Chapter 4: Who guards the guardians? The conflicting interests of investment arbitrators

When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all [...] Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.

Juan Fernández-Armesto, arbitrator from Spain2. They earn handsome rewards for their services. Unlike judges, there is no flat salary, no cap on financial remuneration.

Arbitrators are people to whom others entrust their wealth and welfare.

William W. Park, investment arbitrator3

Arbitrators’ fees can range from US$375 to US$700 per hour depending on where the arbitration takes place4. How much an arbitrator earns per case will depend on the case’s length and complexity, but for a US$100 million dispute, arbitrators could earn on average up to US$350,0005. It can be far more. The presiding arbitrator in the case between Chevron and Texaco v. Ecuador, received US$939,0006. In another case, the Tribunal president billed for 719 hours at an hourly rate of US$660 plus VAT7.

Box 7

Who are the investment arbitrators and how are they chosen?

  • Investment-treaty arbitrators are lawyers.
  • They differ from private commercial arbitrators, who deal with disputes between companies based on contracts. Investment-treaty arbitrators deal with disputes between companies and the state, based on international investment treaties.
  • They can come from law firms, academia or have held government positions.
  • Most arbitration panels are composed of three people. One arbitrator is selected by each of the parties and a third, the president, is usually selected by the two party-appointed arbitrators. Sometimes a previously agreed appointing power, such as the World Bank or International Chamber of Commerce, selects the arbitrators.
  • Arbitrators do not need to be registered anywhere in order to qualify. Both parties can appoint anyone they consider suitable.
  • There are thousands of lawyers who want to become arbitrators, only very few who make it.

To put it simply, if a doctor is sponsored by a pharmaceutical company, we might question whether the medicine prescribed is the best for our health; if a public servant receives money from a lobbyist, we might question whether the policies they promote are in the public interest. In the same vein, if an arbitrator’s main source of income and career opportunities depends on the decision of companies to sue, we should wonder how impartial their decisions are.

And concerns not only arise from the financial benefits arbitrators gain. Arbitrators frequently combine their role with several other hats: working as practitioners, academics, policy advisers or as media commentators. With these various roles, this small group of investment lawyers can influence the direction of the investment arbitration system in a way that they can continue benefiting from it.

A close examination of the arbitration world soon reveals why arbitrators, far from being neutral, have become powerful players who have shaped the pro-corporate investment arbitration system that we see today.

The arbitrators’ club

Arbitrators may not be well known in the outside world, but members of the arbitration club certainly know each other. International arbitrators are the epitome of a close-knit community. Academics, journalists and insiders have described the circuit of investment arbitration as “small, secret, clubby”8, “an inner circle”9, “a closed homogenous group comprised of ‘grand old men’”... “or even an arbitration ‘mafia’”10.

Keeping the club small and cohesive means arbitrators have a tight grip on the investment arbitration system and can exert immense influence over it.

Everyone knows everyone in the arbitration world.

Guy Sebban, former Secretary General of the International Chamber of Commerce (ICC)11

An investment law academic, who prefers to remain anonymous, has questioned whether the investment arbitration system would even be viable if it was not maintained by a small community, bound by similar values, education and outlook. He argues that coherence among arbitrators in their view of how the system should work is essential for its survival. So the arbitrators “play this role of holding the system together”12.

Pro-business, males and from the rich North

Most of the members of this club are men from a small group of developed countries:

  • Proportion of arbitrators from Western Europe and North America: 69% for all cases held at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID)13 and 83% if taking into account arbitrators who have sat in more than 10 cases (see annex A14).
  • Proportion of arbitrators who are women: 4%. Two women (Brigitte Stern and Gabrielle Kaufmann-Kohler) dominate this list, accounting for three quarters of the cases taken by women15

Even more important for the cohesion of the arbitration industry is their shared outlook of the world. “Arbitrators have to make choices to resolve the disputes, which are of course informed by their political standpoint”, Brigitte Stern has noted16.  Evidence shows that many of the arbitrators enjoy close links with the corporate world and share businesses’ viewpoint in relation to the importance of protecting investors’ profits. Given the one-sided nature of the system, where only investors can sue and only states are sued, a pro-business outlook could be interpreted as a strategic choice for an ambitious investment lawyer keen to make a lucrative living17.

What gives the arbitral system order are the arbitrators, who share basic norms and outlooks and who, in the process of deciding disputes, are in many cases also “making law” that supports their shared vision of how the world should be.

Stephan Schill, researcher, Max-Planck Institute for Comparative Public Law and International Law18

The legal anthropologists Yves Dezalay and Bryant Garth, among the first to explore the emergence of a transnational elite of arbitrators in the 1990s, suggested: “this generation of arbitration is closer to business and therefore more likely to work business common sense into the legal norms applied to each case”. The authors also confirm the arbitrators’ “strong market orientation”19. Some of the arbitrators they mentioned in their study 20 years ago are the top investment arbitrators of today. 

In fact, arbitrators themselves have stated that they “do not normally see themselves as guardians of the public interest”20. A known professor in the field noted, “Most arbitrators are experts in “anything but” human rights law”21.

Arbitrators do not normally see themselves as guardians of the public interest.

Guillermo Aguilar Alvarez and William W. Park, arbitrators

There is a dark irony in this situation. While public concerns do not seem to be the arbitrators’ forte, many documented legal claims brought by corporations, involve issues that arise out of governments’ implementation of policies to defend the public interest. Indeed, corporations can and have challenged environmental regulations, tax increases, monetary policies, and the re-nationalisation of public services and natural resources22. In many of these cases, it is within the arbitrators’ discretion to weigh broader public interest when interpreting the treaty rules. For example, when Argentina argued “state of necessity” to justify the measures that took during the 2001-2002 economic crisis which led to over 30 lawsuits by investors, arbitrators could accept this defence. Among the cases decided so far, most arbitrators chose not to23.

The black sheep are shunned

Members of the arbitration community tend to recommend each other as counsel or arbitrator; they invite each other to conferences and to submit articles to journals. However, the black sheep, those investment lawyers who have systemic critiques of the arbitration system, are shunned.

(T)he arbitrati becomes an omertà, a closed society that vows to keep all others out.

Audley Sheppard, partner at law firm Clifford Chance24

To cite one example, there was a hostile reaction towards a public statement from 37 academics, including well-known investment lawyers, who in 2010 called on states to withdraw from or renegotiate current investment treaties25. They were shunned, with accusations that they did not know what they were talking about. Todd Weiler, an arbitration specialist, commented: “I’ve seen the list [of academics who signed the statement]. I see four professionals I recognise as having expertise in investment arbitration policy and only one who has substantive dispute settlement experience. I think that fact speaks for itself”26. The implication was clear: you can only offer useful comment on the system if you are an insider, already beholden to it.

An investment arbitration researcher, who spoke anonymously, explained that while proponents of the investment arbitration system tend to be outspoken, you would never hear a member of the close-knit community openly arguing that countries should restrict corporations’ rights or should critically assess the investor-state disputes mechanism. The same specialist noted that going against the tide, and not reproducing the opinions of those respected in the investment arbitration world, could cost anyone dearly. Breaking with the tight-knit community could entail no further appointments as an arbitrator, no promotion in the law firm, isolation in the academic community, and a drop in invitations to investment treaty conferences27.

This is not to say that arbitrators are a homogenous block. In fact, some leading arbitrators have put forward proposals on how to ‘improve’ some aspects of the system. Critiques, however, seem more likely to be tolerated as long as they do not undermine the legitimacy of the system as a whole.

Movers and shakers: an elite 15

Jan Paulsson, a top-ranking arbitrator, once assured an audience that the existence of an ‘elite’ group of arbitrators was an “illusion”28. However, our research shows that within the close-knit community, there is indeed a group of 15 arbitrators that can be considered the movers and shakers of international investment arbitration (see table 2 below). This group fits the category recently described by arbitrator Toby Landau as “super arbitrators” who are “not just the mafia but a smaller, inner mafia”29.

This elite 15 have the heaviest caseload as arbitrators in investment-treaty disputes, handle most of the biggest cases in terms of amounts demanded by the corporations and have been repeatedly ranked as top arbitrators by well-known surveys.

15 arbitrators have captured the decision making in 55% of the total investment treaty cases known today.

Together they have decided on:

55% (247 cases30)

out of 450 investment-treaty disputes known today31

64% (79 cases)

out of 123 treaty disputes of at least $100 million

75% (12 cases)

out of 16 treaty dispute of at least $4 billion

Sources: see Annexes B and C32

Contrary to Paulsson’s assessment, it seems that among the hundreds of lawyers who serve as investment arbitrators33 an elite group does exist and Paulsson is a leading member.

The concentration of cases in so few hands suggests that this small group of frequently appointed arbitrators has a significant career interest in the system. This is problematic because it poses the danger of making arbitrators even more receptive to investor interests, the latter being the only ones who can initiate investment disputes.

Table 2

Movers and Shakers of investment-treaty arbitration: an elite 15

Arbitrator (country)

Total cases as arbitrator in known investment-treaty disputes% of total known treaty-based cases (450)Total known cases as counsel in investment-treaty disputes34
Note: Information on the elite 15 is not comprehensive but is based on available information combining caseload, ranking in arbitrators scorecards (American Lawyer and Chambers and Partners) and/or the fact that they have other roles as counsel, academic or government official. There may be other arbitrators who qualify as elite based on the frequency of their appointment. The number of 15 has been chosen for convenience and other arbitrators may be considered main players in the industry. The count of cases is based on known investment-treaty cases including different rules (UNCITRAL, ICSID, etc). For the full list of cases see ANNEX B35.
    A few biographic details you might not find in the industry’s own rankings
Brigitte Stern (France) 39 8.7% N/A
  • The states’ favoured choice. Governments have appointed her as arbitrator in 79% of her known investment-treaty cases.
  • Professor of Université Paris I, Panthéon-Sorbonne; is not part of any law firm.
  • Openly against lawyers playing the dual role of counsel and arbitrator36.
  • Although she has criticised conduct in the international arbitration system, she has also said there is no need for a change in its rules: “it appears to me there is no systemic problem with investment treaty arbitration. The biggest challenge is ensuring that all the stakeholders – both the investors and the host states – consider the system is trustworthy”37.
 Charles Brower (US) 33 7.3%3
  • A favourite of investors. Companies have appointed him as arbitrator in 94% of the known investment-treaty caseswith which he has been involved.
  • Has spent the best part of 37 years with top law arbitration firm White & Case. In 2005, he joined 20 Essex Street Chambers in London.
  • An ardent defender of international investment arbitration, he once said, “My proposition is that any proposal that alters any of the fundamental elements of international arbitration constitutes an unacceptable assault on the very institution”38.
  • During the case with Perenco, Ecuador challenged his impartiality as arbitrator after he referred to Ecuador and Bolivia as “recalcitrant host countries” because these countries refused to accept arbitration tribunal decisions that contradicted their own constitutions39. Actions that Brower considered arbitrary acts, can also be interpreted as Ecuador’s and Bolivia’s sovereign right to upheld national law in defence of the interest of their people.
Francisco Orrego Vicuña (Chile) 30 


  • A prolific arbitrator, usually sitting as either president of the panel (57% of total known investment-treaty cases) or investor appointee (33% of known cases).
  • Currently a member of 20 Essex Street Chambers in London. Has held several government positions during the 16 years long Pinochet dictatorship (73-89), the most prominent as Chile’s ambassador to the United Kingdom (1983-1985)40 41.
  • A salient defender of investment arbitration, he does not support national courts deciding on investors claims. Believes that “If countries don’t sign up to [Bilateral Investment Treaties] BITs they will have nothing to offer and will lose the investment”42.

Marc Lalonde (Canada)



  • Politician for 13 years, holding high-ranking positions including Minister of Health, Minister of Justice, Minister of Energy and Minister of Finance in Canada.
  • Prominent lawyer/arbitrator, he worked with Canadian firm Stikeman Elliott for over 22 years, before going solo in 2006.
  • An active member of the corporate community, he joined the boards of Citibank Canada and Air France in the 1990s. Since 1998 he has held board roles in the energy and mining company Sherritt International43. Energy and mining cases account for half of his known investment treaty arbitration work.
  • Strong links to the corporate world might explain why investors have appointed him 17 times and states only 3.

L. Yves Fortier (Canada)



  • Like Lalonde, Fortier has combined government positions with private practice, arbitration and senior corporate positions44.
    As a career diplomat, he was Canada’s ambassador to the UN and in 1989 President of the UN Security Council.
    For almost 50 years, he was part of top arbitration law firm Ogilvy Renault, until he resigned in 2011 citing that “being an international arbitrator as a member of a global legal practice can create inherent conflict risks”45.
  • Currently part of the arbitration panel in two of the biggest cases in terms of the amount requested by the investor: Yukos v. Russia (US$103.6 billion) and ConocoPhillips v. Venezuela (US$30 billion).
  • A member of corporate boards, including NOVA Chemicals Corporation (1998-2009), aluminium producer Alcan Inc. (2002-2007) and giant mining company Rio Tinto (2007-2011), among others.
  • Openly admits that being part of the corporate world has shaped his views: “Sitting on the board of a publicly traded company – and I have served on a number of such boards – has helped me in my practice as an international arbitrator. It has always provided me with a vista on the business world that I would not have known as a lawyer”46.
Gabrielle Kaufmann-Kohler (Switzerland) 28 6.2% N/A
  • Heads Lévy Kaufmann-Kohler, the law firm she founded in 2007. A professor and active arbitrator, she has also been on various corporate boards.
  • As an arbitrator in investment-treaty cases, she has presided over at least 17 panels. In another nine known cases, she was appointed by the investor and in one by the state. In one, her role is unknown.
  • In 2004, she was appointed as arbitrator by water company Vivendi and energy and gas supplier EDF in two different claims against Argentina. Two years later, in 2006, Kaufmann-Kohler was appointed to the Board of the Swiss bank UBS, which was the single largest shareholder in Vivendi and which has stakes in EDF. Kauffman-Kohler claimed she was unaware of the connections. Argentina challenged her impartiality on the case. A committee deciding on the challenge denied Argentina’s claim, but lambasted her for failing to disclose her role as a corporate board member47.
  • Even though she argued that “having an active participation in business through board memberships is undoubtedly an asset for an arbitrator”, she resigned from the UBS board in 200948.
Albert Jan van den Berg (Netherlands) 27 6.0%


Errata: Originally we had reported that arbitrator Albert Jan van den Berg had acted as counsel in 1 case. This was a mistake. We rectify that there is no known case in which Mr van den Berg has fulfilled that role.

  • An active career both as practitioner and in academia. Passed through various law firms from 1980 until he opened his own arbitration law firm49 together with Bernand Hanotiau in 2001.
  • Has been appointed at least eight times by companies in investment-treaty cases, and five of those cases were against Argentina, following the state’s response to the 2001-2002 economic crisis. In two of the cases, van den Berg supported contradictory outcomes even when the facts and reasoning of defence of both lawsuits were almost identical50. Argentina later questioned the arbitrator’s impartiality, though this challenge was rejected51.
Karl-Heinz Böckstiegel (Germany)214.7% N/A
  • An academic-arbitrator, not known to have been appointed as arbitrator by a state. Based on known treaty-cases, has chaired 62% of the cases, and in 28% was appointed by the company.
  • In a 2006 international arbitration lecture, Böckstiegel portrayed states as the biblical Goliath, the gigantic warrior who terrorises the kingdom, and companies with the underdog David52. The use of this metaphor reveals an apparent bias towards corporations in his outlook.
Bernard Hanotiau (Belgium) 173.8%2
  • Hanotiau was a well-established arbitrator when he co-founded the firm Hanotiau & van den Berg, but has since been much in demand. In 2010, he was named arbitrator of the year by Global Arbitration magazine (GAR)53. In 2011, he was selected to arbitrate in at least seven investment-treaty cases.
  • Seems to be riding a wave of new trends in international arbitration following the boom in Asia and he regularly sits as an arbitrator in Singapore54. Maybe anticipating an increase of new lawsuits in the region, in 2011, his firm opened an office in Singapore55.
Jan Paulsson (France) 17


  • A well-known name in international arbitration, Paulsson is based in London, Miami and Bahrain. One of the few elite arbitrators to remain part of a global law firm, Freshfields, despite the increasing risk of conflicts of interest56 His impartiality was challenged in 2008 during the case Lemire v. Ukraine because Freshfields was defending Ukraine in another case.
  • Not only an active arbitrator but also an active counsel on investment-treaty panels. Currently, he represents the oil giant ConocoPhillips in its US$30 billion demand against Venezuela.
  • Despite being a fervent advocate of international arbitration, he recently contested one of the foundations of the current investment arbitration system, suggesting that all three arbitrators should be appointed by a neutral body57
  • In 2009, he published a blistering critique of governments that are attempting to regain control of their natural resources from foreign investors, which have a redistribution policy and which are critical of international arbitration and the laws that grant foreign investors greater rights58.
Stephen M. Schwebel (US) 15 3.3% 10 (9 with D. Price)
  • Judge Schwebel held several posts at the U.S. Department of State under the Kennedy and Carter administrations and was a Judge at the International Court of Justice for 11 years59.
  • A frequent arbitrator in investment-treaty disputes, in 40% of his known cases he has been appointed by the investor.
    The other 60% of known cases are divided equally between state appointments and president of the tribunal.
  • An active counsel, mainly defending companies (eight out of ten known cases).
  • Argues that BITs are an immense advance in the field and should be nurtured and cherished rather than denounced and undermined60. He avidly opposes any restriction on investor protection61.
Henri Alvarez (Canada)14 3.1% N/A
  • Like Paulsson and Galliard, one of the three elite 15 arbitrators still part of a global law firm, Fasken Martineau. 
  • Specialised in Latin America. Nine out of 14 known cases where he arbitrated against a Latin America country.
    Mainly appointed by companies (64% of known cases).
  • Advocated that Canada should sign investment treaties. When the Canada-EFTA (European Free Trade Association - including Norway, Switzerland, Iceland, and Liechtenstein) came into force in 2009, he expressed disappointment because it “does nothing to establish rules for investment protection”62.
Emmanuel Gaillard (France)143.1% 21
  • Gaillard, a lawyer with international law firm Shearman & Sterling, has been more prolific as counsel than as arbitrator in investment-treaty cases. In 76% of known cases, he has represented the investor. He represented Yukos in the high stake case against Russia, claiming US$103.6 billion.
  • The double role of counsel-arbitrator caused him problems when Ghana challenged his impartiality after he arbitrated in the case Telekom Malaysia v. Ghana at the same time as acting as counsel in the related case of RFCC v Morocco63.
  • Criticised Russia for withdrawing from the Energy Charter Treaty64 and the European Commission for proposing to terminate investment treaties between EU member states (intra-EU BITs)65.
William W. Park (US) 9 2.0% 1
  • Currently the President of the London Court of International Arbitration (LCIA), the oldest and one of the most well-known arbitration institutions. LCIA is also one of the most secretive. Until 2006, there was a ban on publication of any decision, but a summary of challenges has  now been published.
  • Suggests that investment agreements which grant foreign investors ample protection as well as the right to sue governments directly are positive for development66. He has advocated this position while not always identifying himself as an active arbitrator who benefits financially from the existence of investment agreements.
  • Defends investment protection provisions in treaties such as the North American Free Trade Agreement (NAFTA).
    He has criticised those in the United States who tried to water down NAFTA provisions67.
Daniel Price (US) 9 2%  15 (with S. Schwebel)
    See his biographic details in Box 8 (page 44).

Keeping it in the family

How would investment arbitration look if it did not operate as a closed-shop? What would happen if many more lawyers motivated by the public interest sat in panels; if the interpretation of investment clauses was more heterogeneous, or if arbitrators tended to allocate people and environmental welfare higher value than property rights when deciding on the merits of a case? Under such a scenario, it is likely that many lawsuits brought by investors would be dismissed. In fact the system may even collapse as investors would be more hesitant to pursue cases if the arbitration system became a level playing field.

The survival of international investment arbitration may well depend on keeping the arbitrators club small, heavily interconnected, and cohesive. And that is how in reality it is run.

Once we recognise that the outcome of investment arbitration is driven, in part, by non-legal factors such as the arbitrators’ policy preferences, their social and personal background68, the fact that elite arbitrators regularly sit side-by-side as co-arbitrators becomes especially relevant. All members of the elite 15 have sat at least once and many twice with another elite arbitrator. The extreme situation where all the arbitrators are from the elite 15 has occurred in at least 15 known treaty cases (see Annex D169). For example, when oil company Yukos sued Russia for US$100 billion under the Energy Charter Treaty in 2005, the case was heard by a panel composed of Yves Fortier, Daniel Price70 and Stephen Schwebel. Incidentally, another elite arbitrator, Emmanuel Gaillard, was representing the investor.

Image 1

Frequency of elite arbitrators sitting side by side as co-arbitrators

Source: own compilation. For a detailed table with all cases see Annex D.171

Once arbitrators with a shared outlook and vested interest in the system form a majority of the tribunal panel, they are in a position to interpret the law in similar way and potentially control its decisions. Some studies have even referred to the role of “collegial politics” in the outcome of the case. Researchers Waibel and Wu have noted, “an arbitrator may vote differently depending on who the two co-arbitrators are”72.

But close ties among members of the club extend beyond their role as co-arbitrators. There are also a significant number of cases where one or more of the elite 15 is part of the arbitration panel, while another, this time in the role of counsel, represents one of the parties (see Annex D.2). In some cases up to four members of the elite 15 have been involved in the same case (see Annex D.3)73. When acting as counsels, arbitrators can argue for a certain interpretation of the treaty clauses. In fact, it is the counsels who first bring forward key arguments. Arbitrators cannot, in principle, decide a case based on positions that have not been already introduced during the proceedings.

A close relationship between the arbitrator and the counsel could well be cause to question their impartiality in the process. While it is largely accepted that the integrity of the process would be compromised if lawyers from the same law firm acted as arbitrators and counsel in the same case, a more lenient approach seems to apply in cases when the relationship is close, but not as straightforward as working for the same firm.

This is the case when arbitrator and counsel are both members of the same Chamber. For example Stephen Schwebel from Essex Court Chambers acted as counsel for the company and Karl H Bockstiegel, also from Essex Court, was one of the arbitrators in 2003 during the US$700 million dispute between Bayindir Insaat Turizm Ticaret Ve Sanayi v. Pakistan. Two other members of Essex Court Chambers were part of Pakistan’s defence team.

Chambers are not law firms, but they can be described as an “office community” of self-employed lawyers. Some arbitrators like Orrego Vicuña, a member of 20 Essex Street Chamber, have argued that this situation does not lead to conflicts of interest74. However, Park, another prominent arbitrator, indicated that “practice in a collective format, sharing premises and clerks, as well as a common image for the public, can result in significant personal and professional bonds”75.

The perception that arbitrators and counsel from the same chambers acting in the same case could lead to conflicts of interest, was reaffirmed in the case Hrvatska Elektroprivreda, d.d. (HEP) v. Republic of Slovenia. An ICSID tribunal decided that Slovenia could not hire David Mildon as their counsel because Mildon and the chair of the arbitration panel, David A.R. Williams, were both members of Essex Court Chambers76.

The hidden agenda behind the multiple roles of arbitrators

It has become normal for investment arbitrators to constantly switch hats: one minute acting as counsel, the next framing the issue as an academic, or influencing policy as a government representative or expert witness.

Over the last few years these multiple roles have become the subject of some debate. This discussion has focused on the fact that some arbitrators also act as counsel which, in some situations, can raise doubts about the arbitrator’s independence and impartiality.

A common example is when an arbitrator has to decide without prejudice on an issue that the arbitrator has previously defended as an advocate. Park explained the conundrum: “On occasion, an arbitrator must address, in the context of an arbitration, the very same issue presented to him or his law firm as advocate in another case, or to himself as scholar in academic writings. It is not difficult to see why such situations might compromise the integrity of the arbitral process”77.

Lawyers cannot always move comfortably between arguing a point of legal interpretation and sitting on a tribunal deciding the issue.

William W. Park, arbitrator78

Box 8

Dan Price: a case of revolving doors

Dan Price has never been GAR magazine’s arbitrator of the year but, if GAR had a category for the arbitrator with the most hats, he would be the undisputed winner. Government official negotiating investment treaties, check; corporate lobbyist advocating investor-state dispute settlement, check; counsel defending the interest of corporations, check, prolific media commentator promoting neoliberalism, check; and  arbitrator; check.

It is common for lawyers to retire into the role of arbitrators, having held positions in government. However, Price has spun through the revolving doors between government and the arbitration circuit several times in the last 20 years. His advocacy for investment protection and investor-state arbitration has been consistent throughout.

Price has also benefited from the investment protection treaties he has promoted and helped negotiate. His roles as arbitrator and counsel (mainly for companies) were many times on cases that relied on the very treaties he helped to shape.

As Deputy General Counsel for the Office of the U.S. Trade Representative, he negotiated the US-Russia BIT for the US. When Russia was sued for US$103.6 billion in the largest claim ever, the investors (Yukos/ Hulley/ Veteran Petroleum) appointed him as arbitrator. He also negotiated investment protection under NAFTA.

Between 2002 and 2006, he represented Fireman’s Fund Insurance (Allianz) in a case against Mexico. While the trial was on-going, he lobbied the Department of Commerce, House of Representatives, Senate, Department of State, US Trade Representative and the White House on behalf of Allianz79. He has also worked as lobbyist for Monsanto, for the Organization for International Investment, and for a group that represents the country’s leading pharmaceutical research and biotechnology companies80.

Price is not a typical investment arbitration champion. By the time he left his first government position in 1992 “he understood globalization from the inside out [...] Price saw a broader order — and a new practice area — emerging from the Uruguay Round of trade talks, the North American Free Trade Agreement, and bilateral investment treaties”, according to the law firm Sidley Austin81. He foresaw the unlimited possibilities to profit from an investment arbitration industry and took on the task of helping develop it. He is known for designing the investor-state provisions and for being one of the first US lawyers to encourage corporations to sue governments by making use of investor-state clauses embedded in investment agreements82.

After four years as Chair of the International Trade and Dispute Resolution practice at Sidley Austin, he moved back to a government position in 2007, as senior economic advisor to U.S. President George W. Bush. He was Bush’s personal representative to the G-8 (Tokyo) and spearheaded the first G-20 summit in Washington in 2008. In 2008, when the global economic crisis was at its peak and governments threatened controls on capital flows, Price seems to have perceived a possible threat to the neoliberal global governance structure he had helped create. Luckily, he was in a position where he could influence the debate. The official G20 communiqué stated “We recognize that these reforms will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets [...] we must avoid over-regulation that would hamper economic growth and exacerbate the contraction of capital flows, including to developing countries”83. Exactly the measures Price was advocating84.

He returned to Sidley Austin in 2009, but left again in 2011. Unlike other arbitrators who left global firms to limit their connections with investors85 he plans to enhance his links with companies, opening both an independent law practice and a business advisory firm, Rock Creek Global Advisors. From one he offers his services as neutral arbitrator86, in the other he promises to help prospective clients “resolve regulatory or other problems they may confront in their worldwide operations”87. In other words, while he presents himself as impartial arbitrator, he offers advice to corporations on how to avoid or counteract government regulations.

Rather than question the potential conflicts of interest, colleagues such as van den Berg and Kaufmann-Kohler have praised the way he has combined the role of independent arbitrator with that of lobbying for transnational corporations88.

Some of those who acknowledge this problem have put forward proposals on how to deal with the issue (such as a ban on the arbitrator-counsel role, or the proposition that arbitrators are appointed by the institutions and not the parties). However, these initiatives suggest that new rules and guidelines would be enough to solve all possible conflicts of interests.

While the dual role of arbitrator-counsel has raised serious concerns and debate among the arbitration community89, what some might see as an even more problematic aspect of arbitrators’ multiple-hats has been largely ignored. Arbitrators are less willing to accept that their multiple roles provide them with the platform to set rules, influence the debate and prevent structural change. In essence, there is an inherent conflict of interest that could be classified as system-related, and which has been long overlooked.

The soccer World Cup is coming soon. Would it be acceptable that the player is also the referee?

Brigitte Stern, arbitrator90

Image 2

How investment arbitrators' multiple roles interact with the investment arbitration system

Promoting the ‘benefits’ of investment arbitration

Elite arbitrators have used different forums to encourage countries to sign investment treaties, to advance laissez-faire economic policy, and promote investor and arbitration-friendly positions. Arbitrators, who claim to be neutral, are employing political rhetoric to push governments into signing investment agreements. And in doing so, there is little evidence that they also warn of the potential risks for states.

BITs are an immense advance in the field and should be nurtured and cherished rather than denounced and undermined.

Judge Stephen M. Schwebel

Well-known arbitrator William W. Park combines the defence of transnational corporations’ economic rights with the assertion that he and his colleagues are not politically biased. “In today’s heterogeneous world”, he wrote, “cross-border investment will be chilled without a willingness of all countries to accept arbitration”. In the same paper he argued “arbitration responds to this apprehension [the bias of host country judges] by providing a forum that is more neutral than host country courts, both politically and procedurally”91.

Park’s claim that there is a direct correlation between signing investment agreements and attraction of Foreign Direct Investment (FDI) is not supported by the facts. Back in 2003, Mary Hallward-Driemeier, a Senior Economist in the World Bank’s Research Department, was already warning that: “analyzing twenty years of bilateral FDI flows from the OECD to developing countries finds little evidence that BITs have stimulated additional investment”92. And his argument that “investors’ economic rights need to be protected”93 tends to overlook investors’ obligations.

Others have resorted to scare tactics. “If international arbitration goes, international economic exchanges will suffer immensely. Nothing will take its place”94 warned Jan Paulsson. Judge Schwebel states that: “the demise of BITs would be regressive for investors, states and the international community”95. And according to Chilean arbitrator Orrego-Vicuña: “if countries don’t sign up to BITs they will have nothing to offer and will lose the investment, as has been seen many times”96. Yet these types of apocalyptic warnings are not based on reality. Brazil, for example, has never signed a BIT and yet receives the largest amount of foreign direct investment of any Latin American country.

Arbitrators have also tried to discredit critics such as journalists and civil society advocates who warn how investment agreements in general and investor-state disputes in particular threaten national sovereignty and democracy97. They claim that they are driven by propaganda, have been misinformed, and do not possess real knowledge of investment arbitration law. Park, for example has argued that “some conspiracy theorists, often journalists or academics, gain traction by targeting arbitration as an inherently unfair process”98. Paulsson has dismissed critics as “shrill voices ... who float propaganda” suggesting that those who question international investment law, have no respect for the rule of law99. To associate all critiques with conspiracy theories or disrespect for the rule of law is a highly defensive reaction, and suggests a community that is unwilling to accept there may be a need for systemic reforms.

Challenging the status quo is not an option

In 2004, the US government, which had been sued several times by Canadian companies under NAFTA, introduced a new BIT template (usually called a Model BIT) which modified the 1994 version. The revised text included new language that would afford the US state some policy space to regulate, particularly in the areas of health and environment. Even though environmental and labour organisations deemed the changes inadequate, prominent US arbitrator Judge Schwebel vocally condemned the changes100.

Price, who had helped to negotiate BITs on behalf of the US, also argued against weakening the provisions in the US Model BIT.101 Park said that “this policy shift is highly problematic, and ultimately will cause significant harm to American interests abroad”102.

My proposition is that any proposal that alters any of the fundamental elements of international arbitration constitutes an unacceptable assault on the very institution [...] Conversely, any proposal that does not attack these fundamental elements, but instead is designed to enhance them, should be considered carefully and may be found to represent an improvement to the process.

Charles Brower, arbitrator103

In 2009, Barack Obama vowed as a Presidential candidate to review the 2004 model BIT to increase labour and environmental obligations. But when the new text came out in 2012 no substantive changes had been made104. Judge Schwebel was part of the government’s advisory committee and, together with the business lobbies, advocated a return to stronger investment protection as contained in the 1994 Model BIT105. He seems to have got his way.

At the same time, investment lawyers were confronted with the possibility of reform of investment treaties in the EU (see chapter 3). Civil society groups had long advocated a whole new generation of investment agreements which better balanced private and public interests106. The EU Commission and the European Parliament seemed to be moving in that direction107. Arbitrators did not waste any time putting forward their “neutral” points of view. Lalonde, for example, expressed concern that the EU’s new investment policy would weaken investor protection. He noted that, for Canada it would be an advantage to negotiate a single European BIT rather than 27 BITs, but warned: “A proviso would be that, we don’t end up with a second rate product or a weaker product than what is available at the present time when we negotiate on a bilateral basis with individual countries”108.

The French arbitrator Emmanuel Gaillard raised concerns about the European Commission’s proposal to phase out BITs between EU Member States (Intra-EU BITs)109. Gaillard warned that the “effort to create a level playing field for investment in Europe will have the unintended consequence of driving companies that wish to invest in Europe away from the European Union”110. Like his colleagues, he seemed to believe that investment agreements are necessary to attract FDI, whereas the evidence is inconclusive111. Perhaps the fact that Gaillard has himself arbitrated in at least three intra-EU BIT cases provides some explanation as to why he was so concerned to maintain these agreements112.

More recently, the Union of South American Nations (UNASUR) have discussed setting up an arbitration centre that could replace ICSID113. This would address some perceived flaws in the current arbitration rules. Asked about his views on this idea, Chilean elite arbitrator Francisco Orrego-Vicuña stated: “The result would be a sort of anti-investment arbitration forum, providing an alternative to ICSID and other forums that are perceived as too investor-friendly. I don’t think it’s a good idea – since such an institution would almost certainly be perceived as too state friendly, and that wouldn’t be satisfactory to investors”114. It is remarkable that Orrego-Vicuña does not appear to realise the inherent double standard in his comment. While he defends a perceived investor-friendly system, a system that could be perceived state-friendly is unacceptable.

As a tight-knit community of arbitrators, who have influential positions in the legal and political field of state-investor relations, arbitrators have tried to ensure that no substantial reforms are implemented which could compromise their own financial position.

Sign here please

Companies can only sue governments when the latter have agreed to international arbitration in investment agreements. For investment lawyers this means: no investment agreement, no cases. No cases, no appointments as arbitrator or counsel.

There have been occasions where elite arbitrators’ role as government advisors have provided them with the opportunity to advocate signing investment treaties that include broad protection for investors.

For example, in the 1990s, Paulsson advised the Mexican government during the negotiation of investment protection rules (Chapter XI) in NAFTA115. This later provided a well-paying appointment when he presided on two arbitration panels where companies sued Mexico invoking that treaty.

[Investment] rules tend to be crafted by the people who inevitably go out and then use them.

Investment Arbitration specialist116

Gaillard was not retained as government advisor, but used a public conference in Mauritius to encourage the Mauritius government to sign investment treaties. He went on to recommend the inclusion of broad investor-friendly protection clauses in new BITs117 118.

Price, who has negotiated investment treaties on behalf of the United States, led negotiations on Chapter XI of NAFTA, where he evidently helped persuade the Mexican government to accept investor-state arbitration119. As a result, the Mexican government dropped the principle that only national courts should have the jurisdiction to hear a case brought by foreign investors (known as the Calvo doctrine) which was part of the Mexican constitution. Price later reaped the benefits when he was hired by two different American companies to sue Mexico due to breach of NAFTA rules120.

Vague rules, more disputes

There is a whole range of investment protection clauses embedded in investment agreements. The alleged breach of one or more of these provisions by the host state gives companies the right to sue. When clauses lack precision, they open the door for companies to sue in a variety of situations that would otherwise not be allowed. The United Nation Conference on Trade and Development (UNCTAD) has noted that “many IIA [international investment agreements] provisions are loosely phrased”. As a consequence, the only thing that stands between the vague rules of investment treaties and a claim from an investor is how the clauses are interpreted by the arbitrators121. If the provision is not precise, it is open to wide interpretation. This shows how important their role is.

An expansive interpretation of minimalist treaty language can give rise to a lack of predictability in the application of the standard. This, in turn, may lead to the undermining of legitimate State intervention for economic, social, environmental and other developmental ends.


The obligation for states to grant fair and equitable treatment (FET) to investors which appears in the great majority of international investment agreements is a good example. It is regarded as one of the most unqualified and imprecise of the clauses, and has emerged, according to UNCTAD, “as the most relied upon and successful basis for IIA claims by investors”123. UNCTAD has also pointed out that arbitrators have “interpreted the FET concept rather broadly”, concluding that “the result may be an open-ended and unbalanced approach, which unduly favours investor interests and overrides legitimate regulation in the public interest”124.

In a recent statistical study based on 140 investment-treaty cases, Professor Gus Van Harten found evidence that arbitrators tend to adopt an expansive (claimant-friendly) interpretation of various clauses, such as the concept of investment. He also found that arbitrators were more likely to have an expansive interpretation of the clauses when the investor in the dispute was from France, Germany, the UK or the US125.

Arbitrators can also promote an expansive interpretation when they act as counsel. In the NAFTA case Fireman’s Fund v. Mexico, the investor, an insurance company, claimed that Mexico expropriated its financial investment. This was a result of Mexico’s emergency measures during the financial crisis in 1997. The interpretation of the expropriation clause was crucial in the decision. The investor’s counsel, Price and Schwebel reportedly wrote an 82-page report making the case that expropriation should be interpreted in a broader way than the notion of confiscation of property126.

Professor Van Harten opened up a heated debate when he pointed out that arbitrators appear to have financial and career interests in interpreting the law in an expansive way. He argued there was an incentive to secure future appointments as well as to please the party (the corporations) as they can initiate disputes, saying: “arbitrators may be influenced by a need to appease actors with power or influence over specific appointment decisions as well as the wider position of the relevant arbitration industry”127.

This proposition has been recently backed by Singaporean attorney general Sundaresh Menon who noted that it is “in the interest of the entrepreneurial arbitrator to rule expansively on his own jurisdiction and then in favour of the investor on the merits because this increases the prospect of future claims and is thereby business-generating. This hints at a modern-day uber-sophisticated ambulance-chasing plaintiffs’ lawyer”128.

While arbitrators tend to apply an expansive interpretation of the clauses that favours the investor, they have taken a restrictive approach in a wider context of international law when it comes to human and social rights. In May 2012, the European Center for Constitutional and Human Rights tried to file a written statement (amicus curiae) to an arbitral tribunal hearing two cases against Zimbabwe129. The cases related to timber plantations. The statement argued that the plantation land in dispute was located on ancestral territories belonging to indigenous peoples, and so the decision of the Tribunal would have an impact on the indigenous communities’ rights to their lands. The Tribunal, chaired by Yves Fortier, refused even to hear these concerns130.

International Court of Justice Judge Bruno Simma has noted that “giving adequate consideration to economic and social rights is the exception rather than the rule in investor-state arbitration” and has advocated greater contemplation of international environmental and human rights law131. Elite arbitrators, practitioners and companies reacted strongly against this proposal132. It exposes a certain hypocrisy when arbitrators encourage an expansive interpretation as long as it favours the investor, but consider the idea of a more expansive approach that favours the interests of other actors, such as victims of human rights abuses, to be unacceptable.

I have always found the submission of expert legal opinions on matters of international law to investment treaty tribunals rather odd.

Andrew Newcombe, University of Victoria Faculty of Law133

Trust the expert

Expert witnesses in trials are usually associated with technical or scientific expertise. However, it has become common practice in investor-state cases to call in other investment lawyers as experts to argue the substantive legal question that is central to the case. The expert will discuss a specific clause in the agreement or will interpret that clause in light of the specific case, on behalf of one side. In essence, senior practitioners, who are likely to be arbitrators themselves, “come in and tell their peer arbitrators what the law is and how the law should apply”134. Paulsson, one of the elite arbitrators, has provided such expert opinions135. This practice would be unacceptable in any other judicial process136.

This role enables them to shape the development of the system from another angle. It also happens to be quite lucrative.

Promoting reform to pre-empt structural changes

There is currently a backlash against the investment arbitration system137. The perceived legitimacy of the system is eroding (see chapter 2). With this pressure on investor-state arbitration, it is not surprising that elite arbitrators are looking for ways to support it.

Some arbitrators have been more receptive than others to the critiques and actions by governments to regain some policy space to regulate. Park, for example, has noted that “If investment arbitration is to fulfil its promise [...] some mechanism must be found to promote greater sensitivity to vital host state interests. Otherwise, investor/government arbitration may fall prey to public pressure arising from a backlash against investor victories”138.

Honatiau put it more bluntly, saying investment arbitration must confront the challenges. He has acknowledged the need to review the roles of all arbitration participants and accept some changes in the way the system works. He said: “It is only at this price that arbitration will remain in the decades to come the “natural judge” of international commerce”139.

While some high profile arbitrators have acknowledged that there is a legitimacy problem, many of their proposed reforms - such as Paulsson and van den Berg’s suggestion that the institutions that administer investor-state disputes (such as ICSID, LCIA, ICC, etc.) should appoint the entire panel instead of the parties140 or that there should be greater transparency - would not challenge the pro-investor bias in the system141.

Today, there are ideas floating about which constitute very significant threats to arbitration. I hope these threats can be averted because I favour arbitration as a matter of political policy. But if they cannot, let us at least make the challengers realise that whatever may be their objections to arbitration, international arbitration is something else.

Jan Paulsson, arbitrator and head of the international arbitration department, Freshfields142

Charles Brower rightly noted that the arbitration community is only prepared to accept reforms as long as “such strategies do not require a fundamental redesign of the entire system”143. So while they may be a sincere attempt to improve a flawed system, they are at the same time fundamentally an exercise in self-preservation.

Arbitrators enjoy a privileged position of influence and power due to their different roles. As academics they are able to shape knowledge and understanding of the field, advance theory that promotes practice, and help to shape the investment lawyers of tomorrow. As government officials, they can negotiate investment treaties containing far-reaching investment protection clauses. As experts in the field, they can promote the investor-state arbitration system and advocate for flexible wording in investment rules. As arbitrators they can interpret vague language, creating the potential for more work by doing so.

If investment law firms can be characterised as ambulance-chasers encouraging “victims” to take advantage of the laws that protect them (see chapter 3), arbitrators could be seen as the ones creating the conditions for the accidents to happen.

Yet, few insiders seem disturbed by these facts. A plausible explanation as to why these types of conflicts may be less acceptable in the investment community lies in the fact that they cut to the core of how the system operates and sustains itself. It cannot be fixed by applying stricter procedural rules. It demands system-change.

This new age of arbitration is in fact its golden age […] Never before have so many controversies been left to the disposal of arbitrators; and never before has so much autonomy been afforded them.

Sundaresh Menon SC, Chief Justice of Singapore144

The investment arbitrator’s toolbox

Get accepted into the close-knit community

It helps a lot to come from Western Europe or North America, and to be male. Most importantly, an aspiring arbitrator needs to have a business-friendly outlook. Remember, only investors can initiate a lawsuit. So, keeping investor’s interests in mind is crucial to keep earning a three digits figure per hour.

Keep the arbitrators’ club small and cohesive

Recommend fellow members as arbitrators or as counsel; invite them to conferences or to submit articles; and be careful not to expose them if they are challenged. It is likely that the favour will be returned.

Keep the black sheep out

Systemic critiques of the arbitration system should not be tolerated since coherence among arbitrators view of how the system should work is essential for its survival.

Sustain and fuel investor-state arbitration

Being an active arbitrator is good but not enough. Occupy as many roles as possible in law firms, academia, and government advisory positions. These roles will enable the elite arbitrator to influence the fate of investment arbitration:

  • Promote international investment arbitration as the best policy choice for governments. The arbitrator does not need to explain his financial interests in the system.
  • Advocate strong investment protection rules and resist any attempt by governments to weaken the current standards.
  • Advise governments to sign new investment treaties – they could provide a useful source of future work.
  • Make sure that the wording of investment protection rules is left vague so investors have more chances of pursuing a claim. The arbitrator will then be able to interpret the vague rules in investor-friendly way.
  • Be invited by fellow arbitrators to act as an expert in a case. In this way, the arbitrator will be able to guide the interpretation of the clauses.
  • Recognise there is a backlash against investment arbitration and promote some minor reforms, as long as they do not challenge the foundations of the system. These will help the arbitrator pre-empt any suggestions of structural changes.

Get the high-stake cases

Once a member of the elite, you will be very busy. The ultimate goal, however, is to arbitrate the high-stake cases, those between US$100 million and several billion. At fees around US$700 per hour, the arbitrators’ financial gains are considerable.


References chapter 4:

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