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Decision on the Respondent's Challenge to the Hon. Marc Lalonde and Prof. Francisco Orrego Vicuña

I. INTRODUCTION

1.
This challenge arises in an arbitration between Claimants CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited and Telcom Devas Mauritius Limited and Respondent the Republic of India under the Arbitration Rules of the United Nations Commission on International Trade Law 1976 (the "1976 UNCITRAL Arbitration Rules") pursuant to the Agreement between the Government of the Republic of Mauritius and the Government of the Republic of India for the Promotion and the Protection of Investments entering into force June 20, 2000 (the "Treaty"). According to Article 8(2)(d)(i) of the Treaty, the appointing authority shall be the President, the Vice-President or the next senior Judge of the International Court of Justice, who is not a national of either Contracting Party.
2.
In this arbitration, the Claimants allege that the Respondent violated the Treaty by taking measures affecting the Claimants’ investments in an Indian company, Devas Multimedia Private Limited ("Devas"), which in 2005 entered into a contract with an Indian state entity under the control of the Indian Space Research Organization, Antrix Corporation Limited ("Antrix").1 According to the Claimants, pursuant to this agreement, Antrix agreed to lease capacity in the S-Band, part of the electromagnetic spectrum, to Devas which would launch two satellites to provide multimedia services to mobile users across India. The Claimants contend that the Respondent endeavored to cancel the agreement in breach of its international obligations under the Treaty.
3.
This decision resolves a challenge brought by the Respondent to the appointment of the Presiding Arbitrator, the Hon. Marc Lalonde, and the appointment of the arbitrator appointed by the Claimants, Professor Francisco Orrego Vicuna, on the ground that the arbitrators served together on two tribunals which took a position on a legal issue (the "essential security interests" clause) expected to arise in the present proceedings. The Respondent finds further grounds for challenging Professor Orrego Vicuna’s appointment in his participation on a third tribunal that also took up the same issue and in an article authored by Professor Orrego Vicuna in which he discussed his view on the issue. The Respondent emphasizes that all three arbitral decisions were later annulled or annulled in part.

II. PROCEDURAL HISTORY

4.
The Claimants appointed Professor Orrego Vicuna as co-arbitrator on July 3, 2012 and notified the Respondent of his appointment in their Notice of Arbitration dated July 4, 2012.
5.
On December 26, 2012, the Respondent appointed the Hon, Shri Justice Anil Dev Singh as coarbitrator,
6.
The two party-appointed arbitrators chose the Hon. Marc Lalonde, P.C., O.C., Q.C., to serve as the third, presiding arbitrator pursuant to Article 7(1) of the 1976 UNCITRAL Arbitration Rules. The Presiding Arbitrator notified the Parties by letter dated February 4, 2013, of his acceptance of the appointment.
7.
By e-mail dated May 11, 2013, the Respondent notified the Claimants and the Tribunal of its intention to challenge the appointments of Professor Orrego Vicuna and the Hon. Marc Lalonde.
8.
The Respondent raised its challenge to the two members of the Tribunal at the First Procedural Meeting held in The Hague on May 15, 2013.2
9.
By letter dated May 20, 2013, the Respondent requested that I decide its challenge in my role as appointing authority ("Respondent’s Request").
10.
By e-mail dated May 21, 2013, the Claimants indicated that they would provide comments on the Respondent’s Request by May 31, 2013.
11.
By letter dated May 23, 2013,I invited comments from the Presiding Arbitrator and Professor Orrego Vicuna.
12.
By letter dated May 31, 2013, the Claimants submitted their Response to the Respondent’s Request.
13.
By letter dated June 3, 2013, I informed the Parties as follows, seeking their comments, if any, by June 10, 2013:

1. In June 2010, I was appointed by the Government of India as arbitrator to the seven-member Court of Arbitration under the 1960 Indus Waters Treaty in the proceedings instituted by the Government of Pakistan. The Partial Award in the case was rendered on February 18, 2013 (the text is available on the PCA website).

2. The International Court of Justice is at present deliberating in the Maritime Dispute case (Peru v. Chile) in which Professor Orrego Vicuna has been chosen by Chile as Judge ad hoc.

14.
By letter dated June 4, 2013, the Respondent commented on the Claimants’ May 31 Response ("Respondent’s Reply"). By e-mail of the same date, the Respondent indicated it would not raise any issue with respect to the June 3 disclosure.
15.
By letter dated June 5, 2013, the Claimants commented on the Respondent’s comments of the previous day ("Claimants’ Rebuttal"). By a second letter of the same date, the Claimants indicated they would raise no issue on the June 3 disclosure.
16.
By letters also dated June 5, 2013, Professor Orrego Vicuna and the Hon. Marc Lalonde submitted comments on the challenge to their respective appointments.

III. THE CHALLENGE TO THE HON. MARC LALONDE & PROF. ORREGO VICUNA

Respondent’s Comments

17.
The Respondent challenges the appointments of the Hon. Marc Lalonde and Prof. Orrego Vicuna on the basis of a "lack of the requisite impartiality under Article 10(1) of the 1976 UNCITRAL Arbitration Rules due to an ‘issue conflict.’"3 The Respondent believes that "strongly held and articulated positions by two of three arbitrators in this case on a controversial legal standard of relevance here ‘give rise to justifiable doubts’ as to their impartiality and constitute a valid reason for concern on the part of the Government of India".4
18.
The controversial legal standard to which the Respondent refers is that of "essential security interests" as found in Article 11(3) of the Treaty.5 In this arbitration, the Respondent intends to argue that the governmental decisions the Claimants allege to be breaches of the Treaty were made for reasons related to the State’s "essential security interests". The Respondent’s challenge is based on the fact that Professor Orrego Vicuna and the Hon. Marc Lalonde participated in two cases together in which the legal interpretation of an essential security interests provision arose.
19.
The Respondent identifies three International Centre for Settlement of Investment Disputes ("ICSID") arbitrations chaired by Professor Orrego Vicuna in which the tribunals decided that the essential security interests provision of the U.S.-Argentina bilateral investment treaty incorporated the "state of necessity" defense under customary international law as reflected in Article 25 of the International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts.6 The Hon. Marc Lalonde served as a co-arbitrator in two of those cases: Sempra v. Argentina and CMS v. Argentina. The Respondent further notes that annulment committees were constituted to review the three arbitral awards rendered by the tribunals in those cases. According to the Respondent, the annulment committees in the two cases in which the arbitrators served together both concluded that the ruling on this legal point by the original tribunals constituted manifest error, while the third award was annulled because the original tribunal erred in its interpretation of the state of necessity defense.7
20.
In light of the two arbitrators’ prior, shared rulings, the Respondent maintains that its challenge should be upheld in the "interests of fundamental fairness" and to avoid that the Respondent is placed at an "unfair disadvantage".8 The Respondent refers to an article stating that "to preserve the appearance of impartiality, [an arbitrator’s having taken a clear position in a concurring or dissenting opinion] should suffice to disqualify the arbitrator".9
21.
The Respondent asserts that its argument concerns "the legal standard to be applied" as opposed to any relationship with the facts of the aforementioned cases in which the arbitrators previously served.10 That legal standard, Respondent claims, is fundamental to other treaties and has broad implications on which the two challenged arbitrators have already established their views.11
22.
In respect of its challenge to Professor Orrego Vicuna, the Respondent further argues that his "strong public declarations on the subject have included at least one clear writing in addition to the three decisions in the aforementioned cases, a chapter in a book published in 2011 in which he strongly defended his position".12 In the Respondent’s view, Professor Orrego Vicuna’s chapter demonstrates his sympathy toward a legal issue in this arbitration that would call into question the fundamental fairness of the proceedings.13
23.
It is the Respondent’s position that its challenge is timely, despite the Claimants’ view that the fifteen-day limitation under Article 11(1) of the 1976 UNCITRAL Arbitration Rules expired by the fifteenth day after each arbitrator’s appointment. The Respondent argues that the fifteen-day limitation applies from the day on which the circumstances underlying the challenge became known to the challenging party, emphasizing that actual knowledge is required.14 The Respondent asserts that it "only became aware of the basis for the challenge... on May 11, 2013" three days after having retained new counsel.15
24.
The Respondent relies on a commentary on the UNCITRAL Arbitration Rules stating that Article 11(1) "requires that a party send notice of challenge within 15 days after the circumstances underlying the challenge ‘became known to that party’".16 The Respondent also quotes from the commentary that "[t]he provision could have but notably does not include, the phrase ‘should have known’ or ‘ought to have known’".17 In support of its interpretation of Article 11, the Respondent refers to a discussion in the Working Group charged with the revision of the 1976 Rules. The Working Group considered the addition of a provision that would grant the appointing authority discretion to dismiss a challenge if the challenging party "ought reasonably to have known the grounds for challenge at an earlier stage of the procedure". According to the Working Group’s Report, that language was rejected in part because it was considered that it would create a standard of "imputed knowledge that would be a novelty in the Rules".18
25.
According to the Respondent, the Claimants’ argument that "ignorance of the law" does not help a party evade the fifteen-day time limit is irrelevant here. The Respondent further contends that one of the cases on which the Claimants rely, AWG v. Argentina, supports not Claimants’ position, but rather Respondent’s, because in that case the time period was said to have begun from the date that the respondent knew of the arbitrator’s prior ruling.19
26.
Finally, the Respondent maintains that the challenge is not untimely because the first memorial had not yet been filed at the time the challenge was made and there would be little disruption to the proceedings as a result.20
27.
It is the Respondent’s position that its challenge carries additional weight, and is unprecedented, on the basis that it involves two arbitrators implicated in the same way.21

Claimants’ Comments

28.
The Claimants ask the appointing authority to reject the Respondent’s challenge in light of its untimeliness, lack of merit, and unprecedented foundation.
29.
Turning first to the question of timeliness, the Claimants maintain that Article 11(1) of the 1976 UNCITRAL Arbitration Rules "does not excuse a party from the fifteen-day deadline by claiming ignorance" of the legal issues at stake here and the decisions of prior tribunals on those issues.22 The Claimants argue that to allow the challenge at this stage would inappropriately reward a party that does not retain counsel until the eleventh hour.23 The Claimants stress that the "security decision" at issue was known to be relevant since December 12, 2011—the date of a letter from the Claimants to the Respondent concerning the dispute.
30.
On the merits of the challenge, the Claimants assert that the Respondent has not cited and cannot cite any decision in which an arbitrator was removed on the basis of an issue conflict; all challenge decisions addressing the question have rejected the issue conflict premise. In the Claimants’ view, "the mere fact that an arbitrator has decided a particular legal issue in a past case involving a different treaty and different parties, is simply not a proper basis for challenging that arbitrator’s impartiality".24
31.
According to the Claimants, to accept such a basis for a challenge would prove untenable for the investor-state system.25 It cites a decision on a challenge in Universal Compression International Holdings, S.L.U. v. Venezuela, in which the World Bank President, as Chairman of the Administrative Council of ICSID, described how "the international investment arbitration framework would cease to be viable if an arbitrator was disqualified simply for having faced similar factual or legal issues in other arbitrations".26 Moreover, it creates a slippery slope for counsel attempting to evade a deadline for bringing a challenge by not advising one’s client of an appointed arbitrator’s previous decisions until convenient to the party’s legal strategy, as a stall tactic.27
32.
Referring to certain arbitral challenge decisions, the Claimants further argue that having rendered an opinion on an issue is not a basis for challenging impartiality as impartiality must entail bias toward a party which the Respondent has not raised here.28 The Claimants distinguish the Respondent’s cited commentary and assert to the contrary that the International Bar Association Guidelines on Conflicts of Interest in International Arbitration expressly provide that no conflict or bias is created when an arbitrator has previously published a general opinion concerning an issue arising in the arbitration.29 In the Claimants’ view, the Respondent’s theory would only support "tactical challenges to duly appointed arbitrators".30

Professor Orrego Vicuna’s Comments

33.
Professor Orrego Vicuna rejects the Respondent’s basis for its challenge. He stresses that the questions involved in the cases to which the Respondent refers are unrelated to the provisions of the Treaty in this case and that he remains unaware of the arguments on which the Respondent intends to rely. Thus, in Professor Orrego Vicuna’s view, there is no possible conflict of interest.
34.
Further, Professor Orrego Vicuna maintains that the composition of a tribunal cannot be made dependent on the views that a party may or may not make in the future.31 The fact that the Respondent announces it is "likely" that "the question of state of necessity" may be raised is "not specific enough to justify a challenge".32 He stresses that "the question concerning state of necessity in the Argentina-United States Bilateral Investment Treaty... [is] unrelated to the provision of the India-Mauritius Bilateral Investment Treaty".33 Likewise, in his view, there is no resemblance between the factual situation as argued in the Argentinean cases and the economic situation of India, as far as he is able to ascertain.
35.
Professor Orrego Vicuna reiterates his impartiality and denies that he has made any "strong public declarations" on any relevant topic as the Respondent claims.34 Nothing in his 2011 book chapter could be construed as a strong public declaration. In Professor Orrego Vicuna’s view, it is for counsel to convince a tribunal as to an appropriate interpretation of treaty language in each case.

The Hon. Marc Lalonde’s Comments

36.
The Hon. Marc Lalonde makes three observations in respect of his view that the arguments presented by the Respondent do not justify his withdrawal from the case. He notes, first, that the Treaty as well as the facts at issue in the current case differ from those involved in the cases to which the Respondent refers.
37.
Second, Mr. Lalonde highlights that the decisions in the two Argentinean cases in which he was involved were rendered "well before the decisions of the annulment committees" in those cases or in the third case to which the Respondent refers; the decisions in the latter cases were rendered in 2005 and 2007 respectively. On that point, he adds that the interpretation of the state of necessity defense in relation to the U.S.-Argentina bilateral investment treaty has been the subject of intense debate.35
38.
Third, should a question of essential security interests arise in this case, Mr. Lalonde maintains that his intention is to "approach the matter with an open mind and to give it full consideration". He declares: "I would certainly not feel bound by the CMS or the Sempra Awards which... referred to a different treaty and different facts".

IV. ANALYSIS

A. Rules relevant to the challenge

39.
It is common ground between the Parties that Articles 10 and 11 of the 1976 UNCITRAL Arbitration Rules set out the relevant provisions for the resolution of the Respondent’s challenge.
40.
Article 10(1) provides:

Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.

41.
Article 11(1) restricts the timing of any challenge under Article 10, stating:

A party who intends to challenge an arbitrator shall send notice of his challenge within fifteen days after the appointment has been notified to the challenging party or within fifteen days after the circumstances mentioned in articles 9 and 10 became known to that party.

B. Timeliness of the challenge

42.
The Parties disagree as to the date on which the limited fifteen-day period provided in Article 11(1) began here. The Parties’ disagreement turns on their respective definitions of which facts constitute "circumstances... that give rise to justifiable doubts" as stated in Article 10(1) and referenced in Article 11.
43.
According to the Claimants, the fifteen-day period expired on July 20, 2012 in reference to any challenge to Professor Orrego Vicuna’s appointment on the ground raised by the Respondent because, in the Claimants’ view, all the facts forming the basis for the challenge were known to the Respondent by July 4, 2012, the date of notification of Professor Onego Vicuna’s appointment.36 In the Claimants’ view, the relevant facts are those relating to the nature of the issues in the case (including the potential for an "essential security" issue to arise) and the identity of the arbitrator.37 Likewise, the fifteen-day period began on February 4, 2013 and expired February 20, 2013 in reference to the present challenge to the appointment of the Hon. Marc Lalonde for the same reason.38
44.
The Respondent, on the other hand, argues that the fifteen-day period began no earlier than May 11, 2013: the date on which it claims it first learned of the facts giving rise to the challenge, which are, in the Respondent’s view, the arbitrators’ past decisions and Professor Orrego Vicuna’s 2011 book chapter. The Respondent notified the Tribunal and the Claimants the same day of its intention to raise the challenge.
45.
I agree with the Respondent that the pertinent circumstances constituting the basis for its challenge as argued in the materials presented to me and triggering the fifteen-day period of Article 11(1) are the facts that the two arbitrators served together on the CMS and Sempra tribunals, that Professor Orrego Vicuna additionally chaired the Enron tribunal, and that all three tribunals took a position on "essential security interest" in their awards (which were subsequently annulled). Further, Professor Orrego Vicuna wrote an article in 2011, defending the approach of these three tribunals.
46.
The Claimants do not contest the Respondent’s assertion that it learned of the arbitrators’ coparticipation in CMS and Sempra, Professor Orrego Vicuna’s chairmanship in Enron, and Professor Orrego Vicuna’s later book chapter on May 11, 2013 - just three days after the Respondent retained new co-counsel. Rather, the Claimants stress that the Respondent could have known these facts at the time of the appointments of Professor Orrego Vicuna and the Hon. Marc Lalonde and that the Respondent should not be rewarded for having retained an experienced counsel at the eleventh hour.
47.
In my view, the text of Article 11(1) is clear enough when it speaks of "the circumstances... became known to the party". According to one leading commentary on the UNCITRAL Rules, Article 11 requires actual knowledge of the fact(s) invoked as a basis for the challenge. Thus, the Parties agree that these facts, which I have found to be those relevant to the timeliness evaluation, became known to the Respondent on May 11, 2013, at which point the Respondent informed the Claimants about its forthcoming challenge, which was then formally raised at the First Procedural Meeting of the Tribunal on May 15, 2013. The Respondent’s Request is therefore timely pursuant to Article 11 of the 1976 UNCITRAL Arbitration Rules.
48.
The Claimants maintain, nevertheless, that the Respondent’s "actual knowledge" interpretation of Article 11 creates an unworkable and risky standard. Under the Respondent’s interpretation, counsel could wait to inform his or her client of circumstances giving rise to justifiable doubt at any stage in the proceeding, permitting a party to present a challenge without regard to the egregiousness of counsel’s strategic maneuver.39
49.
In my view, the Respondent has not raised a frivolous challenge intended to subvert the object and purpose of the fifteen-day limit. Moreover, the Claimants suffer no prejudice by my entertaining the challenge at this stage nor would it pose any serious interruption to the proceedings.
50.
Having dismissed the Claimants’ objection to the timeliness of the challenge, I turn now to the merits of the Respondent’s Request.

C. Merits of the challenge

51.
The Respondent claims that circumstances give rise to justifiable doubts as to the impartiality, and not the independence, of the Presiding Arbitrator and Professor Orrego Vicuna, stating that its "challenge is not based on a lack of independence or inappropriate action by either Professor Orrego Vicuna or Mr. Lalonde, both of whom it holds in high esteem".40
52.
The basis for the Respondent’s doubts as to the arbitrators’ impartiality is what the Respondent calls an "issue conflict".41 By "issue conflict", the Respondent refers to a pre-existing view held by the arbitrators regarding an issue in dispute between the Parties. The Respondent considers that previous statements attributable to the arbitrators reflect their pre-determined view and that the arbitrators might have a "professional interest" in a particular result to avoid contradicting their earlier decisions.42
55.
The Respondent emphasizes that its concern is not related to the substance of the arbitrators’ previously stated views, but rather to the totality of the circumstances, including their service together on two occasions, as well as the additional decision and chapter by Professor Orrego Vicuna, from which it believes its doubts as to both arbitrators’ open-mindedness on the standard for the application of an "essential security interests" provision are justifiable.
56.
In response, the Claimants contend: first, that these circumstances do not give rise to justifiable doubts within the meaning of Article 10 of the 1976 UNCITRAL Arbitration Rules as the arbitrators’ prior decisions do not demonstrate impartiality toward either Party; second, that a prior decision of law or other opinion on a legal issue cannot serve as a basis for a challenge either under the Rules or in the context of the international investment arbitration framework taken as a whole; and third, that granting the Respondent’s Request would be an unprecedented outcome disqualifying an arbitrator for having rendered a decision on a point of law in an unrelated arbitration with different facts, different parties, and a different treaty.
57.
Before turning to my analysis in respect of each arbitrator, I note that the intention of the Respondent to rely on the "essential security interests" provision in Article 11(3) of the Treaty seems credible, not just a pretext to mount the present challenge. According to the Notice of Arbitration, the Additional Solicitor-General of India recommended that the Government of India could make a "policy" decision to reserve the S-Band to itself for national and military purposes. Such decision, he opined, then could serve as basis for Antrix to terminate the contract with Devas, the company in which the Claimants maintain to have made their investment.44 It is certain that the justification provided for the termination of the contract will be one of the legal issues to be considered by the Tribunal should it reach the merits of the dispute, including whether the Respondent can successfully rely on Article 11(3) of the Treaty.

(1) The challenge to the appointment of Professor Orrego Vicuna

60.
Professor Orrego Vicuna observes that each party bears the burden of convincing a tribunal of the appropriate interpretation of a treaty and asserts that he has not made any pre-determination as to the meaning of any provision in the present Treaty.
61.
There is no doubt that the facts in the present case and the Argentinean cases are different. The Respondent’s point is that "the issue giving rise to this challenge is neither treaty-specific nor fact-specific".47 The Respondent accepts that every case is fact-specific and does not contend that the facts at issue in the Argentinean cases are relevant to this arbitration.48 Rather, it contends that as to the interpretation of "essential security interests", Professor Orrego Vicuna has a closed view.
62.
I agree with Professor Orrego Vicuna that the Parties bear the burden of convincing the Tribunal of an appropriate interpretation to be applied. It is not disputed that, should it reach the merits of the Parties’ arguments, the Tribunal will face the issue of essential security interests. In interpreting this legal concept, Professor Orrego Vicuna has assumed a consistent position in three decisions. On a fourth occasion, he further affirmed that position in an academic article in which he wrote:

While the interlinking of treaty and customary law requirements in respect of necessity has been held to be a manifest error of law in the context of a particular case [referring to the decision of the CMS annulment committee], one may respectfully wonder whether the error of law might not lie with the approach suggesting that a rather vague clause of a treaty might be able to simply do away with the obligations established under the same treaty.

[...]

In this light the discussion about whether the availability of the defense should first be examined under the treaty and, only if unsuccessful, examined next under customary international law, appears to be somewhat circular. If the treaty precludes the defense there is no second shot at it under customary law. If it provides for an exception and this is not defined, its examination under customary international law will be the first and only shot supplementing the treaty vacuum. It is the two shots that would appear to run counter to the strictness of the requirements of international law.

63.
Moreover, in his comments on the challenge in the present case, he still refers to "the questions concerning state of necessity in the Argentina-United States Bilateral Investment treaty which were before several tribunals in which [he] sat as President".49
65.
Having considered all the relevant factors, I sustain the Respondent’s Request to disqualify Professor Orrego Vicuna from serving as an arbitrator in these proceedings.

(2) The challenge to the appointment of the Hon. Marc Lalonde

V. DECISION

NOW THEREFORE, having considered the submissions of the Parties and the comments of the challenged arbitrators, I

HEREBY SUSTAIN the challenge brought against the appointment of Professor Francisco Orrego Vicuna by the Respondent in its Request of May 20, 2013, and

HEREBY DENY the challenge brought against the appointment of the Hon. Marc Lalonde also brought by the Respondent in its Request of May 20, 2013.

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