Author

Ms Denise Jansen

Associate - Houthoff

Editors
See all

Constitution of the Arbitral Tribunal (As a Ground to Annul ICSID Awards)

I. Definition

1.

Under Article 52(1)(a) of the ICSID Convention, among other grounds for annulment of ICSID awards, either party may request annulment of the award by an application in writing addressed to the Secretary-General, if: “the Tribunal was not properly constituted”. Further to such a request under Article 52(1)(a) of the ICSID Convention, a three-member ad hoc Committee from the ICSID Panel of Arbitrators will assess the request.

2.

This ground “[i]s intended to cover situations such as a departure from the parties’ agreement on the method of constituting the Tribunal or an arbitrator’s failure to meet the nationality or other requirements for becoming a member of the Tribunal”.1 

3.

Article 52(1)(a) of the ICSID Convention is rarely invoked as a ground to annul an ICSID Award. This comes as no surprise, since the ICSID Secretariat is involved at this stage of the arbitral proceedings and monitors the constitution of the arbitral tribunal.2

II. Procedural issues

4.

Article 52(1)(a) of the ICSID Convention can only be raised by the parties to an arbitration. No organ of the ICSID can raise this ground ex officio, nor can third parties raise it through an actio popularis.3

5.

A party raising Article 52(1)(a) of the ICSID Convention as a ground to annul an arbitral award must have already invoked any irregularity in the constitution of the tribunal before the tribunal during the arbitration proceedings, if it is aware of circumstances that would affect the proper constitution of the tribunal during the arbitration.4 However, if a party only becomes aware of grounds for the challenge of an arbitrator at a stage it can no longer raise a challenge before the arbitral tribunal, it does not lose its right to recourse.5

6.

Ad hoc Committees have rendered different rulings when dealing with the question of whether a request for annulment would be an appropriate procedural remedy in such a situation. The first ad hoc Committee to deal with this issue was the ad hoc Committee in Azurix v. Argentina. In this case, the ad hoc Committee ruled that the party requesting the annulment of the award should have requested a revision of the award.6 This position was confirmed by the ad hoc Committee in OI v. Venezuela, which held that instead of requesting the annulment of the award, the applicant could have requested the reopening of the proceedings under Arbitration Rule 38(2) prior to the issuance of the award or the revision of the award under Article 51 ICSID Convention even after its issuance.7

7.

Several other ad hoc Committees have decided that they should apply a de novo review when dealing with this issue. Consequently these ad hoc Committees allowed a request under Article 52(1)(a) ICSID Convention in such circumstances.8

III. Case law

8.

At time of writing, the improper constitution of the Tribunal as a ground for annulment has been invoked in thirteen annulment proceedings.9 An award was annulled for the very first time on the grounds of improper constitution of the tribunal in June 2020, in Eiser Infrastructure Limited and Energia Solar Luxemburg S.À.R.L. v Kingdom of Spain.10 In this case, the ad hoc Committee annulled the award because a conflict of interest of one of the arbitrators may have existed. According to the ad hoc Committee, the failure to disclose such potential conflict of interest may have affected the outcome of the award. For that reason, the ad hoc Committee was satisfied to annul the award.

A. Burden of proof

B. Applicable standards in case of a prior decision on challenge

10.

Ad hoc Committees have frequently held that the examination of the question as to whether a tribunal was improperly constituted, is limited in cases where an applicant had already challenged the constitution of the tribunal during the arbitration proceedings.

11.

An early available case in this respect is Azurix v. Argentina,12 in which the ad hoc Committee considered that its mandate pertained only to examining whether the “procedure for constituting the tribunal, including the procedure for challenging arbitrators on grounds of a manifest lack of the qualities … have been properly complied with”.13 Other ad hoc Committees have held that they were not limited to the procedural aspects of the decision, but also have the mandate to (restrictively) assess the substance of the request.14 However, it should be noted that the same ad hoc Committees also considered that they would not operate as an appeal mechanism and can only decide whether the decisions made by the tribunals were “so plainly unreasonable that no reasonable decision-maker could come to such a decision”.15

C. Applicable standard in the absence of a prior challenge

12.

An ad hoc Committee cannot logically owe any deference to a prior decision on a challenge in cases where a party becomes aware of facts concerning the improper constitution of the arbitral tribunal after the arbitral proceedings were closed. At time of writing, it has remained up to the ad hoc Committee to establish whether the arbitrators were impartial and independent. For example, the ad hoc Committee in EDF v Argentina stated that “the party seeking annulment is not required to prove that a lack of impartiality or independence did have a material effect on the award [instead, a party] must establish that it could have done so”.16 In other words, only if the outcome of the award could have been different due to the possible irregularities, will the award be annulled.

13.

Another illustrative example of this approach is the case of Vivendi v Argentina II. In this case, the ad hoc Committee considered that although the arbitral tribunal was not properly constituted - since there were doubts regarding the impartiality of one of the arbitrators – such doubts did not have a “material effect” on the award, as the arbitrator it concerned was not aware of the facts that might have resulted in partiality.17

14.

This approach has also been followed by the ad hoc Committees in OI v. Venezuela18 and Eiser v. Spain.19

IV. Types of issues

15.

Challenges based on the improper constitution of the Tribunal under Article 52(1)(a) of the ICSID Convention mostly deal with questions such as:

  1. whether the tribunal handled a challenge to disqualify an arbitrator correctly;20
  2. whether the provisions of the ICSID Convention concerning the nationality of arbitrators were complied with;21 or
  3. whether an arbitrator did not possess a quality which, is required to serve on the Panel of Arbitrators according to Article 14 of the ICSID Convention, the requirement of the arbitrator independence and impartiality included therein.22

Bibliography

Schreuer, C.H., The ICSID Convention: A Commentary, 2001.

Delaume, G.R., The Finality of Arbitration Involving States: Recent Developments, Arbitration International, 1989, pp. 21-34.

Djanic, V. and Schill, S.W., in Fouret, J., Gerbay, R. and Alvarez, G.M. (eds.), The ICSID Convention, Regulations and Rules: a Practical Commentary, Elgar Commentaries, 2019, pp. 579-590.

Select a key word :
1 /