Institutional arbitrations, on the other hand, are conducted pursuant to institutional arbitration rules and overseen by an arbitral institution with responsibility for various aspects such as arbitrator appointments, fixing of arbitrators' fees, and administrative support.3
II. General treaty practice
Most BITs provide for the investor's choice or the disputing parties' agreement between institutional rules (usually the ICSID Arbitration Rules) and ad hoc arbitration (predominantly under the UNCITRAL Arbitration Rules).4 Only very rarely, BITs contain specific rules on the ad hoc arbitration process, instead of referring to pre-existing rules on non-administered arbitrations.5
UNCTAD Investment Policy Hub, Investment Dispute Settlement Navigator, List of Cases brought under the UNCITRAL Arbitration Rules; OECD, Dispute settlement provisions in international investment agreements: A large sample survey, para. 51; UNCTAD, Investor-State Dispute Settlement, UNCTAD Series on Issues in International Investment Agreements II, 2014, p. 64.
III. Advantages of ad hoc arbitration
Ad hoc arbitration tribunals are likely to define the term "investment" more broadly than ICSID arbitration tribunals,8 as they are not bound by the interpretation of the term under , and in particular by the complex and disputed9 criterion of a contribution to the host State's economic development.10 Some UNCITRAL tribunals have, however, adopted a definition similar to that of ICSID tribunals.11
In contrast to ICSID tribunals, ad hoc tribunals have historically been more permissive with respect to allowing claims by dual nationals. Claims by the host State's own nationals were allowed, if the nationality based on which the investors claimed protection was deemed to be "dominant and effective".12 More recently, however, some of these awards have been annulled in domestic courts.13
Ad hoc arbitration awards are subject to appeal under the lex arbitri,14 and may be refused recognition and enforcement under the limited grounds of Article V of the New York Convention. This additional layer of scrutiny ensures the award's compliance with essential guarantees of due process.
Under the UNCITRAL Arbitration Rules as the most frequently used framework for ad hoc arbitration, requests for an arbitrator's disqualification for a lack of independence and impartiality are decided by the appointing authority,15 instead of the challenged arbitrator's co-arbitrators.16 This promises a more precautionary approach to disqualification proposals.17
Mytilineos Holdings SA v. The State Union of Serbia & Montenegro and Republic of Serbia (I), Partial Award on Jurisdiction, 8 September 2006, para. 117; Serafín García Armas and Karina García Gruber v. The Bolivarian Republic of Venezuela, PCA Case No. 2013-03, Decision on Revision, 26 April 2019, para. 68.
Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20 , Award, 14 July 2010, para. 111; KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/09/8, Award, 17 October 2013, paras. 171-173; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award, 31 October 2012, para. 295; Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, para. 5.43.
Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001, para. 52; Malaysian Historical Salvors, SDN, BHD v. Malaysia, ICSID Case No. ARB/05/10 , Award on Jurisdiction, 17 May 2007, para. 123; Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006, para. 39; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction, 14 November 2005, para. 137.
Romak S.A. v. The Republic of Uzbekistan, PCA Case No. 2007-07/AA280, Award, 26 November 2009, paras. 193-207; Alps Finance and Trade AG v. The Slovak Republic, Award, 5 March 2011, para. 239; Christian Doutremepuich and Antoine Doutremepuich vs. Republic of Mauritius, PCA Case No. 2018-37, Award on Jurisdiction, 23 August 2019, para. 117; Isolux Infrastructure Netherlands B.V. v. Kingdom of Spain, SCC Case No. V2013/153, Award, 12 July 2016, para. 686.
Serafín García Armas and Karina García Gruber v. The Bolivarian Republic of Venezuela, PCA Case No. 2013-03, Decision on Jurisdiction, 15 December 2014, para. 200; Serafín García Armas and Karina García Gruber v. The Bolivarian Republic of Venezuela, PCA Case No. 2013-03, Decision of the Paris Court of Appeal, 25 April 2017, para. 30; Rupert Joseph Binder v. Czech Republic, Award on Jurisdiction, 6 June 2007, para. 48.
IV. Potential drawbacks of ad hoc arbitration
Although awards issued by ICSID tribunals benefit from an increased finality and enforceability, certain investor nationality constellations or investors' kinds of economic activities may call for choosing ad hoc arbitration. Incidentally, ad hoc arbitration may prove slightly more cost-efficient, and better suited to ensure arbitrator independence and impartiality.