When Outsiders Get in: Appointment Incentives in Investment Arbitration

• In Event: International Organizations: Bureaucracy and Behavior

Abstract

How do international legal institutions manage the selection of judges and cultivate diversity among adjudicators? This question is particularly important in environments where formal institutions are relatively weak and compete with strong informal institutions that govern judicial tenure. An example of such an environment is in the field of investor-state dispute settlement (ISDS) in which ad-hoc international arbitration tribunals adjudicate foreign investor claims against governments. For years, ISDS has faced criticism for the lack of diversity among arbitrators and the dominance of a small, select group of elite international legal professionals who are repeatedly appointed as arbitrators. This problem is exacerbated by the role that the parties to a dispute, the investor and the state, play in the selection of arbitrators and the minimal influence of the arbitral institutions in deciding the composition of a panel. This paper investigates the conditions under which less experienced arbitrators are able to break through and get appointments, focusing on the universe of investor-state arbitrations registered with the International Centre for the Settlement of Investment Disputes. It shows that despite its general deference to the parties, the ICSID Secretariat plays an active role in encouraging diversity, on average tending to select arbitrators with fewer prior appointments when called upon to make an appointment. Furthermore, it shows that the stakes of the dispute affect the willingness of both the parties and the institution to choose less experienced arbitrators -- disputes where the amount demanded by the investor is higher, all-else-equal, tend to have arbitrators with more prior appointments. Notably, this relationship holds only for appointments made to the presiding (pivotal) arbitrator and not for appointments made by either of the two parties. It concludes by discussing the ways in which experienced arbitrators and the newer entrants differ and what implications this has for ICSID's stated goals of diversifying its pool of arbitrators.

Author

• Anton Strezhnev, University of Chicago