WILMERHALE
24 July 2012
Permanent Court of Arbitration
H.E. Hugo Hans Siblesz
Secretary-General Peace Palace
Carnegieplein 2
2517 KJ The Hague
The Netherlands
E-mail: [email protected]
David W. Ogden
+1 202 663 6440(t)
+1 202 663 6363 (f)
[email protected]
Re: Respondent's Challenge of Judge Stephen M. Schwebel as Arbitrator in Connection with
Merck Sharp & Dohme (I.A.) Corp. v. The Republic of Ecuador - UNCITRAL Arbitration
Dear Secretary-General:
We write on behalf of Claimant Merck Sharp & Dohme (I.A.) Corp. ("MSDIA") in response to
Respondent Ecuador's Rebuttal dated 17 July 2012.
Introduction
Respondent's Rebuttal serves to reconfirm the frivolous nature of this second challenge to Judge
Schwebel. It is clear that this challenge should never have been made.
Respondent's challenge rests on the demonstrably mistaken proposition that any relationship or
fact that a party might subjectively view as relevant must be disclosed, even if that view would
be unreasonable. That is manifestly not the governing standard under the UNCITRAL Rules, as
is clear from both the language of the Rules and uniform authority and commentary on the Rules.
Under Article 10(1) of the UNCITRAL Rules, the correct standard governing a challenge is
whether circumstances "give rise to justifiable doubts as to the arbitrator's impartiality or
independence." Similarly, under Article 9, an arbitrator is obligated to disclose only
"circumstances likely to give rise to justifiable doubts as to his impartiality or independence."
Authority on the issue uniformly holds that "doubts are justifiable ... if they give rise to an
apprehension of bias that is, to the objective observer, reasonable."1 Under this standard,
Respondent's purported subjective doubts—even if they genuinely existed—are plainly
irrelevant to the analysis under Articles 9 and 10 of the UNCITRAL Rules. The question is
whether the facts at issue give rise to "justifiable doubts." They plainly do not.
1 See, e.g., Country X v. Company Q, UNCITRAL (Challenge Decision, Jan. 11, 1995), at para 24 (RCL-17) ↩
(emphasis added); National Grid PLC v. the Republic of Argentina, LCIA Case No. UN 7949, Decicion on the
Challenge to Mr. Judd L. Kessler (3 December 2007), at para. 85 (RCL 18) (same).
Wilmer Cutler Pickering Hale and Dorr LLP, 1875 Pennsylvania Avenue NW, Washington, DC 20006
Beijing Berlin Boston Brussels Frankfurt London Los Angeles New York Oxford Palo Alto Waltham Washington
[Page 2]
Respondent's challenge also rests on the untenable argument that Judge Schwebel's disclosures
were untimely. But in this case, consistent with good practice, all three arbitrators made a joint
disclosure statement shortly after the Tribunal was constituted in May 2012. In that statement,
Judge Simma, the arbitrator appointed by Respondent, disclosed for the first time that he had
been appointed by Respondent in another investor-state arbitration within the past year. This
disclosure was no more timely or untimely than Judge Schwebel's disclosures, which
Respondent puts at issue. Respondent argues that the timing of Judge Simma's disclosure is
irrelevant because MSDIA has not challenged Judge Simma. That is a non sequitur. Our point
is not that Judge Simma's disclosures were untimely; instead, it is that all three arbitrators'
disclosures, including Judge Simma's and Judge Schwebel's, were timely, and further that
Respondent's contentions with respect to Judge Schwebel, if credited, would condemn the
conduct of Respondent's own choice for service in this matter. The truth is that neither Judge
Simma nor Judge Schwebel is to be faulted on this score, and that Respondent's position to the
contrary is frivolous.
In short, nothing in either of Respondent's submissions casts any doubt on Judge Schwebel's
impartiality or independence. We respectfully request that the PCA deny Respondent's
challenge.
Argument
A. Respondent Fails to Show that Circumstances Exist that "Give Rise to
Justifiable Doubts" about Judge Schwebel's Impartiality or Independence
1. Judge Schwebel's arbitral appointments and engagements as an expert
witness have not created a situation of dependence with WilmerHale
Respondent has not even begun to demonstrate justifiable doubts regarding Judge Schwebel's
impartiality or independence. On the contrary, Respondent's Rebuttal confirms that there is no
conceivable basis for raising any objective, reasonable question regarding Judge Schwebel's
independence and impartiality.
Central to Respondent's purported concerns are two prior arbitral appointments. As shown in
MSDIA's Opposition dated 9 July 2012, the underlying concern reflected in the International Bar
Association Guidelines on Conflicts of Interest in International Arbitration ("IBA Guidelines")
with respect to prior arbitral appointments is the possibility that the arbitrator is dependent on a
party or the party's counsel, a "relationship of dependence [with counsel], which could endanger
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[the] independence or impartiality" of an arbitrator.2 Prior arbitral appointments that do not
create such dependence are not considered to be grounds for a challenge. Critically for present
purposes, the "mere fact that an arbitrator was regularly nominated (by different arbitral parties)
on the recommendation of the same Counsel or the same firm of solicitors ought not of itself to
give rise to justifiable doubts as to his independence and impartiality."3
Respondent has provided no basis—and there is none—for concluding that Judge Schwebel is in
any way dependent on WilmerHale. Judge Schwebel has been appointed as an arbitrator by
WilmerHale only twice out of his 63 publicly-reported arbitral appointments (just over 3
percent); undoubtedly Judge Schwebel has served as an expert witness in countless other matters,
and thus the true percentage is actually far lower.4 WilmerHale's two appointments of Judge
Schwebel, whether assessed individually or together, do not come close to establishing a
relationship of dependence; on the contrary, those appointments are significantly more modest
than routinely occurs in international arbitral practice.
Respondent argues that the standard of "economic dependence" (to use Respondent's phrase)
sets the bar too high, but in so contending, Respondent reveals only its recognition that it cannot
possibly satisfy the applicable test. There is no legal basis for Respondent's position that the
standard here should be lower than potential dependence. Respondent does not cite a single
decision that supports this position.5 Nor does Respondent provide any argument why some
other standard than dependence should be adopted.
Indeed, Respondent does not even attempt to articulate an alternative standard. Instead, it simply
asserts—without providing any connection to existing authority—that the circumstances here
should be deemed sufficient to sustain a challenge.
2 Universal Compression International Holdings, S.L.U. v. Bolivarian Republic of Venezuela, ICSID Case No. ↩
ARB/10/9, Decision on Claimants' Proposal to Disqualify Prof. Brigitte Stern and Prof. Guido Santiago Tawil,
Arbitrators (20 May 2011), at para. 87 (RCL-6); see also LCIA Reference No. 81224, Decision Rendered 15 March
2010, in Arbitration International, Special Edition On Arbitration Challenges, Volume 27 Issue 3 (2011), at p. 467
para. 4.4 (Claimant's Challenge Legal Exhibit ("CCL") 6) (noting that an arbitrator's "relations with Counsel are
relevant only if the arbitrator draws an important part of his or her revenues from an ongoing relationship with the
Counsel of the appointing party" and dismissing a challenge where there was nothing to indicate that the "Co-
Arbitrator [has] drawn any significant revenue from a relationship with [counsel]").
3 LCIA Reference No. 81160, Decision Rendered 28 August 2009, in Arbitration International, Special Edition On ↩
Arbitration Challenges, Volume 27 Issue 3 (2011), at p. 451 para. 4.6 (CCL-5).
4 See Biography of Judge Stephen M. Schwebel, available at http://www.londonarbitrators.net/cvs/sschw.pdf (last ↩
visited 25 June 2012) (CCE-1).
5 There is likewise no support whatsoever for Respondent's novel standard of a "longstanding financial and ↩
professional 'relationship of trust," Respondent's Rebuttal at p. 9, but even if such a standard existed, Respondent
could not satisfy it.
[Page 4]
Respondent also fails entirely to respond to the authorities applying the dependence test set forth
in Claimant's Opposition. Instead, Respondent dismisses those cases on the grounds that they
applied the ICSID Convention, which, according to Respondent, has a higher burden of proof for
disqualifying an arbitrator.
But Respondent's effort to distinguish these cases is wholly mistaken. The two ICSID cases on
which Claimant relied in its Opposition are matters in which challenges were evaluated
considering the principles articulated in the IBA Guidelines, principles that Respondent seeks to
apply to this case. Indeed, Respondent itself previously cited both of the ICSID decisions it now
dismisses as irrelevant in its opening submission for the proposition that the IBA Guidelines
should be deemed advisory here.6 Those decisions explain how to apply the factors of the IBA
Guidelines—specifically, how to evaluate whether past appointments by counsel affect the
arbitrator's independence or impartiality—and in both cases the challenges were dismissed
despite facts far more favorable to a challenge than those at issue here.7
Moreover, Respondent's suggestion that all of the cases relied upon in the Claimant's Opposition
"were decided under ... the ICSID Convention"8 is simply false—as Respondent must certainly
know. Respondent's Rebuttal ignores the LCIA cases cited by the Claimant that stand for the
identical proposition that "relations with Counsel are relevant only if the arbitrator draws an
important part of his or her revenues from an ongoing relationship with the Counsel of the
appointing party."9 Respondent's Rebuttal also ignores the Suez v. Argentina case, in which the
tribunal conducted an analysis under the UNCITRAL Rules and again articulated the same
dependence test that Respondent tries here to disavow. The Suez tribunal explained that
circumstances giving rise to justifiable doubts "must be significant and direct, such as an
economic relationship causing an arbitrator to be dependent in some way on a party."10
6 Respondent's Challenge, at p. 3 n.7 (citing to OPIC Karimum Corporation v. Bolivarian Republic of Venezuela, ↩
ICSID Case No. ARB/10/14 (Decision on the Proposal to Disqualify Professor Philippe Sands, 5 May 2011)),
(RCL-4), and Universal Compression International Holdings, S.L.U. v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/10/9 (Decision on the Proposal to Disqualify Prof. Stern and Prof. Tawil, 20 May 2011) (RCL-6),
among other cases.
7 In OPIC Karimum Corp., for example, a challenge to Professor Philippe Sands was rejected despite the fact that he ↩
had been appointed by the party Venezuela or its counsel in five of the eight treaty arbitrations he had sat on in the
prior three years (and five of the nine treaty arbitrations total to which he had been appointed). OPIC Karimum
Corp. v. Venezuela, ICSID Case No. ARB/10/14 (Decision on the Proposal to Disqualify Professor Philippe Sands,
Arbitrator, 5 May 2011), at para. 18 (RCL-4).
8 Respondent's Rebuttal at p. 10. ↩
9 LCIA Reference No. 81224, Decision Rendered 15 March 2010, in Arbitration International, Special Edition On ↩
Arbitration Challenges, Volume 27 Issue 3 (2011), at p. 467 para. 4.4 (CCL-6); see also LCIA Reference No. 81160,
Decision Rendered 28 August 2009, in Arbitration International, Special Edition On Arbitration Challenges,
Volume 27 Issue 3 (2011), at para. 87 (CCL-5).
10 Suez and others v. Argentina, ICSID Case No. ARB/03/19 (Decision on a Second Proposal for the ↩
Disqualification of a Member of the Arbitral Tribunal, 12 May 2008), at para. 24 (RCL-11).
[Page 5]
Nowhere does Respondent's Rebuttal address any of these decisions, nor explain how they can
be reconciled with its claim that the standard relied upon by the Claimant is specific to the ICSID
Convention. Nor does Respondent cite to any authority that contradicts any of these cases on the
issue of dependence.11
Respondent's Rebuttal argues the prior engagements and appointments of Judge Schwebel by
WilmerHale on their face raise justifiable doubts because they are "instances of close
cooperation between them."12 That makes no sense.
Even assuming, arguendo, that all four prior engagements and appointments should be treated
the same, i.e., as the equivalent of arbitrator appointments, they still would not begin to rise to
the level that, under the IBA Guidelines, could raise justifiable doubts about Judge Schwebel's
independence or impartiality. On the contrary, the IBA Guidelines require disclosure only of
more than three arbitral appointments in the prior three years. In this case, Judge Schwebel has
had no appointments or other engagements from WilmerHale in the past three years. That
does not remotely approach the level required even for disclosure—much less justifiable doubts
permitting a legitimate challenge.
Respondent's repeated observation that the guidance the IBA Guidelines provides on multiple
appointments should be subject to the specific circumstances of the case does not advance its
argument, because it cites nothing in the present circumstances justifying application of some
different rule. There is nothing in Judge Schwebel's appointments by WilmerHale—counting
expert witness appointments, just four appointments over a fifteen year period, representing a
11 Respondent's only support for its rejection of the widely-accepted dependence standard is an article by Gabriel ↩
Bottini, the Coordinator of the Department of International Affairs of the Department of the Treasury Attorney
General's Office of Argentina. See G. Bottini, Should Arbitrators Live on Mars, 32 SUFFOLK TRANSNAT'L R. 341,
p. 341 (2008-2009) (RCL-9). Mr. Bottini's article is a direct criticism of several decisions on particular arbitrator
challenges (in some of which his office was on the losing side), including ICSID and UNCITRAL decisions. For
example, Mr. Bottini criticizes the standards under the UNCITRAL Rules as applied in the Suez case as presenting
"quite a high threshold for challenging an arbitrator" and making the "duty of disclosure ... not seem to be very
demanding," but he only offers his own opinion that the standard should be different and does not cite any authority.
See id, at p. 359 (RCL-9). Mr. Bottini is surely entitled to his opinion as to what the standards for arbitrator
challenges should be, but his opinion is just that; it does not reflect what those standards actually are.
12 Respondent's Rebuttal at p. 12. Respondent calls the relationship between Judge Schwebel and WilmerHale a ↩
"relationship of trust." Id. Respondent takes this phrase from a case decided by the Finnish Supreme Court in
which an arbitrator had not previously been engaged as an expert witness by counsel for one of the parties, but rather
had been hired by one of the parties in the arbitration to provide expert legal opinions that would inform business
decisions while the arbitration was ongoing; these expert opinions were in the nature of "legal advice" and were
"given in consideration of a significant financial compensation." Case KKO 2005:14 of the Finnish Supreme Court,
in Bond and Bachand (eds.), International Arbitration Court Decisions (3rd Ed. 2011), at para. 25 (CCL-2). There is
no basis for Respondent's efforts to equate an arbitrator's providing ongoing expert opinions to one of the parties in
the case he is arbitrating with Judge Schwebel's past engagements by WilmerHale to provide legal expert opinions
to a court in completely unrelated cases involving completely unrelated parties.
[Page 6]
minute fraction of Judge Schwebel's appointments during that time—that creates a special
concern as compared to any other arbitrator appointment.
Nor does Respondent's observation that the situations described in the Guidelines are not
exhaustive bolster its case. The situation here is directly addressed by the Guidelines, which find
that, generally speaking, multiple prior appointments of an arbitrator by counsel raise justifiable
doubts only when there have been more than three such appointments in the prior three years.
That is not the case here.
Thus, Respondent simply cannot establish that the prior appointments of Judge Schwebel by
WilmerHale give rise to justifiable doubts.13
2. Judge Schwebel's expert opinion in the Shell Oil cases does not address
issues relevant to this case, and would not bar Judge Schwebel's service
in this case even if it did
Respondent argues alternatively that Judge Schwebel opined on issues related to those likely to
arise in this arbitration in the two almost identical expert opinions Judge Schwebel provided on
behalf of WilmerHale's client Shell Oil Company, among other defendants, in two related
federal court litigations. That argument is also baseless: Respondent fails to identify a single
issue addressed in Judge Schwebel's Shell Oil opinion that might feature in the present matter.
The issues Judge Schwebel addressed in the Shell Oil cases are simply not relevant to this
arbitration, and Respondent nowhere shows anything to the contrary.
First, as explained in MSDIA's Opposition, treaty tribunals have consistently rejected the same
argument Respondent advances here, concluding that prior legal opinions, even on a similar
issue, cannot serve as a basis for disqualification.14 Respondent makes little attempt to
distinguish these cases, arguing in a footnote that the cases did not address the non-disclosure of
expert opinions, and that they were decided under the ICSID Convention. That argument is
plainly incorrect.
13 That two of the cases in which Judge Schwebel was appointed or retained ended less than three years ago is of no ↩
moment. The IBA Guidelines clearly and intentionally focus on the appointment of the arbitrator, not when service
on a case ends. Compare IBA Guidelines, Orange List, at p. 21 para. 3.1.3 (RCL-3) ("The arbitrator has within the
past three years been appointed as arbitrator on two or more occasions by one of the parties ..."), with id. at p. 21
para. 3.1.2 (The arbitrator has within the past three years served as counsel against one of the parties or an affiliate
of one of the parties in an unrelated matter.) (emphasis added). This is for good reason; arbitrations, especially
treaty arbitrations, often last many years, and a conflicts rule that focused on when an arbitrator's service on a case
ended would unreasonably burden arbitrators' ability to serve as arbitrators. Of course, even if the IBA Guidelines
did not focus on the act of appointment, and focused instead on the end of a proceeding, the facts alleged by
Respondent here still would not require disclosure under the Guidelines since only two of Judge Schwebel's
appointments would fall within the three-year window.
14 Claimant's Opposition at p. 10. ↩
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The facts upon which Respondent tries to distinguish these cases are irrelevant. The critical
point of these cases is that the system of international arbitration would be unworkable if an
arbitrator could be successfully challenged merely because he or she had previously encountered
the same legal issue in another case. This is particularly true in the field of investment
arbitration, where arbitrators are often confronted with the same treaty language and legal issues
in multiple cases. And it is true whether the ICSID or UNCITRAL Rules apply, and whether or
not the arbitrator had previously considered a similar issue in the role of arbitrator, academic or
expert witness.
Second, and in any event, Judge Schwebel's expert opinion did not address any issues
conceivably relevant to this arbitration. The Shell Oil cases involved the enforceability in the
United States of Nicaraguan judgments issued pursuant to Nicaraguan Special Law 364. Judge
Schwebel's opinion in those cases focused on the question whether an act of the Nicaraguan
legislature that codified the judicial process for a particular set of cases, and which applied only
to certain defendants singled out by the law, was inconsistent with international norms such that
judgments rendered pursuant to the law failed to comport with due process. The opinion did not
involve Respondent or its courts, did not address the U.S.-Ecuador BIT, and did not involve
issues of a lack of objectivity or bias by a judicial tribunal.15
Respondent argues for the first time in its Rebuttal that Judge Schwebel's opinion in the Shell Oil
cases demonstrates that he "appears to reject the principle that a court decision, against which
there remains further recourse through the judicial process, does not amount to a denial of
justice."16 Again, that is off target and plainly grasping at straws.
Judge Schwebel's opinion in the Shell Oil cases does not reach such a conclusion or even address
the issue, and Respondent cites to nothing in Judge Schwebel's opinion that would suggest
anything of the sort. The cases in which Judge Schwebel offered his opinion arose in the context
of efforts to execute the underlying Nicaraguan judgments against Shell Oil and other defendants
in U.S. courts. The question of the "finality" of those judgments was of no moment whatsoever
15 Respondent suggests that Judge Schwebel's opinion implicated the conduct of particular courts in issuing ↩
judgments, based entirely on Judge Schwebel's own description of his opinion as relating to the "compatibility of
Special Law 364 of the Republic of Nicaragua and of a judgment against Shell Oil Company issued by a Nicaraguan
court in pursuance of that law, with the obligations of Nicaragua under public international law." Respondent's
Rebuttal at p. 11 (quoting Judge Schwebel's Comments dated 10 July 2012, at pp. 2-3). While Respondent
interprets Judge Schwebel's general statement as indicating that his opinion independently analyzed the
discretionary acts of the Nicaraguan courts' in arriving at its conclusion, it cannot point to anything of substance in
Judge Schwebel's actual opinion in support of that position. In fact, Judge Schwebel's opinion did not turn on
particular courts' application of Special Law 364. The "procedures" applied by the Nicaraguan courts, which Judge
Schwebel concluded failed to comply with due process, were applied by the courts as dictated by the strict
provisions of the law itself.
16 Respondent's Rebuttal at p. 11. ↩
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and Judge Schwebel did not address it. And, in any event, as discussed above, even if he had,
this would not be a basis for challenging his independence in this arbitration.17
3. None of the other issues belatedly raised in Respondent's Rebuttal has any
merit
Respondent's Rebuttal asserts a number of other arguments, many in passing, most of which are
entirely unrelated to the allegations in its 21 June 2012 submission and none of which
conceivably gives rise to justifiable doubts as to Judge Schwebel's impartiality or independence.
They can be dismissed briefly:
17 Respondent again seeks to analogize the present case to the Republic of Ghana v. Telekom Malaysia Berhad ↩
arbitration. Respondent concedes that "contrary to the Telekom case, Judge Schwebel is not required to
simultaneously adopt arguably inconsistent positions," but it argues that this fact is somehow "irrelevant."
Respondent's Rebuttal at p. 11. In fact, the contrast between the present facts and Telekom could not be more stark:
in the latter case, Professor Gaillard was in a position in which he would be obligated to simultaneously take
irreconcilable positions on an identical treaty provision in two matters, one in which he had been appointed counsel
and one in which he was serving as an arbitrator. There is no comparison between that case and the present
situation.
18 Respondent's Rebuttal at p. 1. ↩
19 Id. at pp. 1-2, and n.2; Decision on Challenge to Arbitrator Stephen M. Schwebel, 12 April 2012, at para. 61 ↩
(RCL-38)
20 Respondent's Rebuttal at pp. 1-2, and n.3. ↩
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single note of appreciation contained in a single article.22 Again, Respondent does not
offer any argument as to how this could be relevant to the present challenge.
Respondent makes virtually no attempt either to substantiate any these allegations, or to tie them
to its challenge.
B. Nothing About the Timing or Content of Judge Schwebel's Disclosure Raises
Justifiable Doubts As to His Independence or Impartiality
Presumably recognizing that it is unable even to begin to establish that Judge Schwebel's prior
contacts with WilmerHale raise justifiable doubts as to his independence or impartiality,
Respondent, as it did in its first letter, focuses on Judge Schwebel's alleged improper disclosure
of these contacts. Respondent's approach is misguided because the timing of Judge Schwebel's
disclosure was appropriate, the content of his disclosure exceeded what was required, and even if
his disclosure had been insufficient, the non-disclosure of facts cannot itself give rise to
justifiable doubts.
1. Judge Schwebel's disclosure was timely
Respondent claims Judge Schwebel's disclosure was untimely. But Respondent has no answer
for the fact that all three arbitrators—exercising their authority over the arbitral procedures—
considered it proper simultaneously to provide disclosure at the time that they did. If Judge
Simma's disclosure of his appointment as arbitrator by Respondent in a prior investor-state
arbitration during the past year was proper, then so was Judge Schwebel's disclosure of a much
more distant relationship with counsel to Claimant.
Respondent misses the point entirely here, asserting only that Claimant has not challenged Judge
Simma, and should have done so if it believed a challenge was warranted.23 The material point,
however, is not that Judge Simma's disclosure was untimely; it was not. The point is that
Respondent cannot impugn Judge Schwebel on this score without also impugning its own
distinguished appointee, and that both Judge Schwebel's and Judge Simma's disclosures were
entirely proper and timely. Three highly respected international arbitrators believed it to be
proper practice to make a common disclosure statement upon the constitution of the Tribunal,
and that decision was entirely proper.
Respondent suggests that Judge Schwebel made a "deliberate" choice to delay his disclosures, in
order to "suppress relevant circumstances" and "conceal his contacts" with counsel, which,
[Page 10]
according to Respondent, would have strengthened its first challenge.24 That contention is
indefensible. Such a serious charge of improper intent should not be leveled cavalierly without
any evidentiary support. Yet Respondent provides no support. Its allegation that Judge
Schwebel intentionally gamed the timing of his disclosures in an effort to deceive Respondent is
no more than reckless conjecture that is beneath the dignity of these proceedings. It should be
rejected out of hand.
2. Judge Schwebel's disclosure exceeded what was required under the
applicable UNCITRAL Rules
Judge Schwebel's disclosures far exceeded his obligations under the UNCITRAL Rules. In the
Tribunal's joint-disclosure statement, Judge Schwebel disclosed two prior appointments as
arbitrator, and one of two inter-connected (and substantively identical) prior appointments as an
expert witness, none of which had taken place in the past three years, and one of which was
fifteen years ago. None of these appointments or engagements needed to be disclosed, and
neither the UNCITRAL Rules nor any other standard of which we are aware would impose an
obligation to disclose beyond what Judge Schwebel disclosed here.
The parties agree that the test for a successful challenge under Article 10(1) of the UNCITRAL
Rules is objective.25 However, Respondent argues, without support from any authority, that
Judge Schwebel was required under Article 9 to disclose any circumstance that Respondent
subjectively believed could give rise to justifiable doubt.26 Respondent bases its argument on the
fact that "Article 9 speaks of the duty to disclose 'any circumstances likely to give rise to
justifiable doubts” whereas “Article 10's formulation omits the qualification 'likely.'"27
Respondent's interpretation of Article 9 is obviously wrong. The plain language of both Articles
9 and 10(1) make clear that the relevant question under either standard is whether any doubts
raised by a party as to an arbitrator's impartiality or independence are justifiable. Whether in the
context of Article 10(1) or Article 9, "doubts are justifiable or serious if they give rise to an
apprehension of bias that is, to the objective observer, reasonable.28
The PCA has already rejected Respondent's interpretation of Article 9 in this very proceeding.
In rejecting Respondent's first challenge to Judge Schwebel, the Acting Secretary-General
26 Id. at p. 7 (stating that it "is not true" that "the test under Article 9 of the UNCITRAL Arbitration Rules is an ↩
'objective' one.").
28 Country X v. Company Q, UNCITRAL, Challenge Decision (11 January 1995), at paras. 23-24 (RCL-17). ↩
[Page 11]
concluded (correctly) that "[i]n evaluating a challenge to an arbitrator arising under Articles 9
and 10 of the Rules, the appointing authority must determine whether a reasonable, fair-minded
and informed person would have justifiable doubts about the arbitrator's independence or
impartiality."29
Indeed, "[i]f the doubt had merely to arise in the mind of a party contesting the impartiality of an
arbitrator, 'justifiable' would have been almost redundant."30 Were the standard for disclosure to
turn on what a particular party might view as relevant, without reference to how unreasonable
that belief might be, arbitrators would be provided with no guidance on how to fashion
disclosures, and the result would be entirely unworkable. Respondent's argument regarding the
significance of the inclusion of the word "likely" in Article 9 would render the entire standard
meaningless as a practical matter.
Because Article 9 does not support Respondent's position on disclosure, Respondent chooses to
rely instead on the IBA Guidelines' acceptance of a "subjective approach for disclosure" that
"reflect[s] the perspectives of the parties."31 But the IBA Guidelines do not adopt a purely
subjective test. They expressly note that "[b]ecause some situations should never lead to
disqualification under the objective test, such situations need not be disclosed, regardless of the
parties' perspective. These limitations to the subjective test are reflected in the Green List, which
lists some situations in which disclosure is not required."32 As noted above, those circumstances
that should never lead to disqualification include fewer than three prior appointments by counsel
within the past three years.
Moreover, the IBA Guidelines' more subjective approach is inapplicable here. As one
prominent commentator noted in discussing Article 11 of the 2010 UNCITRAL Rules, while
"Principle 3 of the IBA Guidelines provides for a subjective standard for disclosure (in the eyes
of the parties)..., the IBA Working Group stated, the UNCITRAL Model Law standard [like the
UNCITRAL Rules standard] is an objective one."33 Thus, regardless of the IBA Guidelines'
perspective on disclosure, "the better view of the test under Art. 11 of the Rules is that the test is
an objective test."34 This same observation applies to Article 9 of the 1976 UNCITRAL Rules,
as its language does not materially differ from that of Article 11 of the 2010 Rules.
29 Decision on Challenge to Arbitrator Stephen M. Schwebel, 12 April 2012, at para. 52 (RCL-38) (citing National ↩
Grid PLC v. Republic of Argentina, LCIA Case No. UN 7949, Decision on the Challenge to Mr. Judd L. Kessler (3
December 2007)) (emphasis added).
30 Country X v. Company Q, UNCITRAL, Challenge Decision (11 January 1995), at paras. 23-24 (RCL-17). ↩
31 Respondent's Rebuttal at p. 6. ↩
32 IBA Guidelines, Explanation to General Standard 3, at p. 10 (RCL-3). ↩
33 Thomas H. Webster, Handbook of UNCITRAL Arbitration (2010), at pp. 159-160 (CCL-9) (emphasis added). ↩
[Page 12]
Respondent seeks to support its argument that Judge Schwebel failed to comply with his
disclosure obligations by referencing the model disclosure statement associated with Article 11
of the 2010 UNCITRAL Rules. The 2010 Rules do not apply to this arbitration.35 But even if
they did, Ecuador's argument would find no support in them.
The model disclosure statement includes (a) "past and present professional, business and other
relationships with the parties and (b) any other relevant circumstances" (emphasis added). It is
clear that the focus of this disclosure statement is the arbitrator's relationships with the parties.
Judge Schwebel has had no relationship with MSDIA or Respondent, and so even under the
model disclosure statement of the 2010 Rules, his disclosure of his prior appointments by
WilmerHale was not required.36 Moreover, the phrase "relevant circumstances" in the model
disclosure statement also does not support Respondent's argument since the circumstances which
are "relevant" for disclosure under the 2010 Rules are those defined in Article 11:
"circumstances likely to give rise to justifiable doubts," just as in Article 9 of the 1976
UNCITRAL Rules. Thus, Respondent's reliance on the model disclosure statement does not
advance its argument.
In sum, because Judge Schwebel's past appointments and engagements by WilmerHale are not
"likely to give rise to justifiable doubts as to his impartiality or independence,"37 Judge Schwebel
was under no obligation to disclose them. The content of Judge Schwebel's disclosure plainly
exceeded what was required under the applicable rules.38
3. Even if Judge Schwebel's disclosure had been insufficient, non-disclosure
of facts, by itself, cannot give rise to justifiable doubts
Respondent argues that non-disclosure can be considered when determining if justifiable doubts
exist. But the IBA Guidelines make clear that "non-disclosure cannot make an arbitrator
partial or lacking independence; only the facts or circumstances that he or she did not disclose
35 The parties have agreed, at Respondent's urging, that the 1976 UNCITRAL Rules apply to this dispute. Minutes, ↩
Telephone Conference between the Tribunal, PCA, Claimant and Respondent (29 May 2012), at 2 (CCE-7) ("The
Respondent stated that the treaty called for the application of the 1976 UNCITRAL Rules and it had not agreed
otherwise. The Parties and Tribunal agreed that the 1976 UNCITRAL Rules would be applicable to the
arbitration.").
36 Whether the model disclosure statement "formalizes a de minimis test" with regard to a relationship with a party, ↩
as Respondent argues, is irrelevant since Judge Schwebel's prior relationship are not with MSDIA.
37 The UNCITRAL Arbitration Rules (1976), Art. 9. ↩
38 Respondent argues that Judge Schwebel's unintentional conflation of the two substantively identical Shell Oil ↩
cases denied it "pertinent information concerning a much more recent remunerative relationship between Judge
Schwebel and Claimant's counsel." Respondent's Rebuttal at p. 8. But Respondent is not entitled to all information
it may view as "pertinent." It is entitled to information likely to give rise to justifiable doubts.
[Page 13]
can do so."39 One of the LCIA cases on which Respondent relies makes the same point: "the
absence of disclosure or incomplete disclosure [does] not, as such, constitute sufficient
grounds for removal."40 That case further explains that "such failures may in some cases be
taken into account in assessing whether there is apparent bias,"41 but in that case non-disclosure
was taken into account because the facts not disclosed showed a pervasive and substantial
financial relationship between the arbitrator and a party, as well as the party's counsel, that had
existed for the prior five years including the past year. That pervasive financial relationship was
the key consideration that drove the result in that case.42 The contacts between Judge Schwebel
and WilmerHale in this case do not come close to suggesting that Judge Schwebel is dependent
on WilmerHale, and thus the non-disclosure of these contacts in no way supports Respondent's
challenge of Judge Schwebel.
* * * * * *
Judge Schwebel is a highly respected jurist whose long career has been above reproach.
Respondent in this second challenge has offered no more justification for questioning Judge
Schwebel's impartiality than it offered in its first. We respectfully request that the PCA deny
Respondent's challenge.
39 IBA Guidelines, Practical Application of the General Standards, at p. 18 para. 5 (RCL-3). The Guidelines also ↩
make clear that the fact of non-disclosure "should not result automatically in either non-appointment, later
disqualification or a successful challenge to any award." Id.
40 LCIA Reference No. 81160, Decision Rendered 28 August 2009, in Arbitration International, Special Edition On ↩
Arbitration Challenges, Volume 27 Issue 3 (2011), at p. 452 para. 4.16 (CCL-5); see also Respondent's Rebuttal at
p. 4 n.16.
41 LCIA Reference No. 81160, Decision Rendered 28 August 2009, in Arbitration International, Special Edition On ↩
Arbitration Challenges, Volume 27 Issue 3 (2011), at p. 452 para. 4.16 (CCL-5).
42 Id. at p. 451 para. 4.6 (CCL-5) (the "obvious professional importance to the arbitrator of his relationship with ↩
Respondents' Counsel, combined with his barrister/client relationship with one of the Respondents, would
reasonably suggest a real possibility of bias.").
[Page 14]
Sincerely,
Signature
Gary B. Born
David W. Ogden
Rachael D. Kent
cc:
Sir Franklin Berman KCMG QC
Judge Stephen M. Schwebel
Judge Bruno Simma
Mr. Martin Doe
Mr. Mark Clodfelter
Ms. Janis Brennan
Ms. Diana Tsutieva
Mr. Ronald Goodman
Mr. Alberto Wray
Mr. Constantinos Salonidis
Dr. Diego Garcia Carrion
Dra. Christel Gaibor
Ab. Diana Terán
Ab. Juan Francisco Martínez