{"id":8062,"date":"2020-10-05T08:24:35","date_gmt":"2020-10-05T13:24:35","guid":{"rendered":"https:\/\/cf.iisd.net\/itn\/?p=8062"},"modified":"2024-08-09T18:31:09","modified_gmt":"2024-08-09T16:31:09","slug":"icsid-annulment-committee-annuls-eiser-v-spain-award-for-improper-constitution-of-the-tribunal-and-severe-departure-from-a-fundamental-rule-of-procedure","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2020\/10\/05\/icsid-annulment-committee-annuls-eiser-v-spain-award-for-improper-constitution-of-the-tribunal-and-severe-departure-from-a-fundamental-rule-of-procedure\/","title":{"rendered":"ICSID annulment committee annuls Eiser v. Spain Award for improper constitution of the tribunal and severe departure from a fundamental rule of procedure"},"content":{"rendered":"

Eiser Infrastructure Limited and Energ\u00eda Solar Luxembourg S.\u00e0 r.l. v. Kingdom of Spain, ICSID<\/span> Case No. ARB\/13\/36<\/h2>\n

On June 11, 2020, an ICSID ad hoc committee annulled an award in its entirety on the grounds of serious departure from fundamental rules of procedure. The committee found that a lack of disclosure compromised the independence and impartiality of one of the arbitrators, Stanimir Alexandrov, amounting to the improper constitution of the tribunal and a severe departure from a fundamental rule of procedure.<\/p>\n

The Eiser v. Spain award<\/h3>\n

The award relates to a dispute registered at ICSID under the ECT<\/span>. On the award rendered on May 4, 2017, by a panel of three arbitrators composed of Prof. John R. Crook, Stanimir A. Alexandrov, and Prof. Campbell McLachlan, the tribunal ordered Spain to pay damages to the claimants for breach of the FET<\/span> standard under ECT Article 10(1). The tribunal awarded EUR 128 million in damages to Eiser Infrastructure Limited and Energia Solar Luxembourg S.\u00e0 r.l., (collectively, \u201cEiser\u201d).[1]<\/sup><\/a><\/p>\n

The annulment proceedings<\/h3>\n

Spain\u2019s grounds for annulment<\/h3>\n

Spain put forward several arguments for annulment of the award. It argued that, for the case at hand, \u201cmanifest appearance of bias\u201d arose from a long-standing relationship between Alexandrov and the Brattle Group (\u201cBrattle\u201d), in particular Brattle\u2019s employee, Carlos Lapuerta,[2]<\/sup><\/a> and from Alexandrov\u2019s failure to disclose his relationship with Brattle and this particular employee (Brattle is a company that provides expert testimonies and quantum of damages in international arbitration proceedings).<\/p>\n

Although Spain requested the annulment of the arbitral award on multiple grounds, the committee examined only the relationship between Alexandrov and Brattle and the extent to which his connections amounted to an improper constitution of the tribunal and to a serious departure from fundamental rules of the arbitral procedure. The committee declared annulment of the arbitral award and indicated that there was no need to address the other grounds for annulment raised by Spain (para. 256).<\/p>\n

Improper constitution of the tribunal<\/h3>\n

Tribunal\u2019s interpretation of Article 52(1)(a) of the ICSID Convention<\/span><\/h3>\n

Eiser argued that under Art. 52(1)(a) of the ICSID Convention an award can only be annulled for failure to comply with the steps necessary to constitute the tribunal at the outset of the proceedings (para. 63). The committee rejected this approach, concluding that for the purpose of determining whether the tribunal is properly constituted, Art. 52(1)(a) should be interpreted in light of the context,\u00a0object, and purpose of the treaty, which empowered the committee to examine whether \u201cthe members of the tribunal were and remained (and were seen to be\/remain) impartial and independent throughout the proceedings\u201d (para. 178).<\/p>\n

After concluding that review under Art. 52(1)(a) extends to situations in which an arbitrator is alleged to have lacked impartiality and independence at any time during the arbitration, the committee turned to determining the applicable standard to establish if an arbitral award should be annulled under said article.<\/p>\n

The committee concluded that the \u201cimproper constitution\u201d of a tribunal under Art. 52(1)(a) did not prevent the committee from reviewing whether the procedural steps to constitute the tribunal had been appropriately followed at the beginning of the arbitration, as review under Art.52(1)(a) encompasses situations where an arbitrator is alleged to have lacked impartiality and independence at any time during the arbitration.<\/p>\n

The three-step tests<\/h3>\n

To examine the alleged lack of independence, the committee applied the three-step tests following the approach in EDF v. Argentina<\/em> annulment decision:<\/p>\n

    \n
  1. Was the right to raise this matter waived because Spain had not raised it sufficiently promptly?<\/li>\n
  2. If not, has the party seeking annulment established that a third party would find evident or obvious lack of impartiality or independence on the part of an arbitrator on a reasonable evaluation of the facts of the case (the Blue Bank standard)? And,<\/li>\n
  3. If so, could the manifestly apparent lack of impartiality or independence on the part of that arbitrator have had a material effect on the award? ( para. 180).<\/li>\n<\/ol>\n

    Eiser argued that Spain had waived its right to object to the connections between Alexandrov and Brattle because Spain should have known about it since they were public domain before the arbitral award was rendered. The committee rejected this argument and explained that there was nothing on the record to prove that Spain had such knowledge. It also noted that \u201ca clear and unequivocal waiver\u201d is needed to surrender a right so fundamental that it goes to the very foundation of the proper constitution of the tribunal. According to the committee, \u201c[s]uch a waiver cannot be established without proof that the party concerned had actual or constructive knowledge of all the facts\u201d (para. 190).<\/p>\n

    Turning to the second step, the committee had to determine whether the standard for disqualification had been met. For that, the committee adopted the Blue Bank v. Venezuela<\/em> standard that determines that the relevant legal standard is an objective one \u201cbased on a reasonable evaluation of the evidence by a third party\u201d (para. 206). The committee\u2019s view was that a third party would have found an evident or obvious bias on an objective assessment of the facts at hand. It further concluded that Alexandrov should have disclosed his relationship with Brattle and particularly with Lapuerta based on an objective assessment of the multiple professional connections and interactions between them.<\/p>\n

    In this sense, the committee found that the relationship between Alexandrov and Lapuerta created a manifest appearance of bias and, therefore, Alexandrov had an obligation to disclose this relationship (paras 220-228).<\/p>\n

    Tribunal\u2019s interpretation of Article 52(1)(d) of the ICSID Convention<\/h3>\n

    Finally, the committee examined whether there had been a serious departure from a fundamental rule of procedure, and if such departure was serious in terms of Art. 52(1)(a). The committee concluded that the absence of disclosure deprived Spain of the opportunity to challenge Alexandrov during the arbitration proceedings. This constituted a departure from a fundamental rule procedure as it affected Spain\u2019s right to a fair trial and the right to be heard by an independent and impartial decision-maker.<\/p>\n

    Additionally, the committee found nothing upon examination of the award that could signal that Lapuerta\u2019s damages report had no material effect on the reasoning or findings in the award since Lapuerta\u2019s model for damages was adopted in its entirety by the arbitral tribunal. The committee also noted that given the fact that it is in the very nature of deliberations that arbitrators exchange opinions before issuing the award \u201cit would be unsafe to hold that Alexandrov\u2019s views and his analysis could not have had any material bearing on the opinions of his fellow arbitrators\u201d ( paras. 246\u2013247).<\/p>\n

    Arbitral award annulled in its entirety<\/h3>\n

    The committee found that Alexandrov\u2019s failure to disclose could have had a material effect on the award. Hence, the lack of disclosure constituted a serious breach that warranted annulment both under clauses (a) and (d) of paragraph (1) of Art. 52. The committee did not find, as argued by Eiser, that it had the discretion to decide not to annul the award even if the requirements under Art. 52 were met (para. 254), agreeing with the approach taken by the committee in\u00a0Pey\u00a0Casado<\/em>, where the committee concluded it has no discretion not to annul an award if a serious departure from a fundamental rule is established.[3]<\/sup><\/a><\/p>\n

    Notes: The ad hoc committee was composed of Prof. Ricardo Ram\u00edrez Hern\u00e1ndez (president), Makhdoom Ali Khan (member) and Judge Dominique Hascher (member). The annulment decision of June 11, 2020, is available at https:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw11591.pdf<\/a> in English and https:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw11592.pdf<\/a> in Spanish.<\/p>\n

    Maria Bisila Torao<\/strong>\u00a0is an international lawyer based in London. She holds an LL.M. in investment treaty arbitration from Uppsala University, an LL.M. in international commercial arbitration from Stockholm University and a bachelor\u2019s degree in law from the University of Malaga.<\/p>\n

    [1]<\/a> See Arbitral Award, ICSID Case No. ARB\/13\/36, available at\u00a0https:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw9050.pdf<\/a><\/p>\n

    [2]<\/a> Principal of The Brattle Group. Lapuerta acted as an expert on economic analysis and financial valuation in the Eiser v. Spain arbitration, See Arbitral Award, ICSID Case No. ARB\/13\/36, available at\u00a0https:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw9050.pdf<\/a><\/p>\n

    [3]<\/a> ICSID Case No. ARB\/98\/2 Annulment Proceeding https:\/\/www.italaw.com\/sites\/default\/files\/case-documents\/italaw11100.pdf<\/a><\/p>\n