This article is written by Nabria Farman, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction 

Appointment of arbitrators is usually done by the parties in ad hoc arbitration and by institutions in institutional arbitration. In the case of any conflict towards the appointment of arbitrators by the parties, court intervention upon request by either party takes place for making the appointment. However, in a bizarre circumstance, it is seen that the appointing authority itself takes the shape of the arbitrator and this phenomenon is termed as self-appointment. These instances were seen in two inter-state arbitrations under the UNCLOS Annex VII. We will deal in greater detail about these cases and look at the concerns that arise as a result of self-appointments. 

What is self-appointment?

In simple words, when the appointing authority appoints himself/herself as an arbitrator to the panel of arbitrators or as a sole arbitrator, it is known as self-appointment. It is not expressly prohibited for the appointing authority to appoint themselves as an arbitrator under the international rules of arbitration of either PCA Arbitration Rules 2012, Annex VII of UNCLOS, ICSID Convention, or UNCITRAL Arbitration Rules. 

Origin/history of it 

The mechanism of self-appointment does not arise as a result of an explicit rule in favour of it but has come to light due to two inter-State arbitrations in the recent past where appointment had been an issue. Inter-State arbitrations usually go to the United Nations Organization. When member states are unable to resolve their disputes by “peaceful means of their own choice,” UNCLOS (United Nations Convention on Law of Sea) introduces a mandatory dispute resolution regime. According to article 3 of the same, if the parties fail to agree upon the appointment of the panel of arbitrators and the President of the Tribunal and only if parties do not choose to elect a third person or State for making the appointments, the President of International Tribunal for the Law of the Sea (ITLOS) shall act as the appointing authority. In case, the President turns to be a national of either country the parties belong to, the next senior most member shall act as the appointing authority, whosoever is not a national of one of the countries the respective parties belong. 

Recently, the Permanent Court of Arbitration arbitrated the Enrica Lexie case between Italy and India. During the appointment in 2015, the then President of ITLOS, H.E. Judge Vladimir Golitsyn appointed himself as the presiding member of the tribunal. Another UNCLOS Annex VII arbitration between Ukraine and Russia regarding the Dispute of Coastal State Rights in the Black Sea, Sea of Azov, and Kerch Strait saw a similar trait being followed in the appointment of arbitrators. Since President Golitsyn is a national of the Russian Federation, the next senior-most person, that was, the then Vice-President Boualem Bouguetaia, acted as the appointing authority and appointed himself as a member of the tribunal. This dispute is still pending and is yet to be disposed of. 

Legality and validity of Self-appointments

It does not run contrary to principles of arbitration and hence, is not invalid per se. The process of such appointments takes place under the established rules of international arbitrations for inter-state arbitrations. There is no provision exactly prohibiting the appointing authority from appointing itself to the arbitral tribunal. However, due to the nature of the appointment involving the appointing party itself as an arbitrator, some concerns arise towards the impartiality and interests of parties.

Advantages of Self-appointments

When the responding party in arbitration does not appoint an arbitrator and tries to cause a delay in the arbitral process, the initiating party can request the appointing authority to appoint an arbitrator. In case of unavailability of a suitable arbitrator amongst the panel which may arise due to lack of expertise or conflict of nationality, the appointing authority can appoint itself as an arbitrator. Thus, Self-appointments help to keep the process of arbitration ongoing which serves as an efficient dispute resolution mechanism. 

Imminent concerns regarding Self-appointments

Various concerns may arise due to self-appointments due to conflict of interest on the part of the arbitrator, especially when he/she faces a challenge towards its own appointment. Firstly, the rules of arbitration do not prescribe a special provision for such a challenge. Although the ICSID Convention and Arbitration Rules state that challenges are generally determined by the other members of the tribunal, but in certain situations, the appointing authority is the one who makes the decision. Thus, the power to decide upon the challenge of an arbitrator when the arbitrator itself decides on its own challenge brings in the threat to the natural justice principle encapsulated in the maxim nemo iudex in causa sua (“no one should be a judge in his or her own cause”).

Conflicts of interests may also arise when the arbitrator is called upon to appoint another arbitrator, replace an arbitrator or decide a challenge upon a challenge to either himself or any other arbitrator. This can give rise to potential bias as the appointing authority as an arbitrator in the case, is likely to have an opinion about how the case should be resolved. As a result, he or she could make an appointment, substitute someone, or make a decision on the challenge based on his or her role. As an example, he or she might be tempted to nominate someone who shares his or her viewpoints or to disqualify someone who does not. Another conflict of interest occurs in ICSID arbitrations when the governing authority appoints an ad hoc annulment committee to decide on the award’s annulment. The conflict of interest is obvious as the nominating authority would tend to nominate individuals who are unlikely to annul the award so that he or she does not lose face.

Secondly, the appointing authority could exercise undue power over a fellow arbitrator. This may be the case once more if the nominating authority is asked to nominate a fellow arbitrator or to substitute a fellow arbitrator or determine a challenge to a fellow arbitrator.  The power of control may be used ex-post or ex-ante.  For instance, an ex-ante influence can be seen when an arbitrator may have similar feelings about voting on an interim decision in anticipation that the appointing authority will be deciding on a potential challenge to him or her. On the other hand, ex-post influence can be apprehended when an arbitrator might be inclined to vote in line with the vote of the appointing authority if the appointing authority had appointed/rejected a challenge against him or her.

Thirdly, it is also a concern that the parties’ intentions are contravened. The parties’ agreement on the appointing authority but not the arbitrators shows that the appointing authority was not meant to act as an arbitrator. Furthermore, the parties are unlikely to have intended for the two issues described above to arise. On the contrary, it can be argued that the parties’ agreement on the appointing authority indicates that they view the appointing authority as an impartial individual, thereby making him or her an acceptable arbitrator. Had it not been so, the parties would have specifically stated in the underlying treaty that the appointing authority was not to act as an arbitrator.

Impact of Self-appointment of arbitrators

Concerns of conflicts of interest were purposefully mitigated by some elements in the case of Enrica Lexie and Ukraine v. Russia because the ad hoc rules of procedure adopted by the two tribunals did not give the appointing authority the authority to decide on arbitrator challenges. Understandably, the tribunals may have deliberately deviated from the ARA Libertad, South China Sea, and Atlanto-Scandian Herring precedents of choosing the appointing authority as the decision-maker for challenges because they were concerned that the appointing authority as an arbitrator might be questioned, placing him in the unfavourable position of having to rule on its own challenge.

Nonetheless, there is a chance that conflicts of interest will occur. Firstly, since the ad hoc rules of procedure in Enrica Lexie and Ukraine v. Russia do not prescribe a proper procedure for challenge. If a party challenges an arbitrator in either case, the tribunal will have to devise an ad hoc procedure for determining the challenge, as the Annex VII tribunal did in the Chagos Marine Protected Area. In principle, this process might give the appointing authority the power to rule on the appeal, however, one would presume, or at the very least hope, that the tribunal would refrain from exercising such power.

Secondly, if the appointing authority is asked to substitute an arbitrator on the tribunals, conflicts of interest can occur. In this situation, one may be worried that the appointing authority would nominate an arbitrator who shares his own viewpoints. Concerning the question of power, it is probable that the involvement of the appointing authority on the two tribunals would influence the other arbitrators. In the two arbitrations we discussed above, the appointing authority in both of them named not only himself but also two other arbitrators to the tribunal under article 3(e) of Annex VII, giving rise to the possibility for ex-post control.

Conclusion 

As a matter of concern, there are more reasons to avoid self-appointments than adopt them. It poses a potential threat to cardinal principles of arbitration such as neutrality and interests of parties. If more and more arbitration matters were to adopt such appointment procedures, they could drastically affect the integrity of arbitrations. 

Since a few precedents of self-appointments are seen in the past, it is no more a theoretical concept. Therefore, these phenomena should be paid heed and the international arbitration community must be aware of the consequences. To defend the legitimacy of international arbitration in its entirety, rules must be developed that can govern such conduct properly. In conclusion, the appointing authorities must be taken more seriously.