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UNCITRAL and ISDS Reform: Visualising a Flexible Framework

Published on October 24, 2019        Author:  and

In UNCITRAL, states have broken through the impasse of the incrementalist and systemic reformer camps. They have all agreed that they want to pursue systemic reform, but they have different ideas about what that entails and what to prioritise. In broad terms, agreement seems to be coalescing around three main blocks of reforms: updating some of the procedural rules; enacting some sort of optional structural changes for dispute settlement; and creating a mechanism to support developing states with handling their treaties and disputes. Not every state is supportive of every proposal, but most seem open to pursuing all three in a (somewhat) simultaneous fashion.

That leaves an important question, which is starting to bubble up on the side lines of the negotiations: how might these different reforms fit together? Instead of treating the proposals as oppositional, could a flexible framework be developed that would allow multiple reforms to be developed over time in order to create a more holistic approach? What would this look like? What are the component parts or building blocks and how might they fit together?

In this blog series, we typically provide analytical frameworks for (1) understanding how the process is unfolding, including the politics of different camps and the sociology of different actors, and (2) predicting how the process is likely to evolve. In this blog, we are doing something a bit different. We are taking concerns that states have identified in the process and sketching a framework for understanding how they might be brought together. The framework we present below is not simply a descriptive synthesis of the discussions to date, but rather a way to look at the various options raised in their entirety — including how they overlap and relate to one another. Read the rest of this entry…

Filed under: EJIL Analysis
 

UNCITRAL and ISDS Reform: In Sickness and In Health

Published on October 23, 2019        Author:  and

UNCITRAL Working Group III met in Vienna last week to continue its discussions about how to reform investor-state dispute settlement (ISDS). In April 2019, the Working Group agreed that the ISDS system suffered from significant problems and required reform. In colloquial terms, the system was causing a variety of illnesses; states needed to diagnose the underlying causes and prescribe cures. This blog traces the debate dynamics as states considered different treatment plans to restore the system to health. In tomorrow’s blog, we provide a first conceptualisation of how these different treatments might be weaved together in a flexible framework.

Sickness: Causes and Cures

During Phases 1 and 2 of this process, it sometimes felt like states were complaining about having suffered from various illnesses arising from the system. These illnesses included very large awards, inconsistent decisions, frivolous cases, arbitrator conflicts and excessive fees. Different states at UNCITRAL had succumbed to different illnesses, but the general sentiment expressed was that the existing system had created unhealthy pathologies that needed treatment.

In Phase 3, states are recognising that that they are not only patients, they are also doctors. Some (powerful) states have long seen themselves as doctors, able to treat problems with available tools, while other states have either not seen themselves as doctors or not had access to the same tools. At UNCITRAL, there has been a clear shift: all states now recognise that they have individual and collective agency to reform the system. But they disagree on the best course of treatment.

Should the Working Group just treat specific illnesses? States adopting this approach favour non-structural reforms and coalesce around a multilateral instrument on procedural reforms, which they argue would provide significant and speedy fixes to the existing system. Read the rest of this entry…

Filed under: EJIL Analysis
 

UNCITRAL and ISDS Reforms: Agenda-Widening and Paradigm-Shifting

Published on September 20, 2019        Author:  and

On 17 July 2019, South Africa made its submission to UNCITRAL on investor–state dispute settlement (ISDS) reform in which it seeks a “paradigm-shift” in investment law. In keeping with our description of South Africa as a “widener” in the UNCITRAL debates, the submission brings a wide-angle lens to the negotiations, first placing ISDS in a broader context and then discussing a multitude of possible reforms, several of which have not been on the UNCITRAL agenda so far. Time will tell whether South Africa seeks to get other states to rally around its cause, but for now its submission represents an important anchor in the incremental/structural/paradigmatic reform dynamics.

  1. Toward a New Paradigm for Investment Treaties and ISDS

The South African submission starts from first principles, by describing the ideological foundations on which investment treaties rest. It highlights that investment treaties were tied to a narrow vision of development that prioritized “economic growth through the free market, individual property and free flow of capital” and limited the role of a state to “securing property rights to optimize market development.” Read the rest of this entry…

 
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UNCITRAL and ISDS Reform: China’s Proposal

Published on August 5, 2019        Author:  and

On 19 July 2019, China submitted its proposal on investor-state dispute settlement (ISDS) reform to UNCITRAL. A Chinese version is available, though an English translation is yet to be posted. China reaffirms its commitment to ISDS as an important mechanism for resolving investor-state disputes under public international law. However, it takes note of significant criticisms of ISDS and suggests various pathways for reform including, most notably, supporting the study of a permanent appellate body. In combination with the European Union’s “open architecture” approach, where the EU has signalled that it is open to working with other states that might wish to sign onto an appellate body and/or the multilateral investment court, this means that two of the world’s three biggest economies have now signalled support for significant reform of ISDS, including the possible creation of a permanent appellate body.

China’s UNCITRAL submission

China began in the investment treaty system as an ISDS sceptic but, over the years, has become an ISDS convert. In this submission, China starts from the position that ISDS plays an important role in protecting the rights of foreign investors and promoting cross-border investment, as well as helping to build the rule of law in investment governance and avoiding economic disputes between investors and states escalating into political battles. Given this, China affirms its belief that ISDS is overall a mechanism that is worth maintaining. Given China’s growing interests as a capital exporter, particularly along the Belt and Road route, this endorsement of ISDS should not come as a surprise and is in line with the evolution of China’s treaty practice toward embracing ISDS over a full range of disputes.

Despite this general affirmation, China recognizes that there have been significant criticisms made of ISDS that need to be addressed. These include that: the current system lacks an institutionalized and reasonable error-correcting mechanism; the current system of ad hoc awards lacks stability and predictability; the professionalism and independence of arbitrators has been put into question; third party funding is affecting the balance of parties’ rights; and investment arbitration proceedings are long and costly. Of note, China also states that the phenomenon that the arbitrators and lawyers of investment arbitration are limited to a few experts deserves special attention. China states that ISDS should be more open and inclusive with increased participation of experts from developing countries. Read the rest of this entry…

 

UNCITRAL and ISDS Reforms: Battles over Naming and Framing

Published on April 30, 2019        Author:  and

Editor’s Note:  This week, we will be featuring several posts critically examining the UNCITRAL ISDS reform process, which held its latest Working Group III meetings in New York on April 2019.  Yesterday’s introduction from our Contributing Editor Anthea Roberts and UNCITRAL Academic Forum Chair Malcolm Langford summarized key points of contention raised by States as to the narrower procedural reforms to ISDS as the mandate of UNCITRAL Working Group III.  The next series of posts this week focus on broader issues and substantive questions that suffuse the reform process. In this morning’s post and this post, Contributing Editor Anthea Roberts and her co-author Taylor St. John address geopolitical and ideological issues that affect ISDS reforms. Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity. Taylor St John attends UNCITRAL as an observer from PluriCourts, University of Oslo.

A striking feature of the debates over ISDS reform in the last UNCITRAL session were the battles over naming and framing. In some ways, these battles reflect the power that names and frames have in shaping our understanding of reality, guiding and limiting debates, and making some approaches or positions seem more obvious or appealing than others. In another way, these debates often represented proxy battles for deeper, substantive divisions among various states of the type we addressed in our previous blog on the Divided West and the Battle for and by the Rest.

What is in a name? Does framing matter?

When we imagine negotiations between governments, we often picture hard bargaining over bracketed text. In reality, the early stages of negotiation are often more about framing, particularly when negotiations deal with new issues or evolving processes. Framing plays a crucial role in creating the conceptual categories through which participants understand dynamics and formulate or communicate their positions. Every frame simultaneously reveals and obscures, both providing insights and limiting vision.

Naming is important because the names attached to positions can be relatively neutral or can be designed to make some positions seem more attractive or inevitable than others. Actors can attempt to use names dispassionately to describe situations or as advocacy tools to support particular positions. Sometimes it is not clear which is being done. Sometimes different actors can be using the same names in different ways.

Names and frames are often in flux during negotiations. Particularly in a consensus driven negotiation, we should expect naming and framing to shift over time in order to forge consensus among disparate groups. Heated debates in the UNCITRAL ISDS reform process over the use of the names “incremental” and “systemic” provide a good illustration of these phenomena.

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UNCITRAL and ISDS Reforms: The Divided West and the Battle by and for the Rest

Published on April 30, 2019        Author:  and

Editor’s Note:  This week, we will be featuring several posts critically examining the UNCITRAL ISDS reform process, which held its latest Working Group III meetings in New York on April 2019.  Yesterday’s introduction from our Contributing Editor Anthea Roberts and UNCITRAL Academic Forum Chair Malcolm Langford summarized key points of contention raised by States as to the narrower procedural reforms to ISDS as the mandate of UNCITRAL Working Group III.  The next series of posts this week focus on broader issues and substantive questions that suffuse the reform process. Today, Contributing Editor Anthea Roberts and her co-author Taylor St. John address geopolitical issues that inevitably affect ISDS reforms. Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity. Taylor St John attends UNCITRAL as an observer from PluriCourts, University of Oslo.

The UNCITRAL debates over ISDS reforms can serve as a real-world laboratory for observing changes in the national interests and policies of different countries, as well as shifts in their geopolitical weight and alignments. As part of a commitment to transparency, UNCITRAL decided to allow a wide range of observers in the room and to make recordings of the debates available. Such transparency gives non-state actors a chance to analyse these dynamics in real time and to consider not only what they mean for ISDS reforms but how they reflect and reinforce broader shifts in international economic governance. During the latest Working Group III meeting in April in New York, we observed a divided West and an emerging battle by and for the Rest.

The Divided West

The ISDS reform debates reached UNCITRAL despite a division within ‘the West.’ For multiple reasons, most notably that ad hoc investor-state arbitration had become politically toxic within Europe as a form of ‘private justice,’ the European Union proposed the creation of a multilateral investment court. Although initially reluctant to bring these issues to UNCITRAL, the European Union and Canada ultimately supported these reform debates going forward within a multilateral UN body. Other significant powers, including the United States and Japan, were opposed to both the creation of a court and these reform debates going forward in UNCITRAL. Read the rest of this entry…

 

UNCITRAL and ISDS Reforms: Hastening slowly

Published on April 29, 2019        Author:  and

Editor’s Note:  This week, we will be featuring several posts critically examining the UNCITRAL ISDS reform process, which held its latest Working Group III meetings in New York on April 2019.  We begin with today’s introduction from Anthea Roberts and Malcolm Langford.  Malcolm Langford attends UNCITRAL Working Group III as Chair of the ISDS Academic Forum and a representative of Pluricourts, University of Oslo. He writes here in his independent academic capacity.Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity. 

UNCITRAL’s Working Group III on investor-state dispute settlement (ISDS) reform continues to attract substantial and growing interest. In the first week of April 2019, a record number of states and observers descended on New York to clarify the final list of concerns and establish a work plan for moving forward on concrete reforms. This session continued the earlier trend of hastening slowly. A recognition of the need for reform amongst states is clear but the tempo remains modest given the reticence of some and the panoply of reform options being considered. This blog post sums up the four main takeaways of the week and will be followed by three reflective analytical posts on the West/Rest politics underlying the process, the role of academics in international politics, debates around naming and framing (“we are all systemic reformers now”) together with a concluding post. Read the rest of this entry…

 

UNCITRAL and ISDS Reforms: Moving to Reform Options … the Politics

Published on November 8, 2018        Author: 

In the last blog, I provided an update on the UNCITRAL process, including the consensus decision from Vienna last week to move forward to consider possible reforms of investor-state arbitration. This decision is very significant. But to get a sense of how this decision was reached and where the process might be heading, I thought it would be helpful to provide my sense of the politics of the process as well as some projections about how it might move forward.

As stated previously, I am a member of the Australian delegation but I am included in that delegation in my independent academic capacity, so nothing in my writings or talks should be taken to reflect Australia’s views. My academic views are exactly that: mine and academic. Nevertheless, I hope that these views are informed. These blogs are based on official interventions during the UNCITRAL plenary sessions as well as discussions with a diverse range of actors from the process.

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UNCITRAL and ISDS Reforms: Moving to Reform Options … the Process

Published on November 7, 2018        Author: 

Last week has been described as a watershed moment for ISDS reform. During a meeting in Vienna, states decided by consensus on the desirability of developing reforms in UNCITRAL with respect to investor-state arbitration. States now have an opportunity to make proposals for a work plan about what reforms to consider and how to go about considering them. To the extent that the tide has turned on traditional investor-state arbitration, it is now up to states to tell us where they want to sail.

As you might imagine, reaching a decision like this involved quite a process, along with a lot of politics. In this blog, I set out the process in terms of what was decided in Vienna, what was not decided, and what the next steps will be for moving forward in 2019. In the next blog, I will provide some context to this development, giving some insights into the politics of the process as well as some projections about how this process might develop.

This reform process will be long and its ultimate outcome remains unknowable. But the momentum for and direction of reforms are becoming increasingly clear. The calls for systemic reform are rising, though different states may mean different things by “systemic.”

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UNCITRAL and ISDS Reforms: Concerns about Costs, Transparency, Third Party Funding and Counterclaims

Published on June 6, 2018        Author:  and

As explained in a previous post, we have put together four posts that compile the most relevant quotes from the first two meetings of the UNCITRAL Working Group sessions on states’ concerns about investor-state dispute settlement. To facilitate discussions about the desirability of reforms and their potential nature, we have organized these quotes into key themes that emerged during the meetings. This blog sets out quotes about costs, transparency, third party funding and counterclaims. The other blogs deal with concerns about:

  1. Facts versus Perceptions and Systemic Problems or Solutions
  2. Consistency, Predictability and Correctness
  3. Arbitral Appointments, Incentives and Legitimacy

We avoid editorializing because we think that it is important for other stakeholders to hear states’ concerns expressed in their own words. We have grouped states’ concerns under headings but otherwise have kept the interventions on each sub-topic in the order in which they were made. For an analytical framework for understanding these reform dynamics, see Anthea Roberts, Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration, 112 AJIL _ (2018) (forthcoming).

  1. Costs & duration of arbitral proceedings

SOUTH AFRICA – on significant costs of arbitration: “In terms of the issue of costs when it comes to ISDS, we believe that the amounts at stake in investment treaty arbitration are often very high. Claims for compensation do amount to billions of dollars in most cases and in this context entering into treaties with the investor dispute settlement clauses carry significant financial costs for governments particularly the developing countries whose fiscal position can be seriously affected even when cases have been discontinued or when the outcome is said to be in favor of the state. The state will usually have to bear the exorbitant costs of legal defense and arbitrators fees. Furthermore large claims may serve to sustain threats of arbitration increasing the bargaining power of investors in informal discussions with governments to water down regulatory measures or to settle a dispute.” Read the rest of this entry…

 
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