An ad hoc committee has rejected an application, under Article 52 of the ICSID Convention, to annul the tribunal's award (for discussion of the underlying award, see Legal update, Vivendi v Argentina: meaning of fair and equitable treatment). The principal ground relied on was the fact that one of the arbitrators, Gabrielle Kaufmann-Kohler (GKK), was a director of UBS, which owned shares in one of the parties, Vivendi. Argentina argued that the tribunal had not been properly constituted within Article 52. Further, GKK's failure to disclose her directorship had deprived Argentina of the right to challenge her appointment, and therefore there had been a serious departure from fundamental rules of procedure for the purposes of Article 52.

The committee accepted evidence that GKK had no actual knowledge of the connection between Vivendi and UBS until after the award was rendered. The tribunal's exercise of independent judgment had not been impaired for the purposes of Article 14 of the ICSID Convention and, therefore, the award would not be annulled. However, in a decision which has provoked a good deal of criticism, the committee indicated that GKK's conduct had fallen short of what was to be expected of an ICSID arbitrator.

The committee first held that it was not bound by previous decisions in EDF International SA and others v Argentina (ICSID Case No ARB/03/23) (see Legal update, Challenge to arbitrator's independence rejected) or Suez and others v Argentina (Case Nos ARB/03/19 and ARB/03/17) (see Legal update, Arbitrator impartiality and independence in ICSID arbitration), in which similar issues were raised in the context of challenges to the appointment of GKK as an arbitrator in other ICSID references. The committee agreed with the unchallenged evidence of Argentina's expert, Professor Loukas Mistelis, that there was a conflict between the fiduciary duty of a director to the shareholders of a bank, and the duty as an independent arbitrator in an arbitration involving a party in which the bank has a shareholding or other interest "however small it may be". The committee noted that "since a major international bank has connections with or an interest in virtually any major international company ... the positions of a director of such a bank, and that of an international arbitrator, may not be compatible" (paragraph 56). At the very least, extreme caution should be exercised in such cases. Any arbitrator wishing to combine both functions should:

Here, the fact that GKK had provided UBS with a list of arbitrations in which she was involved and asked them to advise of any conflicts was not sufficient to discharge her duty. It was not for the bank to decide such issues for the parties to the arbitration, and GKK should have informed the arbitrating parties of her impending directorship. Nevertheless, the committee accepted that GKK had no actual knowledge of the connection between UBS and Vivendi. In the circumstances, the tribunal's exercise of independent judgment was not impaired for the purposes of Article 14 of the ICSID Convention and the award would not be annulled.

It is interesting that the ad hoc committee accepted Argentina's expert evidence to the effect that there was a demonstrable inclination of international arbitrators to raise the threshold for a challenge to their fellow arbitrators. Its strongly worded decision is clearly intended to provide guidance for future arbitrations and to protect the integrity of the ICSID process, and both parties and arbitrators should consider carefully whether the role of international arbitrator can properly be combined with that of a director of an international bank.

Finally, the very strongly worded additional opinion of one member of the committee is worth noting, as it criticised the conduct of the ICSID Secretariat as usurping the decision-making function of ICSID tribunals and urged the Secretariat urgently to clarify its own role.

Case: Cia de Aguas del Aconquija SA and Vivendi Universal SA v Argentina (ICSID Case No ARB/97/3) (Annulment Proceeding) (10 August 2010).