Home International Tribunals Archive for category "Investor-State Arbitration Tribunals" (Page 2)

Duration of ISDS Proceedings

Published on April 3, 2019        Author:  and

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: 

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, Julien 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

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: 

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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Failing the Hague Stress Test

Published on November 6, 2018        Author: 

On 25 October 2018, the President of the International Court of Justice, Judge Abdulqawi A. Yusuf, made an apparently ordinary announcement in his speech to the United Nations General Assembly. In light of the increasing workload of the Court, Judge Yusuf reported towards the end of his speech, “[m]embers of the Court have come to the decision, last month, that they will not normally accept to participate in international arbitration.” This decision appeared on its face simply to add clarity to the mandate set out in the Statute of the Court that judges may not “engage in any other occupation of a professional nature.” But Judge Yusuf went on with his remarks to specify that “[i]n particular, [members of the Court] will not participate in investor-State arbitration or in commercial arbitration.” Neatly separated from this withdrawal, Judge Yusuf confirmed that the Court will “if the circumstances so warrant, authorize its Members to participate in inter-State arbitration cases.”

Here was the signal international legal observers had been waiting for. The reaction on social media belied the apparently ordinary nature of the statement. The Court had taken a stance on one of the partisan issues of international legal politics – the hot potato of investor-State arbitration.

The events surrounding Judge Sir Christopher Greenwood’s re-election bid to the Court brought that hot potato to the Court’s doorstep. Days after Judge Greenwood conceded defeat in his re-election bid to the Court, a think tank associated with opposition to investor-state arbitration, published a study that called out “moonlighting” by ICJ judges in investor-state arbitrations. One of the judges the think tank focused upon was Judge Greenwood. Its reporting more than implied that Judge Greenwood’s work as arbitrator was a further reason speaking against his re-election. One can only imagine that with the political opposition to investor-State arbitration in Europe and elsewhere, this implication landed with rather a loud thud at the Court. The context thus may have been one of judicial acquiescence to the political headwinds rather than one that was purely a question of workload. After all, while resigning politicians do certainly like to spend more time with their families, this desire is hardly if ever the whole story behind their departure. So, too, the Court’s reasoning appears a little too casual when viewed in context. In fact, this topic was one of the most hotly debated issues at the recent Oxford Investment Claims Summer Academy convened by the Oxford University Press at Kellogg College this July. Read the rest of this entry…

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Can’t Fight the Moonlight? Actually, You Can: ICJ Judges to Stop Acting as Arbitrators in Investor-State Disputes

Published on November 5, 2018        Author: 

The earthquake started in earnest in November 2017. At its epicentre was a report, published in November 2017 by two researchers at the International Institute for Sustainable Development (“IISD“).

In the report, titled “Is ‘Moonlighting’ a Problem? The role of ICJ Judges in ISDS”, researchers Nathalie Bernasconi-Osterwalder and Martin Dietrich Brauch analysed the contents of several public databases of ISDS cases, and found that at least seven judges at the International Court of Justice (“ICJ” or the “Court“) at the time of publishing (and 13 former judges) had worked (or were working at the time of the report) as arbitrators in treaty-based investor state dispute settlement cases during their terms at the ICJ.

Crunching the numbers further, the two IISD researchers looked at the amount of treaty-based cases in which ICJ judges had served as arbitrators. They compared the number against the 817 treaty-based ISDS cases known as of July 2017. The results were surprising: ICJ judges had sat as arbitrators in roughly 10% of all known investment treaty cases during their tenure.

This raises three types of concerns.

First, it seems to contravene the prohibition for ICJ judges to “engage in any other occupation of a professional nature” contained in the Statute of the International Court of Justice (the “ICJ Statute“).

Second, arbitrators are usually paid according to the time (calculated in days or hours) spent working on a case. This means that any ICJ judge who is also appointed as an arbitrator would have an economic incentive to spend more time on the investment treaty case, to the potential detriment of the judge’s Court-related work.

Third, cumulating the roles of ICJ judge and arbitrator (or, as the report called it, “moonlighting”) could potentially impact, or be perceived to impact, the judge’s independence and impartiality. Read the rest of this entry…

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New Restrictions on Arbitral Appointments for Sitting ICJ Judges

Published on November 5, 2018        Author: 

Editor’s Note: This week, in a trio of posts by Callum Musto, Marie Davoise, and Frederic Sourgens, we facilitate discussion on the nature of the International Court of Justice’s judicial function, and the occasional international arbitration appointments accepted by individual judges of the World Court. In view of H.E. President Yusuf’s October 2018 report to the U.N. General Assembly, what can be expected of the Court with respect to managing future arbitral appointments that could be issued by appointing authorities or party nominations for the Court’s individual jurists – whether in inter-State or mixed arbitral disputes?

On 25 October, in the annual address of the President of the International Court of Justice to the General Assembly, President Yusuf announced that the Court had decided to adopt new restrictions on its sitting Members acting as arbitrators in inter-State and mixed arbitration. He said:

The Court is cognizant of the fact that, while the judicial settlement of disputes offered by the Court is enshrined in the Charter, States may, for several reasons, be interested in settling their disputes by arbitration. In such instances, Members of the Court have sometimes been called upon by States to sit on the arbitral tribunals in question dealing in some cases with inter-State disputes while in others with investor-State disputes – a testament, of course, to the high esteem in which the Court’s Judges are held by the international community. Over the years, the Court has taken the view that, in certain circumstances, its Members may participate in arbitration proceedings. However, in light of its ever-increasing workload, the Court decided a few months ago to review this practice and to set out clearly defined rules regulating such activities. As a result, Members of the Court have come to the decision, last month, that they will not normally accept to participate in international arbitration. In particular, they will not participate in investor-State arbitration or in commercial arbitration. [pp. 11-12, my emphasis]

President Yusuf elaborated that while sitting judges would no longer be allowed to arbitrate in mixed proceedings, they would be permitted to do so in ‘exceptional’ circumstances in inter-State disputes, provided that their judicial activities are given ‘absolute precedence’:

… in the event that they are called upon, exceptionally, by one or more States that would prefer to resort to arbitration, instead of judicial settlement, the Court has decided that, in order to render service to those States, it will, if the circumstances so warrant, authorize its Members to participate in inter-State arbitration cases. Even in such exceptional cases, a Member of the Court will only participate, if authorized, in one arbitration procedure at a time. Prior authorization must have been granted, for that purpose, in accordance with the mechanism put in place by the Court. Members of the Court, will, however, decline to be appointed as arbitrators by a State that is a party in a case pending before the Court, even if there is no substantial interference between that case and the case submitted to arbitration. [pp. 11-12, my emphasis]

It does not appear that the Court has elected to make formal amendments to its Rules or to include a Practice Direction reflecting the new appointment policy, but rather for individual judges and the President to manage appointment requests on an individual basis. The difference in approaches taken between inter-State and mixed arbitration presumably reflects the significant jurisdictional and substantive overlaps between the Court’s activities and many inter-State arbitrations — especially under Annex VII UNCLOS — and the comparatively smaller pool of eligible arbitrators to fill these roles.

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Can Investment Arbitration Fix Itself?

Published on October 31, 2018        Author:  and

This week, States have descended on UNCITRAL in Vienna to discuss potential reform of the investor-state dispute settlement (ISDS) system. Many are in a critical mood. During the April session in New York, delegates raised concerns over excessive costs, lack of arbitral diversity, conflicts of interests, inconsistent outcomes, and bias against developing states. More surprising – for many observers – was the appetite for ‘systemic’ reform. Many states have signalled openness to an appellate mechanism and the EU is mobilising support for a more ambitious multilateral investment court. The result is that the pros and cons of different reform models is an emerging field of research.

A question less considered is whether the system might reform itself in the face of state backlash. Could the threat of reform be enough? Elsewhere, we have seen that international courts are sensitive to stakeholder opinion – they can read the writing on the wall. In the WTO, Creamer found that a 10 percent rise in state criticism increases the average panel validation of trade restrictions by 17 percent. Larrson and Naurin found that the probability of the Court of Justice of the European Union (CJEU) ruling for a pro-European position is highly dependent on the direction of third-party state observations. Stiansen and Voeten found similar trends for the European Court of Human Rights after a rising state backlash, although not in the same magnitude.

Could the same pattern apply to international investment arbitration? Might arbitrators sniff the wind and change course lest the system fall into disrepute and disuse? In a newly published article in the European Journal of International Law, we try to answer this question. Read the rest of this entry…

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From the Indigenous Peoples’ Environmental Catastrophe in the Amazon to the Investors’ Dispute on Denial of Justice: The Chevron v. Ecuador August 2018 PCA Arbitral Award and the Dearth of International Environmental Remedies for Private Victims

Published on September 13, 2018        Author: 

The recent 30 August 2018 Chevron v. Ecuador arbitral award is yet another example of the ongoing asymmetries of protection in the much-beleaguered investor-State dispute settlement system, in which States have generously afforded protections to foreign investors to bring suits directly against States, without creating parallel avenues for affected local communities and/or indigenous peoples to initiate arbitration proceedings directly against either foreign investors or irresponsible States. Despite all our collective best efforts at ongoing reform in UNCITRAL (see updates on Working Group III’s mission on ISDS Reform here), ICSID (see their latest rules amendment project here) and elsewhere, I retain serious doubts as to whether investor-State dispute settlement could ever symmetrically represent the environmental and cultural interests of indigenous peoples and local communities, as effectively as it does investors’ claims to treaty protection and (significantly substantial) compensatory relief.  Today, environmental plaintiffs have to navigate between an unwieldy, unpredictable, and quite disparate mix of remedies before domestic (administrative or judicial) courts or tribunals of their home States, potentially some regional courts (such as the Inter-American Court of Human Rights) or treaty monitoring bodies (whether those specifically created in environmental treaties or human rights treaties), other foreign courts in other countries that permit some environmental tort claims, and possibly, any cases that their home State can bring under diplomatic protection to pursue remedies against foreign nationals or the home States of these foreign nationals.  And all these frequently take place in the context of abject differences of power, resources, and capacities between environmental and human rights victims as claimants against either States and/or foreign investors, vis-a-vis foreign investors as claimants or States as respondents.  It’s not at all hyperbolic to observe that, with respect to the international environmental system, the deck already appears heavily stacked against environmental plaintiffs at the outset.  

The Chevron v. Ecuador arbitration presents a crystal example of how what was originally an environmental dispute seeking remediation for one of the worst environmental disasters in history involving oil spillage into 4,400 square kilometers of the Amazon rainforest – ultimately mutated into the investors’ denial of justice claim in investor-State arbitration.  At least, in my view, while  the erudite tribunal in this case thoroughly set out the technical legal reasoning in its award on the precise legal issues of the investment treaty breaches alleged, the award itself more broadly demonstrates that we may well be at the point that a dedicated separate international dispute settlement system might already be necessary to properly adjudicate victims’ claims in human rights and environmental disputes. (Notably, other scholars refer to this dispute to highlight the illegitimacy or alleged exces de poivre of arbitral tribunals making assessments and evaluations of the acts or decisions of domestic courts and judicial systems ipso facto – a significant  heavily disputed structural matter about the current investor-State dispute settlement system, which is, however, not the law and policy observation I make here.) Some efforts looking beyond the narrow ISDS framework, among others, include projects such as the drafting of the new Hague Rules on Business and Human Rights Arbitration; the tentative and non-binding 15 September 2016 policy paper of the Office of the Prosecutor of the International Criminal Court exploring the possibility of prosecuting environmental crimes; as well as the Permanent Court of Arbitration’s suite of environmental dispute resolution procedures (interstate arbitration under environmental treaties, mixed dispute resolution under environmental instruments and contracts, specialized environmental rules for arbitration and conciliation).  To date, these initiatives have not gone much further beyond their incubation.

The most difficult aspect of the Chevron v. Ecuador case is the fact that the arbitration turned on the issue of Ecuador’s investment treaty breaches over what Chevron alleged were very troubling serious acts of fraud and corruption committed by lawyers and judges to produce a favorable 2011 Ecuador court judgment for the environmental plaintiffs.  The fraud and corruption allegations have long since overshadowed the urgency of decades of environmental damage that have largely gone without significant and continuing remedy, alongside ongoing health problems from toxic contamination that have impacted indigenous peoples and local communities for generations. (Note: this pollution disaster originated long before I or generations of current international lawyers were even born.) The Chevron v. Ecuador arbitration succeeded in laying the blame on Ecuador since, for the tribunal, Chevron had already been released from its obligations of remediation under the 1995-1998 Settlement Agreements.  Unfortunately, the arbitral award does not lay out any detailed environmental analysis to explain why contracts such as the 1995-1998 Settlement Agreements would be sufficient to release private parties from short-term, medium-term, and long-term remediation efforts to restore the ecosystem, and whether such releases were at all consistent with international public policy and Ecuador’s own commitments under international law (especially international environmental treaties and customary international environmental law).  Neither did the tribunal explore whether Ecuador alone had the right to conclude the Settlement Agreements on behalf of all the environmental plaintiffs and affected communities, or if Ecuador could indeed effectively and exclusively represent the environmental plaintiffs and affected communities in the investor-State arbitration considering how its government agents exercised oversight (or lack thereof) with respect to the environmental disaster.  Because environmental plaintiffs, indigenous peoples, and affected communities continue to be dependent on the host State of the investment to vindicate their claims against foreign investors, the investor-State dispute settlement system simply cannot lend any of these environmental, indigenous, and local plaintiffs any real, much less effective, voice over their fight to restore the Amazon to health.  While plaintiffs are mired in multiple litigations and arbitrations around the world to seek accountability from either Chevron and its affiliates or their own government in Ecuador, there is virtually no dedicated State, inter-State, regional, or public-private partnership cooperative efforts to try and achieve environmental restoration in the affected 4,400 square kilometers of the Amazon, as depicted in the map below (source here):

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