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Home Posts tagged "ISDS"

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…

 

An Analysis of the Use of ICJ Jurisprudence in Investor-State Dispute Settlement

Published on May 13, 2019        Author: 

Last October 2018, the International Court of Justice (“ICJ” or “the Court”) issued its merits judgment in Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile). In a brief passage, the Court summarily dismissed Bolivia’s argument that the doctrine of “legitimate expectations” exists in general international law outside the context of fair and equitable treatment clauses. Despite the brevity of the Court’s analysis – and the minor importance of the legitimate expectations issue in that case – this finding drew attention from media outlets dedicated to investor-State dispute settlement (“ISDS”), including IAReporter. That the discussion of legitimate expectations in the Bolivia v. Chilejudgment was considered newsworthy in the ISDS sphere is a reflection of the importance that ISDS practitioners place on ICJ jurisprudence. As Professor Alain Pellet observed in a 2013 lecture, “[n]ot only do … investment tribunals… refer to the jurisprudence of the World Court, but they show a particular deference to it.”

There is some evidence, discussed below, to suggest that ISDS tribunals have referred to ICJ jurisprudence with increased frequency in recent years. Moreover, as ICJ President Abdulqawi Ahmed Yusuf highlighted in his October 2018 speech to the U.N. General Assembly, the Court today is particularly busy. There may thus be even more opportunities for jurisprudential cross-pollination in the near future. Now is an opportune time to consider why, when, and how investor-State tribunals refer to ICJ jurisprudence.

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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: 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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UNCITRAL and ISDS Reforms: Concerns about Arbitral Appointments, Incentives and Legitimacy

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 arbitral appointments, incentives and legitimacy. The other blogs deal with concerns about:

  1. Facts versus Perceptions and Systemic Problems or Solutions
  2. Consistency, Predictability and Correctness
  3. Costs, Transparency, Third Party Funding and Counterclaims

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. General observations: the lack of independence and impartiality of adjudicators

INDIA – on the problem of pro-investor and pro-state arbitrators for impartiality and independence: “The very fact that there are investors arbitrators and there are states arbitrators is a testimony that impartiality and independence is lacking in the system. The system is lacking in adequate ethical requirements. And there’s a lot of conflict of interest in this system which needs to be corrected. Third party funding is a problem as well. The mix of third party funding, multiple hatting and lack of adequate ethical standards has the potential to derail the system.” Read the rest of this entry…

 
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UNCITRAL and ISDS Reforms: Concerns about Consistency, Predictability and Correctness

Published on June 5, 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 predictability, consistency and correctness. The other blogs deal with concerns about:

  1. Facts versus Perceptions and Systemic Problems or Solutions 
  2. Arbitral Appointments, Incentives and Legitimacy 
  3. Costs, Transparency, Third Party Funding and Counterclaims

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. Inconsistency and lack of predictability:

EUROPEAN UNION – on the relationship between costs and consistency and predictability: “We think that the system has an effect of increasing those costs and hence by looking at the system we may be able to identify ways to gradually bring about reductions and these costs. We see this happening in three ways. The first way is because the system as it currently functions does not bring about predictability and does not bring about consistency. What does this mean. It means that in any given case before any freshly constituted ad hoc tribunal, a lawyer who is doing his or her job properly will make any possible argument that can be made legally in that particular situation. It doesn’t matter if that particular legal argument has been dismissed on multiple occasions by other tribunals. It may be the case that that particular ad hoc tribunal will accept the argumentation and so any diligent lawyer will have to make that argument again. So we think increasing and dealing with the issue of predictability and consistency will help address the issue of costs.” Read the rest of this entry…

 
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UNCITRAL and ISDS Reforms: What are States’ Concerns?

Published on June 5, 2018        Author:  and

What are states’ concerns about investor-state dispute settlement (ISDS)? To help answer that question, we have put together four posts that compile the most relevant quotes from the first two meetings of the UNCITRAL Working Group sessions. 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.

As explained in a previous post, UNCITRAL granted Working Group III a mandate to: (i) identify and consider concerns regarding ISDS; (ii) consider whether reform was desirable in light of any identified concerns; and (iii) if the Working Group were to conclude that reform was desirable, develop any relevant solutions to be recommended to the Commission.

The mandate calls for the process to be “fully transparent” and thus recordings of the session are available online. These posts are in keeping with that call for transparency. They communicate states’ key concerns to other interested stakeholders, which is important given the disconnects that often exist between different communities in the field.

This post will list quotes about two general issues that emerged in the Working Group: whether states should be concerned with facts and perceptions, or just facts; and whether some of the problems identified were systemic in nature or called for systemic solutions. The next three blogs provide quotes about the concerns states raised with respect to the following topics:

  1. Consistency, Predictability and Correctness of Awards
  2. Arbitral Appointments, Incentives and Legitimacy
  3. Costs, Transparency, Third Party Funding and Counterclaims

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Achmea: The Fate and Future of Intra-EU Investment Treaty Awards under the New York Convention

Published on May 8, 2018        Author: 

On March 6, 2018, the CJEU rendered its judgment in the long-awaited Slovak Republic v. Achmea case (Case C-284/16). This case involved a preliminary reference from the German Bundesgerichtshof in the context of setting aside proceedings initiated by Slovakia against a 2012 award, which was rendered by an investment tribunal in accordance with the UNCITRAL Rules under the BIT between the Kingdom of Netherlands and Czech and Slovak Federative Republic, in force since 1992. Based on its analysis of certain provisions of the EU Treaties (TEU and TFEU), the CJEU ruled that an Investor-State Dispute Settlement (“ISDS”) provision in an intra-EU is not valid under EU law.

Thus far, the academic discussion surrounding the case has focused on the fate and future of Intra-EU BITs (see here and here) but has not ventured into the consequences of the decision for the arbitral awards rendered under these BITs. Since the Achmea decision forms part of EU law and is binding on the national courts of all EU Member States, it reasonably follows that national courts within the EU must now refuse to recognize and enforce non-ICSID awards based on ISDS provisions in intra-EU BITs. However, under Article III of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“New York Convention”), national courts within the EU also have an obligation to recognize and enforce arbitral awards except where one or more of the seven grounds under Article V apply. This piece utilizes this legal conflict that courts within the EU now face as its starting point and explores the practical implications of the Achmea decision through the lens of Article V of the Convention, focusing on two grounds in particular: violation of public policy and invalidity of the arbitration agreement. Read the rest of this entry…

 
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UNCITRAL and ISDS Reform: Pluralism and the Plurilateral Investment Court

Published on December 12, 2017        Author: 

As described in a previous post, the UNCITRAL mandate on the possible reform of investor-state dispute settlement (ISDS) requires states to first identify and consider concerns regarding ISDS before going on to consider and develop any relevant reforms. Although states in the November 2017 session did not debate potential reforms, different solutions lurked in the room like elephants, often seeming to inform the positions taken by various delegations on whether particular issues (such as inconsistency) amounted to “problems.”

In particular, a division appeared to be evident between some states that seem inclined (at least presently) toward incremental, bilateral reforms (such as the US and Japan) and others that openly embrace systemic, multilateral reform (such as the EU and Canada). This positioning reflects broader dynamics about debates over ISDS reforms, in which the issue is often framed as a comparison of the relative merits of investor-state arbitration and a multilateral investment court with states staking out positions as loyalists or reformists respectively.

This dichotomy is false and unhelpful, however, because it presents ISDS reforms as requiring a binary choice. To start with, these are not the only choices. In addition to states that favour incremental and systemic reforms of the existing system, there are states that reject the need for international claims by investors at all. These revolutionaries include Brazil, which has embraced an Ombudsman model followed by state-to-state dispute settlement, and South Africa, which has opted primarily for protection via national legislation and courts. Read the rest of this entry…

 

UNCITRAL and ISDS Reform: Not Business as Usual

Published on December 11, 2017        Author: 

In late November 2017, states from around the world convened in Working Group III at UNCITRAL in Vienna to begin debates about the possible reform of investor-state dispute settlement (ISDS). In accordance with the UNCITRAL mandate (see  Annotated Provisional Agenda) that was given in July 2017:

The Working Group would proceed to: (i) first, identify and consider concerns regarding ISDS; (ii) second, consider whether reform was desirable in light of any identified concerns; and (iii) third, if the Working Group were to conclude that reform was desirable, develop any relevant solutions to be recommended to the Commission.

I attended the Working Group III meetings as an independent legal expert on the Australian delegation, though anything I write is attributable to me personally not Australia. Given the potential importance of these reform efforts, and the public interest in them, this post marks the first in a series that seeks to explain and contextualise the UNCITRAL ISDS reform process. These posts are consistent with the mandate’s call for the process to be “fully transparent” (see  Annotated Provisional Agenda). Recordings of the session are also available online.

The UNCITRAL debates on ISDS reforms are highly political. On an international level, states have split on whether to embrace ISDS and, if so, whether international claims by investors would be better heard by ad hoc arbitral bodies or a permanent investment court. On a domestic level, ISDS has proved highly controversial in a number of states, resulting in strong pushback. Dealing with such a highly charged issue is certainly not “business as usual” for UNCITRAL. This was evident in the November meetings in two key ways. Read the rest of this entry…