Post on 07-Apr-2023
INTERNATIONAL INVESTMENT LAW AND ARBITRATION PAPER
COMPARATIVE ANALYSIS OF THE DISPUTE RESOLUTION MECHANISMS UNDER THE ICSID AND
UNCITRAL ARBITRATION RULES
SUNDAY ADEOLU (as8001@nyu.edu)
I. INTRODUCTION
II. COMPOSITION OF THE ARBITRAL TRIBUNAL
a. APPOINTMENT OF ARBITRATORS
b. CHALLENGE OF ARBITRATORS
III. THE ARBITRAL AWARDS
a. DECISION
b. THE CONTENT OF THE AWARD
c. ANNULMENT OF AWARDS
IV. CONCLUSION AND RECOMMENDATIONS
I. INTRODUCTION
International arbitration has gained its importance in today‟s world. The reason for this
may stem out of the fact that the world is being caught up with by globalization. Globalization
accounts for the situation where individuals, juridical persons and government of nations will
leave the shore of their own territory to invest in another nation. In the event of their investment
in other nations, a dispute may arise between parties to the investment or contract – which in
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most cases arise due to unforeseen situations such as change in laws. It may also be as a result of
legal and illegal expropriation. As a result of this, parties to such investment tend to seek an
acceptable dispute resolution mechanism acceptable by all the parties involved in such
investment in order to adjudicate the dispute that has arisen between them.
The practice is that parties enter into a binding dispute resolution agreement for their
investment at the time of entering into the contract or investment agreement. The dispute
resolution agreement may be included in a Bilateral Investment Treaty (BIT). Such dispute
resolution agreement spells out the manner in which any dispute that may arise between them
will be settled. It goes further to state the dispute resolution mechanism such as the institution
that will adjudicate the dispute and the institutional rules that may be employed to adjudicate the
dispute that may arise between them.
Because, in most cases, sovereign nations are in most cases involved in international
investment, it practically becomes practically difficult for sovereign nations to submit themselves
for adjudication in a national court of another country. On the other hand, in an investor-state
dispute, investors are wary of approaching the national courts of the sovereign state where they
have investment for settlement of their disputes based on the fact that the judges of the local
courts of the state of investment may tend to be partial, and in most cases, they are not
independent.1 Thus, investors feel that the use of the local courts of the state of investment will
put them at a great disadvantage.
1 In Nigeria for example, the constitution empowers the President to appoint the Chief Justice of Nigeria,
subject to the approval of the Senate. See Section 231(1) of the Constitution of the Federal Republic of
Nigeria which provides: “The appointment of a person to the office of Chief Justice of Nigeria shall be
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In some countries, where the judges are appointed by the President, and remunerated by
the government, it may be difficult to a great extent to obtain a judgment from the local court
against the government. The fear of this led to preference for a neutral dispute resolution
mechanism which does not belong to the country of any of the parties to the dispute.2
Prior to the proliferation of Bilateral Investment Treaties (BIT), in a state-investor
dispute, when there is either a lawful or unlawful expropriation of the investor‟s investment or
any violation of the investor‟s rights under the investment agreement, the investor‟s state used to
espouse the investor‟s rights by instrumentality of diplomacy under international law.3 In this
instance, discussions and negotiation between the two levels of government may resolve the
dispute with little damage to the mutual interests of the two governments.4 Thus, once the
investor‟s rights are espoused by his state, the investor‟s claims become that of his home state‟s
claims.5
In Barcelona Traction case6, the International Court of Justice (ICJ) noted that espousal
lies within the discretion of the state. The ICJ further stated that the government itself is the sole
judge of the espousal request.7 Since this is the case, there tends to be situation in which the state
made by the President on the recommendation of the National Judicial Council subject to confirmation of
such appointment by the Senate”.
2 See Krista Nadakavukaren Schefer, International Investment Law, Text, Cases, and Materials, at 363.
3 It was the belief that an individual does not have the right under traditional international law to espouse
his own right with a sovereign state. At best, such espousal could only be done on behalf of such
individual by his home state.
4 Supra, note 3, at 364.
5 Id.
6 See Barcelona Traction Light and Power Company ltd., February 5, 1970 at 44, ¶79
7 Id.
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may not be able to espouse the investors‟ rights properly due to one or two political reasons that
characterized the system. The fact that the espoused investor‟s claim becomes that of the state
afterwards might be one of the backlashes to this traditional international law dispute resolution
mechanism when it comes to investment law. This might prompt the search for the better means
of dispute resolution mechanism under investment law as mentioned above.
Typically, nowadays, there are various BITs between states under which there are
reciprocal provisions for individuals, companies and governments of each state to invest in one
another state. These BIT also do contain a clause for dispute resolution mechanism that will be
opted for by the party should there is any dispute that arises between them in the future. From a
typical BIT provision, parties will prefer to submit their disputes to international arbitration
administered by the International Centre for Settlement of Investment Disputes (ICSID) which is
a branch of the World Bank, with its seat at Washington DC, United States of America.8
Alternatively, settlement of investment disputes under the BIT is also provided for under the
United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.9
8 See https://icsid.worldbank.org/ICSID/Index.jsp. The idea of an International Centre for Settlement of
Investment Disputes which will focus more on procedural norms for investment protection rather than the
substantive aspect was initiated by the then World Bank legal counsel, Aron Broches He wanted a neutral
multilateral forum where investment disputes will be resolved between the host state and the investor
which will also be accepted by parties to the disputes.
9 Article 24(3) of the US Model BIT 2004 provides: “. . . a claimant may submit a claim referred to in
paragraph 1: (a) under the ICSID Convention and the ICSID Rules of Procedures for Arbitration
Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID
Convention; (b) under the ICSID Additional Facility Rules, provided that either the respondent or the
non-disputing Party is a party to the ICSID Convention; (c) under the UNCITRAL Arbitration Rules; . . .
. Note that Article 1120 of NAFTA provides something very similar to the above provisions.
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The UNCITRAL Arbitration Rules were originally designed for ad hoc arbitration in the
context of international commercial arbitration.10
However, there have been many reviews of the
UNCITRAL Arbitration Rules. The recent is the UNCITRAL Arbitration Rules adopted in
December 2013 and which came into force on the 1st of April 2014. One of the unique things
about the 2013 reviewed Rules is the fact that it incorporates rules on transparency in treaty-
based investor-state arbitration.11
However, the use of the UNCITRAL Arbitration Rules has
been extended to other disputes that are not commercial origin in nature as originally
contemplated. The UNCITRAL Arbitration Rules have also been useful in the investment
arbitration context.12
This is evidenced by references to the UNCITRAL Arbitration Rules in
many BIT between states13
and that of North America Free Trade Agreement (NAFTA). The
UNCITRAL Arbitration Rules may also serve as institutional rules for arbitrations that are
conducted under arbitral institutions such as International Chamber of Commerce (ICC), or
London Court of International Arbitration (LCIA) to mention but a few.
10
This is evident from the preamble of the UNCITRAL Arbitration Rules. It provides thus: Recognizing
the value of arbitration as a method of settling disputes arising in the context of international commercial
relations; being convinced that the establishment of rules for ad hoc arbitration that are acceptable in
countries with different legal, social, and economic systems would significantly contribute to the
development of harmonious international economic relations . . . .
11 See www.uncitral.org/uncitral/uncitral_texts/arbitration/2014Transparency.html.
12 See David D. Caron, Lee M. Caplan, & Matti Pellonpaa, The UNCITRAL Arbitration Rules, A
Commentary at 8.
13 See Article 24(3) of the US Model BIT 2004, supra, note 10.
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It has been noted that a number of arbitral institutions have also adopted the UNCITRAL
arbitration Rules in handling international cases.14
Because the UNCITRAL Arbitration Rules
was designed for ad hoc purposes, parties find flexibility in choosing them. Aside this, some
renown arbitral institutions that have their own rules also do provide services as appointing
authority coupled with administrative services for arbitration that are conducted under the
UNCITRAL Arbitration Rules.15
The foregoing is a pointer to the fact that the UNCITRAL
Arbitration Rules have been widely accepted as procedural framework being used in
international dispute settlement.16
Under the UNCITRAL Arbitration Rules, the former Article 1(1) stipulates that “where
parties have agreed in writing that disputes in relation to that contract shall be referred to
arbitration under the UNCITRAL Arbitration Rules, such disputes shall be settled in accordance
with these Rules subject to such modification as the parties may agree in writing”.17
The
implication of this provision is that parties have the flexibility to make the rules to suit their
needs. However, the modification may not be something that will be totally out of the scope of
the provisions of the Rules. One of the elements of the requirements in the former Article 1(1)
above is that parties‟ agreements to arbitrate must be made in writing. The writing requirement is
14
Caron & Caplan, et al, supra, note 12 at 9. Such institutions include Inter-America Commercial
Arbitration Commission, the Cairo International Commercial Arbitration Centre (CICAC), and Hong
Kong International Arbitration Centre (HKIAC) etc.
15 Id. Some of the Arbitral institutions that engage in this are America Arbitration Association (AAA),
the London Court of International Arbitration (LCIA), and the Stockholm Chamber of Commerce (SCC).
See n 29 of the book cited here.
16 Id.
17 See Article 1(1), United Nations Commission on International Trade Law (UNCITRAL) Arbitration
Rules, General Assembly Resolution 31/98.
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no more in the 2013 adopted UNCITRAL Arbitration Rules. It has been noted that the writing
requirement is important in order to avoid a situation where there may be uncertainty with
respect to whether the Rules have been made applicable.18
Given certainty and conformity with
national laws, and the New York Convention19
, it seems that the writing requirement of this
article will strengthen the acceptance and enforceability of the arbitral award that may emanate
from the arbitral proceedings under these Rules.20
But the world has advanced more than then
and so the writing requirement is not a necessary condition as mentioned above. Oral agreement
is now being recognized.
Another reason why the UNCITRAL Rules give latitude to parties to modify the Rules
may stem out of the fact that parties autonomy which underlies the rule of contract is respected.21
As such, the Rules do not give a stringent condition that the parties must adopt the Rule
wholesale. The Tribunal Rules of the Iran-US Claims Tribunal has been noted to be one of the
modified versions of the UNCITRAL Arbitration Rules.22
The UNCITRAL Arbitration Rules
can be smoothly modified to cover disputes that involve non-contractual issues like torts, or
public international law.23
The Iran-US Claims Tribunal is an example of situation where the
scope of article 1 incorporated claims that arose from debts, contracts, expropriation and other
measures that affected property rights.24
18
Caron & Caplan, et al, supra, note 16 at 19-20.
19 See the New York Convention on Enforcement of Foreign Arbitral Awards, 1958.
20 Caron & Caplan et al, supra, note 18.
21 Id.
22 Such a modification is reflected in the following provisions of the
23 Caron & Caplan, et at, supra, note 21 at 21.
24 Id.
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On the other hand, the ICSID Convention does not have a provision in which the
subheading deals with “scope of application”. From the preamble of the ICSID Convention, it is
clear that the aim of the Convention is basically for the need to encourage international
cooperation for economic development.25
Further to this, under the Section 1 of the Convention,
article 1(1) provides thus: “there is hereby established the International Centre for Settlement of
Investment Disputes. Article 1(2) further states: “the purpose of the Centre shall be to provide
facilities for conciliation and arbitration of investment26
disputes between Contracting States in
accordance with the provisions of this Convention.27
It is evident from the foregoing provisions
that the ICSID Convention was purposely designed for the resolution of investment disputes.28
However, there is one salient factor in this provision. The Convention dispute resolution
mechanism cannot be employed by countries that are not Contracting States to the Convention.
This gives a narrow application to the Convention. Unlike the UNCITRAL Arbitration Rules
which could be applied by any country whether a party to the UNCITRAL Rules or not, the
ICSID Convention can only be applied by Contracting States to the Convention.
Article 2 of the Convention stipulates that the seat of the Centre shall be at the principal
office of the International Bank for Reconstruction and Development.29
However, the seat may
25
The ICSID Convention preambles provides: “the Contracting States, considering the need for
international cooperation for economic development, and the role of private international investment
therein; bearing in mind the possibility that from time to time disputes may arise in connection with such
investment between Contracting States and nationals of other Contracting States; . . . .
26 Emphasis is mine.
27 See the International Centre for Settlement of Investment Disputes, October 14, 1966.
28 This is evidence by section 25 of the ICSID Convention.
29 The full provision of article 2 provides that: the seat of the Centre shall be at the principal office of the
International Bank for Reconstruction and Development (hereinafter called the Bank). The seat may be
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be moved to other places as may be agreed by Administrative Council.30
This is a pointer to the
fact that parties that bring investment disputes to be resolved under the ICSID system do not
have the freedom to move the Centre‟s seat to other places under their agreement as they may
have under the UNCITRAL Rules without the consent of the Administrative Council. Article 63
of the ICSID Convention stipulates, inter alia, that arbitration proceedings may be held under the
parties‟ agreement at the Permanent Court of Arbitration (PCA) or at any other appropriate institution.
With respect to other appropriate institutions, these may be private or public institutions. However, the
Centre has to endorse the option of any other appropriate institutions because it is the Centre that
will make arrangement for this.31
Aside this, if the parties also wish to move the seat of
arbitration to any other place, there is a need for the Commission or Tribunal‟s approval after
due consultation with the Secretary-General of the Secretariat.32
Under the UNCITRAL
Arbitration Rules, parties have the latitude to choose wherever they want the seat of arbitration to
be.33
As noted above, this is because the UNCITRAL Arbitration Rules were purposely
designed for ad hoc arbitral processes which will not limit parties‟ flexibility and autonomy to
modify the Rules to suit their purpose.
moved to another place by decision of the Administrative Council adopted by a majority of two-thirds of
its members.
30 Id.
31 See Article 63 of the ICSID Convention which provides that “Conciliation and arbitration proceedings
may be held, if the parties so agree, (a) at the seat of the Permanent Court of Arbitration or of any other
appropriate institution, whether private or public with which the Centre may make arrangements for that
purpose; or (b) at any other place approved by the Commission or Tribunal after consultation with the
Secretary-General.
32 Id.
33 This is further evidenced by the Model Arbitration Clause which provides inter alia that parties may
wish to consider adding: “ (c) the place of arbitration shall be . . . (town or country).”
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Initiating arbitration process under the two systems is characterized with some
differences. Article 3(1) of the UNCITRAL Rules presupposes that it is the claimant who shall
initiate the arbitration process.34
Addition to this, the arbitration shall be deemed to commence
on the date that the respondent receives the notice of arbitration. The demand that the dispute
shall be referred to arbitration made by the claimant seems to be an important element in the
initiation of the arbitration process. In the ICSID arbitration system, it seems that any party
between the claimant and the respondent could initiate the arbitration process. In the words of
Article 36 of the ICSID Convention, it make reference to “making a request” for arbitration,
which is different from the language used by the UNCITRAL Rules.35
34
The full provision of Article 3 of the Rules reads: “(1) the party initiating recourse to arbitration
(hereinafter called the “claimant”) shall give to the other party (hereinafter called the “respondent”) a
notice of arbitration. (2) Arbitration proceedings shall be deemed to commence on the date on which the
notice of arbitration is received by the respondent. (3) The notice of arbitration shall include the
following: (a) A demand that the dispute be referred to arbitration; (b) The names and addresses of the
parties; (c) A reference to the arbitration clause or the separate arbitration agreement that is invoked; (d)
A reference to the contract out of or in relation to which the dispute arises; (e) The general nature of the
claim and an indication of the amount involved, if any; (f) The relief or remedy sought; (g) A proposal as
to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon. (4) The
notice of arbitration may also include: (a) The proposals for the appointments of a sole arbitrator and an
appointing authority referred to in article 6, paragraph 1; (b) The notification of the appointment of an
arbitrator referred to in article 7; (c) The statement of claim referred to in article 18.
35 The provisions of article 36 of ICSID Convention provides as follows: (1) Any Contracting State or any
national of a Contracting State wishing to institute arbitration proceedings shall address a request to that
effect in writing to the Secretary-General who shall send a copy of the request to the other party. (2) The
request shall contain information concerning the issues in dispute, the identity of the parties and their
consent to arbitration in accordance with the rules of procedures for the institution of conciliation or
arbitration proceedings. (3) The Secretary-General shall register the request unless he finds, on the basis
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This paper does a comparative analysis of the dispute resolution mechanisms under the
ICSID regime and UNCITRAL Arbitration Rules. However, the paper does not to do an
exhaustive comparative analysis of the dispute resolution mechanisms under the two systems.
Part II of this paper examines the composition of ICSID arbitral tribunal and that of UNCITRAL
arbitral tribunal. It looks at appointment of arbitrators and the challenge of arbitrators under both
systems which have become troubles wearing a special cap. Few cases are considered here in
order to critically examine this position.
Part III examines the arbitral awards, its content and the effect of the award under the two
systems. The mere fact that an award is issued at the end of an arbitral proceedings does not
suffice for the enforcement of the award. Also, this part considers whether the two systems have
provisions for annulment of arbitral awards after it has been issued by the arbitral panel. In part
IV, a conclusion is drawn. Concurrently, a recommendation is made based on the observation
from the disparities inherent in the two systems and how they can better serve the international
arbitration community.
II. COMPOSITION OF THE ARBITRAL TRIBUNAL
Article 7 of the UNCITRAL Rules seems to favor the appointment of three arbitrators as
against one arbitrator. A careful reading of the intendment of the drafters of the Rules tends to
show this. The provision of the article states that “if the parties have not previously agreed on the
number of arbitrators, and if within 30 days after the receipt by the respondent of the notice of
of the information contained in the request that the dispute is manifestly outside the jurisdiction of the
Centre. He shall forthwith notify the parties of registration or refusal to registrar.
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arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators
shall be appointed.” Perhaps, one of the reasons why the Rules tilt towards the side of three
arbitrators might be because a three-member panel arbitrator will render a thorough and un-bias
decision characterized with competence and expertise.36
Absent the choice of one arbitrator by
the parties to the dispute, the choice of three arbitrators favored by the UNCITRAL Rules is said
to have worked well in the experience of both Iranian and American Arbitrators with the Iran-US
Claims Tribunal.37
In the case of NAFTA under Chapter Eleven, a commentator has noted that it
is a choice that is politically wise and beneficial.38
In the ICSID regime, Article 37(1) states that ”the Arbitral Tribunal (hereinafter called
the Tribunal) shall be constituted as soon as possible after registration of a request pursuant to
Article 36”. Further in paragraph 2(a) of the same Article, attention is drawn to the fact that the
number of the arbitrators that may be chosen by the parties is either one or an uneven number,
subject to the parties‟ agreement.39
The possible interpretation from the above provision is that
where parties appoint arbitrators under their agreement, in situations where they agree to choose
more than one arbitrator, it is not a mandatory requirement for them to appoint only three
arbitrators. However, in their bid to appoint more than one arbitrator, the number of the
arbitrators must be uneven. For example, this could be five, or seven. It seems that the
constitution of the Tribunal under the ICSID regime is governed by the freedom of choice of the
36
See Caron & Caplan et al, supra, note 24 at 171.
37 Id.
38 Id.
39 See Article 36(2)(a) which states that: “ The Tribunal shall consist of a sole arbitrator or any uneven
number of arbitrators appointed as the parties shall agree.”
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parties and that of non-frustration.40
These principles are also inherent in the UNICTRAL regime
in the Tribunal‟s constitution. The only situation in which the number of arbitrators will consist
of three under the ICSID regime will be where the parties to arbitration do not agree on the
number of arbitrators and the method of appointment.41
In this wise, the Convention mandates
that the number of arbitrator shall consist of three. Each of the party to the arbitration shall be
allowed to appoint its own arbitrator, which shall be one from each party, and the third arbitrator
who shall be the presiding arbitrator shall be appointed by the “agreement of the parties” and not
by the parties‟ appointed arbitrators.42
This is evident in Fedax v. Venezuela43
In situations where the parties have appointed their arbitrators under the ICSID regime
and there is a deadlock in appointing the presiding arbitrator under the parties‟ agreement, one of
the parties could request the Chairman to act under Article 38 of the Convention and nominate
the presiding arbitrator. In SOABI v. Senegal44
, the two parties appointed their arbitrators.
40
See Christoph H. Schreuer & Loretta Malintoppi et al, The ICSID Convention – A Commentary, at
476.
41 See Article 37(2)(b) of ICSID Convention. It provides: “where the parties do not agree upon the
number of arbitrators and the method of their appointment, the Tribunal shall consist of three arbitrators,
one arbitrator appointed by each party and the third, who shall be the president of the Tribunal, appointed
by agreement of the parties” (Emphasis is mine).
42 Id.
43 See the case of Fedax v. Venezuela, Decision on jurisdiction, 11 July 1997, ¶¶ 4-7 as illustration on this
issue. Here, when the Claimant did not receive a response from the Respondent after 60 days, it informed
the Centre that it was adopting the provisions of Article 37(2)(b)(sic). However, the Respondent acted
promptly after this and appointed its own arbitrator. Subsequently after this, the Respondent proposed that
the presiding arbitrator be appointed by the Chairman. The Claimant accepted the proposal and the
Chairman appointed the presiding arbitrator in that case.
44 SAOBI v. Senegal, Decision on jurisdiction, 1 August, 1984, ¶¶ 4-5; Also, Award, 25 of February 1988
¶¶ 1.04 – 1.05.
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Subsequent to this, by their agreement, the two parties further appointed Mr. Pierre Lalive as
presiding arbitrator. However, Mr. Lalive declined the appointment and the parties were unable
to reach an agreement to appoint another presiding arbitrator. Further to this, SAOBI requested
the Chairman of the Centre to appoint the presiding arbitrator pursuant to Article 38 of the ICSID
Convention. The Chairman nominated Professor R.L. Bindschedler. Professor Bindschedler
accepted the nomination to act as the presiding arbitrator and the Tribunal was fully constituted
pursuant to Rule 6 of ICSID Arbitration Rules of Procedures.
Radically different from the last sentence of the preceding paragraph is Article 9(1) of the
UNCITRAL Arbitration Rules. The article provides that where parties intend to appoint three
arbitrators, each of the party shall appoint one arbitrator, while the presiding arbitrator shall be
appointed by the parties‟ appointed arbitrators.45
In the event that a party has not notified the
other party within 30 days of receipt of a party‟s notification of appointment of an arbitrator, the
first party who has made appointment under here has the right to request the appointing authority
to appoint the second arbitrator for the other party. Afterwards, the procedure set forth in
paragraph 1 of Article 9 may then apply in appointing the presiding arbitrator. However, if the
two parties‟ appointed arbitrators as well failed to appoint the presiding arbitrator within 30 days,
the appointing authority shall appoint the presiding arbitrator without having any recourse to any
of the parties.46
45
See note 48 below.
46 See note 48 below as well.
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Under the UNCITRAL Arbitration Rules, the case is different. If none of the parties
responded to either of the party‟s proposal to appoint a sole arbitrator within the 30 days47
provided for in paragraph 1 of Article 7, or the necessary party that is expected to appoint the
second arbitrator has failed to do so in accordance with Article 948
, or 1049
. If a party then makes
a request to the appointing authority for appointment of the other arbitrator or a sole arbitrator,
the appointing authority has the latitude to appoint a sole arbitrator. This is consequent to the
47
Article 7(2) provides that “ Notwithstanding paragraph 1, if no other parties have responded to a party‟s
proposal to appoint a sole arbitrator within the time provided for in paragraph 1 and the party or parties
concerned have failed to appoint a second arbitrator in accordance with article 9 or 10, the appointing
authority may, at the request of a party, appoint a sole arbitrator pursuant to the procedure provided for in
article 8, paragraph 2, if it determines that, in view of the circumstances of the case, this is more
appropriate.
48 Article 9 of the UNCITRAL Arbitration Rules provides; “(1) if three arbitrators are to be appointed,
each party shall appoint one arbitrator. The two arbitrators thus appointed shall choose the third arbitrator
who will act as the presiding arbitrator of the arbitral tribunal. (2) If within 30 days after the receipt of a
party‟s notification of the appointment of an arbitrator the other party has not notified the first party of the
arbitrator it has appointed, the first party may request the appointing authority to appoint the second
arbitrator. (3) If within 30 days after the appointment of the second arbitrator the two arbitrators have not
agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by the
appointing authority in the same way as a sole arbitrator would be appointed under article 8.
49 Article 10 of the same Rules provides: (1) For the purposes of article 9, paragraph 1, where three
arbitrators are to be appointed and there are multiple parties as claimant or as respondent, unless the
parties have agreed to another method of appointment of arbitrators, the multiple parties jointly, whether
as claimant or as respondent, shall appoint an arbitrator. (2) If the parties have agreed that the arbitral
tribunal is to be composed of a number of arbitrators other than one or three, the arbitrators shall be
appointed according to the method agreed upon by the parties. (3) In the event of any failure to constitute
the arbitral tribunal under there Rules, the appointing authority shall, at the request of any party,
constitute the arbitral tribunal and, in doing so, may revoke any appointment already made and appoint or
reappoint each of the arbitrators and designate one of them as presiding arbitrator.
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procedure in paragraph 2, article 8 of the UNCITRAL Rules. However, this is subject to the
discretion of the appointing authority given what might be the circumstances of the case.
Article 39 of the ICSID Convention makes provision for the arbitrators‟ origin. At the
first arm of this article, it stipulates that the “majority” of the arbitrators that shall be appointed
by parties to the arbitration shall not come from countries of parties to the dispute. The purpose
of this might be an effort to ensure transparency at the arbitration proceedings and to ensure that
the arbitrators are not bias. However, the second arm of the same article in discussion gives
arbitrating parties the freedom to choose their arbitrators without restriction in so far there is an
agreement between the parties to that effect. In the case of a sole arbitrator, if there is an
agreement to that effect as well, the sole arbitrator could come from the country of any of the
parties to the dispute.50
From the provision of this article, in the case of three arbitrators, it seems
that the presiding arbitrator could also come from the country of any of the party to the dispute
provided that this is done under their mutual agreement. It has been noted that the provision of
this article could lead to a situation where the party that first appoints an arbitrator will appoint a
national of its country and thus preventing the other party from appointing an arbitrator from its
own State.51
Rule 1(3) of the ICSID Arbitration seems to provide a solution for this when it
states, inter alia, that in a situation where the Tribunal is expected to consist of three arbitrators,
a national of either of the two parties in dispute may not be appointed as an arbitrator by a party
50
Article 39 of the ICSID Convention provides that: “The majority of the arbitrators shall be nationals of
States other than the Contracting State party to the dispute, and the Contracting State whose national is a
party to the dispute; provided however, that the foregoing provisions of this Article shall not apply if the
sole arbitrator or each individual member of the Tribunal has been appointed by agreement of the
parties”.
51 Schreuer & Malintoppi et al, supra, note 40 at 501.
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without the agreement of the other party to the dispute. Additionally, where the Tribunal is
supposed to consist of five or more arbitrators, the nationals of each of the disputing parties may
not be appointed if the appointment by the other party would result in a majority number of
arbitrators from the parties‟ nationalities.
There seems to be no similar provision of this nature under the UNCITRAL Arbitration
Rules. The reason for that, as noted above, might be because the UNCITRAL Rules is purposely
designed for ad hoc arbitration. Article 10 of the Rules makes a provision that covers multi
parties.52
In effect, by the provisions of this Article, where there is more than one person as
claimant or respondent in an arbitration, assuming that they are claiming from the same
respondent, there shall not be a situation where each of them shall appoint different arbitrators as
claimants arbitrators. The article stipulates that all the potential claimants shall appoint one
arbitrator to represent them. This is also the situation in a case where we have many respondents.
However, the situation described here shall only happen where three arbitrators are to be
appointed in the case and there are many claimants or respondents. I envisage that the problem
that may emanate here bothers on how to balance the interest of all the claimants or respondents
and as well factor in the interest of all the claimants or respondents in choosing their arbitrators.
However, if the parties agreed to another method of appointing their arbitrators, the provision
that the multi parties shall jointly appoint their arbitrators shall not apply.53
Paragraph 2 of the
same article further provides that in a situation where parties by their agreement voluntarily
52
Article 10 of the UNCITRAL Arbitration Rules provides that: “. . . where three arbitrators are to be
appointed and there are multiple parties as claimant or respondent, unless the parties have agreed to
another method of appointment of arbitrators, the multiple parties jointly, whether as claimant or as
respondent, shall appoint an arbitrator.
53 Id.
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agreed that the tribunal shall be composed of numbers that are different from the traditional one
or three for arbitrators, there is no other way than for the arbitrators to be appointed by the
method that have been agreed upon by parties.54
Paragraph 3 of Article 10 in discussion makes provision for situation similar to what is
found under Article 38 of the ICSID Convention. Under the UNCITRAL Arbitration Rules, the
above paragraph stipulates that in situations where the parties have reached a deadlock to
constitute the arbitral tribunal, one of the parties to the dispute could make a request to the
appointing authority to constitute the arbitral tribunal. Subsequent to this, the paragraph further
empowers the appointing authority to revoke any previous appointment that might have been
made by the party and reappoint the new arbitrators. The appointing authority also has the power
to designate one of the arbitrators appointed as the presiding arbitrator.55
Notable in this
paragraph is the fact that the appointing authority could also reappoint parties‟ appointed
arbitrators.
Article 40 of the ICSID Convention bothers on the appointment of arbitrators from the
Panel of Arbitrators that is preserved by the Centre with respect to Articles 12-16. Therefore, in
the event that the Chairman is requested by one of the parties to make appointment of arbitrators
54
Paragraph 2 of the above article provides thus: “if the parties have agreed that the arbitral tribunal is to
be composed of a number of arbitrators other than one or three, the arbitrators shall be appointed
according to the method agreed upon by the parties”.
55 See Paragraph 3, Article 10, UNCITRAL Arbitration Rules, which provides thus: “In the event of any
failure to constitute the arbitral tribunal under these Rules, the appointing authority shall, at the request of
any party, constitute the arbitral tribunal and, in doing so, may revoke any appointment already made and
appoint or reappoint each of the arbitrators and designate one of them as the presiding arbitrator.
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on their behalf under article 38, the Chairman may not go beyond the Panel of Arbitrators in
making this appointment.56
B. CHALLENGE OF ARBITRATORS
Challenge of arbitrators is a big issue in international arbitration – whether in
international investment arbitration or international commercial arbitration. Domestic arbitration
is not as well left out of this issue. There have been attempts by the International Bar Association
(IBA) to ensure that there are some guidelines which will guide arbitrators in order to reduce the
cases which challenge to arbitrators may spring up.57
This part examines challenge under the
UNCITRAL Arbitration Rules vis-a-vis that of ICSID Convention.
After appointment of an arbitrator in an international arbitration, situations abound where
either claimant or respondent may challenge the claimant or respondent‟s appointed arbitrator
based on some reasons. Some of these reasons may be based on the connection of the arbitrator
concerned with the case or relationship with one of the parties.58
If this situation arises, what is
56
See Article 40 (1) which provides that; “ Arbitrators may be appointed from outside the Panel of
Arbitrators, except in the case of appointments by the Chairman pursuant to Article 38”. (2) Arbitrators
appointed from outside the Panel of Arbitrator shall possess the qualities stated in paragraph (1) of Article
14.
57 See the IBA Guidelines on Conflict of Interest in International Arbitration.
58 See Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, decided in
2013 where the Centre‟s Chairman disqualified the Claimant‟s appointed arbitrator in a bilateral
investment treaty arbitration on the ground that there the Claimant‟s appointed arbitrator‟s law firm, in
another arbitration case, is acting against Venezuela. Available at
http://www.iareporter.com/downloads/2013118_1.
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expected of the arbitrator concerned is either to resign his appointment or continue to be on the
panel of arbitrators. If the arbitrator continues to be on the panel of arbitrators that will decide the
case, this may significantly affect the credibility of the award that will emanate from the arbitral
process.
Article 11 of the UNCITRAL Arbitration Rules stipulates that a potential arbitrator is
expected to disclose any circumstances likely to give rise to justifiable doubts as to his or her
impartiality or independence59
at the point where he or she is approached. However, this must be
when the potential arbitrator is approached in connection with his or her appointment as an
arbitrator in a case.60
Aside this initial disclosure that is expected of a potential arbitrator in a
case, the article also seeks the arbitrator to disclose any further circumstances that may affect his
independence or impartiality in the case to the other parties and every other arbitrators. The only
exemption to where the arbitrator will be expected to do further disclosure of any situation which
will might affect his or her independence or impartiality is where the other party or other
arbitrators are informed of the situations. However, the provision of this article does not tell us
the person that is obligated to inform the other party or the arbitrators. It is assumed that the onus
to discharge this responsibility rests on the arbitrator that is expected to disclose or on the party
59
Emphasis is mine.
60 See Article 11 of the UNCITRAL Arbitration Rules which provides: “When a person is approached in
connection with his or her possible appointment as an arbitrator, he or she shall disclose any
circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. An
arbitrator, from the time of his or her appointment and throughout the arbitral proceedings, shall without
delay disclose any such circumstances to the parties and the other arbitrators unless they have already
been informed by him or her of these circumstances.
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that appointed him. Notable here is the fact that the disclosure expected of the arbitrator is a
continuing one which lasts till the end of the arbitration proceedings.61
Paragraph 2 of Article 12 of the UNCITRAL Arbitration Rules considers a situation
where the party itself will be challenging its own appointed arbitrator. The paragraph gives
latitude to a party to challenge its appointed arbitrator in a circumstance where the party becomes
aware of the reasons after the appointment. This may probably be in a case where it is later
discovered by the party that the arbitrator it has appointed has a bias against it or the arbitrator is
working in favor of the other party.62
It should be noted that this is the only ground upon which a
party can challenge its own appointed arbitrator.63
The silent question in this paragraph that
seems unaddressed is who makes the effort to become aware of the reasons. In other words, if
the party appointed arbitrator later discloses this information by himself to the party that
appointed it, will the party still reserve the right to challenge the arbitrator?
Paragraph 1 of the same Article 12 gives the standard that is expected before an arbitrator
can be challenged by any of the parties to the arbitration. The UNCITRAL Arbitration Rules
makes use of the words “justifiable doubts” as to the arbitrator‟s impartiality or independence. It
appears that the inclusion of the word “justifiable” to define the type of doubt expected to sustain
a challenge under the UNCITRAL Rules reflects a clear intention to establish an objective
standard for impartiality and independence.64
It has been noted that while a party‟s subjective
concern as to an arbitrator‟s bias may trigger a challenge, it is the objective reasonableness that
61
Id.
62 See Caron & Caplan et al, supra, note 38 at, 231.
63 See Article 12 (2) which states that: “A party may challenge the arbitrator appointed by it only for
reasons of which it becomes aware after the appointment has been made.‟
64 See Caron & Caplan, supra, note 62, at 210.
PAGE 22 OF 33
will be eventually used as a standard.65
For an arbitrator to be „impartial and independent‟ of all
the parties in the arbitration proceedings, circumstances must exist to evidence that the arbitrator
will not favor one party over another party. Additionally, it must be ensured that the arbitrator
concerned is free from the control of any of the party to the arbitration.66
It seems that questions
as to the impartiality of the arbitrator will arise as a result of the arbitrator‟s internal dispositions
while questions as to his independence will arise as a result of the arbitrator‟s external control by
one of the parties.67
It appears that the independence and impartiality standard expected of an arbitrator under
the UNCITRAL Arbitration Rules is the same under the International Bar Association (IBA)
general standards regarding impartiality, independence, and disclosure. In the IBA guidelines on
the conflicts of interests in international arbitration, the general principle provision under its Part
I provides that “every arbitrator shall be impartial and independence of the parties at the time of
accepting an appointment to serve and shall remain so during the entire arbitration proceeding
until the final award has been rendered or the proceeding has otherwise terminated”. This is a
pointer to the fact that the obligation of impartiality and independence placed on the arbitrator is
continuing all through the whole of arbitration proceedings. Alternatively, where the arbitration
65
Id. In the Challenge Decision of 11 January 1995, para., 23, reprinted in (1997) XXII YCA 227, 234,
the appointing authority explained the standard thus: “if the doubt had merely to arise in the mind of a
party contesting the impartiality of an arbitrator, „justifiable‟ would have been almost redundant. The
word must import some other standard – a doubt that is justifiable in an objective sense. In other words,
the claimant here has to furnish adequate and solid grounds for its doubts. Those grounds must respond to
reasonable criteria. In some, would a reasonable well informed person believe that the perceived
apprehension – the doubt – is justifiable? Is it ascertainable by that person and so serious as to warrant the
removal of the arbitrators?”
66 Supra, note 65 at 215.
67 Id.
PAGE 23 OF 33
proceeding is terminated, the obligation is expected to continue until the point of termination of
the arbitration proceeding. This provision is the same under the UNCITRAL Arbitration Rules as
mentioned above where the burden of disclosure placed on arbitrator is continuing till the end of
the arbitration proceeding.
Further, the IBA Guidelines on conflict of interests in international arbitration
categorized circumstances that would be necessary for an arbitrator to make disclosure in order
to avoid conflict of interest among parties to the arbitration. There is non-waivable red list. In the
non-waiveable red list, the fact that the prospective arbitrator made disclosures would not cure
the potential conflict that would arise in the arbitration proceedings if the arbitrator would have
to continue to act in the arbitration proceedings. In other words, the arbitrator would have to
resign notwithstanding disclosures in order to forestall situations where the award that will
emanate from the arbitration will be challenged and subsequently annulled.
There is the waivable red list. Under here, though the situations are serious, the parties
may still consent that the arbitrator continues to act after disclosure. Absent parties‟ consent that
the arbitrator continues to act after disclosure, the arbitrator would have to decline the
appointment. The orange list contains some specific situations which may give rise to justifiable
doubts in the eyes of the parties as to arbitrator‟s impartiality and independence. However, this is
depending on the facts of each case. Thus, the arbitrator would have to disclose such situations.
The green list contains situations where there is no any appearance and actual conflict of interest
between parties. In this circumstance, there is no any obligation on the arbitrator to make any
disclosure to parties to the arbitration. To a very large extent, the situations above have reduced
PAGE 24 OF 33
the rate at which arbitrators are challenged, especially in international commercial arbitration and
where the UNCITRAL Arbitration Rules are used.
Article 13 of the same UNCITRAL Arbitration Rules informs us of the steps the party
that intends to challenge an arbitrator must take.68
As soon as the party that intends to challenge
an arbitrator has been notified of the appointment of the arbitrator, it is obligatory on the party to
send the notice of its challenge within 15 days after such party has been notified of the
appointment of the arbitrator that it wishes to challenge. In another sense, the notice could also
be sent after 15 days in which the circumstances giving rise to „justifiable doubts‟ as to the
arbitrator‟s impartiality or independence arise. Further, this notice of challenge shall forthwith be
communicated to every other party involved in the arbitration which shall include the challenged
arbitrator and other arbitrators. The challenge may be invalid if the reasons for the challenge are
not stated in the notice that communicates the challenge.
It is instructive to note that when an arbitrator has been challenged, it is not necessary for
the arbitrator to resign just because there has been a challenge to his appointment. The fact that
68
Article 13(1) provides thus: “A party that intends to challenge an arbitrator shall send notice of its
challenge within 15 days after it has been notified of the appointment of the challenged arbitrator, or
within 15 days after the circumstances mentioned in article 11 and 12 became known to the party.
Paragraph 2 of the same article further provides that: “The notice of challenge shall be communicated to
all other parties to the arbitrator who is challenged and to the other arbitrators. The notice of challenged
shall state the reasons for the challenge”. Paragraph 3 stipulates that: “When an arbitrator has been
challenged by a party, all parties may agree to the challenge. The arbitrator, may, also after the challenge,
withdraw from his or her office. In neither case does this imply acceptance of the validity of the grounds
for challenge”. In the paragraph 4 of this same article, it provides as follows: “If within 15 days from the
date of the notice of challenge, all parties do not agree to the challenge or the challenged arbitrator does
not withdraw, the party making the challenge may elect to pursue it. In that case, within 30 days from the
date of the notice of challenge, it shall seek a decision on the challenge by the appointing authority”.
PAGE 25 OF 33
other arbitrators and parties to the arbitration agree to the challenge does not suggest that the
grounds for the challenge are valid.69
Notable is the use of the word “may” in paragraph 3 of the
article to infer discretion. Thus, it is left at the discretion of the challenged arbitrator whether he
or she wants to withdraw or not.
In a situation where the challenged arbitrator refuses to withdraw after the 15 days from
the date of notice, the party initiating the challenge may elect to pursue it. At this stage, it is also
clear that the pursuit by the party that initiates the challenge is a discretionary one. This is
evidenced by the use of the word “may”. In a circumstance where the party that initiates the
challenge elects to pursue it, within 30 days from the date that the notice of challenge was
received, the party initiating the challenge shall seek to obtain a decision from the appointing
authority.
Article 14 of the ICSID Convention stipulates the standard that is expected of persons
expected to serve on the panels of arbitration under the ICSID dispute settlement mechanism.
Among these standards is the requirement that the person designated to serve on the panel must
be of “high moral character”. Aside this, it further provides that the person must have
recognized competence in the relevant field. Emphasis is laid on competence in the field of law
as of particular importance for individuals expected to be on the panel of arbitrators.70
It seems
that the standard of high moral character required from an arbitrator which will enable him/her
69
See paragraph 3 of Article 13 in note 66 above.
70 The full provisions of Article 14(1) of the ICSID Convention provides thus: “Persons designated to
serve on the Panel 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.
Competence in the field of law shall be of particular importance in the case of persons on the Panel of
Arbitrators”.
PAGE 26 OF 33
to exercise independent judgment is not defined in the Convention. However, Rule 6(2) of
Arbitration Rules of ICSID makes provision for what is similar to disclosure that is expected of
an arbitrator under the UNCITRAL Arbitration Rules. The provision requires that an arbitrator
files a declaration of independence. The Arbitrator is also expected to provide a written
statement of (a) his past and present professional business and other relationship with parties to
the arbitration. It should be noted that this is only in the case where there is any past or present
business or professional relationship; (b) the arbitrator is expected to provide a statement of any
other situation that may cause his reliability for independent judgment to be questioned by one of
the parties to the arbitration. Notable among the statement of declaration is the fact that the
disclosure obligation placed on the arbitrator to notify the Secretary-General of the Centre is a
continuing one which lasts till the end of the arbitration proceeding. This is akin to what we have
under the UNCITRAL Arbitration Rules.71
If an arbitrator fails to sign a declaration by the end
of the first session of the tribunal, the arbitrator shall be deemed to have resigned from acting as
an arbitrator in the proceeding.72
Notwithstanding the statement of declaration above, a party may still propose to the
Commission or Tribunal to disqualify an arbitrator if there is any fact to the effect that there is a
“manifest lack of the qualities”73
required by paragraph (1) of Article 14 of the ICSID
Convention.74
Additional to this, a party to the arbitration proceedings may also propose the
71
Rule 6(2) of Rules of Procedures for ICSID Arbitration Proceedings.
72 Id.
73 Emphasis is mine.
74 Article 57 of the ICSID Convention provides: “A party may propose to a Commission or Tribunal 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. A party to arbitration proceedings may, in addition, propose the
PAGE 27 OF 33
disqualification of an arbitrator on the ground that such arbitrator is ineligible for appointment to
the Tribunal under Articles 37, 38, 39, and 40 of the ICSID Convention.
Under the ICSID regime, the controversial issue boils down on manifest lack of qualities.
The use of the word “manifest” sets a very high threshold for proposing the disqualification of
an arbitrator under the ICSID Convention. It does suggest that it must be very clear, unequivocal,
and unambiguous, that the arbitrator lacks the qualities required in Article 14(1) of the ICSID
Convention.75
The Amco v. Indonesia case is a good example to the high threshold
clarification.76
Article 58 of the ICSID Convention technically gives the Centre‟s Chairman the
power to make decision on any proposal to disqualify an arbitrator.77
However, this will only
happen in situations where other members of the Commission or Tribunal have not been able to
have a consensus on the disqualification of the arbitrator.78
disqualification of an arbitrator on the ground that he was ineligible for appointment to the Tribunal under
Section 2 of Chapter IV. See also Rule 9(1-6) of the ICSID Arbitration Rules of Proceedings.
75 In Amco v. Indonesia, Decision on Jurisdiction, 25 September 1983, the Respondent filed a proposal for
disqualification of the Claimant‟s appointed arbitrator shortly after the Tribunal‟s constitution. The
Respondent alleged acquaintance between the Claimant‟s appointed arbitrator and the individual who
controlled the Claimant. However, the majority of the Arbitrators found that the facts of the case did not
reveal a manifest or highly probable lack of independence. He Arbitrators further said that the mere
appearance of partiality was not a sufficient ground for disqualification. The lack of independence had to
be “manifest” or “highly probable” and not just “possible”.
76 Id.
77 Supra, note 58.
78 See Article 58 of the ICSID Convention which provides that: “The decision on any proposal to
disqualify a conciliator or arbitrator shall be taken by the other members of the Commission or Tribunal
as the case may be, provided that where those members are equally divided, or in the case of a proposal to
disqualify a sole conciliator or arbitrator, or a majority of the conciliators or arbitrators, the Chairman
shall take the decision. . . .
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III. THE ARBITRAL AWARDS
Akin to the judgment of national and international courts is arbitral award. At the end of
the arbitral proceedings, the arbitrators render a decision which is called an award. The award
could be in favor of the Claimant and on the other hand, it could be against the Claimant.
Because there is no appellate system like the national court where arbitrators‟ decision can be
appealed, in situations where a party is dissatisfied with the decision of the tribunal, then there
may be annulment of the decision. This part considers the decision of the arbitral tribunal and
annulment of arbitral awards.
III.A. DECISION
Article 33 of the UNCITRAL Arbitration Rules set forth the basic rule for the level of
agreement required for an award to be made in favor of one of the parties to the arbitration.
Specifically, when the number of arbitrators is more than one, it is expected that decision as to
the award or any other decision of the arbitral panel shall be made by the majority of the
arbitrators. However, where there is a sole arbitrator, the decision as touching on the award is
expected to be made by the sole arbitrator.79
Paragraph 2 of the same Article in discussion
empowers the presiding arbitrator to make decision alone. This shall be in the case of questions
of procedure, when there is a deadlock in reaching a decision or when the arbitral tribunal so
79
See Article 33 (1) of the UNCITRAL Arbitration Rules which provides as follows: “Where there is
more than one arbitrator, any award or other decision of the arbitral tribunal shall be made by a majority
of the arbitrators.
PAGE 29 OF 33
authorizes. However, this single decision may be subject to revision, where there is a provision
for that mechanism under the UNCITRAL Arbitration Rules.80
The ICSID Convention is not left out of the majority facts represented under the
UNCITRAL Arbitration Rule. Article 48 (1) of the ICISD Convention provides that the Tribunal
shall decide questions by a “majority” of votes of all its members.
III. B. THE CONTENT OF THE AWARD
Article 34(2) of the UNCITRAL Arbitration Rules provides that the arbitral awards shall
be made in writing and shall be final and binding on the parties. Essential to note in this
provision is the finality of the arbitral awards arising under the UNCITRAL Arbitration Rules.
This simply restates the fact that an award that is rendered by international tribunal is res
judicata.81
In other words, the implication of the finality of the award rendered under the
UNCITRAL Arbitration Rules is that parties will not raise their claims against each other again
in so far the award remains in force.82
In paragraph 3 of the same Article, the arbitral tribunal is
expected to state the reasons upon which the arbitral award is based. However, by the parties‟
agreement, the arbitrators may not give reasons for their decision of the award. Further,
paragraph 4 states that the award shall be signed by the arbitrators. It shall also contain the date
that the award was made and the place where the award was made. This provision further
80
See Article 33 (2) of the UNCITRAL Arbitration Rules. It provides thus: “In the case of questions of
procedure, when there is no majority or when the arbitral tribunal so authorizes, the presiding arbitrator
may decide alone, subject to revision, if any, by the arbitral tribunal.
81 See Caron & Caplan et al, supra, note 67, at 797.
82 Id.
PAGE 30 OF 33
envisages a situation where the award will not be signed by one of the arbitrators. It then
provides that the award shall state the reason why an arbitrator fails to sign the award. It appears
that this provision suggests that all the arbitrators are expected to sign the award. This is
notwithstanding whether an arbitrator refuses to agree with the majority of the arbitrators in
issuing the award.83
Under the ICSID regime, paragraph 2 of Article 48 states that the award that emanates
from the ICSID Tribunal shall be in writing and shall be signed by the members of the Tribunal
who voted for it. There seems to be a sharp difference from what exists under the UNCITRAL
Arbitration Rules. It appears that under the ICSID regime, it is not only arbitrators that expected
to vote for it, irrespective of their positions in the issuing of the award, are not expected to vote
for it.84
However, Rule 46 of the ICSID Arbitration Rules of Proceedings provides that the award
shall be drawn up and signed within 120 days after closure of proceedings by individual or any
dissenter.85
Further to paragraph 2 of Article 48, paragraph 3 states that the award shall address
every question submitted to the tribunal. Also, the reasons upon which the award was rendered
shall be stated. This is an indication that the award must be exhaustive. It is also a measure to
ensure that the tribunal does not deal with a question not presented before it.86
In a case where an
individual of the tribunal dissented with the majority, paragraph 4 allows the dissenter to attach a
statement of his dissent to the award.
III. C. ANNULMENT OF AWARDS
83
See Article 34(1-6) of the UNCITRAL Arbitration Rules.
84 See Article 48(2) of the ICSID Convention.
85 See Rule 46 of the ICSID Arbitration Rules.
86 See Caron & Caplan et al, supra, note 82, at 815.
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The ICSID regime provides for a situation where awards that emanated from the ICSID
tribunal could be annulled. Article 52(1) of the ICSID Convention stipulates that any of the
parties to the arbitration proceeding may make request for the annulment of the arbitral award
that has already been issued by the tribunal. However, there are some grounds stipulated by the
article. One or more of these grounds must be met before an award can be effectively annulled.87
Either the Claimant or the Respondent could allege that the tribunal was not properly constituted
or that the tribunal has manifestly exceeded its power. The annulment system under the ICSID
regime could be liken to an appellate mechanism where parties may challenge the outcome of the
arbitral awards88
. Notable is the fact that a party cannot just make a request for annulment of an
arbitral award because such a party is dissatisfied with the outcome of the arbitration procedure.
As noted above, the reason for such request must be based on one of the grounds stipulated under
article 52(1) of the ICSID Convention. In Rule 50(1)(iii), the same grounds upon which an
ICSID arbitral award could be annulled are listed. Further to that, paragraph 3 of the same
section provides for situations in which the Secretary-General shall refuse to register a party‟s
application for annulment of award.
The above paragraph requires that a party making application for annulment should do so
within 120 days after the date on which the award was rendered. Any day counting after the 120
87
Article 52(1) provides as follows: “Either party may request annulment of the award by an application
in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the
tribunal was not properly constituted; (b) that the tribunal has manifestly exceeded its power; (c) that
there was corruption on the part of a member of the tribunal; (d) that there has been a serious departure
from fundamental rule of proceedings; or (e) that the award has failed to state the reason on which it was
based.
88 This opinion is mine and does not represent the ICSID Convention provision nor that of its Rules of
Arbitration.
PAGE 32 OF 33
days after the date that the award is rendered will give the Secretary-General the power to refuse
to register the application for annulment, notwithstanding that the facts alleged by the applicant
are those grounds stated in Article 52(1)(a-e) of the ICSID Convention. Notable is the fact that
the refusal power conferred on the Secretary-General by this Rule is not one where s/he could
choose to exercise discretion as to whether to refuse application for annulment or honor it. The
use of the word “shall” makes it mandatory.89
It should be noted that the UNCITRAL Arbitration
Rules have no provision for annulment of arbitral awards.
IV. CONCLUSION AND RECOMMENDATIONS
The regime where the UNCITRAL Arbitration Rules are used only for international
commercial arbitration has for long time been a bygone. Though the UNCITRAL Arbitration
Rules is an appropriate rules for parties in ad hoc arbitration, there is a growing use of the rules
currently even in state-investor arbitration. The revised UNCITRAL Arbitration Rules adopted in
December 2013 which came into force on April 1st, 2014 is a testimony to this. Additional Rules
on Transparency in Treaty-based Investor-State Arbitration has been added to the UNCITRAL
Arbitration Rules.
There is no doubt that the system of this world cannot be perfect. Essentially because of
the fact that man, judges and arbitrators of this world are all infallible. However, a system that
allows for annulment of arbitral awards after much energies, efforts and financial resources have
been expended leaves much questions to ask about the finality of arbitration, which was initially
seen as a quicker, and less cumbersome procedure. With the annulment procedure under the
ICSID regime, international arbitration, especially state-investor arbitration under BIT is
89
See Rule 50, ICSID Rules of Arbitration.
PAGE 33 OF 33
gradually resembling local litigation where there is an appeal procedure for dis-satisfied parties.
In the history of ICSID, record has it that only few cases had got to the annulment level.90
Instead of retaining the annulment provision under the ICSID Convention which could
cause a serious negative effect on the reputation of international arbitration itself – especially
state-investor arbitration, I would recommend that there should be a broader provision on the
issue of disclosure by arbitrators. Perhaps, a standard definition of manifest lack of qualities will
go a long way in solving the issue of qualities expected of arbitrators. Also, since the grounds for
annulment are exhaustive, I recommend that persons appointed as arbitrators under ICSID
arbitration should only be people knowledgeable in international arbitration or in transnational
dispute resolution. These would obviate the need for annulment under the ICSID regime and
ensure the finality that should be synonymous with arbitration.
90
See Klockner Industrie-Anglagen GmbH and others v. United Republic of Cameroon and Societe
Camerounaise des Engrais, Decision annulling the award, May 3, 1985. See also Amco Asia Corporation
and others v. Republic of Indonesia, Decision annulling the award, May 16, 1986.