Tag Archives: ICC

ALR 2024-2025

From Shadows to Sunshine: Why Climate Arbitration Must Go Public

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Sakina Bhatti*

The world is burning, drowning, and gasping for air. Rising sea levels now threaten to swallow entire nations and displace millions of people.1 Once seasonal, wildfires now rage year-round, turning hundreds of acres in California into ash and forcing thousands to flee their homes.2 Hurricanes grow fiercer each year, like Hurricane Helene which struck North Carolina as the “deadliest and most devasting storm” in the state’s history.3 The climate crisis is here, and its impact is inescapable.

Yet, while the world grapples with the visible impacts of the global battle against climate change, many of the invisible battles shaping our planet’s future are fought in secret, behind the closed doors of arbitration.4  Climate change-related disputes, as defined by the International Chamber of Commerce, include “any dispute arising out of or concerning the effect of climate change and climate change policy, the United Nations Framework Convention on Climate Change and the Paris Agreement.”5 These disputes broadly fall into three categories: disputes tied to specific contracts for transition, adaptation, or mitigation; disputes arising from contracts not directly related to these climate objectives; and disputes that parties agree to submit to arbitration after they arise.6

Arbitration has proven to be an effective forum for resolving climate disputes, with the number of climate arbitrations increasing rapidly in recent years.7 Its ability to provide binding, enforceable resolutions involving stakeholders across the globe makes it uniquely situated to address many of the disputes relating to climate change.8 Without arbitration, many significant rulings might have never existed, primarily due to jurisdictional hurdles.9 For example, in climate litigation establishing that a duty of care is owed to a specific individual or attributing harm to a single source can be particularly challenging.10 In contrast, the only requirement for a claim to proceed in arbitration is the existence of a valid arbitration agreement between the parties.11

While arbitration is often preferred for its efficiency and ability to navigate complex disputes,12 the confidentiality secrecy it affords can limit the public’s access to important information regarding the parties, arguments, and outcomes in climate arbitrations. For example, the Energy Charter Treaty (hereinafter, “ECT”) has been used by fossil fuel industry to challenge government policies aimed at reducing emissions.13 Governments across the world have paid billions of taxpayer dollars to fossil fuel companies for damages related to environmental protection legislation.14 The secrecy of these cases shields key details, such as decision rationales and financial awards, from public scrutiny. This lack of transparency undermines accountability and raises concerns about whether climate arbitration decisions adequately protect public interests, especially for those most vulnerable to the impacts of climate change.

In the fight against climate change, arbitration can and should be used to address the increasing disputes. In doing so, however, transparency measures, such as publishing rulings and allowing affected communities to observe proceedings, are essential. By fostering a more open arbitration environment, the legitimacy of the outcomes would be strengthened, thereby increasing their effectiveness in driving meaningful climate action.15

Climate arbitrations are not merely mechanisms for resolving disputes, but rather battlegrounds for the future of the planet. Decisions made in these forums have consequences that will impact the world for generations to come;16 keeping these proceedings shrouded in confidentiality denies the public the right to know how critical decisions that shape our collective future are being made.

* Sakina Bhatti is Senior Editor of Arbitration Law Review and a 2025 Juris Doctor Candidate at Penn State Law.

  1. See Victoria Masterson et al., Sea Level Rise: Everything You Need to Know, World Econ. F. (Sept. 20, 2024), https://www.weforum.org/stories/2024/09/rising-sea-levels-global-threat/#:~:text=Which%20countries%20will%20be%20most,coastal%20areas%20in%20acute%20danger. ↩
  2. See Deb Schweizer, Wildfires in All Seasons?, U.S. Dep’t of Agric. (June 27, 2019), https://www.usda.gov/media/blog/2019/06/27/wildfires-all-seasons. ↩
  3. Luke Tucker, Helene Labeled Most Destructive Hurricane in North Carolina History with Estimated $53 Billion in Damage, WBTV (Oct. 24, 2024), https://www.wbtv.com/2024/10/24/helene-labeled-most-destructive-hurricane-north-carolina-history-estimated-53-billion-damage/. ↩
  4. See Steven Finizio & Matteo Angelini, Climate-Related Disputes and International Arbitration, Global Arb. Rev. (Sept. 30, 2024), https://globalarbitrationreview.com/guide/the-guide-climate-change-and-related-disputes/first-edition/article/climate-related-disputes-and-international-arbitration. ↩
  5. Int’l Chamber of Com., Resolving Climate Change Related Disputes Through Arbitration and ADR, ICC Pub. No. 999 ENG, at 8 (2019), available at https://www.iccwbo.org/climate-change-disputes-report. ↩
  6. See id. at 8-11. ↩
  7. See Climate Litigation More Than Doubles in Five Years, Now a Key Tool for Delivering Climate Justice, U.N. Env’t Programme (July 27, 2023), https://www.unep.org/news-and-stories/press-release/climate-litigation-more-doubles-five-years-now-key-tool-delivering. ↩
  8. See Finizio & Angelini, supra note 4. ↩
  9. See Andria So, What is Jurisdiction, and Why is it Important to Climate Change Litigation?, Legal Planet (Nov. 28, 2022), https://legal-planet.org/2022/11/28/what-is-jurisdiction-and-why-is-it-important-to-climate-change-litigation/. ↩
  10. See James Langley et al., Procedural Issues in Climate-Related Disputes, Global Abr. Rev. (Sept. 30, 2024), https://globalarbitrationreview.com/guide/the-guide-climate-change-and-related-disputes/first-edition/article/procedural-issues-in-climate-related-disputes. ↩
  11. See id. ↩
  12. See Brian Haderspock, Guiding Principles: Commercial Arbitration Advantages Compared to Traditional Litigation, Am. Bar Ass’n (June 26, 2024), https://americanbar.org/groups/dispute_resolution/resources/just-resolutions/2024-june/guiding-principles-commercial-arbitration-advantages-compared-to-traditional-litigation/. ↩
  13. See David Keating, A Little-Know EU Investor Dispute Treaty Could Kill the Paris Climate Agreement, Forbes (Sep. 30, 2019), https://www.forbes.com/sites/davekeating/2019/09/05/a-little-known-eu-investor-dispute-treaty-could-kill-the-paris-climate-agreement/#38ef24dc4ecf. ↩
  14. See id. ↩
  15. See Int’l Chamber of Com., supra note 5. ↩
  16. See e.g., Uniper SE, Uniper Benelux Holding B.V., and Uniper Benelux N.V. v. Kingdom of the Netherlands, ICSID Case No. ARB/21/22 (initiating arbitration under the ETC against the Netherlands, contesting the country’s decision to ban coal electricity by 2030). ↩
ALR 2023 - 2024

Crystallizing Jurisprudence: Analyzing the Remedies Available to ICSID Tribunals in Arbitrator-Counsel Conflicts

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By

Ishita Wargaht

The principal responsibility of any counsel in a dispute lies in the orchestration and administration of any procedural mechanisms aimed at resolving the conflict. The importance of such a representation is highlighted in many conventions. The International Covenant on Civil and Political Rights1 and the European Convention on Human Rights2 are two preeminent examples. Such a legal representation is equally important in an arbitration proceeding. However, there is always a probability of the existence of a conflict of interest with respect to the individuals involved in an arbitration proceeding. This conflict mainly arises between the arbitrators and the counsels representing the parties. This post analyses the remedies available to ICSID tribunals in case of an arbitrator-counsel conflict of interest while referencing the London Court of International Arbitration (“LIAC”),3 ICC International Court of Arbitration (“ICC”),4 and International Bar Association (“IBA”)5 for a comparative analysis.

The International Centre for Settlement of Investment Disputes (“ICSID”) has long been regarded as the cornerstone of investor-state dispute resolution, providing a specialized forum for the resolution of investment disputes and is governed by the ICSID Convention, Regulations, and Rules (“ICSID Rules”).6 These rules, among others, demarcate the powers and remedies available to the tribunals in case of any arbitrator-counsel conflict of interest contention, for example, where a counsel has some connection with one of the arbitrators which can result in bias and lack of impartiality in the proceedings. Procedurally, in case any such contention is raised by the parties, the only remedy available at hand is to remove the conflicted arbitrator. However, in recent times, tribunals have taken a different stance and have begun removing the conflicted counsel.

This stand was first taken in the Hrvatska Tribunal,7 where, in order to avoid bias due to the acquaintance of one of the counsels with the arbitrators, the counsel was disqualified from representing the concerned party. When questioned as to where the tribunal got the authority to order such a removal, the tribunal opined that it was authorized under Article 44 of the ICSID Convention to make such a decision. Citing the aforementioned case, the same was held in the Rompetrol Tribunal8 wherein it was also added that such a power could only be used in exceptional circumstances when the integrity of the proceedings could be compromised. A similar understanding was reflected in the Edmond Khudyan Tribunal9 and Fraport Tribunal10 decisions. In the Theodore David Einarsson Tribunal decision,11 (Feb. 24, 2022).] during deliberations regarding the removal of counsel, it was asserted that ICSID Tribunals lack the authority to monitor a counsels’ adherence to ethical obligations imposed by local codes. These ethical constraints, stemming from codes governing lawyers’ professional conduct, encompass responsibilities such as not discontinuing representation without just cause and maintaining confidentiality. The Tribunal argued that as the removal of counsel directly impacts the fundamental fairness of proceedings, it falls within the jurisdiction of the ICSID Tribunal.

These above-referenced decisions indicate that ICSID tribunals have the authority to disqualify the representation by a counsel in a particular case. However, such a disqualification is based on exceptional circumstances, and the recourse should be availed only when the integrity of the proceedings would be compromised should the counsel not be removed.

Arbitration is a self-contained, party-centric dispute resolution mechanism existing outside the realm of stare decisis. For example, ICSID tribunals render non-precedential awards that subsequent tribunals are free to follow or ignore. It can be argued that it is an unnecessary practice recognized only in a handful of cases, is not a customary norm, and does not hold any precedential value. Therefore, it can be claimed that when arbitrator-counsel disputes arise, the arbitrator should be disqualified, not the counsel.

However, such a contention does not hold water, and to understand the need for such an alternate remedy, the concept of fungibility is relevant. Fungibility means the quality of being interchangeable or substituted.12 In the context of arbitration, it refers to the parties that can be replaced. In an arbitration proceeding, the level of fungibility of each participant is not equal and depends on the relevance of the parties. In the case of arbitrator-counsel disputes, the fungibility level of arbitrators is lower than that of the counsels as arbitrators are appointed by a common consensus between the parties themselves, which forms the foundation of any arbitration agreement. This is also recognized in the ICSID convention as the principle of immutability. It means that a properly constituted arbitral tribunal cannot be changed as it may imperil the legitimacy of the whole process, thereby also attributing procedural sanctity to such an aspect. The ICSID Convention explicitly states, “[a]fter a Commission or a Tribunal has been constituted and proceedings have begun, its composition shall remain unchanged.”13 Additionally, while removing an appointed arbitrator, the principal consequences, both for the parties and the arbitration system, are the increased cost of the dispute and the length of the proceedings.14 A counsel, on the other hand, is appointed by the express choice of the respective parties, thereby having a higher fungibility level than that of an arbitrator, and therefore, in most cases, the counsel should be removed. However, this should not be construed as a hard-and-fast rule. Before resorting to any alternative, the concept of fungibility should be analyzed according to the facts of each case. The circumstances of a particular case might mandate the removal of an otherwise less fungible participant, for example, an arbitrator, especially when the counsel has been involved extensively in the case for a long period of time. Removing the counsel in such a case shall just prolong the process and not be in the best interests of all the participants in the proceeding.

The concept of fungibility therefore explains why is there a need for an alternate remedy in the case of an arbitrator-counsel dispute. The author in the current piece is proposing to attribute procedural sanctity to the removal of a counsel as against the customary and procedural mandate of removing the arbitrator after assessing the fungibility of the concerned actors in the proceedings and analyzing the facts and circumstances of each case.

The primary problem in ICSID decisions is their non-precedential nature. As noted above, while there are only a handful of decisions available for an arbitrator-counsel dispute wherein the counsel is disqualified from participating in the proceedings, these are of a non-precedential nature.15 This gap was also observed by a commentator who stated:

At any rate, there is no rule of binding precedent in investment treaty arbitration. There is nothing in the ICSID Convention itself or in its travaux préparatoires to indicate the existence of such a doctrine. The decentralized structure of investment treaty arbitration is not well suited to the application of stare decisis. There are over 3000 distinct investment treaties currently in force. There is no hierarchy as between ICSID tribunals, and no mechanism of appeal. There are limited grounds for annulment and the annulment mechanism is not designed to provide consistency or predictability. And the publication of investment arbitration awards is subject to party consent. These factors have occasionally led to divergent and even conflicting awards on the same points of law or similar facts.16

This empowers the arbitral tribunal to exercise its powers in a wider import than necessary thereby necessitating the consolidation of such an alternate remedy within the framework of ICSID to impart procedural legitimacy to the same.
Secondly, for the cases that necessitate the removal of an arbitrator instead of a counsel in case of an arbitrator-counsel conflict of interest, the power to decide upon such a removal is given to the arbitral tribunal (including the conflicted arbitrator). Such an inclusion of the conflicted arbitrator is also observed in LIAC,17 ICC,18 and IBA19 processes. However, logical gaps can be observed in such a process. By including the conflicted arbitrator in an issue that involves himself as a party to the conflict of interest, gives rise to a secondary conflict of interest. The first and the primary one being between the arbitrator and the counsel and the secondary one being the constitution of the tribunal in deciding such an issue. In such a case, only the non-conflicted arbitrators (i.e., the ones not a party to the conflict of interest) should determine the secondary issue.

To conclude, the remedies available to ICSID tribunals in arbitrator-counsel conflicts constitute a dynamic area within the landscape of investor-state dispute resolution. While traditionally the remedy involved removing the conflicted arbitrator, recent decisions, as exemplified by the Hrvatska Tribunal,20 demonstrate a shifting trend towards disqualifying the counsel. This evolution, grounded in the authority granted by Article 44 of the ICSID Convention, underscores the tribunal’s commitment to preserving the integrity of proceedings and addressing exceptional circumstances where the participation of a conflicted counsel could compromise the fairness of the proceedings.

However, challenges persist, notably the non-precedential nature of previous decisions and the logical gaps in the process, particularly while deciding on the removal of an arbitrator which also includes the conflicted arbitrator. These problems have a simple solution, codify a tribunal’s ability to remove conflicted counsel into the framework of the ICSID convention. Additionally, the conflicted arbitrator should not be allowed to participate in deliberations involving himself and the conflicted counsel. Overall, a balanced and comprehensive approach is essential to enhance the legitimacy and effectiveness of the ICSID dispute resolution mechanism.

  1. International Covenant on Civil and Political Rights, March 23, 1976. ↩
  2. European Convention on Human Rights, September 3, 1953. ↩
  3. London Court of International Arbitration Rules, October 1, 2020. ↩
  4. ICC International Court of Arbitration, Arbitration Rules, January 1, 2021. ↩
  5. IBA International Principles on Conduct for the Legal Profession, May 28, 2011. ↩
  6. ICSID Convention, Regulations, and Rules, July 01, 2022. ↩
  7. Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel 33 (May 6, 2008) ↩
  8. The Rompetrol Group N.V. v. Romania, ICSID Case No. Arb/06/3, Decision of the Tribunal on the Participation of a Counsel 15 (Jan. 14, 2010). ↩
  9. Mr. Edmond Khudyan and Arin Capital & Investment Corp. v. Republic of Armenia, ICSID Case No. ARB/17/36, Procedural Order No. 2 (Decision on Application to Remove Counsel) 50 (Dec. 5, 2018). ↩
  10. Fraport AG Frankfurt Airport Services Worldwide v. Republic of The Philippines ICSID Case No. Arb/03/25, Decision on Application for Disqualification of Counsel 36-39 (Dec. 23, 2010). ↩
  11. Theodore David Einarsson, Harold Paul Einarsson, Russell John Einarsson, and Geophysical Service Incorporated v. Government of Canada, ICSID Case No. UNCT/20/6, Decision on Claimants’ Motion to Disqualify Counsel [91 ↩
  12. See Fungible, MERRIAM-WEBSTER (11th ed. 2023), https://www.merriam-webster.com/dictionary/fungible. ↩
  13. ICSID Convention, Regulations, and Rules, supra note 6, at Art. 56. ↩
  14. Federica Cristani, Challenge and Disqualification of Arbitrators in International Investment Arbitration: An Overview, 13 LAW & PRAC. INTL. CTS. & TRIBUNALS 153, 175 (2014). ↩
  15. See, e.g., Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel (May 6, 2008); The Rompetrol Group N.V. v. Romania, ICSID Case No. Arb/06/3, Decision of the Tribunal on the Participation of a Counsel (Jan. 14, 2010); Mr. Edmond Khudyan and Arin Capital & Investment Corp. v. Republic of Armenia, ICSID Case No. ARB/17/36, Procedural Order No. 2 (Decision on Application to Remove Counsel) (Dec. 5, 2018); Fraport AG Frankfurt Airport Services Worldwide v. Republic of The Philippines ICSID Case No. Arb/03/25, Decision on Application for Disqualification of Counsel (Dec. 23, 2010); Theodore David Einarsson, Harold Paul Einarsson, Russell John Einarsson, and Geophysical Service Incorporated v. Government of Canada, ICSID Case No. UNCT/20/6, Decision on Claimants’ Motion to Disqualify Counsel (Feb. 24, 2022). ↩
  16. Abdulqawi Ahmed Yusuf & Guled Yusuf, Precedent & Jurisprudence Constante, in BUILDING INTERNATIONAL INVESTMENT LAW: THE FIRST 50 YEARS OF ICSID 72 (Meg Kinnear, Geraldine R. Fischer ed., 2015). ↩
  17. London Court of International Arbitration Rules, supra note 3, at Art. 5. ↩
  18. ICC International Court of Arbitration, supra note 4, at Art. 17.2. ↩
  19. IBA International Principles on Conduct for the Legal Profession, supra note 5, at Guideline 6. ↩
  20. Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel (May 6, 2008). ↩