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Investment treaty – ICSID tribunal dismisses application to disqualify an arbitrator for 'issue conflict'
Oct 18 2010

An ICSID tribunal has dismissed Argentina's application to disqualify an arbitrator, Professor Campbell McLachlan. Argentina advanced its application on the basis that the arbitrator in question had expressed opinions in published scholarly articles which evidenced that he had prejudged essential elements of the case, namely the effect of Most Favoured Nation clauses and the defence of necessity. This decision makes it clear that there is a high threshold to meet in order to bring about the disqualification of an arbitrator, and that there is a distinction to be drawn between writing academic articles and a decision made in the framework of an arbitration, with its own particular facts and set of circumstances.

The Republic of Argentina filed a proposal to disqualify Professor McLachlan as an arbitrator on the basis that he had prejudged essential elements of the arbitration. The application was brought under Article 57 of the ICSID convention, and concerned views expressed by Professor McLachlan in the book "International Investment Arbitration, Substantive Principles", which he wrote jointly with Herbert Smith partner Matthew Weiniger and former partner Laurence Shore.

Article 57 of the ICSID Convention allows a party to propose "the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14". Such qualities include being "Persons designated to serve on the Panels shall be persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment".

Professor McLachlan provided the parties with a statement acknowledging the Claimants' concern and assuring the parties that he would approach his task as arbitrator unconstrained by the prior positions he had expressed.

It was held that, when rendering judgment in a legal dispute, what is required is "the ability to consider and evaluate the merits of each case without relying on factors having no relation to such merits". The question is therefore whether, according to a reasonable and informed third party, there is an appearance of bias. The tribunal considered that the opinions expressed by Professor McLachlan "did not contain any element indicating, from the point of view of a reasonable third party, that he will not be capable of giving his full attention and consideration to the positions developed by each Party involved in the instant case as they relate to the legal items he previously examined". The opinions published by Professor McLachlan were specific to the cases examined, and like all academics, his opinions were subject to change. Every decision will be different according to the specific set of facts and circumstances in question.

Furthermore, the decision was also taken on policy grounds. The Tribunal expressed fear that, if they were to disqualify Professor McLachlan on the basis of his academic statements, "nearly all arbitrators who have ever expressed an opinion on an item specific to ICSID arbitration would be at risk of challenge. Such an approach would lead to the disqualification of as many arbitrators, including in particular those who have acquired the greatest experience, thus leading to the paralysis of the ICSID arbitral process". This approach would risk stifling the current widespread exchange of views on matters of international investment law within the community.