How essential is public law experience in investor-state cases?

A panel at the Latin Lawyer-GAR Live Arbitration Summit that considered the prerequisites for choosing an arbitrator was divided on whether arbitrators in investor-state cases should have extensive expertise in public international law, or whether commercial experience is more important.

How essential is public law experience in investor-state cases? James Lloyd Loftis, Hagit Elul, Pedro Soares Maciel, Kate Brown de Vejar and Roberto Aguirre Luzi

Strong experience in public international law and a governmental background may allow arbitrators to truly get behind the states they represent, but it can also mean they lack understanding of the commercial context surrounding cases, heard delegates. When it comes to investor-state arbitration, Kate Brown de Vejar, partner at Curtis, Mallet-Prevost, Colt & Mosle SC in Mexico City, said extensive experience in public international law is the most important factor at play when choosing an arbitrator, but that few have the relevant experience. “One of the concerns that states have in choosing their arbitrator that there aren’t enough candidates out there with experience who understand where they’re coming from,” she said. She pointed to OECD figures showing that 60% of arbitrators come from private law firms, with the remaining number coming from an academic background. “You need someone who has experience and a background in public international law matters,” she said. “A little commercial sense and some commercial experience can go a long way, but the fact of the matter is that we are getting arbitrators in investor-state cases who don’t have that background and it can be problematic and does affect the effectiveness of that arbitrator in the tribunal.” States have a limited choice, because few arbitrators have a background in treaty negotiation or government representation and may not be able to understand states’ position on sovereign issues. “Issues such as sovereignty, the scope of a sovereign right to regulate, state responsibility and when it is appropriate to attribute to the state responsibility for a contract entered into by a state are a grave concern to a state who is appointing their representative. There are not enough candidates out there who have experience but also have those qualities,” noted Brown de Vejar.  But Vinson & Elkins LLP partner James Lloyd Loftis, who was chief counsel at the United Nations Compensation Commission between 1997 and 2000, said hiring an international law expert is not paramount when it comes to choosing an arbitrator. He stressed the importance that arbitrators have commercial experience that allows them to fully understand the commercial context of disputes. “You do need to have an eye for the context in which these issues arise,” he said. “Familiarity with BIT cases alone doesn’t qualify you to sit on any given case.” The panel highlighted areas where few arbitrators have experience. Panel moderator Pedro Soares Maciel, who leads Brazil’s Lefosse Advogados’ litigation practice, posed a hypothetical case to the panel involving a US shareholder of an Ecuadorian company bringing a bilateral investment treaty (BIT) claim against Ecuador. The hypothetical claim alleged that, through a court decision and liquidation of the Ecuadorian company, the country effectively expropriated the investment.

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