Eiser v. Spain

For the Applicant :

Counsel
Mr. José Manuel Gutiérrez Delgado Abogacía del Estado, Ministerio de Justicia
Ms. María José Ruiz Sánchez Abogacía del Estado, Ministerio de Justicia
Mr. Pablo Elena Abad Abogacía del Estado, Ministerio de Justicia
Ms. Patricia Elena Froehlingsdorf Nicolás Abogacía del Estado, Ministerio de Justicia
Ms. Gabriela Álvarez Ávila Curtis, Mallet-Prevost, Colt & Mosle LLP Mr. Benard Preziosi Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Arianna Sanchez (by Curtis, Mallet-Prevost, Colt & Mosle LLP videoconference)
Mr. Ricardo Mier y Terán Curtis, Mallet-Prevost, Colt & Mosle LLP Ms. Mariana Gómez Vallin Curtis, Mallet-Prevost, Colt & Mosle LLP

For the Eiser Parties :

Counsel
Mr. Jeffrey Sullivan Gibson, Dunn & Crutcher LLP
Mr. Rahim Moloo Gibson, Dunn & Crutcher LLP
Ms. Ceyda Knoebel Gibson, Dunn & Crutcher LLP
Ms. Ankita Ritwik Gibson, Dunn & Crutcher LLP
Mr. Theo Tyrrell Gibson, Dunn & Crutcher LLP

Court Reporters:
Mr. Dante Rinaldi D-R Esteno
Ms. Dawn Larson Worldwide Reporting

Interpreters:
Ms. Amalia Thaler - de Klemm English/Spanish Interpreter
Ms. Gertrudis Durkop English/Spanish Interpreter
Mr. Daniel Giglio English/Spanish Interpreter

Under Article 52(1)(a) of the ICSID Convention, a party may seek the annulment of an award if the tribunal "was not properly constituted." According to the Applicant, this provision has to be read together with Chapter IV, Section 2 of the ICSID Convention titled "Constitution of the Tribunal", which includes Article 40(2). Article 40(2) states that the arbitrators must possess the qualities listed in Article 14(1), which include impartiality and independence. Thus, under Article 52(1)(a) of the ICSID Convention, an award can be annulled for improper constitution of the tribunal if an arbitrator did not possess the qualities of impartiality and independence.⁷

The Applicant rejects the Eiser Parties' argument that Article 52(1)(a) of the ICSID Convention only applies to procedural deficiencies regarding the constitution of the tribunal at the outset of an arbitration. The Applicant's position is based on the following reasons: (i) the Eiser Parties have not provided a single authority that supports such interpretation;⁹(ii) issues related to the independence and impartiality of the arbitrators can arise throughout the entire proceeding, as supported by Rule 6 of the Arbitration Rules;¹⁰ and, (iii) previous committees and commentators have recognized that the tribunal was not properly constituted if an arbitrator did not possess the qualities of independence and impartiality.¹¹

The Applicant recognizes that, as a general rule, a party must challenge the arbitrator promptly, when the relevant facts are known and, in any event, before the proceeding is declared closed. However, it has been recognized that a party can still challenge the independence and impartiality of an arbitrator in annulment proceedings if the relevant facts only became known once the arbitration proceedings were closed.¹²

According to the Applicant, the facts surrounding the close relationship between Dr. Alexandrov and Brattle only came to light after the Award was rendered, when public reports of such relationship emerged in July 2017, as a consequence of a challenge filed in an unrelated arbitration involving Pakistan.¹³ Therefore, it can still raise the challenge to Dr. Alexandrov's independence and impartiality at the annulment stage.

According to the Applicant, to demonstrate the lack of independence and impartiality of an arbitrator, it must prove that a reasonable third party would consider that there were reasonable grounds for an appearance of dependence or bias.¹⁴ It is not required, however, to prove actual bias.¹⁵ Further, pursuant to Article 57 of the ICSID Convention, the lack of the required qualities must be "evident" or "obvious" but does not need to be "self-evident."¹⁶ When the challenge to the independence and impartiality of an arbitrator is raised for the first time in annulment, the committee must approach the question de novo.¹⁷

First, according to the Applicant, during the course of his 15 years at Sidley Austin's Washington, D.C. office, where Dr. Alexandrov was a partner and co-head of the firm's international arbitration practice, Dr. Alexandrov and his team appointed the Brattle Group in numerous cases where he served as counsel, including, but not limited to, nine investor-State arbitrations, including eight at ICSID alone, and numerous commercial arbitrations.²¹ In four of these cases Mr. Lapuerta was the testifying expert.²²

In Spain's view, the fact that this took place while Dr. Alexandrov was at Sidley Austin is of particular relevance for two reasons. First, the identity of an arbitrator and his law firm must be considered as one for the purpose of identifying and revealing conflicts of interest. Similarly, individual experts cannot simply be detached from the company for which they work, as the Eiser Parties assert.²³ Second, it has been recognized that the fact that an arbitrator is co-head of his firm's worldwide international arbitration practice implies a degree of connection and coordination that creates conflicts even if the arbitrator himself was not involved in the representation.²⁴

Moreover, in two of these cases, Dr. Alexandrov was working with Brattle at the same time that the Underlying Arbitration was taking place. In Pluspetrol and Bear Creek, Dr. Alexandrov and/or his client appointed Mr. Lapuerta and the Brattle Group as the experts, and worked together while the Underlying Arbitration was still pending.²⁵

Although a failure to disclose does not automatically demonstrate the arbitrator's lack of impartiality and independence, it does so, according to the Applicant, when it is a "part of a pattern of circumstances raising doubts as to impartiality."³⁷ For the Applicant, Dr. Alexandrov's failure to disclose his relationship with Brattle Group is not an isolated occurrence and has also occurred in the Raiffeisen Bank, SolEs Badajoz, and Tethyan Copper cases.³⁸ A reasonable third party would therefore conclude that Dr. Alexandrov was unable to objectively and impartially assess the opinions of Brattle and that the Award should be annulled.³⁹

If the Committee were to accept a more expansive interpretation of Article 52(1)(a) of the ICSID Convention and allowed the application of Article 57 of the ICSID Convention "under the guise of annulment",⁴³ a view which the Eiser Parties do not support, the Committee would have to do so "with the safeguards imposed by the Convention on the standards of review for annulment",⁴⁴ especially because the challenged arbitrator cannot furnish any explanations.⁴⁵

According to the Eiser Parties, the Applicant should have known about the relationship between Dr. Alexandrov and Brattle during the course of the arbitration. Therefore, it has waived its right to challenge his independence and impartiality at the annulment stage.⁴⁷

First, the Eiser Parties argue that even though an arbitrator may be considered to bear the identity of his law firm, the IBA Guidelines make it clear that the activities of an arbitrator's law firm should not automatically create a conflict of interest, and this should be assessed on a case by case basis. According to the Eiser Parties, Spain has failed to explain how Sidley Austin's activities create a conflict in the present case.⁵⁷

Second, the cases in which experts from Brattle, other than Mr. Lapuerta, worked together with lawyers from Sidley Austin do not support Dr. Alexandrov's close personal relationship with Mr. Lapuerta. These include:⁵⁸

- Five ICSID cases where Mr. Lapuerta was not involved and that were handled by Sidley Austin's arbitration team in Washington D.C.;⁵⁹

- Four commercial arbitration cases handled in whole or in part by Sidley Austin's arbitration team in Washington D.C.;⁶⁰ and

- One investment arbitration case at the initial stages.⁶¹

Out of these four cases, there is only one in which Dr. Alexandrov worked with Mr. Lapuerta while the Underlying Arbitration was taking place, namely Pluspetrol v. Perupetro. As recognized by the Secretary-General of the PCA, "concurrent service as an arbitrator and as counsel in an unrelated matter in which the same expert has been engaged does not automatically result in a conflict of interest warranting disqualification under the ICSID Convention."⁶⁴

For the Eiser Parties, the SolEs Badajoz and Tethyan Copper cases are irrelevant for establishing the basis of any conflict because, in these cases, Dr. Alexandrov was acting as an arbitrator and not as counsel.⁶⁵ Further, the Eiser Parties argue that the Applicant's description of the SolEs Badajoz case is misleading. While the unchallenged co-arbitrators were equally divided on the matter, the Applicant cannot know without being privy to the deliberations that one of the co-arbitrators believed that there were justifiable doubts regarding Dr. Alexandrov's impartiality.⁶⁶

In any event, even if the Committee concludes that Dr. Alexandrov's engagements with Mr. Lapuerta constituted a close professional relationship, such relationship does not necessarily create a conflict.⁶⁷ Dr. Alexandrov has further confirmed that his relationship with the Brattle Group did not go beyond engaging them as experts and that he has not had any other joint activities with Mr. Lapuerta or any other expert from Brattle.⁶⁸

Fourth, the Eiser Parties draw the Committee's attention to the fact that in three different instances, it has already been decided that Dr. Alexandrov's relationship with Brattle does not constitute a ground for disqualification. In fact, the very same issue that the Applicant is presenting to the Committee was already decided in Tethyan Copper v. Pakistan. In that case, it was decided that there was no manifest lack of impartiality on the part of Dr. Alexandrov.⁶⁹

For the Eiser Parties, a lack of disclosure does not automatically imply the existence of a lack of independence and impartiality.⁷² The obligation to disclose under ICSID Arbitration Rule 6(2)(b) is a subjective standard. As such, it is for the arbitrator to exercise his or her discretion whether to disclose a fact or circumstance. An arbitrator cannot be criticized for honestly exercising that discretion.⁷³

According to the Eiser Parties, even if the Committee decides to review de novo the request to disqualify Dr. Alexandrov, it must reject Spain's case because there is no manifest appearance of bias or dependence. Spain has the burden to point to specific facts that demonstrate bias, which it fails to do because its arguments are based on inferences and speculation and not on objective evidence.⁷⁶

Accordingly, unless the Applicant points to specific objective facts that demonstrate Dr. Alexandrov's bias in favor of the Brattle reports and that the case was decided on considerations other than the merits of the submissions before the Tribunal, a presumption of impartiality must apply.⁷⁷

According to the Applicant, under Article 52(1)(d) of the ICSID Convention, an award may be annulled if "there has been a serious departure from a fundamental rule of procedure." This requires that the departure be: (a) "serious"; and, (b) from a "fundamental" rule of procedure.¹²³ For the Applicant, this test is the same as the "three-limb test" proposed by the Eiser Parties since the additional requirement the existence of a departure is implied in this two-tier test.¹²⁴

On the one hand, for a departure to be "serious", it must have had or may have had a material effect on the tribunal's decision.¹²⁵ According to the Applicant, contrary to the Eiser Parties' contention, evidence of an "actual material prejudice" and the showing that the violation created a substantially different result are not required.¹²⁶ On the other hand, the term "fundamental rule of procedure" refers to a set of minimal standards of procedure that must be respected and includes the right to an independent and impartial tribunal, and the right for the parties to be heard and to be treated equally.¹²⁷

According to the Applicant, the right to be heard encompasses different protections including: (i) the right to submit arguments and evidence that it deems relevant to support its case, and to do so with a comparatively equal opportunity to that given to the other party;¹³¹(ii) the right to respond to the arguments and evidence submitted by the other party, including the right to make submissions when new evidence is received and considered by the tribunal;¹³² and (iii) not being unjustifiably denied a request for document production, especially when the tribunal, after denying such request, concludes that there was an absence of evidence on the matter.¹³³

The Tribunal allowed the Eiser Parties, during the Hearing, to submit new documents into the record, one of which was used by Brattle as a basis for its new damages calculations presented for the first time at the Hearing. Despite the Applicant's objections, the Tribunal allowed this, failed to give a reasonable opportunity to the Applicant to rebut this new material, and relied on such calculations in its determination of damages in the Award.¹³⁵

The Eiser Parties do not contest that the right to be heard has been recognized as a fundamental rule of procedure. However, for the annulment to proceed, it must be unequivocally and objectively established that a tribunal has violated this right. As such, this right is not violated when a party does not avail itself of the opportunity to be heard that was granted to it and does not preclude the Tribunal's discretion to admit and evaluate evidence. Similarly, the right to be treated equally is not violated when a request for document production is denied and does not require the parties to have been granted an equal number of requests.¹⁴⁶

In Spain's view, this is confirmed by: (a) the Updated Background Paper on Annulment, which explains that under this provision "[t]he parties may raise an objection concerning compliance with [the provisions of Chapter I of the ICSID Arbitration Rules, entitled 'Establishment of the Tribunal']";¹⁸⁵ and (b) the committee in EDF v. Argentina, which stated that Article 52(1)(a) must be understood as referring to the requirements of Chapter IV, Section 2 of the ICSID Convention ("Constitution of the Tribunal"). These provisions regarding the "constitution of tribunal", in turn, include all those qualities that an arbitrator must possess.¹⁸⁶

Article 40 of the ICSID Convention, which is also part of Chapter IV, Section 2 of the same instrument, establishes that arbitrators "shall possess the qualities stated in paragraph (1) of Article 14." According to the Applicant, it is well stablished that Article 14 of the ICSID Convention includes the qualities of impartiality and independence.¹⁸⁷ Therefore, if an arbitrator did not possess the qualities of Article 14, including those of independence and impartiality, the tribunal was not properly constituted and, therefore, the award might be annulled under Article 52(1)(a) of the ICSID Convention.¹⁸⁸

For the Eiser Parties, when the facts on which a challenge is based became known after the award was rendered, the appropriate remedy is the revision of the award in accordance with Article 51 of the ICSID Convention. Thus, the Applicant should seek the revision of the Award and not its annulment, which will also allow Dr. Alexandrov to furnish explanations.¹⁹⁹

The Eiser Parties criticize the decision of the EDF committee, relied upon by Spain, for erring in the interpretation of Article 52(1)(a) of the ICSID Convention. According to them, the EDF decision failed to address the drafting history of the ICSID Convention.²⁰⁰ It is also inconsistent since, one the one hand, it concluded that challenges to the independence and impartiality of an arbitrator should be heard by the remaining members of the tribunal and, on the other hand, still rejected that the revision is the appropriate remedy.²⁰¹ In addition, the EDF decision is inconsistent with the object and purpose of the Convention and with the role of the annulment committee, which should not undertake a de novo review as if it were an arbitral tribunal assessing the merits of a disqualification proposal.²⁰²

The Parties are in disagreement as to the correct interpretation of Article 52(1)(a) of the ICSID Convention. The Committee will interpret this provision in accordance with the customary rules of interpretation, as reflected in Article 31 of the Vienna Convention. Accordingly, the Committee will interpret Article 52(1)(a) in light of its (1) text; (2) context; (3) object and purpose; and, (4) in light of any relevant rules of international law applicable in the relations between the Parties.²⁰³

(1) 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;

[…]

(1) Persons designated to serve on the Panels shall be persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment. Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators.

Art. 14(1) describes the qualifications of individuals who may be designated to serve on the Panel of Arbitrators […] the individuals must be persons of high moral character who may be relied upon to exercise their independent judgment. Under Art. 40(2) even arbitrators appointed from outside the Panel of Arbitrators must possess these qualities. Appointment of an arbitrator who manifestly does not possess these qualities may be put forward as a ground for annulment […].²¹³

With respect to object and purpose of the text, features such as the finality of awards, exclusion of appeals, and the exceptional nature of the annulment remedy may be among those that inform the role of annulment committees.²²⁰ As other committees have observed, the role of an annulment committee relates to "procedural legitimacy",²²¹ "the legitimacy of the award,"²²² and "safeguard[ing] the integrity" of the proceedings and the award.²²³ Thus, while agreeing with the Eiser Parties about the "limited scope" of the annulment procedure,²²⁴ this Committee holds that there can be no greater threat to the legitimacy and integrity of the proceedings or of the award than the lack of impartiality or independence of one or more of the arbitrators. As the Suez committee stated:

In this regard, the Committee agrees with Respondent that the parties' confidence in the independence and impartiality of the arbitrators deciding their case is essential for ensuring the integrity of the proceedings and the dispute resolution mechanism as such; thus, in principle, a lack of the qualities in Article 14(1) may serve as ground for annulment under Article 52(1)(a).²²⁵

a) was the right to raise this matter waived because the party concerned had not raised it sufficiently promptly?

b) if not, has the party seeking annulment established that a third party would find an evident or obvious appearance of lack of impartiality or independence on the part of an arbitrator on a reasonable evaluation of the facts of the case (the Blue Bank standard)? and

c) if so, could the manifestly apparent lack of impartiality or independence on the part of that arbitrator have had a material effect on the award?

According to the Applicant, as a general rule, a party challenging an arbitrator for lack of independence and impartiality is required to do so promptly and, in any event, before the proceeding is closed. However, it has been recognized that this general rule cannot prevent a party from challenging that arbitrator for the first time in the annulment phase if the relevant facts only became known after the arbitration proceedings were closed.²³⁰ In this case, the Applicant argues that it became aware of the facts on which it bases its challenge to Dr. Alexandrov only after the Eiser Award was rendered. According to the Applicant, in these circumstances, it must be allowed to raise the issue in this annulment proceeding.

The Applicant argues that the relationship between Dr. Alexandrov and the Brattle Group, in particular Mr. Lapuerta, came to the Applicant's attention after the Eiser Award was issued in May 2017. It is only in July 2017 that public reports of this relationship emerged, in the context of a disqualification proposal filed in an unrelated arbitration involving Pakistan.²³¹ As a consequence, Spain was deprived of the opportunity to challenge Dr. Alexandrov in the course of the Underlying Arbitration proceeding.²³²

The Eiser Parties note that Spain relies on a series of press reports published in GAR and Investment Arbitration Reporter in July 2017, which refer to a challenge filed in the Tethyan Copper v. Pakistan case.²³⁵ However, in their view, the fact that Dr. Alexandrov had previously worked on the same cases alongside Mr. Lapuerta was public knowledge years before the Award was issued.²³⁶ The Eiser Parties point to the following factors:

a) The decision and awards in PSEG v. Turkey and Pluspetrol v. Perupetro, cases in which Dr. Alexandrov and Mr. Lapuerta worked together, were issued in June 2004,²³⁷ January 2007,²³⁸ and May 2015,²³⁹ years before the Eiser Award was issued in May 2017;²⁴⁰

b) GAR published an article in May 2015 where it was stated that both Dr. Alexandrov and Mr. Lapuerta were retained by the respondent in Pluspetrol v. Perupetro ;²⁴¹

c) Spain itself relies on information that was publicly available, including awards issued and made public in November 2007 and August 2009, and in a GAR article of September 2016;²⁴²

d) Dr. Alexandrov's curriculum vitae, which was provided to the Parties when he was appointed as arbitrator in the Eiser case, listed his representations of Bulgaria, Costa Rica, Peru and Turkey. For the Eiser Parties, this covers the cases of PSEG v. Turkey, Pluspetrol v. Perupetro, and Bear Creek v. Peru.²⁴³

For the Applicant, the standards for the disqualification of arbitrators under Article 57 of the ICSID Convention are directly applicable to the annulment under Article 52(1)(a). Accordingly, pursuant to the decision in Blue Bank and many others that have followed it, there has to be an objective "appearance of dependence or bias" and the Applicant is not required to demonstrate "proof of actual dependence or bias."²⁴⁷ Thus, the standard is "whether, based on a reasonable evaluation of the facts […] a third party would find" an "evident or obvious appearance of lack of impartiality."²⁴⁸

First, the Applicant argues that proof of the relationship between Dr. Alexandrov and the Brattle Group, in particular with Mr. Lapuerta, is based on the following facts:²⁵²

a) During his time at Sidley Austin, where he was a partner and co-head of international arbitration, Dr. Alexandrov and his team appointed Brattle in numerous cases, four of which involved Mr. Lapuerta as the testifying expert.²⁵³ According to Spain, this is particularly relevant because the arbitrator bears the identity of his firm, which is reinforced by his role as co-head of the firm's worldwide international arbitration practice;²⁵⁴

b) At the same time he was serving as arbitrator in Eiser, Dr. Alexandrov was working with the Brattle Group in Pluspetrol and Bear Creek. In Pluspetrol, the testifying expert was Mr. Lapuerta;²⁵⁵

c) In four cases, Blusun v. Italy, Ioan Micula v. Romania, Tethyan v. Pakistan, and SolEs Badajoz v. Spain, Dr. Alexandrov was appointed as an arbitrator by the same party that engaged the Brattle Group as its expert. In Blusun and SolEs Badajoz, the testifying expert was Mr. Lapuerta.²⁵⁶

In the eyes of the Eiser Parties, Spain's case is based on speculations. Spain has resorted to misrepresenting the facts in an attempt to amplify the magnitude of the professional relationship between Dr. Alexandrov and Mr. Lapuerta.²⁶⁹ Specifically, the Eiser Parties argue that:

a) In the 15-year period at issue, there are only three ICSID cases in which Dr. Alexandrov and Mr. Lapuerta were respectively engaged by the same party as counsel and expert; these are PSEG v. Turkey, Alapli v. Turkey, and Pluspetrol v. Perupetro ;²⁷⁰

b) Pluspetrol is the only case in which Mr. Lapuerta and Dr. Alexandrov were engaged by the same party at the same time Dr. Alexandrov was sitting as arbitrator in the Underlying Arbitration;²⁷¹

c) Mr. Lapuerta was not the testifying expert in Bear Creek ;²⁷²

d) There is an undisclosed commercial arbitration in which the same party engaged Sidley Austin and Mr. Lapuerta; as of October 12, 2017, this arbitration was suspended and Dr. Alexandrov was asked by the party to remain involved only if the proceeding resumed;²⁷³

e) The SolEs Badajoz and Tethyan Copper cases are irrelevant for the purpose of establishing the basis of any conflict because Dr. Alexandrov was acting as arbitrator and not counsel;²⁷⁴ and

f) Overall, there are only four cases in which Dr. Alexandrov and Mr. Lapuerta worked, respectively, as counsel and expert witness for the same party (PSEG v. Turkey, Alapli v. Turkey, Pluspetrol v. Perupetro, and a commercial arbitration, which was in abeyance).²⁷⁵

The Eiser Parties conclude that Spain has offered no evidence of any "'close relationship'" between Dr. Alexandrov and Mr. Lapuerta or any "'unique reliance'" by the former upon the latter.²⁷⁶ On the contrary, his relationship with any of the experts from the Brattle Group did not go beyond engaging them as experts, which is common practice in international arbitration.²⁷⁷ In any case, even if the Committee were to conclude that Dr. Alexandrov's engagements with Mr. Lapuerta constitute a close professional relationship, the Eiser Parties contend that such a relationship does not create a conflict.²⁷⁸