Originally from Investment Treaty Arbitration and International Law - Volume 6

A lively debate has emerged in the investment arbitration community over the desirability and legitimacy of party-appointed arbitrators. The system is said to be flawed because arbitrators need appointing counsel, appointing counsel need clients, and clients want to win.1

Yet the unilateral appointment of arbitrators remains the best available system of appointment for investment arbitration notwithstanding an admittedly imperfect incentive structure. In regarding this as reason enough to put an effective system to rest, opponents of party appointment have become the enemy of the good by championing the perfect.

This paper will begin by examining the thrust of the argument against party appointment: that it is a system of distorted motivating forces, in which many “party-appointed arbitrators respond to their personal incentives and become to a certain extent party advocates within a system that expects them to behave objectively.”2 The second section will look to the proposed alternative to the party-centric status quo: “to forbid, or at least rigorously police, the practice of unilateral appointments.”3 The third section will look to what extent a transition away from party appointment may adversely affect market interest in international arbitration. The fourth and final section, in addressing the advantages of party-appointed arbitration, will shed light on what would be lost were investment arbitration to transition to a system of institutional appointment.