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What We Learn from the Suez/Vivendi v. Argentina Non-Annulment (1) — Arbitrator Disclosure

Engaging in imitation as a sincere form of flattery I begin this post with a warning: very short post, as your author on May 8 is already a week overdue to you, and is threatened with duties not consistent with his devotion to you for the next two weeks.

So, let us consider, quickly and with more than the usual disarray and risk of error from which these posts chronically suffer, what we take away from an ICSID Annulment Committee’s decision dated May 5, 2017 in the Vivendi and Suez v. Argentina case (Suez & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Annulment, May 5, 2017), in regard to the issue of the Arbitral Tribunal’s refusal to accept a challenge to the service of one of its members – a decision held by the Annulment Committee to have been not manifestly unreasonable. (Faint praise can be a blessing!)

Buffs who follow investment arbitration intensely will recall that a famous Swiss arbitrator famously joined the Board of Directors of a famous if not infamous Swiss bank in 2006, gave the Bank a list of her pending arbitrations, and in effect delegated to the Bank the task of ascertaining if any of her case commitments could result in her being perceived to lack independence of judgment as a Bank fiduciary. She determined not to investigate, on her own, the extent of the Bank’s proprietary or client-based investments in the companies appearing before her in this and another related investment arbitration against Argentina, and elected not to disclose, in either case, the fact of her election to the Bank’s board.

From the Annulment Committee’s holding and its remarks, we may discern that the following key elements of analysis by the Tribunal were at least not manifestly unreasonable: that the Bank’s holdings in the Claimant companies (proprietary and for clients in their accounts, combined), while making it a large if not the largest shareholder of each company with something north of two percent, constituted a very small fraction of the Bank’s investments even though the dollar amount of such investments, more than $2 billion, would appear substantial. Equally, while the stakes in the arbitration were in the hundreds of millions of dollars, in relation to the size and turnover of the Claimant companies the amounts in dispute were not particularly material, certainly not of “bet the company” proportions. Also, the arbitrator determined in 2009, at which point the Tribunal had unanimously upheld its jurisdiction but had not issued an award on liability or quantum, to give up her Board seat at the Bank.

Having promised brevity, I leave you with these questions: Should full time arbitrators, especially those who are regularly called upon to decide high-stakes cases involving large multinationals and States, confine their fiduciary service to predictably conflict-free institutions, mainly in the non-profit sector? Should an arbitrator’s duty to investigate potential conflicts of interest ever be delegable, at least not without disclosure to the parties of the determination to delegate? In the interest of making awards as invulnerable as possible, and of reducing the costs and uncertainties involved in post-Award challenges – whether in Annulment Committees or in ordinary courts – should prominent arbitrators involved with high-stakes disputes and high-profile entities more often err on the side of disclosure even where a strong case can be made under IBA Guidelines and other relevant conflicts guidance that disclosure is not required?

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