly associated with arbitration.24 Hence, the vast majority of research on the subject analyzes whether or not standing panels should be used as a formal response to perceived limitations associated with unregulated arbitration, and not whether or not standing panels actually have functional utility in regulating arbitration proceedings. In other words, there is a strong presumption that standing panels are beneficial to the resolution of disputes, but without substantiation.

19 See, eg, Hans Smit, ‘The Pernicious Institution of the Party-Appointed Arbitrator’ (2010) 33 Columbia FDI Perspectives 1, 2, available at <ccsi.columbia.edu/files/2014/01/FDI_33.pdf> (arguing that party appointed arbitrators should be banned unless their role as advocates is fully disclosed and accepted); Jan Paulsson, ‘Moral Hazard in International Dispute Resolution’ (2010) 25 ICSID Review Foreign Investment Jaw Journal 339, 352 (arguing that ad-hoc appointments should be abolished in all types of commercial arbitration); Gus, Van Harten, ‘Reform of Investor-State Arbitration: A Perspective from Canada’ Unpublished Draft (2011) 1, 8, available at <http://ssrn.com/abstract=1960729>; Ingo Venzke, ‘Investor-State Dispute Settlement in TTIP from the Perspective of a Public Law Theory of International Adjudication’ (Forthcoming 2016) 17 Journal of World Investment & Trade 1, 24; Sam Luttrell, ‘Bias Challenges in Investor – State Arbitration: Lessons from International Commercial Arbitration’ in Chester Brown and Kate Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge University Press, 2011) 445, 481 (arguing that structural problems of ISA may be addressed by establishing a ‘standing corps of arbitrators’). Gus Van Harten, ‘The (lack of) Women Arbitrators in Investment Treaty Arbitration’ (2012) 59 Vale Columbia Center on Sustainable International Investment 1, 2 (arguing that a mandatory roster of arbitrators will contribute to greater involvement of women arbitrators in investment treaty arbitration). 20 Investment Report above n 16, 148. 21 At the time of writing, the parties concluded 13th round of negotiation talks. See Ignacio García Bercero ‘Conclusion of the 13th TTIP Negotiation Round’ (news release, 29 April 2016) <http://trade.ec.europa.eu/doclib/html/154480.htm>. 22 The European Council – Trade, ‘Investment in TTIP and Beyond – the Path for Reform: Enhancing the Right to Regulate and Moving from Current Ad-hoc Arbitration towards an Investment Court’ (news release) <trade.ec.europa.eu/doclib/html/153408.htm>. 23 Ibid, 7-8. 24 See generally above n 19 and the accompanying text.

http://ssrn.com/abstract=1960729

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Thus, it is not surprising that the World Investment Report merely lists standings panels as a possible option to improve proceedings, without actually raising any arguments in support of that claim.

B Arguments in Support of Standing Panels under ISA

Even though arguments supporting standing panels made in relation to international commercial arbitration [‘ICA’] are not equally applicable to ISA, scholars have invoked ICA to justify standing panels in relation to investor-state arbitration. Broadly, arguments in support of standing panels in ISA can be divided into four categories: impartiality, accountability, efficient resource allocation, and equity considerations. While these are not clearly distinguishable categories, they are helpful for the purpose of the analysis.

1 Impartiality

Impartiality remains the most commonly cited reason in support of standing panels. Scholars supporting a move toward standing panels argue that party appointed arbitrators are fundamentally unable to remain neutral throughout the proceedings because they are directly appointed by the disputing parties.25 Furthermore, even if these arbitrators choose to rule against the parties appointing them, they still have multiple ways to indirectly support their appointees.26 Finally, according the report by the International Institute for Sustainable Development, even if a party appointed arbitrator is determined to be impartial and, in fact, acts impartially, there may still be the perceived presence of partiality in the proceedings due to the manner in which disputants appoint arbitrators.27

Accordingly, partiality is difficult to detect. It also has a substantially damaging effect on the institution of arbitration as a whole. After all, decisions of arbitrators will never be accepted as legitimate unless the individuals rendering these decisions appear to do so in an impartial manner.28

The independence and impartiality of arbitrators is also viewed to be of paramount importance to future ISA reforms. For example, Ghouri argues that arbitrators should be empowered to interpret investment treaties broadly in order to incorporate policy concerns of nation states.29 Arguably, arbitrators who are influenced by their appointing authorities will be unable to act in such a manner. According to Ghouri, encouraging arbitrator activism is the most practical and feasible way to reform the ISA system.30

25 Leif Cocq-Rasmussen, ‘An Analysis of Geopolitical Considerations of Investor State Dispute Settlement and the Pursuit of Impartial Justice’, (2015) 7(1) Amsterdam Law Forum 36, 47; Jan Paulsson, above n 19, 348. 26 Hans Smit notes that arbitrators could reduce an award or rule only partially in favour of the other side. See Smit above n 19, 2. 27 Nathalie Bernasconi-Osterwalder and Diana Rosert, ‘Investment Treaty Arbitration: Opportunities to Reform Arbitral Rules and Processes’ (2014) The International Institute for Sustainable Development 1, 12 <www.iisd.org/pdf/2014/investment_treaty_arbitration.pdf>. 28 Charles N. Brower and Charles B. Rosenberg, ‘The Death of the Two-Headed Nightingale: Why the Paulsson—van den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded’ (2013) 29(1) Arbitration International 7, 8; Bruno Manzanares Bastida, ‘The Independence and Impartiality of Arbitrators in International Commercial Arbitration’ (2007) 6(1) Review of E-Mercatoria 1, 5-6. 29 Ahmad Ali Ghouri, ‘On Genealogy of Proposals to Reform Investor-State Arbitration’ (2014) 11(1) Transnational Dispute Management 1, 9-10. 30 Ibid, 4.

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Highlighting these concerns, critics of ISA argue that its legitimacy crisis is related to the manner in which the disputants select arbitrators. Accordingly, the question of partiality can be effectively addressed by establishing a roster of arbitrators that will be vetted by all participants. This view is most famously promoted by Paulsson, who argues for the abolition of unilateral appointments. According to Paulsson, arbitrators should be selected either jointly or from a panel of standing arbitrators.31 Paulsson notes that arbitrators are chosen for their perceived loyalty to the appointing authority, cultural affinities and specialized skills and knowledge, and not for their potential to be impartial.32 Thus, the bias of these individuals is tied directly to the manner in which they are appointed. In fact, one scholar advocated renaming arbitrators as ‘party appointed advocates’ in order to accurately capture their true loyalties and to adjust expectations of all participants in the proceedings.33

Concerns over impartiality have been voiced repeatedly by the EU in its reform proposals to the DSU and in its TTIP negotiation platform. In the case of the WTO, the EC noted that standing panels ‘would enhance the legitimacy and credibility of the panel process in the eyes of the public, as the possibility of conflicts of interests would be eliminated and the independence of the panelists would be protected.’34 More recently, the EU noted that ‘[t]he current system does not preclude the same individuals from acting as lawyers (e.g. preparing the investor’s claims) in other ICSID cases … [and] … this situation can give rise to conflicts of interest – real or perceived’.35 In both instances, the EU advocated for the adoption of standing panels to break the link between disputing parties and the arbitrators they appoint. In summary, standing panels are viewed to be beneficial because they have the potential to alleviate concerns over the partiality of arbitrators. Since arbitrators are traditionally appointed by disputants, it is difficult for them to remain impartial, consciously or otherwise. Furthermore, even if arbitrators will act in a genuinely impartial matter, the appearance of bias will impact upon the legitimacy of arbitral proceedings.

2 Accountability

Another commonly cited argument in support of standing panels is that they create a mechanism for accountability. Specifically, individuals must meet the relevant qualifications in order to be placed on a roster of arbitrators.

According to Maida, rosters of dispute resolvers serve as a basic form of membership control.36 They are an efficient way to address concerns for competency in a particular industry. Furthermore, rosters serve a signaling function to clients and can also be used as an informal accrediting mechanism.37 Finally, if an arbitrator is suspected of misconducted, the individual in question can be reported to the accrediting authority and conceivably, removed.

31 Jan Paulsson, above n 19, 352. 32 Ibid, 349-51. 33 Seth H. Lieberman, ‘Something's Rotten In The State Of Party-appointed Arbitration: Healing Adr's Black Eye That Is “Nonneutral Neutrals”’ (2004) 5(2) Cardozo Journal of Conflict Resolution 215, 217. 34 Above n 8, 2-3. 35 Above n 22, 6-7. 36 Peter R. Maida, ‘Rosters and Mediator Quality: What questions should we ask?’ (2001) 8 Dispute Resolution Magazine 17, 18. 37 Ibid.

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Issues of misconduct are becoming a major source of discussion in ISA reforms. Some scholars argue that abuse of the arbitral process is a major rising trend in arbitration.38 Aggravating these issues is the fact that it is very difficult to challenge an arbitrator because the party raising the challenge must establish evidence of manifest lack of qualities such as independence or impartiality.39 Furthermore, ICSID arbitrator challenges are heard by the very same panel on which the arbitrator suspected of misconduct presides. Thus, in a three member panel, the two remaining arbitrators must rule on the validity of the challenge to the third arbitrator.40

Due to the challenges associated with removing arbitrators under the ICSID rules, standing panels of arbitrators provide an alternative mechanism to sanction wrongful conduct of arbitrators. Although it is very difficult to remove an arbitrator presiding over a panel under the ICSID rules, the presence of a roster would allow a party to petition the managing authority for the removal of that individual from the roster. Furthermore, the desire of arbitrators to remain on a roster will encourage them to show greater deference to their professional obligations as opposed to situations where they act on a purely ad-hoc basis.

3 Efficient Resource Utilization

Supporters of standing panels also cite various practical advantages to having standing panels. For example, standing panels can improve efficiency in selecting arbitrators. According to the reasoning, investors facing their first arbitral claim need to spend considerable time locating an appropriate arbitrator. A roster of arbitrators can expedite appointments and ensure that investors are able to select qualified individuals.41 Furthermore, a sophisticated roster allows disputing parties to select arbitrators who specialize in the area that is pertinent to the dispute in question.

The issue of delays in establishing arbitral panels and the quality of arbitral reports was a major consideration in the EC’s reform proposals to the WTO. According to the EC, the WTO panels took too long to form and there was a shortage of qualified arbitrators due to the ever increasing list of cases. Thus, the EC argued that a standing roster of panelists would alleviate these challenges and improve the quality of reports.42

Finally, although, the vast majority of studies provide that standing panels contribute to improving quality panel decisions, most scholarly literature is silent on how this is achieved in practice. Bourgeois provides some insights into this issue and argues that experienced panelists lead to standardized panels

38 See generally above n 18 (discussing recent trends in arbitrator challenges). 39 ICSID Convention, above n 1, art 57. Also see Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrates de Agua S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Suez, Sociedad General de Aguas de Barcelona S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 (noting that ‘[t]he challenging party must prove not only facts indicating the lack of independence, but also that the lack is 'manifest' or 'highly probable,' not just 'possible' or 'quasi-certain’). For an in-depth discussion of the arbitrator challenges in the context of the ICSID rules, see Lars Markert, above n 18. 40 ICSID Convention, above n 1, art 58. 41 Maida, above n 36, 17-19. Ank Santens and Heather Clark, ‘The Move Away from Closed-List Arbitrator Appointments: Happy Ending or a Trend to Be Reversed?’ (2011) Kluwer Arbitration Blog <http://kluwerarbitrationblog.com/2011/06/28/the-move-away-from-closed-list-arbitrator-appointments-happy-ending-or-a-trend-to-be-reversed/>. 42 Above n 8, 2.

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which in turn promote standardized procedures. He maintains that this leads to improvements in the arbitral process and promotes greater coherence of reports.43 4 Equity Considerations

Finally, recent literature emphasizes a number of equity considerations that may be addressed by relying on standing panels. Specifically, scholars argue that a roster of arbitrators can promote greater diversity in the profession and more holistic decisions.

Studies show that the world of arbitration is generally dominated by repeat players who arbitrate the majority of cases. In addition, women are highly underrepresented in arbitration. For example, one study conducted in 2012 provides that out of 631 investment treaty arbitration appointments, only 41 were women.44 Within that number, a small minority of women captured 75% of all appointments,45 inferring that most women never arbitrated more than one case.

In addition, racial and regional representation in arbitration remains highly uneven. Jacobs highlights that seventy percent of ICSID arbitrators are from Western Europe and North America.46 Comparatively, a mere two percent are from Sub-Saharan Africa.47 Similarly there are few arbitrators from Asia, despite the fact that Asia is the top destination for outbound FDI.48

The findings of these two studies were largely affirmed in a major 2015 study conducted by Franck et al on diversity in arbitration. The study analyzed 413 individuals who served as counsel in arbitral proceedings and a further 262 individuals who acted as arbitrators. Out of these 262 arbitrators, 67 served on ISA panels.49 The study concludes that only 17.6% of arbitrators were female; however, there was no significant variation in male/female appointments in the context of international arbitration.50 More tellingly, at most merely 20% of all appointments were from developing countries.51

In order to address perpetual gender and racial inequalities in international arbitration, the authors of these studies propose that greater reliance be placed on standing panels. Franck et al advise arbitral institutions to strategically utilize arbitral appointments they can control.52 The other two studies advocated for the appointment of arbitrators from rosters.53

43 Jacques H. F. Bourgeois, ‘Comment on a WTO Permanent Panel Body’ (2003) 6(1) Journal of International Economic Law 211, 211. 44 Gus Van Harten, ‘The (lack of) Women Arbitrators in Investment Treaty Arbitration’ (2012) 59 Vale Columbia Center on Sustainable International Investment 1, 1. 45 Ibid. 46 Becky L. Jacobs, ‘A Perplexing Paradox: ‘De-statification of ‘Investor-state’ Dispute Settlement?’ (2015) 30 Emory International Law Review 17, 32. 47 Ibid. 48 In 2014 China became the world’s top FDI destination. See UNCTAD, ‘Global Investment Trends Monitor’ (news release, 29 January 2015) <unctad.org/en/PublicationsLibrary/webdiaeia2015d1_en.pdf>. 49 Susan D. Franck, et al, ‘The Diversity Challenge: Exploring the ‘Invisible College’ of International Arbitration’ (2015) 53 Columbia Journal of Transnational Law 429, 430-31. 50 Ibid, 452. 51 Ibid, 491-492. 52 Ibid, 499. 53 Van Harten, above n 44, 2; Jacobs, above n 46, 498.

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III ANALYSIS OF AVAILABLE RESEARCH ON STANDING PANELS

A Summary of the Research

This section of the paper provides a survey of research on standing panels. The objective is to gain insights into three questions. First, what do scholars mean by the term ‘standing panels’? Second, how prevalent are standing panels in treaty practice? Third, what evidence is available on the benefits of standing panels?

1 What is a ‘standing panel’?

In the opening sections of the paper, we noted that the scholars rely on different terminology when discussing standing panels. Some simply refer to a roster of arbitrators, while others mention a ‘closed system of appointments’. Underlying this divergent use of terminology is the fact that scholars do not generally explain what they mean by ‘a standing panel of arbitrators’. Rather, it is assumed that standing panels are lists of dispute resolvers available to disputants.

This general understanding of standing panels is not helpful in exploring the nature of standing panels. Indeed, little light is shed beyond the broad proposition that a roster should be available to disputing parties. Questions about the institutional structure governing such a system are also almost invariably absent in the academic literature.

However, a 1997 article by Charles Pou provides a useful topology for the study of standing panels. The institutional structure of standing panels can be visualized as a spectrum of different institutional arrangements, plotted along the level of control exercised by an administrator. For example, at one extreme of the scale, some administrating authorities merely draft a list of arbitrators available for party consideration.54 According to Poe, the majority of rosters fall into this category.55 On the other end of the spectrum, administrative authorities select the arbitrators to preside over a dispute.56

Furthermore, Pou argues that a threshold distinction between these different types of standing panels is whether they are constituted for governments and courts, or in the private sphere. 57 In the government/courts sphere, standing panels rely on simple institutional arrangements. They are usually court mandated programs that resolve a narrow range of issues which are repeatedly subject to dispute. Pou argues that rosters in the private sphere operate differently from public sphere rosters. For example, he notes that arbitrators in the private sphere are usually required to pay a fee in order to serve on a roster.58

Nevertheless, Pou cautions against generalizing institutional arrangements based on the abovementioned framework. He argues that the analysis of standing panels should be contextual since ‘ … roster models range greatly in their contexts, purposes, exclusivity, openness and operating

54 Charles Pou Jr, ‘“Wheel of Forture” or “Singled Out?”: How Rosters “Matchmake” Mediators’ (1997) 3 Dispute Resolution Magazine 10, 10-11. 55 Ibid, 11. 56 Ibid. 57 Ibid. 58 Ibid, 12.

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philosophies, as well as the degree of forethought that have gone into their establishment’. 59 Furthermore, his study was not concerned with international arbitration and concentrated on the domestic mediation in the United States. Limiting the scope of Pou’s analysis, the distinction between standing panels in the private and public spheres is not particularly helpful in the context of ICSID. First, the ICSID is a hybrid institution. While it reflects the ultimate will of sovereign states, it allows private parties to challenge government entities. Second, many investor state disputes concern governmental measures which are often characterized as public policy initiatives. Regardless, Pou’s contextual analysis of standing panels is valuable and will be referred to variously in the ensuing sections of this paper. His analysis is particularly useful in encouraging policy makers to consider different configurations of standing panels, and to avoid relying on a limited generic format. 2 Prevalence of Standing Panels

A study of the available literature and a survey of recent BITs suggest that reliance on standing panels is exceptional rather than the common practice of states. Standing panels are found more frequently in domestic contexts, and also among commercial arbitration institutions that do not ordinarily arbitrate issues involving state entities.

In the domestic context, Maida notes that standing panels are common in specific areas of practice. Arguing that the use of rosters is increasing, Maida cites examples of this growing practice in the construction, family, civil and commercial industries.60 Maida’s analysis was based on the United States mediation landscape. However, his analysis is consistent with the findings of Brower and Rosenberg who examined arbitration in international context. The latter authors argue that selection from a pre-existing list of arbitrators is common in specialized areas of law in which the issues are finite, standard and repetitive. Furthermore, they identify the use rosters with cases involving repeat disputants who have very particular needs and expertize.61

It should be noted that standing panels are relatively common in international commercial arbitration. A number of major arbitration centers have publicly available rosters of panelists. Relying on Pou’s framework, we note that these arbitration centers have more sophisticated rules for the management of their roster. Prospective arbitrators must submit an application, or they can be invited to serve on the roster by the administrative authority. Candidates who apply to be on a roster are ordinarily screened in accordance with the requirements of the arbitral institution and are routinely denied admission.

For example, the Singapore International Arbitration Centre (SIAC) maintains two rosters of permanent arbitrators – a general list and a list for IP related disputes.62 It also maintains publicly available admission requirements for prospective arbitrators wishing to be added on its rosters.63 SIAC’s

59 Ibid, 10. 60 Maida, above n 36, 17. 61 Brower and Rosenberg, above n 28, 21-2. 62 Singapore International Arbitration Center, SIAC Panel <http://siac.org.sg/our-arbitrators/siac-panel>. 63 Singapore International Arbitration Center, Standards for Admission to SIAC Panel/SIAC IP Panel <http://siac.org.sg/our-arbitrators/standards-for-admission-to-siac-panel>.

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arbitration rules were updated twice since 2007, but do not require disputes parties to rely exclusively on arbitrators drawn from the roster.

Comparatively, the International Center for Dispute Resolution (ICDR), managed by the American Arbitration Association, does not provide a publicly accessible roster of arbitrators. It requires instead that parties first contact the Center to request a list of experts.64 The ICDR also offers additional matching services to disputants according to the nature of their disputes.

Although an exhaustive study of commercial arbitration centers is beyond the scope of this paper, it must be emphasized that, even though these arbitration institutions maintain standing panels of arbitrators, private parties are still able to select their arbitrators on an ad-hoc basis. The two major arbitral institutions cited above, SIAC and the ICDR, reflect this trend. Furthermore, Santens and Clark note that ‘virtually none of the major international arbitration institutions [require] that parties appoint arbitrators from a closed list’.65

Standing panels generally are limitedly utilized as dispute mechanism by international institutions created by party states. For example, Article 13 of the ICSID Convention allows state parties to nominate up to four arbitrators to be placed on a roster. However, a recent survey conducted by Jacobs suggests that, as of 2013, only 108 of 158 ICSID members have nominated arbitrators.66 Further limiting the scope of standing panels, Article 40 of the ICSID Convention provides that disputants are not obligated to select arbitrators from the list constituted pursuant to Article 13. Generally, arbitrators are appointed from a roster by the Secretary General of the ICSID when parties are unable to select arbitrators or cannot agree on the third arbitrator who must serve as a chair during the proceedings. Brower and Rosenberg note that parties will try their outmost to agree on the third arbitrator in order to avoid the default ICSID selection rules, illustrating a deep distrust of the roster appointment system.67 Available statistics also appear to support this observation. Giorgetti’s study suggests that in 75% of the cases, parties select their own arbitrators and the trend of party-appointed arbitrators continues to increase.68

General resistance to standing panels is not particular to ICSID. Brower and Rosenberg state that, in the vast majority of interstate agreements, going back generations, states have insisted on selecting their own arbitrators in the majority of arbitration rules and most trade related agreements.69 Stopping short of declaring a right to select arbitrator as a rule of customary international law, they conclude that the disputing parties have a ‘timeless right’ to choose the arbitrators.70

Finally, although no recent empirical studies have been conducted on the prevalence of standing panels in the context of investment treaties, earlier surveys of bilateral trade agreements support the general trends cited above. For example, an older study by Smith, provides that 50% of FTAs provide for ad-hoc

64 Instructions to prospective clients are available at <www.adr.org/cs/idcplg?IdcService=GET_FILE&dDocName=ADRSTG_013015&RevisionSelectionMethod=LatestReleased> 65 Santens and Clark, above n 41. 66 Jacobs, above n 46, 33. 67 Brower and Rosenberg, above n 28, 14 (n 48). 68 Chiara Giorgetti, ‘Who Decides Who Decides in International Investment Arbitration?’ (2013) 35:2 The University of Pennsylvania Journal of International Law 431, 446. 69 Brower and Rosenberg, above n 28, 10-12. 70 Ibid, 8.

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panels.71 The study was conducted in 2000 and probably does not reflect contemporary realities. However, a major 2008 survey of FTAs by Donaldson and Lester produced similar findings. That study concludes that half of the FTAs examined provide for a roster of people who can serve on panels.72 Interestingly, where a roster is used, the panelists are generally selected from that roster and where an individual is not selected from a roster, an off-roster appointment can be challenged by the other party.73 However, the authors still conclude that governments generally choose the arbitrators to preside over disputes.74

3 Evidence on the Benefits Associated with Standing Panels

The research on the benefits of standing panels is somewhat fragmented and presents major challenges to a comprehensive analysis. First, as was noted earlier, studies on standing panels adopted by international institutions tend to be general and not context specific. Many of these studies are polarized over the issue of arbitrator ethics and impartiality and do not examine standing panels per se. Second, investor-state proceedings traditionally have been confidential. Although panel reports are now published more frequently, they tend not to include a detailed record of the selection of panelists.

These limitations explain in part why no comprehensive surveys on the benefits of standing panels have been conducted in the context of ISA. At any rate, such surveys would be difficult to undertake due to the predominantly normative nature of arguments in favour of standing panels. After all, it would be difficult to quantify such factors as the ‘resource allocation’ and ‘impartiality’ of investor-state arbitrators drawn from standing panels.

A challenging preliminary question is whether standing panels promote a higher quality of arbitrators, however such qualities defined? Although no hard evidence is available on this question, a reasonable supposition is to argue in affirmative. After all, a roster of arbitrators is a basic form of membership control. Individuals who are unqualified to serve on a roster cannot be admitted. Furthermore, competition for the limited number of roster seats will likely increase the overall quality of the applicants.

However, Pou’s contextual framework for the analysis of rosters of arbitrators challenges these suppositions.75 Echoing Pou’s challenge, Maida notes that whether serving on a roster reflects one’s qualifications depends solely on the roster in question.76 A roster that is nothing more than a directory of individuals arguably has limited impact on quality of the arbitration service. For example, membership in many referral programs can be purchased simply by submitting a resume and paying a registration fee, and not invariably being subject to acceptance based on the qualifications and experience of the prospective member. Maida suggests that a roster could impact on quality if the appointing institution

71 James McCall Smith, ‘The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts’ (2000) 54 International Organizations 137, 154-8 (arguing that 31 of 62 trade agreements provide for ad-hoc arbitration). 72 Simon Lester and Victoria Donaldson, ‘Dispute Settlement’ in Mercurio and Lee (eds), Bilateral and Regional Trade Agreements: Commentary and Analysis (Cambridge University Press, 2008) 367, 389. 73 Ibid. 74 Ibid, 368. 75 Pou, above n 54, 10-11. 76 Maida, above n 36, 18.

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requires an assessment of the suitability of the person seeking membership on the roster.77 Even so, Maida argues that rosters at most provide only an indirect supervisory role, since the assessments of a potential applicant is based on the evaluation undertaken by others.78

Yet, scholars have highlighted that ISA style arbitration has the potential to promote biased panels. This is because an investor facing a powerful opponent, such as a state is likely to appoint an arbitrator who is most likely to favour that investor’s priorities. Using a prisoner’s dilemma type of analysis, Giorgetti argues that the complaining party is invariably incentivized to appoint an arbitrator who is predisposed to favour that complainant’s perspective.79 This is especially so, considering that an investor wants to avoid being disadvantaged by the state’s capacity to appoint an arbitrator who is more likely to favour the state’s priorities. In issue, therefore, is the investor’s concern, in firing the first shot, to utilize its resources strategically, not least of all in light of the likely response of the state.

Although no evidence is available to support the contention that standing panels will ameliorate possible bias in ad-hoc panels, a number of studies suggest that standing panels may have the countervailing effect.

First, scholars note that a predisposition to favour a particular side may exist in the very design of a treaty, regardless of the dispute resolution format.80 Indeed, there is nothing controversial in the idea that an investment treaty may be designed to promote greater investment liberalization, including in support of foreign investors.

Second, the personal accounts of practitioners and a number of empirical studies suggest that arbitrators on standing panels remain vulnerable to outside influences. In addition, a particularly strict roster appointment rule is likely to promote domestic political maneuvering. If a state is required to nominate a limited number of individuals to preside on a roster, arbitrators will likely to lobby their governments in order to be placed on the list.81 If all states engage in similar activities, the reputation of arbitrators as a whole could well suffer.

Illustrating the influence of third parties on standing panels, Cartland argues that many states were frustrated with the WTO AB. Thus, major ‘horse trading’ occurred behind the scene over who could be appointed to hear the appeals.82 Similarly, Santens and Clark argue that a panel of arbitrators could actually accentuate rather than alleviate appointment bias. They illustrate this argument by referring to a personal experience involving ‘the openly partisan party appointed arbitrator […] appointed from a closed list […] repeatedly by the party whom he openly favoured’.83

Third, institutional bias may also be exercised by the institutional authority compiling the roster of arbitrators. The bias may be real or there may be a strong appearance of bias without any irregularities. This is illustrated in two empirical studies that are highlighted below.

77 Ibid, 18-19. 78 Ibid. 79 Giorgetti, above n 68, 445-6. 80 Jason Webb Yackee, ‘Controlling the International Investment Law Agency’ (2012) 53(2) Harvard International Law Journal 391, 430. 81 Brower and Rosenberg, above n 28, 22. 82 Michael Cartland, ‘Comment on a WTO Permanent Panel Body’ (2003) 6(1) Journal of International Economic Law 214, 215. 83 Santens and Clark, above n 41.

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The first study involved securities arbitration in the United States. Here, Gross and Black examined the perception of arbitral fairness by the parties who participated in that process.84 Regarding the context, securities arbitration was created as a mandatory ADR by the US government to expedite the resolution of disputes involving investors and their brokerage firms. According to the rules governing such arbitration, the arbitrators presiding over such disputes had to be selected from a roster.85 That roster arrangement was somewhat unique as it required the presence of one industry expert, in addition to two regular arbitrators, to hear a dispute.86

Gross and Black surveyed over 3,000 participants87 in this arbitration system and made a number of surprising findings. They discovered that investors had a consistently negative impression of mandatory arbitration. Specifically, these investors felt that arbitral panel were biased in favour of the industry.88

It must be noted that the authors of the study were not concerned with investigating whether these perceptions of bias were well founded, though it was noted that there is some evidence to support this claim.89 Rather the authors sought to investigate the causes of the perception of arbitral bias.

According to Gross and Black, the perception of bias was created by the design of the standing panel itself. Specifically, the presence of the industry expert led the participants to believe that their case was doomed due to the perceived bias of the expert in favour of the industry.90 The study recommended the association to eliminate the mandatory requirement for the presence of an industry expert on an arbitral panel.91

The study is significant as it highlights that even the most well-thought-out rosters of arbitrators can have unintended consequences. It is likely that the government intended to create a balanced arbitral panel by providing for a presence of a qualified industry expert to hear arbitral disputes. However, when the industry expert was contrasted with other arbitrators on the panel, the participants felt that the expert was biased.

The study by Gross and Black was concerned with perceptions of bias. The second study, conducted by Geist, attempted to investigate whether there was actual bias arising from the appointment of panelists from a standing panel to decide domain names disputes.

In his research of Uniform Domain Name Dispute Resolution, Geist surveyed 4000 resolved panel decisions.92 Geist sought to identify why, out of the three forums for the resolution of domain name disputes, WIPO and the National Arbitration Forum (NAF) became particularly popular, while eResolution fell into disuse and was ultimately abandoned.93

84 Jill I. Gross and Barbara Black, ‘When Perception Changes Reality: An Empirical Study of Investors' Views of the Fairness of Securities Arbitration’ (2008) 2 Journal of Dispute Resolution 349, 354. 85See FINRA Rules, art 12403 <http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4141>. 86 Ibid. 87 Gross and Black, above n 84, 359. 88 Ibid, 385, 389. 89 Ibid, 391. 90 Ibid, 400. 91 Ibid. 92 Michael Geist, ‘Fair.com? An Examination of the Allegations of Systemic Unfairness in the ICANN UDRP’ (2002) 27(3) Brooklyn Journal of International Law 903, 911. 93 Ibid, 906.

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Geist ascertained that complainants, who were almost always trademark holders, won in 80% of the cases when these cases were arbitrated by WIPO and the NAF. However, that success rate fell to 60% when the cases were arbitrated in eResolution.94 This pattern was particularly curious, since many of the panelists found on one roster were also found on the other two rosters.95

Geist concluded that this disparity between eResolution and the other forums could be explained by panelist allocation. According to Geist, the roster itself was not the issue. Rather, the manner in which the roster was deployed explained the disparity in the winning rates.96 Guest maintained that control over panel composition was the most important factor in the decision outcome. In surveying all the decisions, Geist concluded that, where panel members were assigned through a roster system, trademark holders won in 80% of the cases. Comparatively, when the appointing authority had less control over the panel, the winning rates fell to 60%.97

These unexpected findings suggested that the allocation of cases through a roster system was heavily biased in favour of complainants. The bias of arbitral rosters was even more pronounced when only a single panelist was appointed to decide a domain name dispute. In that case, some five individuals decided over 50% of all cases, with the win rate at 95%.98 Geist concluded that the existing dispute resolution system was biased in favour of trademark holders.99

In summary, the studies by Gross and Black and by Geist demonstrate that the design of standing panels can perpetuate institutional bias that will impact upon proceedings and results. While standing panels are often suggested as a mechanism to avoid arbitrator bias, the available research challenges these assumptions.

B Synthesis of the Findings

Notwithstanding the limited published sources on standing panels, we are able to draw a number of preliminary conclusions based on the available research. First, Pou’s research suggests that the functioning of standing panels extends beyond a list of arbitrators. Scholars who use the term ‘standing panel’ without qualification run the risk of oversimplifying complex and varied institutional arrangements that support a system of standing panels. If standing panels are to be adopted in the investor-state context, policy makers need to consider the kind and degree of authority to be exercised by the administrative authority in appointing and regulating the operation of standing panels, in addition to the contextual factors highlighted by Pou.

Second, the administration of rosters could conceivably be more accurate if the rules governing the standing panel included a procedure to remove an arbitrator. However such removal procedure would require sophisticated institutional mechanisms for evaluating and assessing the conduct of roster members which, according to the available research, most rosters lack. Such an institutional result

94 Ibid, 910. 95 Ibid, 907. 96 Ibid, 911. 97 Ibid, 911-13. 98 Ibid, 912. 99 Ibid, 913.

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would be difficult in relation to investor-state arbitration, given the absence of a centralized investment court with unified procedures to manage arbitral rosters. Reflecting this problem, the ICSID default rules provide only general rules for managing rosters of panelists.

However, as a counterargument, standing panels in investor-state arbitration may have discrete functional value which may improve the overall quality of the panelists, regardless of the institutional arrangements regulating these rosters. For example, membership on a roster, such as the ICSID, carries immense prestige. Thus, it is probable that many qualified candidates will compete for a limited number of roster spots, increasing the overall quality level in the pool of candidates.

Third, it is difficult to conclude that an ISA arbitrator appointed through a roster, would be more able than one appointed by a party not on a roster. It is arguable that an investor who brings a claim against a well-resourced state would seek to appoint a highly qualified arbitrator, if only to have the acumen to persuade another member of the Tribunal of the legitimacy of the investor’s claim. As a result, one would expect that investor’s appointee to have the capacity to influence proceedings and the award reached by a three person Tribunal.

Fourth, although a BIT by BIT reform is conceivable, a wholesale reform of existing investment treaties is unlikely. Studies cited in this article suggest that standing panels occupy a niche market in domestic dispute resolution. At the interstate level, their use is not extensive. Typically, governments create specialized standing panels to expedite the resolution of industry-specific conflicts. Such disputes entail routine and repeat legal issues. Standing panels are regularly found in international commercial arbitration. However, in all of the cases analyzed, private parties are still able to elect their arbitrators on ad-hoc basis.

Standing panels appear to be irregularly used in trade treaties. The studies surveying FTAs maintain that standing panels are found in close to 50% of agreements. Even here, the weight of opinion favours ad-hoc over standing panels to resolve disputes arising from such agreements. However, these studies are somewhat dated and may have limited guidance in the context of ISA.

Fifth, even if such panels are included to resolve investor-state disputes, a major question would arises over whether the disputants would be permitted to select arbitrators who are not appointed from standing panels. Ceding significant regulatory control to a third-party body may be unpalatable for states seeking to guard their domestic sovereignty.

Even assuming that states are willing to cede their sovereignty and establish sophisticated institutional arrangements to regulate standing panels in trade disputes, the issue of institutional bias is likely to remain without easy solution. The studies conducted by Gross and Black and by Geist largely confirm arguments of Brower and Rosenberg who believe that institutional bias may be exercised by the institutional authority compiling the roster.100 Although rosters themselves are not the cause of the bias, the institutional authority in charge of the roster, wittingly or otherwise, may be perceived as favouring one disputant over the other in the manner in which it administers the roster.

Thus, parties contemplating inclusion of standing panels in their BITs need to consider the underlying purpose behind their treaties and evaluate appropriate institutional mechanisms to ensure that the perception of arbitrator predisposition in favour of an investor or state, is appropriately redressed. 100 Brower and Rosenberg, above n 28, 25.

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Finally, the evidence in support of standing panels, at best, is anecdotal. There are two main reasons for this apparent dearth of research. It is difficult to verify the claims used in support of standing panels in the absence of quantitative studies into the nature and operation of standing panels. Even it were possible to create an adequate research methodology, standing panels appear to be rare.

As a result, despite assertions made in support of standing panels, no studies give significantly factual credence to support such assertions. Indeed, a number of studies on arbitral institutions directly challenge assumptions about the advantages of standing panels. These studies suggest that standing panels in use retain all of the drawbacks generally associated with ad-hoc arbitration.

In conclusion, while there are some practical benefits to establishing standing panels in the context of ISA, it is difficult to conclude that these benefits will be realized in the absence of significant institutional support.

IV SURVEY OF RECENT BILATERAL INVESTMENT TREATIES

A Survey Methodology

As noted in Part III of this paper, there are no studies that explore the prevalence of standing panels in BITs. To bridge this analytical gap, we conducted a survey of recent bilateral investment treaties.

We chose BITS concluded between 2016 and 2014 to identify trends in making treaties. Given that dissatisfaction with ISA peaked around 2012, states had over two years in which to formulate a response to the perceived deficiencies of ISA. Thus, we decided to concentrate on the recent treaties concluded after 2014.

The analysis below concentrates on the adoption in BITs and investment chapters of FTAs of standing panels, codes of conduct governing arbitrators, and mechanisms for challenging arbitrators. These issues are prioritized because they are most closely associated with the analysis of standing panels.

In executing the survey, we relied on the UNCTAD investment treaty database.101 The treaties are organized by year. In total, we surveyed 35 investment related treaties. The results of that survey are summarized in Section B below and in the Table of Investment Agreements attached at the end of this study.

It must be noted that a number of BITs are omitted from the study because their texts are not publicly available. Furthermore, non-English language treaties are excluded. Finally, although all BITs contain rules for interstate dispute resolution, the analysis focuses only on the rules governing the resolution of investor-state disputes.

B Findings

101 UNCTAD, Investment Instruments Online Database <http://investmentpolicyhub.unctad.org/IIA/MostRecentTreaties#iiaInnerMenu>.

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At the outset, it is noteworthy that states have taken a variety of approaches to drafting provisions regulating arbitrator appointments in investment treaties. These approaches fall into two broad categories: deference to the default arbitral rules of relevant arbitration institutions, and arbitral rules that modified these default rules.

Regarding deference to the default rules of arbitration institutions, some treaties do no more than provide disputants with a list of acceptable arbitration institutions at which investors can file their disputes. Treaties relying on this drafting methodology are: Japan - Oman BIT, 102 China-Korea Investment Chapter, 103 Japan – Ukraine BIT, 104 Eurasia Economic Union – Vietnam Investment Chapter,105 and Japan – Myanmar BIT.106 It must be noted that these types of agreements are a minority in the study.

The second group of agreements vary significantly in the degree to which they modify the default arbitration rules. Although the possible combinations are too numerous for an exhaustive survey, we note some major trends common to this cluster of agreements.

1 Arbitrator Challenges

First, not a single treaty in the entire survey modified rules regulating challenges to arbitrators. In all treaties, states appear to rely on the default rules of arbitration institutions. This uniform behaviour is inconsistent with the academic literature cited above.107

One possible explanation for this behaviour is that states (and investors) are confident about the manner in which parties appoint arbitrators. However, it is also likely that states emphasize the need for stability and predictability during the course of arbitral proceedings. Thus, they are hesitant to create a mechanism that would allow for greater access to arbitral challenges during proceedings. Once the disputants select an arbitrator, they assume that the arbitrator will remain for the duration of proceedings. This is consistent with the narrow scope for challenging arbitrators under the ICSID. Indeed, even those states that engaged in innovative treaty drafting did not alter the default rules for arbitrator challenges. Whatever the ultimate explanation for this trend, it appears that there is strong emphasis on the finality of arbitrator appointments.

2 Arbitrator Qualifications and Code of Conduct

102 Agreement between Japan and the Sultanate of Oman for the Reciprocal Promotion and Protection of Investment (signed 19 June 2015, awaiting ratification). Treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3481>. 103 Free Trade Agreement between the Government of the People’s Republic of China and the Government of the Republic of Korea (signed 01 June 2015, entered into force 20 December 2015). Investment Chapter treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3462>. 104 Agreement between Japan and Ukraine for the Promotion and Protection of Investment (signed 05 February 2015, awaiting ratification). Treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3324>. 105 Free Trade Agreement between the Eurasian Economic Union and its Member States, of the One Part, and the Socialist Republic of Viet Nam, of the Other Part (signed 29 May 2015, awaiting ratification). Investment Chapter treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3457>. 106 Agreement between the Government of Japan and the Government of the Republic of the Union of Myanmar for the Liberalisation, Promotion and Protection of Investment (signed 15 December 2013, entered into force 07 August 2014). Treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3113>. 107 See above n 39; Lars Markert, above n 18.

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States in general defer to the default rules of arbitration institutions in matters concerning arbitrator qualifications and ethics. The majority of agreements analyzed typically provide that:

arbitrators shall have expertise or experience in public international law, international investment or international trade rules, or the resolution of disputes arising under international investment or international trade agreements. Arbitrators shall be independent of, and not be affiliated with or take instructions from, either Party and the disputing investor.

This provision is similar to the ICSID rules.108 It is found in nearly all agreements surveyed in this study.109

However, some treaties transcend this drafting language and include supplementary rules governing the qualifications and conduct of arbitrators. For example, Canada’s treaties contain an additional requirement. In matters related to financial services, the treaties provide that the arbitrators appointed shall have ‘expertise or experience in financial services law or practice, which may include the regulation of financial institutions’.110

The TPPA also adopts modified rules governing arbitrator appointments and conduct. It provides that ‘the Parties shall […] provide guidance on the application of the Code of Conduct for Dispute Settlement Proceedings under Chapter 28 (Dispute Settlement) to arbitrators selected to serve on investor-State dispute settlement tribunals.’111 The code of conduct is mentioned in Article 28.10.1(d) of the TPPA as the Rules of Procedure, which are found in Article 28.13. These rules of procedure provide a non-exhaustive list of rights that disputants have during the proceedings.112 However, at the time of writing, it is not clear how this Code of Conduct will function in relation to investor-state disputes.

Finally, the China-Australia agreement is most detailed in this regard. In addition the standard arbitrator qualifications quoted above, the agreement provides detailed rules on the appointment and conduct of arbitrators in Annex 9-A. For example, arbitrators are responsible to be impartial and must avoid any

108 ICSID Convention, above n 1, art 14(1). 109 See, eg, Foreign Investment Promotion and Protection Agreement between Canada and Hong Kong Special Administrative Region (signed 10 February 2016, awaiting ratification), art 25(2). Full text of the treaty is available at <http://www.tid.gov.hk/english/trade_relations/ippa/index.html> (‘Canada - Hong Kong BIT’); Agreement between the Slovak Republic and the Islamic Republic of Iran for the Promotion and Reciprocal Protection of Investments (signed 19 January 2016, awaiting ratification), art 18(4-5). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3601>; Free Trade Agreement between Australia and China (signed 17 June 2015, entered into force 20 December 2015), art 9.15(8). Investment Chapter treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3453> (China-Australia Agreement); Republic of Korea-Viet Nam Free Trade Agreement (signed 05 May 2015, entered into force 20 December 2015), art 9.21(2)(a-b). Investment Chapter treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3582> (‘Korea – Vietnam Agreement’). 110 See, eg, Agreement for the Promotion and Reciprocal Protection of Investments between Canada and the Republic of Guinea (signed 27 May 2015, awaiting ratification), art 23(2). Full text of the treaty is available at <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/republic_guinea-republique_guinee/republic_guinea-agreement-republique_guinee.aspx?lang=eng> (‘Canada – Guinea BIT’); Agreement between the Government of Canada and the Government of Burkina Faso for the Promotion and Protection of Investments (signed 20 April 2015, awaiting ratification), art 24(2). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3460> (‘Canada – Burkina Faso BIT’). 111 Transpacific Partnership Agreement (signed 04 February 2016, awaiting ratification), art 9.22(6). Full text of the Investment Chapter treaty text is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3573> (‘TPPA’). 112 Ibid, art 28.13.

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appearance of partiality. The Annex includes additional rules regulating arbitral proceedings. In particular, arbitrators are required to make relevant disclosures before and during the proceedings. Finally, the agreement includes rules regulating the conduct of staff working with arbitrators, as well as provisions on confidentiality.113

The China-Australia agreement is further supplemented by the Side Letter on Transparency Rules Applicable to ICSID. The letter provides that ‘the Parties shall enter into consultations within 12 months of the date of entry into force of the Agreement on the future application of the United Nations Commission on International Trade Law (UNCITRAL) Rules on Transparency in Treaty-based Investor-State Arbitration’.114 At the time of writing, these negotiations have not taken place. In summary, the majority of agreements surveyed rely on generic rules regulating the appointment and conduct of arbitrators. Comparatively, few agreements attempt to expand upon these regulations by elaborating upon the rules governing arbitrator conduct. Given this approach, implementing these rules prospectively is uncertain at the time of writing. 3 Standing Panels

Although approximately 50% of trade agreements provide for standing panels,115 the survey concludes that only one investment treaty provides for standing panels in relation to investor-state disputes.

The China-Australia Agreement provides that both sides must establish a roster of arbitrators for the resolution of investor-state disputes.116 The appointment process is not offset by any removal process. However, as was noted above, the requirements for qualifications and the accompanying code of conduct are more detailed in that Treaty than in any other agreement.

While it is unlikely that the roster has been constituted at this time, the roster system warrants further analysis.

One point of ambiguity in the China-Australia Agreement is the question as to who constitutes the standing panel. According to the agreement, the Joint Committee on Investment establishes and maintains a roster.117 However, it appears that the words ‘establish’ and ‘maintain’ do not include appointment of arbitrators to the roster. Article 9.15(6) provides that the state parties to the Treaty select five arbitrators each, while 10 additional arbitrators who are not nationals of either party are chosen jointly. Thus, while the Joint Committee has oversight over the standing panel, China and Australia each intend to retain a high degree of control over the appointment of arbitrators.

The second issue relates to the selection of arbitrators from the standing panel to preside over an investor-state dispute. The agreement does not explicitly provide that, in making arbitral appointments, the disputants are limited to the roster of arbitrators. It notes that the disputing parties select one arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise.118

113 China-Australia Agreement, above n 109, Investment Chapter Annex 9-A. 114 See Side Letter on Transparency Rules Applicable to Investor-State Dispute Settlement, available at <http://dfat.gov.au/trade/agreements/chafta/official-documents/Documents/chafta-side-letter-on-transparency-rules-applicable-to-investor-state-dispute-settlement.pdf>. 115 Smith, above n 71; Donaldson and Lester, above n 72. 116 China - Australia Agreement, above n 109, art 9.15(5). 117 Ibid. 118 Ibid, art 9.15(1).

24

Comparatively, in the event that the disputants are unable to make their selection within the mandated time frame, the arbitrator ‘shall be drawn’119 from the roster by the appointing authority. Arguably, if the treaty drafters intended the disputants to only rely on the standing panels, they could have used similar language. Thus, it appears that the standing panel under the China-Australia agreement is used as a fall-back resource by the disputants who are unable to make their arbitrator selection.

In summary, although only one recent ISA related treaty provides for standing panels, even that agreement does not oblige the disputants to rely on that list in making arbitral appointments.

4 The Indirect Influence of Standing Panels

Scholarly works examined in this study maintain that states guard their right to appoint arbitrators to serve on rosters. We note that this right is not absolute in the context of ISA. In fact, as was discussed immediately below, a number of treaties provide that arbitrators are to be appointed from standing panels by a third party. Thus, although states do not generally establish standing panels, third party panels may indirectly affect the appointment process.

For example, the BITs involving Canada generally provide that, in consolidation proceedings, the appointing authority makes all three arbitral appointments. Indeed, Canada’s treaties generally restrict the right of disputants to make such appointments themselves. There are two conditions to these third party appointments in Canada’s BITs. First, they must be made according to the UNCTRAL rules. Second, restrictions are placed on the nationalities of arbitrators selected by the appointing authority.120 Beyond these requirements, the person making these appointments is not restricted, possible political pressures notwithstanding. Of note, the same approach was adopted in the Korea-Vietnam agreement.121

A less intrusive variant to Canada’s approach is found in a number of other agreements. For example, the TPPA provides that, in consolidation orders, the appointing authority only selects the chair in accordance with the UNCTRAL rules, while the disputing parties each appoint the other two arbitrators.122 The same approach is adopted in the Australia-Korea Agreement, although it allows the disputing parties to reject the proposed chair appointment.123

119 ibid, art 9.15(3-4). 120 See, eg, Canada - Hong Kong BIT, above n 109, art 26(3); Canada – Guinea BIT, above note 110, art 28(3); Canada – Burkina Faso BIT, above n 110, art 29(1-4); Canada - Côte d’Ivoire Foreign Investment Promotion and Protection Agreement (signed 30 November 2014, entered into force 14 December 2015), art 27(3). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3242>; Canada - Mali Foreign Investment Promotion and Protection Agreement (signed 28 November 2014, awaiting ratification), art 27(5). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3239>; Canada-Senegal Foreign Investment Promotion and Protection Agreement (signed 27 November 2014, awaiting ratification), art 28(3). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3240>; Free Trade Agreement between Canada and the Republic of Korea (signed 23 September 2014, entered into force 01 January 2015), art 8.28(5). Full text of the Investment Chapter is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3077>. 121 Korea – Vietnam Agreement, above n 109, art 9.22(5). 122 TPPA, above n 111, art 9.28(4)(a-c). 123 Free Trade Agreement between Australia and the Republic of Korea (signed 08 April 2014, entered into force 12 December 2014), art 11.25(4). Full text of the investment chapter is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/2971>.

25

Furthermore, states generally grant a right to a third party to make the relevant appointments if they are unable to agree on the arbitral panel within the specified timeframe. Two broad approaches are used to regulate these third party appointments.

First, a state may grant a third party absolute discretion in making all relevant appointments. For example, the TPPA provides that if disputants fail to appoint arbitrators within the allotted time, the Secretary General of the ICSID will make appointments at his/her discretion.124 The word ‘discretion’ is found in Korean-New Zealand and the Korea-Vietnam Agreement.125

The word ‘discretion’ is a potential source of confusion for standing panels. Although typically, the Director-General of the ICSID is required to make the appointments from the roster, the word ‘discretion’ may entitle her/him to look beyond the roster of ICSID panelists in making such appointments. Of note, the ASEAN – India Agreement resolves this potential controversy by providing that the administering authority shall make the appointments at her/his discretion but from the roster of panelists.126 However, other agreements do not provide such language.

A less ambiguous approach is used in the majority of treaties which simply provide that the appointing authority will make the relevant appointments. In practical terms, the authority making the selection of arbitrators will have to rely on the relevant arbitration rules. This drafting language is found in the treaties between Egypt and Mauritius; Japan – Kazakhstan BIT, Japan-Iran BIT, and in many other agreements.

Second, a treaty may allow the disputants to retain some influence over the selection process even if they are unable to make the relevant appointments within the required timeframe. This model was selected by Canada in the vast majority of its BITs. These treaties typically provide that, when the disputants fail to appoint arbitrators within the allotted time, the Secretary General of the ICSID will make appointments at his/her discretion, ‘in consultation with the Parties where practical’.127

In summary, the survey provides that states do not retain absolute authority over arbitral appointments. The recent practice, particularly of Canada, suspends this right of states in consolidation proceedings. Furthermore, states that fail to make their arbitral appointments, surrender this power to the relevant administering authority. Research notes that in 75% of the cases the disputants will still make the arbitral appointments.128 However, what is emphasized here is that the relationships between standing panels and treaties is more nuanced than initially assumed. Although standing panels are rarely used in BITs, third party standing panels may still be relevant during investor-state disputes.

The final section of the paper synthesises all of these findings and makes a number of recommendations on standing panels in context of ISA.

124 TPPA, above n 111, art 9.22(3) 125 Free Trade Agreement between New Zealand and the Republic of Korea (signed 23 March 2015, entered into force 20 December 2015), art 10.23(3). Full text of the Investment Chapter is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3592>; Korea – Vietnam Agreement, above n 109, art 9.21(4). 126 Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India (signed 12 November 2014, awaiting ratification), art 20(10). Full text of the treaty is available at <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3337>. 127 See, eg, Canada – Guinea BIT, above n 110, art 26(4). The identical language is used in most of Canada’s agreements. For a detailed overview see Annex: Table of Investment Treaties. 128 Giorgetti, above n 68.

26

V RECOMMENDATIONS AND CONCLUSIONS

This study has sought to reconcile the qualitative benefits attributed by commentators to standing panels against the lack of quantitate research to affirm such comments. As was noted, quantitative research on standing panels is rather limited, with most studies being conducted in the context of domestic arbitral institutions ICA, or interstate trade disputes. There are also no published quantitative studies available on standing panels in relation to investor-state disputes. As a result, this study has relied on evidence of standing panels in sectors other than investor-state arbitration. However, it has also taken into account provision for standing panels in recent bilateral investment treaties.

As a preliminary matter, it is important to highlight that the various studies analyzed do not suggest that standing panels are per se ineffective. Rather these studies provide useful guidance on possible issues that can arise when particular kinds of standing panels are used in dispute resolution.

Additionally, the studies demonstrate that qualitative discussion on the virtues of standing panels tend to exaggerate their real benefits. It is doubtful, therefore, to posture that standing panels will cure all deficiencies of arbitration. Their benefits are likely to be narrower in practice than many ISA reform advocates attribute to them.

Scholarly studies further indicate that standing panels are likely to be as functional as are the institutions that administer them. An institution that provides nothing more than a list of potential arbitrators is unlikely to have any meaningful positive impact on the overall dispute resolution process. Thus, some form of institutionalization is required to ensure the effectiveness of standing panels. The shape that such administering authority should take involves a delicate balancing exercise. Regardless, we conclude that such institutionalization of standing panels is essential for standing panels to have any meaningful positive effect on the dispute settlement mechanism.

However, any recommendations in favour of adopting standing panels cannot ignore the evidence of state practice. The research suggests that states value their right to select arbitrators. For example, even the distinctive China – Australia agreement provides that parties are not restricted to selecting arbitrators from the standing panel established by the state parties pursuant to the agreement.

States are also generally reluctant to modify the rules governing arbitrator challenges. There is a strong emphasis on the finality of arbitrator appointments and challenges are used only as a last resort in cases of manifest injustice. In summary, states demonstrate their commitment to remain invested in the selection of arbitration and wish to see a high degree of predictability in the overall appointment process.

Yet, the exercise of sovereign rights by states should not be overemphasized. We noted two discreet situations in which states have surrendered their sovereign right of appointment to third party institutions in the context of ISA. Furthermore, interstate dispute resolution mechanisms also rely on standing panels. Thus, there is no inherent aversion to standing panels in the conduct of states. The key question that remains to be answered is what shape these standing panels should take?

At the time of writing, two expansive approaches to standing panels were utilized in the context of ISA. One approach is found in the China – Australia Agreement. This model relies on a standing panel that

27

must be established by both state parties. Alternatively, Canada’s treaties rely on third party standing panels and outsource the appointment of arbitrators in a narrow range of circumstances.

Canada’s approach may be controversial because the grant of the right to appoint arbitrators wholly to an administering authority may be perceived as an abrogation of power by the disputing parties. In addition, the studies suggest that administering authorities in other sectors often reflect institutional biases that harm standing panels. However, insofar as the applicable administering authority demonstrates a commitment to avoid such institutional bias, objections to their role may dissipate.

Comparatively, the Australia – China model provides a better alternative to administering standing panels than the Canadian model as it attempts to craft an “in-house” system of standing panels. However, that system is insufficiently defined in the treaty, with overlapping authorities being responsible to administer standing panels. A system that more clearly delineates the scope and function of the authorities is likely to render the management of standing panels more efficient and reputable.

These two models notwithstanding, the conclusion is that policy makers should approach the topic of standing panels with caution. Given the dearth of research available, it is advisable to develop such the system experimentally and through gradual institutionalization. Giving disputants a choice in selecting their respective arbitrators would be beneficial. A system that obliges disputes to rely solely on a roster of arbitrators appointed by state parties to treaties would go too far in restricting the right of parties to appoint arbitrators. Such a system is contrary to the balance of state practice, with notably exceptions such as Canada’s recent BITs. However, having state parties to treaties appoint all member of standing panels, such as under the China-Australia FTA could lead to consternation among investors who are challenging state policies.

Although we question unqualified reliance on standing panels, we believe that disputants will generally select arbitrators from standing panels, especially if such panels are demonstrably qualified, have sufficiently diverse backgrounds, and are supported by sound institutional structures and practices. Disputants involved in investor-state arbitration, investors, and to a lesser extent, states, are frequently unfamiliar with the practice of arbitration. Investors, in particular, are likely to invest significant resources to retain lawyers who understand the process and are capable of engaging in it. Issues of distrust and the gravity of the claim will further complicate this appointment process. However, if investors are presented with a list of possible arbitrators who passed the relevant screening procedures, it is probable that these arbitrators will be considered for appointment.

Although states are hesitant to allow unconstrained arbitrator challenges, an effective vetting system will balance out the rigidities of the existing system. States have significant flexibility in organizing a vetting system that best reflects their agreements. Available studies should serve as useful guidance to them in implementing a viable structure and system to manage standing panels. For example, it is probably best for states to avoid reliance on a single specialized industry expert on a three panel arbitral tribunal, particularly in the context of ISA. Given studies conducted in other sectors, it is arguable that an investor who must arbitrate in front of an industry expert appointed by a state party may assume that the overall process is biased.

In conclusion, standing panels can improve the overall ISA dispute resolution process. However, these improvements are likely to be subtle and not as significant as is often claimed for them. The absence of strong evidence in support of such a system and the existing state practice suggest that standing panels

28

should be introduced gradually. States should retain a high degree of flexibility in making their appointments. Time is also required for standing panels of arbitrators to gain the trust of all participants. A mandatory system of referrals is unlikely to foster such trust.

Of all ISA reform proposals, standing panels appear to be one of the least intensively reviewed. Lack of research on this area should not discourage states from experimenting with it. Provided that an effective institutional system supports standing panels, it is likely that they will improve the overall ISA experience.

29

APPENDIX

TABLE OF INVESTMENT AGREEMENTS

BILATERAL INVESTMENT

TREATY/CHAPTER

ARBITRAL INSTITUTION

STANDING PANELS APPOINTING AUTHORITY ROSTER CONSTITUTED

ARBITRATOR QUALIFICATIONS

AND CODE OF CONDUCT

ARBITRATOR CHALLENGES

Canada - Hong Kong (2016)

UNCTRAL [Art 23(1)]

NO o The disputants select one

arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 25(1)] Exception: consolidation

orders

Secretary-General of the PCA appoints at own discretion, in consultation with the disputants if possible, when the parties are unable to make ad-hoc appointments within the allotted time [Art 25(4)]

In consolidation cases, Secretary-General of the PCA makes the appointments in accordance with UNCTRAL rules (Art 26(3))

NOT APPLICABLE

Art 25(2)

Not specified, default institution rules

Japan - Iran (2016)

UNCTRAL; ICSID [Art 18(2)(b-c)


arbitrator each, the selected arbitrators select the chair [Art 18(4)(a)]

Secretary-General of the PCA appoints if the disputants fail to make ad-hoc appointments within the allotted time [Art 18(4)(b)]

NOT APPLICABLE



TPPA (2016)

ICSID; ICSID Faculty rules; UNCTRAL [Art 9.19(4)(a-c)]

Any other arbitral tribunal if both sides agree [Art 9.19(4)(d)]


arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 9.22(1)] Exception: consolidation

If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion [Art 9.22(3)]

In consolidation proceedings, the third arbitrator is appointed by the Secretary General, unless the disputants agree otherwise [Art 9.28(4)(a-c)]

NOT APPLICABLE

Code of Conduct for Dispute Settlement Proceedings


Iran - Slovakia (2016)

UNCTRAL [Art 17(3)(a)]

Any other arbitral institution if both sides agree [Art 17(3)(b)]


arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 18(1)]

President of the ICJ makes appointments if parties fail to make appointments within the allotted time [Art 18(3)]

NOT APPLICABLE

Art 18.4-5; UNCTRAL Transparency Rules


Brazil-Malawi (2015)

NO ISA NO ISA NO ISA NO ISA NO ISA NO ISA

30

Japan - Oman (2015)

ICSID; ICSID Faculty rules; UNCTRAL [Art 15(4)(a-c)]

Any other arbitral tribunal if both sides agree [Art 15(4)(d)]


Not specified, default institution rules NOT APPLICABLE



Australia - China (2015)

ICSID; ICSID Faculty rules; UNCTRAL[Art 9.12(4)(a-c)]

Any other arbitral tribunal if both sides agree[Art 9.12(4)(d)]

YES o NOTE: unclear if the disputants

are limited to selecting arbitrators from the roster

o The disputants select one arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 9.15(1)]

The Joint Committee on Investment establishes and maintains a roster that has at least 20 arbitrators willing to serve on arbitral panels [Art 9.15(5)]

o Parties select 5 arbitrators each and 10 additional arbitrators who are not nationals of either party are chosen jointly [Art 9.15(6)]

The Secretary-General of ICSID makes appointments from other sources if the list is not constituted [Art 9.15(7)]

The Secretary-General of ICSID makes appointments from the roster if parties are unable to select arbitrators within the allotted time [Art 9.15(3-4)]

NOT AVAILABLE AT THE TIME OF

WRITING

Art 9.15(8); Side Letter on Transparency Rules Applicable to ICSID; Annex 9-A (Arbitrator Code of Conduct)


China - Korea (2015)

ICSID; ICSID Faculty rules; UNCTRAL [Art 12.12(3)(b-d)]

Any other arbitral tribunal if both sides agree [Art 12.12(3)(e)]

NO o Selection of arbitrators not

specified, default institution rules apply




Eurasia Economic Union - Vietnam

(2015)

ICSID; ICSID Faculty rules; UNCTRAL [Art 8.38(3)(b-d)

Any other

NO o Ad-hoc UNCTRAL arbitration

[Art 8.38(3)(b) o For other forums, selection

rules not specified; default




31

arbitral tribunal if both sides agree [Art 8.38(3)(e)

institution rules apply

Canada - Guinea (2015)



arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 26(1)] Exception: consolidation

orders

If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion, in consultation with parties where practical [Art 26(4)]

In consolidation orders, the Secretary-General of ICSID makes all arbitrator appointments under the UNCITRAL Arbitration Rules [Art 28(3)]

NOT APPLICABLE

Art 23(2); Art 26(2);


Korea - Vietnam (2015)




arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 9.21(1)] Exception: consolidation –

panels must be constituted under UNCTRAL rules

If the disputants fail to appoint arbitrators within the allotted time, the appointing authority will make appointments at his/her discretion [Art 9.21(4)]

In consolidation proceedings, a tribunal is chosen at the discretion of the Secretary General [Art 9.22(5)]

NOT APPLICABLE

Art 9.21(2)(a-b) Not specified, default institution rules

Burkina Faso -Canada (2015)


Any other arbitral tribunal if both sides agree [Art 25(1)(d)]


arbitrator each and jointly appoint the third arbitrator by agreement, unless determined otherwise [Art 27(1)] Exception: consolidation –


If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion, in consultation with the parties where practical [Art 27(4)]

In consolidation proceedings, the Secretary General of ICSID makes the appointments [Art 29(1-4)]

NOT APPLICABLE

Art 24(2); Art 27(2);


Korea - New Zealand (2015)


Any other arbitral tribunal


arbitrator each and jointly appoint the third arbitrator by agreement, unless otherwise decided [Art 10.23(1)]

If the disputants fail to appoint arbitrators within the allotted time, the appointing authority will make appointments at his/her discretion [Art 10.23(3)]

In consolidation proceedings, the

NOT APPLICABLE



32

if both sides agree [Art 10.20(3)(d)]

Exception: consolidation – panels must be constituted under UNCTRAL rules

appointing authority appoints the third arbitrator who serves as the chair of the panel, unless parties otherwise agree [Art 10.29(4)(a-c)]

Korea - Turkey (2015)

ICSID; ICSID Faculty rules; UNCTRAL [Article 1.17(5)(a-c)]

Any other arbitral tribunal if both sides agree [Article 1.17(5)(d)]


arbitrator each and jointly appoint the third arbitrator by agreement, unless otherwise decided [[Article 1.17(5)(13)]




Japan - Mongolia (2015)




arbitrator each and jointly appoint the third arbitrator by agreement, unless otherwise decided [Art 10.13(10)]

If disputants fail to appoint arbitrators within the allotted time, the appointing authority will make the appointments

NOT APPLICABLE



Japan - Ukraine (2015)

ICSID; ICSID Faculty rules; UNCTRAL [Art 18.4(a-c)

Any other arbitral tribunal if both sides agree [Art 18.4(d)]





Japan - Uruguay (2015)




arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 21.11]

If the disputants fail to appoint arbitrators within the allotted time, The Secretary-General of ICSID will make appointments [Art 21.11]

NOT APPLICABLE

Art [21.12(a-c)]; Art [21.13];


Canada - Côte ICSID; ICSID NO If the disputants fail to appoint NOT Art 22(2); Art Not specified,

33

d'Ivoire (2014)

Faculty rules; UNCTRAL [Art 23.1(a-c)


o The disputants select one arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 25(1)] Exception: consolidation –


arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion, in consultation with the parties where practical [Art 25(4)]


APPLICABLE 25(2) default institution rules

Canada - Mali (2014)



arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 25(1)] Exception: consolidation –


If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion [Art 25(4)]


NOT APPLICABLE

Art 22(2); Art 25(2)


Canada - Senegal (2014)



arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 26(1)] Exception: consolidation –


If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion, in consultation with the parties where practical [Art 26(4)]

In consolidation orders, the Secretary-General of ICSID makes all appointments under the UNCITRAL Arbitration Rules [Art 28(3)]

NOT APPLICABLE

23(2); 26(2) Not specified, default institution rules

ASEAN - India (2014)

ICSID; ICSID Faculty rules; UNCTRAL [Art 20(7)(b-d)

Any other arbitral tribunal if both sides agree [Art 20(7)(e)


arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 20(10)]

If the disputants fail to appoint arbitrators within the allotted time, the appointing authority will make appointments at his/her discretion from panel of arbitrators [Art 20(10)]

NOT APPLICABLE

Art 20(11)(a-e) Not specified, default institution rules

Japan - Kazakhstan (2014)

ICSID; ICSID Faculty rules;


If the disputants fail to appoint arbitrators within the allotted time,

NOT APPLICABLE

Not specified, default institution

Not specified, default

34

UNCTRAL [Art 17(4)(a-c)

Any other arbitral tribunal if both sides agree [Art 17 (4)(d)]


the Secretary General of ICSID will make appointments [Art 17(11)], subject to parties selecting up to three nationalities each unacceptable to them [Art 17(13)]

rules institution rules

Israel - Myanmar (2014)

ICSID; ICSID Faculty rules; UNCTRAL [Art 8(2)(c-e)]


NOTE: arbitrators shall be nationals of states that have diplomatic relations with both contracting parties [Art 8(4)]




Canada - Korea (2014)




arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 8.25(1)] Exception: consolidation –



In consolidation orders, the Secretary-General of ICSID makes all arbitrator appointments under the UNCITRAL Arbitration Rules [Art 8.28(5)]

NOT APPLICABLE

Art 8.25(2)(a)(b) Not specified, default institution rules

Canada - Serbia (2014)



arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 26. 1)] Exception: consolidation –


If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion, in consultation with parties where practical [Art 26(4)]


NOT APPLICABLE

Art 23(2); Art 26(2)


Colombia - Turkey (2014)

ICSID; UNCTRAL [Art 12(6)(b)(c)]




Art 17(a)(b) Not specified, default institution rules

Australia-Japan (2014)


35

EU-Georgia (2014)


EU-Moldova (2014)


EU-Ukraine (2014)


Egypt-Mauritius (2014)

ICSID; UNCTRAL [Art 10(4)]

Cairo Regional Centre for International Commercial Arbitration [Art 10(4)]

the LCIA-MIAC Arbitration Centre in Mauritius [Art 10(4)]




If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will appointing authority of the relevant arbitral tribunal will make appointments

NOT APPLICABLE



Canada - Nigeria (2014)





If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion in consultation with the disputants, when possible [Art 26(4)]


NOT APPLICABLE

Art 23(2); Art 26(2)


Australia-Korea (2014)


Any other arbitral tribunal if both sides


arbitrator each and appoint the third arbitrator by agreement, unless otherwise decided [Art 11.19(1)] Exception: consolidation


In consolidation orders, the Secretary-General of ICSID appoints the 3rd

NOT APPLICABLE



36

agree [Art 11.16(3)(d)]

arbitrator who will act as a chair, unless parties agree otherwise [Art 11.25(4)]

Canada-Cameroon (2014)





If the disputants fail to appoint arbitrators within the allotted time, the Secretary General of ICSID will make appointments at his/her discretion in consultation with the disputants to the extent possible [Art 25(4)]


NOT APPLICABLE

Art 22(2); 25(2) Not specified, default institution rules

Japan-Myanmar (2013)


ICSID; ICSID Faculty rules; UNCTRAL [Art 18(4)(d)]



NOT APPLICABLE

