BCDR International Arbitration Review
December 2020 – Volume 7 Issue 2
Page 429

Ethical Concerns in Investor-State Dispute Settlement: Seeking a Permanent Solution

Colin M. Brown & Niki Koumadoraki


Investor-state dispute settlement ("ISDS") as we know it today has been the object of significant ethical concerns and discussions. In this article we analyse four such concerns that are particularly compelling, because they challenge the impartiality of the dispute settlement function and the independence of the adjudicators deciding cases. We first briefly present the four concerns: the party choice of adjudicator, repeat appointments, "double hatting" and the problem of conflicts, both stricto sensu conflicts of interest, as well as issue conflicts. We argue that it is the very structure of today's arbitration, with its mechanisms having been historically developed in the framework of private commercial disputes, that gives rise to these concerns. However, ISDS is different from commercial arbitration and the nature of one party as a state vests it with additional requirements to guarantee independence and impartiality. We explain that any attempt at ISDS reform is insufficient if it does not amount to a structural reform of the ISDS architecture itself in a systemic and preventive way. We then argue that these ethical concerns can only be resolved through the introduction of a permanent body with full-time adjudicators appointed for long, non-renewable terms. Only such a solution could provide an effective guarantee of the independence and impartiality of ISDS arbitrators, ensuring that they have no other activities which could create incentives, or perceptions of incentives, in their adjudicatory work.