Arbitrator forced to choose in NAFTA dispute over thwarted Canadian garbage site

By Elizabeth Whitsitt

December 6, 2009

Mr. J. Christopher Thomas Q.C. has resigned from his appointment as an arbitrator in a Chapter 11 NAFTA dispute initiated by US investor Vito G. Gallo against the Canadian government.

Canada’s nominee to the tribunal resigned on October 21, 2009, one week after ICSID Deputy Secretary-General, Nassib G. Ziade, determined that Mr. Thomas would have to choose between continuing to provide legal advice to Mexico or serving as an arbitrator in the case.

Mr. Gallo’s challenge was filed with Mr. Ziade in July of 2009 after learning that Mr. Thomas’ professional situation had changed since the commencement of the arbitral proceedings.  For fifteen years, Mr. Thomas was the managing partner of Thomas & Partners, a law firm specializing in international trade and arbitration matters.  In this capacity he had served as a legal advisor to Mexico in various trade and investment matters (including NAFTA chapter 11 arbitrations).  At the time of his arbitral appointment, however, Mr. Thomas was in the process of joining a larger Canadian law firm as an independent consultant so that he could focus on serving as an arbitrator.  In this new role Mr. Thomas subsequently agreed to advise the Government of Mexico regarding “…specific legal matters as they arose…”

Mr. Thomas attempted to notify the parties of the changes to his professional status and his advisory role to the Mexican government.  A mistyped email address, however, prevented the parties from receiving that communication until early June 2009.  Shortly thereafter, counsel for Mr. Gallo requested that Mr. Thomas withdraw from his post as arbitrator.

In so doing, Mr. Gallo and his counsel stressed that they did “not allege the existence of actual bias” on the part of Mr. Thomas.  Instead they grounded their request on Articles 9 and 10 of the UNCITRAL arbitration rules and argued that Mr. Thomas could not act as an arbitrator in the dispute and at the same time act as advisor to another NAFTA state party.  Doing so, in the claimant’s opinion “…[gave] rise to justifiable doubts as to [Mr. Thomas’] impartiality and independence.”

In response Canada attempted to test the timeliness of the claimant’s challenge.  Canada argued that Mr. Gallo was outside the 15 day time limit to challenge Mr. Thomas’ appointment.  In addressing this issue, the parties made numerous arguments about when the Mr. Gallo became aware or should have become aware that Mr. Thomas was continuing to act as a counsel for Mexico.  Eventually siding with Mr. Gallo, Mr. Zaide remained unconvinced by Canada’s evidence on this point and determined that “[t]he proper matter to be considered [in the case was] whom Mr. Thomas ha[d] counseled, and on what topics.”

Mr. Zaide clarified that the applicable standard under Articles 9 and 10 of the UNCITRAL arbitration rules in addressing that question is an objective one, clarifying that “…one may as a general matter be simultaneously an arbitrator in one case and a counsel in another.”  Moreover, he was clear that Mr. Gallo could not sustain his challenge on the basis of Mr. Thomas’ expressed intention to retire as counsel and subsequent change of heart.  In his view, the potential for conflict in this case lay in NAFTA Article 1128, which provides NAFTA state parties the right to make submissions in Chapter 11 disputes (as non-disputing parties) on questions of interpretation of NAFTA.

Considering Mexico a “potential participant” in the case, Mr. Zaide rejected evidence provided by Mr. Thomas which indicated that he had only provided a “de minimis” amount of legal advice to Mexico in his new role as an independent consultant.

Mr. Zaide was careful, however, to recognize that “Mr. Thomas’ personal integrity [was] unquestioned” and commended him for disclosing his advisory services to Mexico in a forthright manner.

Nonetheless, Mr. Zaide concluded that “[b]y serving on a tribunal in a NAFTA arbitration involving a NAFTA State Party, while simultaneously acting as an advisor to another NAFTA State Party which has a legal right to participate in the proceedings, [Mr. Thomas] inevitably risked creating justifiable doubts as to his impartiality and independence.”  Accordingly, Mr. Zaide asked Mr. Thomas to choose whether he would continue to advise Mexico, or continue to serve as an arbitrator in the dispute between Mr. Gallo and Canada.

Sources:

Decision on the Challenge to Mr. J. Christopher Thomas, QC in Vito G. Gallo v. Canada, UNCITRAL (NAFTA) is available here:

http://ita.law.uvic.ca/documents/Gallo-Canada-Thomas_Challenge-Decision.pdf

Resignation Letter of Mr. J. Christopher Thomas, QC is available here:

http://www.naftaclaims.com/disputes_canada_gallo.htm

Previous ITN Reporting:

“US investor notifies Canada of potential arbitration over thwarted waste site,” By Luke Eric Peterson, Investment Treaty News, 15 November 2006, available here:

http://www.iisd.org/pdf/2006/itn_nov15_2006.pdf

“US investor files formal arbitration against Canada over thwarted garbage disposal site,” Luke Eric Peterson, Investment Treaty News, 27 May 2007, available here:

http://www.iisd.org/pdf/2007/itn_may27_2007.pdf

“Tribunal appointed to hear NAFTA claim over thwarted garbage site in Canada,”
By Luke Eric Peterson, Investment Treaty News, 21 February 2008, available here:

http://www.iisd.org/pdf/2008/itn_feb21_2008.pdf