Don't Trust the Arbitrators? Belgium-Based 'Corporate Europe Observatory' Blasts the International Investment Arbitration System

By Keith Edmund White, Editor-in-Chief

Yikes, do we need to shine more light on the the rule-enforcers for international trade?

Corporate Europe Observatory Observatory (CEO) and the Transnational Institute have released a report slamming international arbitration arbitrators:

"Yet rather than acting as fair and neutral intermediaries, it has become clear that the arbitration industry has a vested interest in perpetuating an investment regime that prioritises the rights of investors at the expense of democratically elected national governments and sovereign states. They have built a multimillion-dollar, self-serving industry, dominated by a narrow exclusive elite of law firms and lawyers whose interconnectedness and multiple financial interests raise serious concerns about their commitment to deliver fair and independent judgments."  [Source: Profiting from Injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom]

And Rabble.ca blogs on the report, giving a nice backdrop to how important the arbitration system to trade deals and why is has particular relevance for recent Canada trade policy moves.

From Stuart Trew's posting for Rabble.ca:

There's nothing fair or just about the investor-state dispute settlement (ISDS) process inside Canada's free trade deals and Foreign Investment Protection and Promotion Agreements (FIPAs). Actually, according to a new European report, ISDS looks more like a racket, supported by an inner circle of secretive investment lawyers and arbitrators with "a vested interest in perpetuating an investment regime that prioritizes the rights of investors at the expense of democratically elected national governments and sovereign states."

The controversy about a recent FIPA with China continues to burn. Ontario and Quebec have just been hit by two ridiculous NAFTA lawsuits against a ban on fracking and amoratorium on offshore wind developments. And there is news suggesting an investment treaty inside the Canada-EU free trade deal could be much worse than either NAFTA or the China FIPA by expanding the opportunities for European firms to seek compensation from changes to Canadian health, environmental or safety rules that lower profit expectations. 

A Few Elites Really Run Everything?

From page 38 of the report:

And from Page 45:

Where's the Beef?  How Are Arbitrators Regulated?

The report is an interesting read, and so is Trew's article. And the report's Chapter 4 does point out some worrisome trends.  But is this cherry-picking, or the canary in the coalmine? 

This points to be a big omission in both sources:  Is there an analogous system for professional responsibility to U.S. state Board of Bar Examiners to police international arbitrators?  And, if not, how does ethics in international arbitration work?  Without this as a baseline, it's hard to gauge opinions on whether CEO gets it right or wrong.

But, at the very least, I would have to guess that 'the regulation of arbitrators' is not a main topic when nations are coming together and crafting or updating foreign investment treaties or free trade deals.  

Side-Note for All Those Who Had to Take the Multistate Professional Responsibility Exam

And, naturally, as a one-time law student who took Professional Responsibility and had to pass a national exam on lawyerly ethics, I--at least--want to make sure arbitrators who may be dealing with international law, multiple domestic systems of law, and perhaps troubling conflict of interest concerns, have to do what lawyers do so well--passing ethical tests.

Next Steps for Interested Readers

I'm working on getting more information on the subject of Professional Responsibility and International Arbitrators (i.e. getting a one-time professor to do some searching on the side me! [Thanks, Prof!])--my quick Google searches were rather unsatisfying. If it comes quick and easy, I'll update the post.  Otherwise, I'll do some digging--and readers should keep their eye out for a in-depth posting soon!

Naturally, anyone with more information on this should shoot me a line at cuslinexus@gmail.com.

I did find these rough sources that may help out:

International Bar Association materials

United Nations Commission on International Trade Law (UNCITRAL)