The United Nations Commission on International Trade Law (the “UNCITRAL”) officially adopted a “Code of Conduct for Arbitrators in International Investment Disputes” (hereby referred to as the “Code”), which was prepared jointly with the International Centre for Settlement of Investment Disputes (the “ICSID”), during its 56th annual session held in Vienna in July 2023.

The UNCITRAL Working Group III has been pursuing a reform of the investor-state dispute settlement (“ISDS”) process through various discussions since 2017. As part of this effort, the latest Code focuses on promoting the integrity of the ISDS and reducing conflicts of interest. “The Code of Conduct is a further example of governments and stakeholders working together on effective reforms to investor-state dispute settlement.” said Meg Kinnear, Secretary-General of ICSID.

Noticeable key provisions of the Code are as follows:
 

The Code not only requires arbitrators in ISDS proceedings to be bound by their duties of independence and impartiality, but also provides details regarding such duties. For example, an arbitrator is obligated not to take instruction from any organization, government or individual regarding any matter addressed in the ISDS proceeding he/she is involved in (Article 3(2)(b)); not to be influenced by any past, present or prospective financial, business, professional or personal relationship (Article 3(2)(c)); and not to take any action that creates the appearance of a lack of independence or impartiality (Article 3(2)(f)). This is meaningful in that, unlike other rules or standards frequently applied to international commercial arbitration, the duties of independence and impartiality are not merely stipulated in the form of general principles, but are also reinforced and specified through practical examples.
 

The double-hatting practice in which an arbitrator also serves as counsel or an expert in other ISDS cases has been criticized for undermining the credibility of the ISDS system by raising doubts about the neutrality of the arbitrator. In light of such concern, the Code prohibits an arbitrator from holding multiple roles for a certain period of time without the consent of the disputing parties. First of all, an arbitrator in an ongoing ISDS case is not allowed to act concurrently as a legal representative or an expert witness in any other proceeding involving the same measure(s), the same or related party (parties) or the same provision(s) of the same instrument of consent. In addition, any former arbitrator of an ISDS case will be prohibited from acting as legal counsel or an expert witness in any other proceeding involving the same measures and/or the same or related parties for a period of three years. Such activities are prohibited for one year if the other proceeding involves the same provision(s) of the same instrument of consent.
 

To enhance transparency in the ISDS process, the Code obligates arbitrators (and arbitrator candidates) to disclose information that can potentially lead to conflicts of interest. It stipulates that an arbitrator shall disclose any circumstances that are likely to give rise to justifiable doubts as to his/her independence or impartiality (Article 11(1)). The Code further enumerates circumstances that need to be disclosed regardless of whether they raise justifiable doubts (Article 11(2)). For example, it is necessary to disclose any financial, business, professional or close personal relationship in the past five years with a disputing party, the legal representative(s) of a disputing party, other arbitrators and expert witnesses, and any person or entity having interest in the outcome of the ISDS proceeding, such as a third-party funder (Article 11(2)(a)). An arbitrator or an arbitrator candidate is also required to disclose all ISDS and related proceedings in which he or she is currently or has been involved in the past five years as an arbitrator, a legal representative or an expert witness (Article 11(2)(c)). For the purpose of the above disclosure, arbitrators are required to make all reasonable efforts to become aware of such circumstances and information, and shall err in favor of disclosure if there is any doubt as to whether a disclosure should be made. The Code has strengthened an arbitrator’s disclosure obligation compared to existing standards such as the IBA Guidelines on Conflicts of Interest, in the sense that it requires certain information to be disclosed regardless of its likeliness to raise justifiable doubts.
 

The Code applies to international investment dispute proceedings by complementing the provisions on the conduct of arbitrators that may be contained in the relevant instrument of consent, and it may also be applied in any other dispute resolution proceeding by the disputing parties’ agreement (Article 2). In addition to the Code, the UNCITRAL also released a commentary on the Code in order to provide guidance on its interpretation and usage in ISDS proceedings. The adoption of the Code is expected to contribute to addressing concerns about the independence of arbitrators within the ISDS system.

[Korean Version]