Are Arbitrators Biased in ICSID Arbitration? A Dynamic Perspective

Abstract

Concerns over arbitrator impartiality and independence in ICSID arbitration have led to reform proposals geared towards an investment court system. Due to the ad hoc nature of appointments, it has been suggested that arbitrators may strategically render decisions in biased ways with the goal of encouraging reappointments. Arbitrator independence and impartiality may also be compromised due to multiple appointments by the same parties or counsel. This paper introduces a dynamic perspective to examine these concerns. It distinguishes three sources of arbitrator bias: “pre-existing bias” which arbitrators possess prior to their first ICSID appointments, “prospective bias” where arbitrators vote in biased ways to increase reappointments by shaping reputations over time, and “retrospective bias” where arbitrators vote catering to entities responsible for more past appointments. Compared to pre-existing bias, prospective bias and retrospective bias are more pressing concerns in arbitration than court proceedings. Hence, identifying the magnitude of these biases is relevant for evaluating the merits of investor-state dispute settlement reform proposals. This paper finds that appointment decisions appear driven by preferences related to arbitrator pre-existing bias, but finds no support for the existence of either prospective or retrospective bias. These findings lend credence to the view that an investment court system may not be more effective in achieving independence and impartiality among adjudicators of investor-state disputes.