From Trade to Investment: Can the ACWL Model Travel?

UNCITRAL Working Group III has been seized with Investor-State Dispute Settlement (ISDS) reform for nearly ten years. Pursuing several initiatives in parallel, one project now entering its final stages is the Advisory Centre on International Investment Dispute Resolution (Advisory Centre). The Advisory Centre, as stated in Article 2 of its draft statute, aims to enhance the capacity of Least Developed Countries (LDCs) and Developing Countries to prevent and respond to international investment disputes.

While a need for legal assistance for states certainly exists in ISDS, this blog post questions whether the current approach, largely mirroring the Advisory Center for WTO Law (ACWL) in both activities and budget, will lead to a successful transplantation of the ACWL model. Investment Arbitrations are often more costly and complex than WTO Dispute Settlement, and the Advisory Centre will be established in a different, more developed institutional context. As such, current proposals for the Advisory Centre may require adaptation and a significant budget expansion to sustainably respond to the demand it is likely to face.

The Advisory Centre aims to address the longstanding concern that LDCs and Developing States face challenges in defending themselves effectively in ISDS. Indeed, while all major investment arbitration rules require formal equal treatment of the disputing parties, little accommodation is made for differences in institutional capacity, experience, and funds among states. A case in point is paragraph 76 of the annulment application in De Sutter v. Madagascar, where counsel highlighted the asymmetry in capacity between the claimant’s legal team and the state’s sole counsel, who, on top of this, was replaced midway through the arbitration.

As noted above, the Advisory Centre closely resembles the ACWL, which has provided technical and legal assistance in WTO Dispute Settlement since 2001. As declared by the Dutch Foreign Minister at the signing of its Statute, the ACWL functions to promote “the principle of effective access to justice, in addition to formal equality before the law”. The institution has been enviably successful, and replicating such success in ISDS would be appreciated by many. However, adapting the ACWL model to ISDS may require changes not currently present in existing proposals.

A first issue concerns the duplication of effort in technical assistance. Whereas the technical assistance and legal opinions provided by the ACWL filled a gap in the institutional landscape, established only six years after the entry into force of the WTO Agreement, the Advisory Centre will be established in a more developed institutional landscape. As such, its proposed technical assistance and capacity building activities, as described under Article 6 of its statute, risk duplicating those of other, more mature organisations. Such duplication is especially unfortunate given that funding for international organisations is increasingly scarce, and a warning in this regard can be found in another blog post and submissions to UNCITRAL by UNCTAD and other organisations active in this area.

The Advisory Centre’s potential added value lies instead in the legal services it may offer to states, as set out in Article 7 of its Statute. However, the proposed services under Article 7 face another issue: the budget for the Advisory Centre is expected to stand at just under USD 5 million. While this amount equals the ACWL’s current budget, there are multiple reasons why it may need to increase significantly to meet the urgent demand for accessible legal assistance in ISDS.

Firstly, when compared to WTO Dispute Settlement, ISDS is significantly more costly. While literature on the cost of private counsel in disputes is scarce, a 2014 column indicates a range of USD 250,000 to 750,000 for WTO disputes. In contrast, a 2021 book chapter estimates that the cost per investment arbitration is around USD 4 million. While some differences may be due to higher billing rates, the higher cost is largely attributable to the lengthier and more procedurally complex nature of ISDS. The Advisory Centre must accommodate these factors.

Considering the above, the Centre’s expected capacity appears optimistic. The most recent UNCITRAL document indicates that eight legal officers would support up to ten concurrent proceedings, if the arbitrations are at various stages of completion. By comparison, the ACWL’s nine to twelve counsel, reduced in recent years, assisted with an average of sixteen concurrent cases. While the cost of counsel replaced is at least five times that seen in WTO Dispute Settlement, a similar caseload is expected to be handled. Furthermore, the 2025 report on the ACWL’s operations excludes cases pending before the currently blocked appellate body, or ‘appeals into the void’, and revises down the number of active cases to five. The inclusion of these cases in earlier years suggests that the ACWL’s average active caseload in recent years is likely lower. It should be noted that counsel at the ACWL is not exclusively dedicated to supporting disputes; for example, they also write legal opinions and provide training. While a different allocation of tasks at the Advisory Centre may increase capacity to handle cases, the current expectation may require further consideration.

Secondly, even if the expected caseload is realised, another issue arises. The ACWL’s success lies not only in the quality of its services but also in its effective response to demand from capacity-constrained states. During the first twenty years of its operation, the ACWL supported an average of three new cases per annum. With ten to fifteen panels composed each year, it was active in 19% of all WTO disputes, supporting a significant share of disputing parties.

In ISDS, one currently sees a much higher number of 55 to 80 investment arbitrations initiated each year. Amongst these, 61% involve an LDC or Developing Country. While states such as Argentina have independently developed in-house ISDS expertise, these numbers are likely to increase demand for assistance. However, the average 3.5-year duration per arbitration means the ten concurrent cases translate to a capacity to accept two to three new cases per year, on average. UNCTAD data suggest that LDCs alone would already exhaust this capacity, facing 43 arbitrations between 2013 and 2023. To make matters worse, a proposal to bolster the Advisory Centre’s capacity through external counsel did not receive support during WG III discussions. More subtle issues remain, too: while LDCs are to be given priority access, it is equally stated that cases will be taken on a first-come, first-served basis, as resources allow. How these two mechanisms will coexist is unclear, as requests for assistance are unlikely to arrive simultaneously.

The limited capacity is especially problematic given the Advisory Centre’s proposed funding structure. The ACWL is an organisation primarily funded by twelve developed states, none of which are entitled to use its services. Instead, these countries support the ACWL as it seeks to promote beneficiary governments’ legal capacity and, thereby, the participation of developing WTO Members in the WTO, including in dispute settlement. As such, it can support LDCs for a capped fee of just under 24,000 CHF (around USD 30,400) for consultations and first-instance panel proceedings. Furthermore, the WTO does not charge institutional fees, and the ACWL has established a Technical Expertise Fund, financed by voluntary contributions from Denmark, the Netherlands, and Norway, to remunerate experts.

Current budget drafts suggest that the Advisory Centre will be funded in significant part by developing states, in return for access to its services. Yet, with LDCs given priority, access to the Centre’s legal assistance is far from certain. Turning away a developing state that contributes significantly to the Centre’s budget may soon compromise the institution’s financial viability.

On top of this, it is stated that fees charged by the Centre should become the main source of income once operations stabilise (para 44). Current proposals for such fees include a retainer fee of USD 5,000 and an hourly rate of USD 250—550 for counsel services, significantly higher than the ACWL. No provisions are currently in place to cover institutional fees, arbitrator fees, or expert costs. While such income may lower membership fees, the addition of a yearly membership fee, a reduced yet uncapped fee for Article 7 services, and the absence of assistance with other arbitration-related costs may erode the relative advantage of joining the Advisory Centre vis-à-vis engaging a traditional law firm.

Creating a shared legal service makes perfect sense for ISDS, as the limited incidence of claims precludes the development of costly in-house expertise for many states. However, the current budget and financing proposals may not enable the institution to respond effectively to the pressing issue of access to effective and affordable counsel. More broadly, one wonders why a budget equal to the average cost of a single arbitration was chosen to support ten arbitrations concurrently, while also providing training and other services. At the same time, one should recognise that the budget and financing of the ACWL have changed significantly over the years, and that the current draft statute of the Advisory Centre is an important step in the right direction.

While an institution such as the Advisory Centre may hold the key to reducing structural inequality between states with different institutional capacities in ISDS, its budget would benefit from enlargement now, or at least from concrete discussions on how to finance a significant enlargement as its membership expands. With the Statute subject to final discussions at the 59^th session of UNCITRAL beginning in late June, before adoption later this year—time may, however, be running short.