March 29, 2009

Centurion To Select Arbitrator For NAFTA Proceedings


We are in the beginning process of selecting arbitrators for our NAFTA proceedings. Under NAFTA articles the parties can choose their own arbitrators. Under Article 3 of the UNCITRAL Arbitration Rules, arbitration proceedings are initiated when the claimant gives the respondent a notice of arbitration. Which has already been submitted to the Government of Canada. This notice can include a proposal for the appointment of an arbitrator, a “notification of the appointment of an arbitrator,” and a statement of claim. An arbitrator can be appointed at any time from the delivery of the notification of arbitration, which was also done by us last week. A proposal for selection of arbitrators was submitted by the Government of Canada we agreed with all of the deal points instead of one. However it is a major one it’s the issue of the newly appointed Secretary General of the International Centre for Settlement of Investment Disputes (ICSID) Meg Kinnear.

Meg Kinnear Elected ICSID Secretary-General Ms. Kinnear was counsel for the Government of Canada in these proceedings before she took her post to become Secretary General at the ICSID. The reason this is important to me besides the obvious conflict. Is the amount of authority the Secretary General has over the dispute resolution process. The Secretary-General of ICSID, is the appointing authority for arbitrations under NAFTA's investment disputes.Under Article 1123, Chapter 11 disputes are presided over by a tribunal of three arbitrators unless the parties to a dispute agree otherwise. Each party may pick one arbitrator; the third arbitrator is the presiding arbitrator and is to be appointed by the agreement of the parties. The specific mechanics of actual appointment of a person as arbitrator are governed by the rules under which the claim is made, unless the parties have agreed to some other procedure. Under the ICSID Convention, the procedures for appointing arbitrators are governed in a large part not by the Convention, but instead by the ICSID Procedure Rules established by the Administrative Council under the authority given to it by Article 6 of the ICSID Convention. In large part, the Additional Facility Rules combine the elements of the ICSID Convention and the ICSID Procedure Rules into one document. In most instances, the rules under the ICSID Convention and the Additional Facility Rules are the same. So what happens if both parties cannot agree on the third arbitrator? You guessed it one party may request the Secretary General to step in.

Appointment by the Secretary-General

Article 1124 of the NAFTA establishes a system by which the Secretary-General of the ICSID may appoint one or more of the arbitrators for a dispute, on application by one or more of the parties to the dispute. This system exists to prevent an intransigent party from holding the process hostage to its refusal to appoint an arbitrator. Such provisions exist in the ICSID Rules and UNCITRAL Arbitration Rules as well.

Here is something else I need to be on the look out for accordingly, in any NAFTA Chapter 11 arbitration that does not come under the tent of the ICSID Convention, there remains, as in any other interna­tional arbitration, the risk that a domestic court, ex­ercising its power to register a NAFTA award, might purport to vacate or refuse to enforce the award.  The key procedural advantages that  ICSID Convention arbitration has namely, nonappealability pursuant to Article 54, under which any ICSID Convention award is tantamount to a final, nonappealable money judgment in each ICSID Contracting State. From an investor’s perspective, it prevents (or at least should prevent) the host state from nullifying an adverse award through action in its own courts. NAFTA also explicitly grants parties the freedom to select their arbitral locale.  Absent such a choice, pursuant to both the ICSID Additional Facil­ity Rules and the UNCITRAL Rules,18 the choice is left to the arbitrators, the only restriction being that the arbitration must take place “in the territory of a Party.” Also NAFTA’s does not expressly require that arbitration take place in a “neutral” forum unconnected with either of the parties. So jurisdiction becomes important as well. So these issues need to be addressed as we move forward to arbitration. Check back later for an update.