Caratube v. Kazakhstan: For the First Time Two ICSID Arbitrators Uphold Disqualification of Third Arbitrator Original publication of ASIL http://www.asil.org/

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Caratube v. Kazakhstan: For the First Time
Two ICSID Arbitrators Uphold Disqualification
of Third Arbitrator
Volume: 18
Issue: 22
Author: Chiara Giorgetti
Monday, September 29, 2014
Introduction
For the first time in the history of the International Centre for Settlement of Investment Disputes (ICSID), on
March 20, 2014, a proposal to disqualify an arbitrator was accepted by the two unchallenged arbitrators. The
tribunal in Caratube v. Kazakhstan[1] (/print/1674#_edn1) upheld a proposal for disqualification of fellow
arbitrator Mr. Bruno Boesch.[2] (/print/1674#_edn2) Together with two similar decisions by the Chairman of the
ICSID Administrative Council, also reviewed in this Insight, this case suggests a notable change in the
assessment of proposals challenging arbitrators under the ICSID Convention.[3] (/print/1674#_edn3)
The grounds to challenge arbitrators are generally similar among different arbitration rules, and they pertain to
an alleged lack of independence or impartiality.[4] (/print/1674#_edn4) However, ICSID rules for challenging
arbitrators are unusual for two main reasons. First, procedurally, the decision on a challenge is first taken by the
unchallenged members of the arbitral tribunal. The more common procedure of requesting a third party to take
a decision is adopted only when a sole arbitrator or a majority of the arbitral tribunal is challenged.[5]
(/print/1674#_edn5) In that case, challenges to ICSID arbitrators are decided by the Chairman of the ICSID
Administrative Tribunal, who is also the President of the World Bank. Second, Article 57 of the ICSID
Convention provides that a party may propose the disqualification of an arbitrator “on account of any fact
indicating a manifest lack of the qualities” of impartiality or independence.[6] (/print/1674#_edn6) This threshold
to evaluate the grounds for a challenge has been criticized as too strict and difficult to meet.[7]
(/print/1674#_edn7) More common, lower thresholds allow for a challenge to arbitrators in circumstances that
give rise to “justifiable doubts” as to the impartiality or independence of an arbitrator.[8] (/print/1674#_edn8)
Caratube v. Kazakhstan: A First in ICSID
The case against Kazakhstan was filed at ICSID in June 2013 by Caratube International Oil Company LLP
(Caratube), a Kazakh-incorporated company, and Mr. Devincci Salah Hourani, a U.S. national. The claimants
appointed Prof. Laurent Aynès and the respondent appointed Mr. Bruno Boesch as arbitrators. The parties

2. jointly nominated Dr. Laurent Lévy to act as president. In January 2014, the claimants sent a letter to the ICSID
Secretariat, requesting Mr. Boesch to resign from the tribunal pursuant to Article 8 of the ICSID Arbitration
Rules.[9] (/print/1674#_edn9) Mr. Boesch considered himself independent and impartial and therefore made it
known that he did not intend to resign from the tribunal. The claimants then proposed his disqualification under
Article 57 of the ICSID Convention.
In their proposal, the claimants submitted that respondent-nominated Bruno Boesch “manifestly cannot be
independent and impartial” because of his serving as arbitrator appointed on behalf of Kazakhstan in another
related case, Ruby Roz Agricol v. Kazakhstan.[10] (/print/1674#_edn10) The claimant identified similarities
between Ruby Roz and Caratube and pointed out that both claims relied on essentially the same factual
allegations with respect to acts and omissions and pattern of conduct. Additionally, the claimant argued that
several individuals who submitted witness statements in Ruby Roz would also likely submit witness statements
in Caratube. The claimants also took issue with the fact that Mr. Boesch had been appointed as arbitrator by
the same firm, Curtis, Mallet-Prevost, Colt & Mosle LLP, in numerous cases including Caratube and Ruby Roz.
[11] (/print/1674#_edn11)
The respondent argued that two grounds invoked by the claimants in support of the proposal were baseless
and should be rejected. In relation to the burden of proof, the respondent argued that “clear evidence was
required and that the heavy burden of proof required the challenging party to establish facts that made it
obvious and highly probable, not only possible,” that the challenged arbitrator could not exercise independent
or impartial judgment.[12] (/print/1674#_edn12) In his submission, Mr. Boesch reiterated his assurances that he
was independent of the parties and was and would remain impartial throughout the proceedings.[13]
(/print/1674#_edn13)
The unchallenged arbitrators concluded that “Articles 57 and 14(1) of the ICSID Convention do not require
proof of actual dependence or bias; rather it is sufficient to establish the appearance of dependence or bias.”
The claimants thus had to show that “a third party would find that there is an evident or obvious appearance of
lack of impartiality or independence based on a reasonable evaluation of the facts in the present case.”[14]
(/print/1674#_edn14)
The unchallenged arbitrators agreed with the claimants that Ruby Roz arose out of the same factual context as
Caratube. They therefore concluded that the case exhibited an imbalance because of Mr. Boesch’s
involvement with Ruby Roz and that Mr. Boesch could not be expected to “to maintain a ‘Chinese wall’ in his
own mind.”[15] (/print/1674#_edn15) The arbitrators explained that they did not question Mr. Boesch’s moral
character, his actual impartiality, or his honesty,[16] (/print/1674#_edn16) but concluded that “a third party
would find that there is an evident or obvious appearance of lack of impartiality or independence based on a
reasonable evaluation of the facts in the present case.”[17] (/print/1674#_edn17) Accordingly, the unchallenged
arbitrators upheld the claimants’ proposal for disqualification of Mr. Boesch.[18] (/print/1674#_edn18) At the
same time, the arbitrators did not impugn the involvement in both cases of the firm of Curtis, Mallet-Prevost,
Colt & Mosle LLP.[19] (/print/1674#_edn19)
This decision is important for two reasons. First, unchallenged ICSID arbitrators have never previously taken
the decision to disqualify a fellow arbitrator. Given that challenges are becoming more common, albeit usually
unsuccessful, this decision helps to reassure stakeholders that the ICSID system continues to work when
arbitrators are faced with a meritorious challenge. Second, the threshold that the arbitrators applied to evaluate
the grounds for challenge was based on the assessment of the evidence by a reasonable third party. In this
regard, the decision follows the standard applied by the ICSID Chairman in two recent ICSID decisions.
Other Recent ICSID Decisions Adopting the Reasonable-Third-Party Standard
On November 1, 2013, a proposal of the parties to disqualify the majority of the tribunal was accepted in Blue
Bank v. Venezuela.[20] (/print/1674#_edn20) As required by the ICSID Convention, the decision was taken by
the Chairman of the ICSID Administrative Council, Dr. Jim Yong Kim.[21] (/print/1674#_edn21)
The respondent challenged the claimant appointee—José María Alonso—based on his partnership in the
Madrid office of Baker & McKenzie. At the time, Baker & McKenzie was representing the claimant in Longreef v.
Venezuela[22] (/print/1674#_edn22) through its offices in New York and Caracas. The Chairman noted several
undisputed facts: that Mr. Alonso was a partner at Baker & McKenzie; that Baker & McKenzie’s offices in New

3. York and Caracas represented the claimant in an ongoing ICSID case against Venezuela; that Mr. Alonso was
not involved with that case; and that Mr. Alonso was a member of Baker & McKenzie’s International Arbitration
Steering Committee.[23] (/print/1674#_edn23)
The Chairman applied “an objective standard based on a reasonable evaluation of the evidence by a third
party”[24] (/print/1674#_edn24) and interpreted the word “manifest” in the ICSID Convention “as meaning
‘evident’ and ‘obvious’ and relating to the ease with which the alleged lack of qualities can be perceived.”[25]
(/print/1674#_edn25) Based on the undisputed facts and the similarity of the issues between the two ICSID
cases against Venezuela, the Chairman found that a reasonable third party would find an appearance of lack of
impartiality in Alonso’s judgment.[26] (/print/1674#_edn26) Hence, the Chairman upheld the challenge against
Mr. Alonso, in the first ICSID decision to disqualify an arbitrator on the basis of the appearance of lack of
impartiality.[27] (/print/1674#_edn27)
Shortly after, the Chairman used the same standard of assessment to decide another challenge.[28]
(/print/1674#_edn28) In a decision dated December 13, 2013, the Chairman of the Administrative Council
disqualified Professor Francisco Orrego Vicuña in Burlington v. Ecuador.[29] (/print/1674#_edn29) The grounds
of the challenge to Orrego Vicuña were similar to those in Blue Bank and Caratube. Ecuador challenged the
claimant-appointed Orrego Vicuña on three grounds: first, that the claimant’s counsel, Freshfields Bruckhaus
Deringer, had appointed Orrego Vicuña too frequently; second, that Orrego Vicuña had failed to disclose the
circumstances of his involvement in cases involving Freshfields; and, third, that Orrego Vicuña showed “a
blatant lack of impartiality towards Ecuador as represented by his conduct during the proceedings.”[30]
(/print/1674#_edn30)
The two unchallenged arbitrators were unable to reach a decision and therefore referred the case to the
Chairman. The Chairman dismissed much of the proposal concerning the first and second grounds, concluding
that Ecuador should have been, and likely was, well aware of Orrego Vicuña’s involvement with Freshfields
before his accepted appointment, and therefore that those grounds for challenge were untimely. On the last
ground, however, the Chairman noted that Orrego Vicuña had made some allegations about the ethics of
counsel for Ecuador that did “not serve any purpose in addressing the proposal for disqualification.”[31]
(/print/1674#_edn31) The Chairman concluded that a third party undertaking a reasonable evaluation of those
remarks would conclude that they “manifestly evidence[d] an appearance of lack of impartiality” with respect to
Ecuador and its counsel.[32] (/print/1674#_edn32) In upholding the challenge, the Chairman explained that the
ICSID Arbitration Rules “do not require proof of actual dependence or bias;” rather, it is “sufficient to establish
the appearance of dependence or bias.”[33] (/print/1674#_edn33) The Chairman’s description of the relevant
standard is mirrored in decisions rejecting challenges to arbitrators.[34] (/print/1674#_edn34)
Conclusion
These are significant developments in ICSID jurisprudence on challenges to arbitrators and they align the
ICSID standard with the threshold adopted by other major international arbitral institutions to assess challenges
based on alleged lack of impartiality and independence. Caratube shows that co-arbitrators are ready to take a
bold stance, if necessary, when deciding challenges to peers. More importantly, together with Blue Bank and
Burlington, the case reveals a shift away from a strict approach to the “manifest lack of” independence or
impartiality standard to a more relaxed understanding focused on evident or obvious appearance of lack of
impartiality or independence based on a third party’s reasonable evaluation of the facts the case.
About the Author: Chiara Giorgetti, an ASIL member, is Assistant Professor of Law at Richmond University
School of Law.
[1] (/print/1674#_ednref1) Caratube International Oil Company LLP & Mr. Devincci Salah Hourani v. Republic of
Kazakhstan, ICSID Case No. ARB/13/13, Decision on the Proposal for Disqualification of Mr. Bruno Boesch, ¶
62 (Mar. 20, 2014), available at http://italaw.com/sites/default/files/case-documents/italaw3133.pdf
(http://italaw.com/sites/default/files/case-documents/italaw3133.pdf) [1].
[2] (/print/1674#_ednref2) Luke Eric Peterson, Appearance of Possible Prejudgment of Key Issues Leads to
Unprecedented Disqualification of ICSID Arbitrator at the Hands of Colleagues, Investment Arbitration Reporter
(Mar. 20, 2014), http://www.iareporter.com/articles/20140321_1

4. (http://www.iareporter.com/articles/20140321_1) [2].
[3] (/print/1674#_ednref3) Convention on the Settlement of Investment Disputes between States and Nationals
of Other States, March 18, 1965, 575 U.N.T.S. 159, [hereinafter ICSID Convention], available at
https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp (https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp)
[3].
[4] (/print/1674#_ednref4) See Karel Daele, Challenges and Disqualification on Arbitrators in International
Arbitration (2012); Noah Rubins & Bernhard Lauterburg, Independence, Impartiality and Duty of Disclosure in
Investment Arbitration, in, Investment And Commercial Arbitration – Similarities And Divergences 153 –180
(Christina Knahr, Christian Koller, Walter Rechberger & August Reinisch, eds., 2010).
[5] (/print/1674#_ednref5) ICSID Convention, supra note 3, art. 58. See generally Chiara Giorgetti, Challenges
of International Investment Arbitrators – How it Works, and Does it Work?, 7 World Arb & Med. Rev. 303
(2013).
[6] (/print/1674#_ednref6) See, ICSID Convention, supra note 3, arts. 57, 14. Article 57 provides: “A party may
propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating
a manifest lack of the qualities required by paragraph (1) of Article 14.” Article 14(1) provides: “(1) Persons
designated to serve on the Panels shall be persons of high moral character and recognized competence in the
fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment.”
[7] (/print/1674#_ednref7) Critics have highlighted that despite the substantial increase in cases at ICSID and
the more recent increase in challenges to arbitrators, successful challenges remain rare. Because numerous
challenges are tactical and spurious, however, this criticism remains difficult to assess. See Constantine
Partasides, Head of Arbitration at Freshfields London, The Art of Selecting the Right Arbitrator, Lecture at
London School of Economics (Nov. 9, 2011), available at
http://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1252
(http://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1252)
[4].
[8] (/print/1674#_ednref8) See, e.g., UNCITRAL Arbitration Rules, art. 12(1) (2010).
[9] (/print/1674#_ednref9) ICSID Rules of Procedure for Arbitration Proceedings, art. 8 (2006), available at
https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp (https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp)
[3].
[10] (/print/1674#_ednref10) Ruby Roz Agricol v. Kazakhstan, Award on Jurisdiction (UNCITRAL 2013).
[11] (/print/1674#_ednref11) Caratube, supra note 1, ¶¶ 24–26, 30.
[12] (/print/1674#_ednref12) Id. ¶¶ 36–37.
[13] (/print/1674#_ednref13) Id. ¶ 47.
[14] (/print/1674#_ednref14) Id. ¶ 57.
[15] (/print/1674#_ednref15) Id. ¶ 75.
[16] (/print/1674#_ednref16) Id. ¶ 65.
[17] (/print/1674#_ednref17) Id. ¶ 91.
[18] (/print/1674#_ednref18) Id. ¶ 111.
[19] (/print/1674#_ednref19) Id. ¶¶ 71, 74–75.
[20] (/print/1674#_ednref20) Blue Bank Int’l & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/12/20, Decision on the Parties’ Proposals to Disqualify a Majority of the Tribunal, ¶¶ 22–26
(Nov. 12, 2013).
[21] (/print/1674#_ednref21) ICSID Convention, supra note 3, art. 58

5. [22] (/print/1674#_ednref22) Longreef Investments A. V. V. v. Bolivarian Republic of Venezuela, ICSID Case
No. ARB/11/5, Notice of Arbitration (Feb. 23, 2011).
[23] (/print/1674#_ednref23) Id. ¶ 66.
[24] (/print/1674#_ednref24) Id. ¶ 60.
[25] (/print/1674#_ednref25) Id. ¶ 61.
[26] (/print/1674#_ednref26) Id. ¶ 71.
[27] (/print/1674#_ednref27) Luke Eric Peterson, ICSID Removes Arbitrator in Blue Bank v. Venezuela Case
Due to His Law Firm Elsewhere Acting Against Venezuela, Investment Arbitration Reporter (Nov. 18, 2013),
http://www.iareporter.com/articles/20131118_4 (http://www.iareporter.com/articles/20131118_4) [5].
[28] (/print/1674#_ednref28) Luke Eric Peterson, Arbitrator’s Reaction to Challenge Becomes Crucial Evidence
that Leads to his Removal in Burlington v. Ecuador Case; Separate Challenges Rejected in Repsol v. Argentina
Case, Investment Arbitration Reporter (Dec. 16, 2013), http://www.iareporter.com/categories/20090724_6
(http://www.iareporter.com/categories/20090724_6) [6].
[29] (/print/1674#_ednref29) Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5,
Decision on the Proposal for Disqualification of Professor Francisco Orrego Vicuña (Dec. 13, 2013), available at
http://italaw.com/sites/default/files/case-documents/italaw3028.pdf (http://italaw.com/sites/default/files/case-documents/
italaw3028.pdf) [7].
[30] (/print/1674#_ednref30) Id. ¶ 20.
[31] (/print/1674#_ednref31) Id. ¶ 79.
[32] (/print/1674#_ednref32) Id. ¶¶ 80–81.
[33] (/print/1674#_ednref33) Id. ¶¶ 66, 81.
[34] (/print/1674#_ednref34) See ConocoPhillips Petrozuata B.V., Petrozuata B.V., ConocoPhillips Hamaca
B.V., ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30,
Decision on the Proposal to Disqualify a Majority of the Tribunal, ¶ 56 (May 5, 2014); Repsol S.A. and Repsol
Butano S.A. v. República Argentina, ICSID Case No. ARB/12/38, Decisión Sobre la Propuesta de Recusación
a la Mayoría del Tribunal (Decision on the Proposal to Disqualify a Majority of the Tribunal), ¶ 86 (Dec. 13,
2013).
Source URL: http://www.asil.org/insights/volume/18/issue/22/caratube-v-kazakhstan-first-time-two-icsid-arbitrators-uphold
(http://www.asil.org/insights/volume/18/issue/22/caratube-v-kazakhstan-first-time-two-icsid-arbitrators-uphold)
Links:
[1] http://italaw.com/sites/default/files/case-documents/italaw3133.pdf
[2] http://www.iareporter.com/articles/20140321_1
[3] https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp
[4] http://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1252
[5] http://www.iareporter.com/articles/20131118_4
[6] http://www.iareporter.com/categories/20090724_6
[7] http://italaw.com/sites/default/files/case-documents/italaw3028.pdf