On July 29, 2020, Mr. Bob Meijer ("Claimant") filed a Request for Arbitration at the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") against Georgia ("Georgia" or "Respondent"), under the 1998 Netherlands-Georgia BIT. The Claimant and the Respondent are collectively referred to as the "Parties." The Parties' representatives and their addresses are listed above on page (i).
It was not the Claimant but the Respondent that appointed me as an arbitrator in the ICC Case No. 25542/HBH.
The parties to that ICC case are Anaklia Development Consortium LLC as the claimant and the Government of Georgia as the respondent.
In 2016, I was appointed by the Respondent, represented by White & Case LLP, in ICC Case n° 20965/MHM. Neither Georgia nor a Georgian state-owned entity was a party to that arbitration. The case was terminated by a final award rendered in June 2020.
a. Prof. Dr. Sachs accepted concurrent appointments in the present arbitration and the ICC Arbitration;2
b. Prof. Dr. Sachs' was repeatedly appointed by the Respondent and/or White & Case LLP, namely in the ICC Arbitration, this arbitration and ICC Case No. 20965/MHM;3 and
c. The contents of Prof. Dr. Sachs' disclosure statement contain three obvious and substantial errors which revealed that he has already prejudged the factual dispute.4
On the same date the Centre informed the Parties that:
Pursuant to Chapter V of the ICSID Convention and ICSID Arbitration Rule 9, a party may propose the disqualification of an arbitrator only after the tribunal has been constituted. In this case, the tribunal has not yet been constituted. Accordingly, the Centre may not take action on the disqualification proposal submitted, which is premature. It will be transmitted to Prof. Dr. Sachs and Dr. Charles Poncet for their information only.
Once the tribunal has been constituted, either party may promptly propose the disqualification of any of its members, in accordance with Article 57 of the ICSID Convention and ICSID Arbitration Rule 9.
On February 22, 2021, Prof. Bernard Hanotiau accepted his appointment, by agreement of the Parties, as president of the Tribunal. On the same date, the Secretary-General, in accordance with ICSID Arbitration Rule 6(1), notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date.
On March 1, 2021, the Claimant resubmitted its Proposal to Disqualify Klaus Sachs. On that date, the Centre informed the Parties that the proceeding had been suspended until the Proposal was decided, pursuant to ICSID Arbitration Rule 9(6).
The Court considered that the ICC and the ICSID arbitrations appear to be based on substantially the same factual background, which is in fact not disputed by the parties. The parties also agree that there is at least a partial overlap in the legal issues to be decided in the two cases. It therefore appears probable that at least some common factual and legal issues will arise in both arbitrations.
It is unclear at this stage whether Mr. Sachs will need to decide on such issues in the ICSID Case before having to address them in the ICC proceedings because, at the moment, both arbitrations are at the same stage of constitution of the arbitral tribunal. In this regard, Claimant suggests that the ICSID Case may proceed at a faster pace than the ICC case whereas Respondent submits that this is contradicted by statistics indicating that ICSID proceedings take on average longer than ICC proceedings. Respondent therefore submits that there is no reason to assume that when Mr. Sachs will be called to decide on certain issues in the ICC case, such issues will have already been addressed in the ICSID Case.
The Court considered that it is difficult to speculate on the exact time and sequence of the decisions to be made in both arbitrations and that challenges must be decided on the basis of the facts as they stand when the Court decides. It suffices for a risk of prejudgment to exist that similar issues of fact or law exist in different proceedings that are pending at the same time involving the same arbitrators. Although the Court has no reasons to doubt that Mr. Sachs would fulfil his duties with fairness and integrity, the risk of unconscious biases resulting from the involvement in two overlapping proceedings cannot be discarded.
With respect to the asymmetry of information, although Claimant and Mr. Meijer are represented by the same legal counsel in both cases, the Court considered that Mr. Sachs may still have access to information that will not be available to his fellow arbitrators in the ICC proceedings, who will not participate to the ICSID Case, including evidence submitted in the ICSID Case that may not be produced in the ICC case, as well as internal discussions and deliberations within the ICSID arbitral tribunal. It may moreover not be excluded that legal representation in either case could change during the course of the proceedings.
Against this background, and based on the review of the relevant documents, the Court concluded that there is merit in the first ground raised by Claimant to accept the Challenge.6
a. Following the successful challenge of Prof. Dr. Sachs in the ICC Arbitration, it is now impossible for him to maintain the required appearance of impartiality towards the Claimant and his counsel;10
b. Prof. Dr. Sachs' refusal to engage with the concerns raised by the Claimant and his subsequent decision to accept the Respondent's appointment in the ICSID arbitration show a serious lack of judgment and create an obvious appearance of lack of impartiality;11 and
c. The contents of Prof. Dr. Sachs' disclosure statement create an obvious appearance of lack of impartiality and the situation is exacerbated by Prof. Dr. Sachs' alleged prejudgment of the issue of the identity of the Parties, showing that he has already conflated ADC and the Claimant.12
First, I want to make it absolutely clear that I harbor no feeling of enmity towards Mr. Meijer or his counsel. Being challenged is part of life as an arbitrator and there is nothing personal about such matters.
Second, in its decision upholding the challenge in the ICC arbitration, the ICC Court took a cautious approach based on the risk that I might prejudge issues in the ICC arbitration. I believe that the merits of the ICC Court's approach could be debated, but that is of course of no relevance now. I disagree, however, with the notion that I lacked judgment in accepting the nominations in both the ICC and ICSID matters.
Third, I also disagree with the notion that I have prejudged issues in dispute. In my ICSID disclosure I referred to the two arbitrations as being "parallel" but that reflected an understanding that the two arbitrations arise out of the same events, concern the same underlying facts and involve related claimants (Mr. Meijer, as I understand it, being a minority shareholder of ADC), and are proceeding concurrently. If any part of that understanding turns out to be incorrect, however, then of course I would change my understanding. Further, that I stated in the ICSID disclosure that the two cases were "between the same Parties" was an obvious mistake (as also found in the ICC Challenge Decision) which I corrected and for which I apologize.
Finally, I reconfirm that I have always been and intend to continue to be independent and impartial.
The Claimant submits that Article 57 of the ICSID Convention allows a party to propose the disqualification of any member of a tribunal in the following terms:
A party may propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14.
The Claimant argues that the standard for disqualification under Article 57 is an objective standard, based on how a reasonable third party would evaluate established facts.14 He argues that as noted in Ayat Nizar Sumrain,15 Blue Bank,16 BSG Resources,17 Burlington18 and Caratube19 "the word 'manifest’ in [Article 57] means 'evident’ or 'obvious’ and that it relates to the ease with which the alleged lack of the required qualities can be perceived and not to the seriousness of the alleged lack of required qualities.20
Finally, the Claimant argues that ICSID disqualification decisions often refer to the IBA Guidelines, with the qualification that these are not binding but can be "useful references"23 It relies on several provisions of the Orange list, described below, as relevant to the present proposal.
The Claimant relies on Burlington v. Ecuador and submits that it "is good authority for two key legal principles relevant to the analysis of the present case":
(a) prior conduct of an arbitrator in connection with a challenge and feelings of enmity of that arbitrator towards one of the parties and its counsel are capable of forming the basis of a successful disqualification proposal in the ICSID context; and
(b) such circumstances are to be assessed by the Unchallenged Arbitrators from an objective standpoint, considering whether the relevant facts "evidenc[e] an appearance of lack of impartiality with respect to" the challenging party or its counsel.30
Applying the reasoning of the Burlington v. Ecuador decision, the Claimant submits that the following circumstances demonstrate an appearance of lack of impartiality towards Mr. Meijer and his counsel:
(a) the adverse ICC Challenge Decision;
(b) the fact that this decision was reached by the ICC Court in plenary session;
(c) the publication of the fact of the adverse ICC Challenge decision (as well as the reasons for it) by GAR;
(d) the possible reputational harm arising therefrom;
(e) that in Professor Sachs' mind, ADC and Mr Meijer are closely related claimants in "parallel" proceedings; and
(f) that ADC and Mr Meijer are represented by the same legal counsel team, evidence an obvious appearance of Professor Sachs' lack of impartiality towards Mr Meijer and/or his legal team based on a reasonable evaluation of these facts by an informed third party.31
The Claimant further submits that this is a situation - referred to in paragraphs 3.3.7 and 3.4.4 of the Orange List of the IBA Guidelines on Conflicts33 - that may, in the eyes of a third party, give rise to doubts as to an arbitrator's independence and impartiality.
(a) First, the Disclosure Statement averred that "the Claimant" appointed Professor Sachs in the ICC Arbitration. The Claimant in these ICSID proceedings, being Mr Meijer, had of course not appointed Professor Sachs as arbitrator in the ICC Arbitration to which he is not a party. As noted above, the claimant in the ICC Arbitration is ADC. In any event, it is the Respondent who appointed Professor Sachs in that arbitration.
(b) Second, the Disclosure Statement noted that Professor Sachs had been appointed in the "parallel" ICC case. However, that statement is also not correct. The arbitration would be "parallel" if (at a minimum) the identity of all of the parties were the same. However, that is not the case given that Mr Meijer is not the (or a) party to the ICC Arbitration.
(c) Third, and importantly, the Disclosure Statement avers that the ICSID Arbitration and the ICC Arbitration are "between the same parties". This is not only wrong but, indeed, shows bias towards the case that has been advanced (quite forcefully) by the Respondent to date. This situation is of particular concern given that we are at a stage before the proceedings have fully commenced.51
A party may propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14. A party to arbitration proceedings may, in addition, propose the disqualification of an arbitrator on the ground that he was ineligible for appointment to the Tribunal under Section 2 of Chapter IV.
A number of decisions have concluded that the word "manifest" in Article 57 of the ICSID Convention means "evident" or "obvious,"56 and that it relates to the ease with which the alleged lack of the required qualities can be perceived.57
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.
The Claimant has referred to the IBA Guidelines on Conflicts of Interest in International Arbitration in his arguments. While these rules or guidelines may serve as useful references, the Chair is bound by the standard set forth in the ICSID Convention. Accordingly, this Decision is made in accordance with Articles 57 and 58 of the ICSID Convention.
I also disagree with the notion that I have prejudged issues in dispute. In my ICSID disclosure, I referred to the two arbitrations as being "parallel" but that reflected an understanding that the two arbitrations arise out of the same events, concern the same underlying facts and involve related Claimants (Mr. Meijer, as I understand it, being a minority shareholder of ABC), and are proceeding concurrently. If any part of that understanding turns out to be incorrect, however, then of course I would change my understanding. Further, that I stated in the ICSID disclosure that the two cases were "between the same Parties" was an obvious mistake (as also found in the ICC Challenge Decision) which I corrected and for which I apologize.
Finally, I reconfirm that I have always been and intend to continue to be independent and impartial.
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