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
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
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.
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