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Lack of Consistency and Coherence in the Interpretation of Legal Issues

Published on April 5, 2019        Author: , and
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Editors’ Note:  This is the last post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here, third post on the diversity deficit in investment arbitration here, fourth post on the impartiality and independence of arbitrators here, fifth post on an empirical assessment of ISDS here) , sixth post on incorrectness of ISDS decisions here) authored by individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This post summarizes a more detailed concept paper prepared by members of Academic Forum Working Group 3.

This post is the product of the work of the UNCITRAL Academic Forum’s (own) “Working Group 3” whose focus is on the lack of consistency and coherence in the interpretation of legal issues. Lack of consistency has been identified in UNCITRAL Working Group III (WGIII)as one of the concerns with regard to the current system of investor State dispute resolution.

In the view of WGIII, the most glaring cases of unjustifiable inconsistency are cases “where the same investment treaty standard or same rule of customary international law was interpreted differently in the absence of justifiable ground for the distinction” (UN Doc No A/CN.9/935 (14 May 2018), para. 21). Other apparent inconsistencies may be wholly justifiable, where tribunals are interpreting similar, but materially different treaty texts – or interpreting the same treaty in relation to materially different facts. Usually, however, inconsistencies in the case-law fall somewhere between these poles. Indeed, there may be problematic inconsistencies where tribunals make too much of formal differences in treaty texts, where different interpretations may nevertheless prove materially unjustifiable. Not every difference in drafting across thousands of investment treaties necessarily signals a divergent meaning.

Rather than focus on only the glaring cases, we have sought to push further into analyzing the incidents, causes, and varied harms produced by discrete inconsistencies in the ISDS case law. In approaching our task, we have focused on three discrete issues:(1) the obligation to provide full protectionand security (“FPS”); (2) the treaty / contract relationship; and (3) the scope of the most-favoured-nation (“MFN”) clause.  In determining whether there are unjustifiable inconsistencies with respect to these issues, we have explored the following questions: (a) what is the inconsistency?; (b) what is the cause of that inconsistency?; (c) what is the harm being caused by this inconsistency?; and (d) what is the solution for this inconsistency (if one can be identified)?

We have found that a fruitful distinction can be drawn between two kinds of unjustifiable inconsistencies: inconsistent interpretations of basic substantive obligations (e.g. FPS) and inconsistent interpretations of more structural “rules of the game” (e.g. MFN and the treaty / contract issue). The former phenomenon can be problematic, but such inconsistencies are to some extent endemic to any legal system. The life of the law is, everywhere, one of change and development. Moreover, such inconsistencies are relatively manageable. For example, should States worry about inconsistent interpretations of FPS, they can clarify the meaning of such treaty terms through treaty drafting, amendment, and/or joint interpretations. Governments and investors can also, in theory, manage such inconsistencies through private agreement, by contracting for what they consider important.

Unjustifiably inconsistent interpretations of the rules of the game are more problematic, insofar as they create severe uncertainty and unpredictability inthe making of investments and for national regulatory choice. Where there is uncertainty as to whether States and investors can contract around investment treaty rules, efficient private ordering is off the table, leaving price as the best lever to reduce uncertainty. Similarly with MFN, uncertainty about whether such clauses allow importation of substantive treaty rules from treaties with third-parties, procedural rules, or neither, creates severe ex ante uncertainty for all parties about the nature and extent of the regime applicable to the investment. In both cases, uncertainty as to the rules of the game creates harms ex ante and ex post. To the extent that States and investors are aware of these problems, they can lead to bargaining and price inefficiencies in the making of investments. To the extent they are unaware, such inconsistencies can lead to unfair and unjustifiable surprise ex post.

For the purposes of this short blog post, we draw out this distinction by sketching our analyses of inconsistencies in the case law on FPS, treaty / contract, and MFN.  

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Responding to Incorrect ISDS Decision-Making: Policy Options

Published on April 5, 2019        Author: 
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Editors’ Note:  This is the latest post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here, third post on the diversity deficit in investment arbitration here, fourth post on the impartiality and independence of arbitrators here, fifth post on an empirical assessment of ISDS here) authored by individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This post summarizes a more detailed concept paper prepared by members of Academic Forum Working Group 4 (members Daniel Behn, Chi Manjiao, Eric De Brabandere, Anna De Luca, Jaemin Lee, Martins Paparinskis, Catharine Titi).

In UNCITRAL Working Group IIIdiscussions, concerns have been raised about the consistency, as well as the correctness, of investor-State dispute settlement (ISDS) decisions. Consistency and correctness are distinct concepts: inconsistent ISDS decisions can be correct, and consistent ISDS decisions can be incorrect. Developing potential policy responses to incorrect ISDS decision-making first requires an understanding of how achieving correctness requires more than achieving consistency.

Working Group Four of the Academic Forum on ISDS has prepared a report analyzing the “correctness” of ISDS decision-making. That analysis balances two competing considerations. First, the legal reasoning and outcomes of many ISDS decisions have faced significant criticism from a range of actors – including States, organizations, and scholars– which has raised questions of correctness and, more generally, the substantive legitimacy of the ISDS regime. Second, criticism of particular ISDS decisions, even when widespread and intense, does not necessarily establish the incorrectness of those decisions, due to a number of factors, including how investment treaty obligations are drafted (often in open-textured terms) and interpreted (where, under principles of treaty interpretation reflected in the Vienna Convention on the Law of Treaties, factors beyond the ordinary meaning of treaty text must be considered). Particularly with respect to disapproval of ISDS decisions by States, such disapproval might, in some instances, reflect State views that the decisions were incorrectly decided, but in other instances might only reflect a perceived need by States to provide clearer policy guidance to ISDS tribunals. Read the rest of this entry…

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Investment Arbitration and its Discontents: An Empirical Assessment

Published on April 5, 2019        Author: , and
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Editors’ Note:  This is the latest post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here, third post on the diversity deficit in investment arbitration here, fourth post on the impartiality and independence of arbitrators here) individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This post summarizes a more detailed concept paper prepared by members of Academic Forum Working Group 7.

Introduction

The legitimacy crisis in international investment arbitration continues to generate attempts at systemic reform. The latest act is playing out in the theatre of UNCITRAL, which is wrestling with issues such as excessive costs, outcome bias, and lack of arbitral independence. Yet, not everyone is certain that there is a problem and some participating states have queried the critiques and their empirical basis.

So, what is the state of the evidence? Which critiques deserve serious consideration? These questions are challenging. The fragmented nature of the investor-state dispute settlement (ISDS) system and a traditional focus on doctrinal research has hindered systemic analysis. However, the rise of quantitative and qualitative research and new databases allows us to get a better grip on the evidence.

The ISDS Academic Forum working group (No. 7) has reviewed and assessed the available empirical research on the central concerns in the UNCITRAL reform process, which are also the subject of other Academic Forum working group reports. These concerns are: excessive costs, lengthy proceedings, inconsistency, incorrect decisions, arbitral diversity and arbitral independence.

For each issue, we asked two simple but difficult questions: (1) What do we know? and (2) Does it matter? To be sure, there is a recurrent tension in both questions. There is an epistemological challenge: some topics are under-studied or difficult to study. There is also an evaluative challenge. It is not always easy to assess whether a problem really matters – the magnitude of the concern might be unclear or the normative yardstick contested.

We therefore sought to map the state of evidence onto a 2*2 framework, allocating our findings to one of the four quadrants in the figure below. The findings can range from good knowledge of a concrete problem (Quadrant I) to poor knowledge of a doubtful problem (Quadrant IV). In between, we find good knowledge but no problem (Quadrant II) and poor knowledge, but likely problem (Quadrant III).

Figure 1: Empirical perspectives

 

 

 

 

 

                          Problem

                 Knowledge

 

 

 

 

 

   No Problem

 

           I

 

         II

 

 

         III

 

 

         IV

                  Ignorance

  1. Excessive costs of proceedings

The legal costs and damages associated with ISDS have been consistently and frequently studied. Expenses relating to arbitrators and tribunals (‘tribunal fees’) average about 1 million USD, constituting a fraction of the costs that a party will experience in a typical ISDS case. The most significant legal costs are those of counsel (including experts costs). The average costs of counsel for claimants is around 6 million USD and for respondents 5 million USD. Yet, compared to international commercial arbitration or complex domestic court litigation, it is still unclear whether ISDS is uniquely expensive. A typical ISDS case can now can have thousands of pages of documentary evidence. Nonetheless, a process to simplify and improve case management may be beneficial, especially for states and small investors. Enhanced transparency on tribunals’ rationale for the calculation and allocation of costs is also highly desirable, given the lack of a consistent approach.

Losing states will almost always pay compensation (non-monetary damages are rare). The mostrecent study by Behn and Daza of all investment arbitration cases with known amounts awarded up through 1 February 2019 (193 cases) found an average award of 482.5 million USD, with a median of 31 million USD. Are these amounts excessive? While investors are only awarded a little over a third of what they claim on average, these awards can be significant for poorer states. The result is that while tribunal costs are more likely situated in Quadrant II (clear knowledge, not a major problem), higher counsel costs and compensation awards may be closer to Quadrant I (clear knowledge, a problem).

  1. Duration of proceedings

Recent studies on the duration of ISDS proceedings provide a fairly clear picture on the nature of duration and, increasingly, the causes of delay. The average period for both arbitration cases and ICSID annulments is relatively constant at 3.73 and 1.91 years respectively with a slight decrease in the past 5 years. But it is less clear whether there is a problem. The length of proceedings is much shorter than in many other international adjudicative proceedings. One study indicates that it is longer than comparable litigation in some developed state jurisdictions, but not in less developed states. Moreover, recent statistical research suggests that it is the parties themselves – especially states – that are largely responsible for longer proceedings, specifically through requests to bifurcate proceedings or arbitrator challenges. This raises the question of whether delay is (or should be) a major issue for the reform process, perhaps in Quadrant II.

  1. Lack of consistency and coherence

Like doctrinal studies, empirical approaches paint a mixed picture of the consistency of decision-making in ISDS. The conclusions depend on the specific issues studied, the analytical framework, terminology and methodology used. Moreover, we should expect inconsistency for differently-worded treaties or factual situations.

Citation network analysis has provided one lens of the nature and degree of jurisprudentialintegration and thus consistency.For example, Stone Sweet and Grisel trace a dramatic shift in ISDS awards from citations to other international courts to a citation network of prior ISDS awards, suggesting the system is increasingly becoming internally consistent – although not necessarily externally consistent. Moreover, additional studies have found that ICSID and NAFTA tribunals refer to case law more frequently than non-ICSID cases, marking the limits of internal consistency.

Whether inconsistency is a problem depends on the importance one places on legal certainty. Quality decision-making, sociological legitimacy, and dynamic learning might be equally valued. The consistency concern may therefore fall between Quadrant I and II: some knowledge, partly problematic.

  1. Incorrectness of decisions

Making conclusions on incorrectness is challenging for empirical methods as much as it is for doctrinal methods. On one hand, some authors and actors dispute that the ISDS system is biased and point to the even-handedness in final outcomes: see figure 2. Strezhnev finds also thatdeveloping countries lose more frequently because they are more likely to settle otherwise successful cases.

On the other hand, some authors have found that the majority of arbitrators advanced a pro-investor jurisprudence and that developing countries are more likely to lose a case, even when controlling for most democratic governance indicators. Based on case studies, Sattorova also finds that ‘there is a significant current within the international arbitration community that favours the vision of investors as victims of corrupt governments.’ The results are thus mixed, pushing the issue into the ‘known unknowns’ of Quadrant III or IV.

5. Arbitrator diversity

The evidence also indicates that change is sluggish across all aspects of diversity. The ‘prior experience’ norms dominates as parties have strong incentives to (re)appoint experienced arbitrators whose leanings are known. The result is a system that struggles with legitimacy and some studies suggest a more diverse group of arbitrators may partly decide differently. This issue clearly falls in Quadrant I.

6. Arbitrator independence, impartiality and neutrality

Empirical research raises some real questions over the impartiality, neutrality and to some extent independence of arbitrators. A survey experiment conducted on about 250 international arbitrators demonstrates that arbitrators are more likely to choose outcomes favorable to the side appointing them. Moreover, a study on double hatting shows that up to 47% of cases (509 in total) involve at least one arbitrator simultaneously acting elsewhere as legal counsel in another ISDS case.

However, empirical work on independence must proceed with caution. It is frequently difficult to demonstrate with precision the causal effects of alleged bias. However, institutional behavior such as double-hatting and party-based appointment creates at least a perceived bias and legitimate concern, putting the issue between Quadrant I and III: some knowledge and a potential problem.

Conclusions

The survey of the empirical studies in relation to the six issue areas that the UNCITRAL Academic Forum has provided reports revealing an emerging base of evidence for assessing the ISDS process. In some cases, precise statistics can be given on the nature of the regime (legal costs, duration, diversity) and increasingly on the casual factors behind its outcomes (e.g. causes of delay, presence of bias effects on diversity on outcomes). However, the survey also indicates the limitations of an empirical perspective. The main challenges are accessto all relevant data and modelling challenges in explaining outcomes. Moreover, evaluative challenges remain – it was not always clear whether there is a normatively or empirically relevant problem.

Nonetheless, in Figure 3 we have plotted our six conclusions on the epistemologicaland evaluativeaxes. In some instances, there is clear evidence of a problem (diversity, costs) or clear evidence that raises questions as to whether there is a significant problem (duration of proceedings). In other areas, we don’t know enough (inconsistency, independence, and incorrectness) although some evidence points toward a problem.

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Independence and Impartiality of Arbitrators in Investor-State Arbitration: Perceived Problems and Possible Solutions

Published on April 4, 2019        Author: 
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Editors’ Note:  This is the latest post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here, third post on the diversity deficit in investment arbitration here) from individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This post summarizes a more detailed concept paper prepared by members of Academic Forum Working Group 6 (Steven Ratner as chair, members are Jeffrey Dunoff, Shotaro Hamamoto, Luke Nottage, Stephan Schill, and Michael Waibel).

Introduction

The principle that adjudicators must be independent and impartial is at the core of any adjudicatory mechanism, whether domestic or international, and is a basic principle of the rule of law. It plays an important role in Investor-State arbitration (ISA), where arbitrators typically sit for a short amount of time in specific cases and are not career judges.

The requirements that arbitrators be independent and impartial are usually found in the applicable rules of procedures to the arbitration, including UNCITRAL Arbitration Rules (2010) and the ICSID Convention.

However, concerns over the possible or perceived lack of independence and impartiality of arbitrators have been raised by diverse ISA stakeholders, including parties and the general public. In this context, this post first identifies the issues that may rise concerns about the independence and impartiality of ISA arbitrators. It then explains how some of the reform proposals under possible consideration at UNCITRAL would or would not solve the identified problems.

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The Diversity Deficit in Investment Arbitration

Published on April 4, 2019        Author: 
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Editors’ Note:  This is the latest post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here) from individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This morning’s post summarizes the concept paper for Academic Forum Working Group 5 (members are Andrea Kay Bjorklund, Susan Franck, Chiara Giorgetti, Won Kidane, Arnaud de Nanteuil, Emilia Onyema).

The lack of diversity among adjudicators is particularly notable in international investment law, where a recent study finds that only two of the 25 most influential arbitrators are women, 22 are from either North America or Europe (of the other three one is from New Zealand, one was from Chile but made his home in London, and the third is from Costa Rica). In one study focusing on both commercial and international arbitrators, Professor Franck and her co-authors mapped diversity according to six factors: gender, nationality, age, linguistic capacity, legal training, and professional experiences. They concluded that the ‘median international arbitrator was a fifty-three year-old man who was a national of a developed state and had served as arbitrator in ten arbitration cases.’

Reasons to Prioritize Diversity

 This diversity deficit is troubling.  Ensuring that decision-making bodies are inclusive and that decision-makers represent diverse constituencies serves multiple purposes.  Social science literature shows that diverse decisionmakers are more likely to avoid cognitive biases and group-think in decision making. One or more decision-makers might have the cultural knowledge to understand the dispute in context.  The decision-making process is likely to be, and to be perceived, as fairer if the decision makers are more diverse.  This latter factor in particular is likely to enhance the sociological legitimacy of an adjudicatory regime, and even its normative legitimacy. 

Variations in Diversity

Diversity can be conceptualized around multiple factors. Above we mentioned gender and regional representation, yet these are only two features, and the latter in particular needs to be disaggregated as it (1) is often a proxy for multiple considerations such as presumed political ideological alignment, educational and other formative experience, and experience with and expectations of governmental authority and (2) is too broad, as it presumes that people within a region share the same experience whereas the regions into which people are often placed are quite diverse.  Nationality, ethnicity, race, educational attainment and experience, legal training (common and/or civil law expertise, Islamic law expertise, etc.), age, work experience (government, private sector, or both of these), social and economic class, development status of the arbitrator’s home state, repeat appointments by either investors or host states, religion, and language proficiency are other factors that can contribute to inclusivity in decision-making. 

The Current Diversity Deficit

recent study by PluriCourts researchers (including a sample period up to 2017) covering arbitrators in ICSID as well as non-ICSID cases found that 11% of arbitrators were female. Yet two women – Kaufmann-Kohler and Stern – account for 57% of all appointments given to female arbitrators.

In addition, investment arbitration is dominated by arbitrators from Western states.  Through 1 August, 2018, only 35% of 695 individual arbitrators who have sat in at least one investment case were from non-Western states (as non-Western is defined by the United Nations). Non-Western arbitrators are predominantly appointed by respondent states or by institutions. Even these numbers might be a bit misleading, however, in that most international arbitrators have elite educational backgrounds.  Waibel and Wu looked at presiding arbitrators and found that 90% of them have received their higher education in OECD countries.  In other words, even arbitrators from the Global South have likely spent a significant amount of time in the Global North.

Reasons for the Lack of Diversity

Another key feature related to diversity is the prior-experience norm:  the practice of disputing parties to re-appoint arbitrators raises a barrier to entry.  More than 700 arbitrators have been appointed in investment arbitrations, yet the same arbitrators tend to be re-appointed multiple times, while many are never re-appointed.   The PluriCourts Investment Treaty Arbitration Database (PITAD) shows that of the 716 arbitrators who have sat in at least one investment arbitration case, 377 arbitrators have received only one appointment. The 50 arbitrators who have received the most appointments in investment arbitration cases account for 1710 appointments, which is nearly 50% of all the appointments on offer to date (data on appointments up through 1 January 2019).

The appointment process tends to perpetuate a lack of diversity, as each party tends to appoint an arbitrator perceived as influential and experienced.  Moreover, because these appointments happen on a case-by-case basis, no one is working systemically to broaden the pool.  Institutions have some opportunity to influence the composition of various arbitral tribunals, but their reach is limited.  For example, ICSID makes only about 40% of arbitral appointments in ICSID-administered cases p. (of 1453 total appointments, ICSID appointed 589)

A failure in the ‘pipeline’ is sometimes mooted as a reason for the lack of diversity in arbitrators.  If one looks at the pipeline in terms of gender, this argument does not pass muster.  There is no shortage of women working in the field of investment arbitration. According to a study mapping all known actors involved in investment arbitration in different roles, while the percentage of women receiving appointments in investment cases is relatively low (10%), the overall number of women working in investment arbitration (as either arbitrators, experts, counsel or tribunal secretaries) is significantly greater (approximately 30%). 

Ways to Improve Diversity in Decision-makers

Improving diversity and inclusiveness in the international adjudicative setting requires sustained commitment by states.  This is true for all of the major reform options, including amendments to existing ISDS practice, the possibility of adding an appellate body, the possibility of creating a multilateral investment court (MIC), or jettisoning investment arbitration altogether. The latter – no ISDS – would have as one possibility decision-making by national courts, which would place responsibility for diversity squarely in the hands of that state and outside the realm of influence of international investment law. 

As reform scenarios are considered, one should keep in mind that the greater the number of possible adjudicators the easier it is, at least in theory, to create an inclusive and diverse set of decision-makers.  The smaller the number of individuals the greater the challenge.  Creating a standing panel of arbitrators offers an opportunity to craft a diverse cohort, but successful doing so will take time and attention.  It will also take agreement on what kinds of diversity to emphasize. 

If states are appointing decision makers to an investment court, what criteria should they consider in making those appointments?  To the extent that diversity helps to foster representativeness, how can a multilateral court with dozens of members ensure sufficient diversity among its members?

Improving Diversity in ISDS+ Scenarios

From both the statistics and the structural issues relating to a system based on party-appointed adjudicators, it is relatively obvious that parties themselves are unlikely to increase either gender or nationality-based diversity on their own.  Small amendments to the current system could nonetheless help to enhance diversity.  Any progress is, however, likely to be only incrementally achieved given the large number of existing treaties and the well-entrenched habits of investors and of states in selecting arbitrators.

Eliminating or amending the party appointment process could help. Treaties could require that appointments be made by institutions, rather than by the parties themselves. Parties could be given some input in the process, with perhaps a limited ability to reject proposed arbitrators.

A second option could be to require that all appointments be made from a roster made up of diverse individuals.  This alternative might work either with party appointment or with institutional appointment.  This would improve the possibility of having tribunals that include a variety of perspectives and experiences.  That roster would also have to be complemented by an appointment practice that ensures a range of experience in any given case. 

Improving Diversity in Permanent Tribunals

A multilateral investment court that includes an appellate body, or an appellate body on its own, could be created to be diverse and inclusive.  This result might not be that easy to achieve, however, given the limited number of people likely to sit on it. 

For example, if one had a first-instance tribunal of 15, and an appellate body of six (as envisaged in the CETA), there would be 21 people to be named to the bench.  Assuring that those 21 people are balanced around considerations of gender, nationality, experience, race, legal training, experience would be facilitated by the centralized creation of a slate of candidates taking into account the factors that states wish to emphasize.  Given the likely desire to appoint judges of renown, it is entirely possible that the MIC could simply replicate imbalance we see in ISDS now. And if states or groups of states have independent authority to select judges, and they do not coordinate those selections, each judge could have similar characteristics.  Achieving diversity in a MIC scenario thus depends on the choices that states make. States would have the power to select an inclusive and diverse set of decisionmakers, but they would have to use that power.

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Duration of ISDS Proceedings

Published on April 3, 2019        Author:  and
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Editors’ Note:  We continue the series of posts (see this morning’s introduction here, and first post on costs here), contributed by individual members of the Academic Forum of the UNCITRAL Working Group III (UNCITRAL WG III) on Investor-State Dispute Settlement Reform, which provide summaries of individual concept papers prepared by various Academic Forum working groups jointly authored by members therein.   These posts will run simultaneously with the ongoing UNCITRAL WG III sessions in New York this week.  This post, authored by Holger Hestermeyer with Anna De Luca, summarizes the concept paper on duration of ISDS proceedings, which was jointly authored by the members of Academic Forum Working Group II (Holger Hestermeyer as chair, Jose Manuel Alvarez Zarate, Crina Baltag, Daniel Behn, Jonathan Bonnitcha, Malcolm Langford, Anna De Luca, Loukas Mistelis, and Gregory Shaffer.)  Clara Lopez Rodriguez and Simon Weber provided assistance.

The length of proceedings, and the resulting impact on costs, has long been a topic of considerable importance for arbitration: a lack of speed is widely perceived by users as one of the downsides of international arbitration. In the current debate about ISDS reform, the length of ISDS proceedings, alongside their costs, has been raised as a concern at the thirty-fourth session of UNCITRAL Working Group III. In the following paragraphs we will try to answer the following questions: when are proceedings excessively long? How long are ISDS proceedings? What is the effect of the various reform proposals on the length of ISDS proceedings?

In carrying out this evaluation the authors faced a number of challenges. Firstly, none of the reform scenarios has been intended to specifically address the duration of ISDS proceedings except for some of the improvements suggested by the scenario “Investment Arbitration (IA) improved”. As a result, the impact on the duration of ISDS proceedings is more of a collateral damage or benefit of the reform proposals under discussion and is, accordingly, not always easy to ascertain. Secondly, the length of investment arbitration is so heavily fact-specific that it seems to defy all attempts at generalisation. Thirdly, short proceedings are not automatically better proceedings. Shortening proceedings can affect dispute resolution in complex ways and involves trade-offs. These have to be made clear. 

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Excessive Costs and Insufficient Recoverability of Cost Awards

Published on April 3, 2019        Author: 
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Editors’ Note:  This is the first in a series of posts we are running from individual members of the Academic Forum of the UNCITRAL Working Group III on Investor-State Dispute Settlement Reform, in parallel with UNCITRAL WG III’s ongoing sessions this week in New York.  These posts at EJIL:Talk! are meant to summarize more detailed concept papers prepared by various Academic Forum members.  This first post synthesizes the concept paper prepared by Academic Forum Working Group I (members: Catharine Titi, Julienne Chaisse, Marko Jovanovic, Facundo Perez Aznar, and Gabriel Bottini), with assistance from Olga Puigdemont.

The Academic Forum on ISDS proposed the preparation of a concept paper (the “Paper”) on the issue of excessive costs and insufficient recoverability of cost awards, in support of the State delegations deliberating ISDS reform issues during the UNCITRAL WGIII sessions to take place in New York City the week of April 1st, 2019.  The concept paper indicates sources considered by Working Group 1.

The Paper addresses the issue from four different angles. First, it deals with fees. On the one hand, it examines party costs (fees and expenses of counsel, experts, and witnesses) and, on the other, tribunal costs (fees and expenses of arbitrators and arbitral institutions, including secretariat services for ad hocarbitrations). Second, it addresses the issue of the length of proceedings and its impact on costs, including the impact of document production on the length/cost analysis. Third, the paper delves into the issue of insufficient resources to bring or defend against an investment claim. In so doing, it assesses the role of third-party funding (“TPF”) and contingency and conditional fee arrangements. Fourth, with respect to the issue of insufficiency of resources or unwillingness to pay a cost award, the Paper examines the availability or lack thereof of mechanisms to secure prompt payment of an award on costs. This includes a reference to the impact of TPF and security for costs.

For the purposes of this post, I summarize the issue of (i) excessive fees, and (ii) insufficient recoverability of cost awards, focusing in particular on how it is impacted by TPF.

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Reform of ISDS: Matching Concerns and Solutions

Published on April 3, 2019        Author:  and
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Editors’ Note:  For the rest of this week, we are featuring successive posts by certain individual members of the Academic Forum of the UNCITRAL Working Group III (UNCITRAL WG III) on Investor-State Dispute Settlement Reform, in parallel with ongoing UNCITRAL WG III meetings in New York.  EJIL:Talk! will thereafter feature invited contributions to respond to the posts.

Over the last few years, growing criticism over investor-State arbitration has triggered demands for reform of the existing framework from States, international organizations, and civil society groups. At its fiftieth session in July 2017, Member States of the United Nations Commission on International Trade Law (UNCITRAL) decided to entrust Working Group III (WGIII) with a three-phase mandate on investor-State dispute settlement (ISDS) reform, whereby WGIII would first identify concerns regarding ISDS; second, consider whether reform was desirable in the light of those concerns; and third, if WGIII were to conclude that reform was desirable, develop solutions to be recommended to UNCITRAL (see here, paras. 263-264).

Although the UNCITRAL process is government‐led, it is open to consider views of various stakeholders, including civil society and academia. In that context, in 2018 the Geneva Center for International Dispute Settlement (CIDS) facilitated the creation of an “Academic Forum on ISDS”, the purpose of which is for academics active in the field of ISDS to exchange views, explore issues and options, test ideas and solutions, and hopefully make a constructive and research-based contribution to the ongoing discussions on possible reform of ISDS, in particular the discussions in the context of WGIII.PluriCourts at the University of Oslo is the current administrator of the Academic Forum, which presently counts more than 120 members and is led by a Steering Committee, which Prof. Malcolm Langford chairs.

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

Published on November 8, 2018        Author: 
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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: 
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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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