UNCITRAL and ISDS Reform (Hybrid): Islands of Persuasion

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Since UNCITRAL Working Group III opened its most recent session on 14 February, many delegates began their interventions by wishing each other a Happy Valentine’s Day. As they did this, we recalled our blog after the first virtual session, in which we wrote that moving online was “like entering into a long distance relationship that remains fueled by memories of in person connection. But what happens as the time drags out and the challenges mount? Will the group’s commitment remain? Or will it wane?” 

Sixteen months later, the group’s commitment has not waned. Most sessions this week had 270 attendees, despite time zone challenges and competing priorities. Large delegations from Korea (7 officials), China (10 officials), and Singapore (7 officials) were still on the line as the clock struck 2am in Seoul and 1am in Beijing and Singapore at the end of the morning sessions. These delegations were all back again four hours later for the afternoon session, as were other Asian delegations, including Thailand’s delegation of 7 officials, from 4 different ministries, despite  the afternoon sessions beginning at 4am Bangkok time.

And it wasn’t just Asian delegations who impressed us with their commitment; this week we noticed that several small states, including Costa Rica, the Dominican Republic, and Mali, often had four officials from capital on the line. These big delegations are even more notable when compared against attendance rates in other, earlier UNCITRAL groups; before 2017 most governments, if they attended at all, usually sent one delegate, possibly two, often from the nearest permanent mission, not from capital.

Attendance has fluctuated over the course of the pandemic, but there is no downward trend. The Working Group has been together five years now and states remain committed—the group is going steady. In relationships, people do not stagnate, they grow and change independently and together, sometimes developing new interests or reading different books, and sometimes even forgetting “which books are yours? And what books are mine?” In negotiations, does something similar happen for delegates? For states?

Deitelhoff’s Islands of Persuasion

Nicole Deitelhoff, a Professor of International Relations, developed an influential theory of how state interests can grow and change during multilateral negotiations. She argues that “islands of persuasion” can emerge between certain actors or during certain phases of a negotiation. Since persuasion is a process that can change interests, these moments can open up new possibilities.

For Deitelhoff, these islands of reasoned deliberation are the exception, not the norm. No multilateral negotiation will ever be transformed into an ideal deliberative environment. But we can use the ideal of deliberative lawmaking (that is, deliberations grounded purely in reason-giving and isolated from power politics) to identify moments when negotiations come closer to this ideal, when power recedes and reasoned deliberation takes center stage. And when we see this happening, we can ask what led to these moments, and what consequences may flow from them?

Deitelhoff developed her theory by observing the negotiations to create the International Criminal Court (ICC). Of course, 2022 is not 1998, criminal law is very different to investment law, and the ICC as an institution is different in many respects to whatever permanent architecture may emerge at UNCITRAL. But negotiations about the ICC are the most recent effort to create an international court, and we see states themselves referencing aspects of the ICC as examples at UNCITRAL. So while the parallels are not perfect, it is a comparison worth exploring.

In this blog, we explore three steps that we should see if islands of persuasion are emerging, as they did during the creation of the ICC. We are not trying to convince readers to see this process as one of pure persuasion. Instead, we are inviting readers to see both fixed clashes and fluid deliberation in this process. On certain topics, states’ positions are fixed, but they are more fluid on other topics. Certain moments are full of clashes and feel more zero-sum game in nature, but other moments are collaborative and generative.

The Emergence of a Constructive Core

When people commit to each other, the idea is usually to build one future together. Not so at UNCITRAL: the delegates are building several possible futures, in the form of multiple, partially overlapping but often distinct reforms. This week they spent two and a half days discussing selection and appointment of adjudicators to a permanent tribunal, then two and a half days discussing a code of conduct (drafted primarily, though not exclusively, for application to ad hoc arbitration).

In earlier stages of the process, it was common to see these reforms as opposing visions of the future: either the establishment of a new permanent tribunal or the continuation of ad hoc arbitration. But by now, the room has internalized that this is not an “either/or” process but a “both/and” one. Sometimes officials within a delegation specialize—for instance, one official spoke for Canada on issues pertaining to a permanent tribunal and another spoke on a code of conduct. But Canada, like most states, is actively building multiple visions of the future.

Pluralism infuses the Working Group’s approach in big and small ways. Working Paper 213 on selection and appointment of ISDS tribunal members structured the discussions about a permanent tribunal. With regard to nomination, WP 213 presented delegates with a choice: should potential adjudicators be nominated by states (option 1) or should potential adjudicators be self-nominated or nominated by “civil society, bar association, academic and relevant organizations in the investing community” (option 2)? After a few delegations voiced a preference for option 1 or 2, Singapore intervened to support both options:

“We do not consider these options to be mutually exclusive … we agree that there should be a diversity of avenues for nomination, such as active nomination by participating states, self-nomination, or even nominations by stakeholders like the investing community, following an open call. We would therefore be happy to further explore a draft provision that merges these two options for nomination and expresses them as different possible routes to nomination rather than as binary choices as they are currently set out.”

Then Canada, the EU, Korea, Switzerland and others supported Singapore’s call to move beyond seeing them as binaries.

This was not a major flashpoint of the week, but one of many episodes that suggested islands of persuasion might be emerging. In the ICC case, Deitelhoff emphasized the leadership of middle powers, working in coalitions, as decisive in creating opportunities for deliberation and persuasion.

At UNCITRAL this week, we saw the emergence of a core group of states, including Canada, Korea, Switzerland, and Singapore as mentioned above, and also Argentina, Armenia, Brazil, China, Morocco, Sierra Leone, South Africa, Thailand, and Vietnam, making substantive interventions on a permanent tribunal. These states led collaborative discussions on the issues set out in WP 213: jurisdiction, governance structure (including a committee of the parties), tribunal members, ad hoc tribunal members, nomination procedures, and a selection panel. The European Union, while active, was one among many delegations making detailed interventions on these issues. The views of the EU and its Member States about permanent architecture were not taken as the first or last word; instead there was often genuine deliberation.

The states that we saw acting as a constructive core have not necessarily announced their support for a permanent tribunal—many expressly reserved their positions on the matter and some might dislike the idea of such a tribunal. But it is clear that these states have thought seriously about how their priorities fit within a plural approach to reforms that includes permanent adjudicators. This appeared to reflect a growing acceptance that this option might actually come to pass, making it strategically wise to engage in discussions about what such an option might look like. We heard Brazil intervening to ensure provisions also work for state-state dispute settlement, and South Africa intervening to ensure that previous experience with public policy is valued in appointing adjudicators, to give two examples. Even China, a state that has supported an appellate body but not a court of first instance, intervened three times to give views on selection criteria for the latter.

As states intervene, it is also clear that they are thinking about the interconnectedness of various reforms. For instance, should the definition of International Investment Dispute (IID) be the same across all reform products generated by this Working Group? The definition of an IID was discussed last session with regard to a code of conduct and emerged again this session with regard to the jurisdiction of a permanent tribunal. A common definition has intuitive appeal, and the set-up of this process – including that inconsistency in investment law without sufficient justification was one of the concerns this Working Group set out to address, and that harmonization has long been part of UNCITRAL’s work – pulls states toward greater coherence and centralization.

But the Working Group is not attempting total centralization, their approach seems better characterized as injecting some centralizing elements into the investment treaty system while valuing pluralism and enabling all states, at least in theory, to choose among several possible futures for themselves, opting into some reforms and not others. Providing many choices, however, leads to questions about compatibility and connectedness. If each reform is an individual protocol that states can opt into within a larger framework agreement (or an individual “app” that states can download from “an Android operating system” as one delegate put it), are their underlying components – like definitions – interoperable? Or are some reforms more tightly connected (and share definitions) while other reforms are more loosely connected (and might not share definitions)?

The (Temporary) Receding of Power Politics

As readers of these blogs know, clashes between fixed coalitions of states dominated early sessions of this Working Group. It sometimes felt as though states, led more overtly or more covertly by certain key powers, were lined up in formation along various battle lines, and the role of delegates was to hold their line on time allocation (to structural reform versus non-structural reform) or other points of contention.

Over time, these battle lines have softened and a collective interest in getting reform products to the UNCITRAL Commission for approval appears to be growing. The time allocation for this week is evidence of this growth. Originally this week was to be spent entirely on structural reform, but a compromise was agreed in which half of the week was spent on a code of conduct (a non-structural reform), in order to advance the group’s collective goal of sending a code to the UNCITRAL Commission for approval in June/July.

The Working Group spent two and a half days discussing Articles 9-11 on fees and expenses, disclosure obligations, and compliance with the code of conduct (following Working Paper 209). These discussions were collegial, substantive, and largely collaborative, just as we observed last session when the earlier articles of the code were discussed. But by Friday afternoon, it was clear that the Working Group would not have time to consider the revised version of other articles in the draft code of conduct, notably Article 4 on double-hatting, and therefore, the code would not be ready to send to the UNCITRAL Commission in June. 

The reality that the first reform product would miss its deadline was something of a wakeup call: we had been enjoying life on an island of persuasion, with its relaxing collaborative vibe, but now it looked like the holiday might be ending and a clash coming. Because even if the battle lines have faded a bit, they are still very much there. While the Chair emphasized the substantial progress that had been made despite obstacles (including the continued reduction of working time from six to four hours a day, a consequence of moving online), others noted their disappointment. The US, which would prefer the Working Group to spend all of its time developing non-structural reforms, noted pointedly that this outcome “may lead us to question how we allocated our time,” hinting that structural reform should not have been discussed at all. Timing concerns may affect what reforms are discussed when, but they may also translate into additional pressure to ensure that sufficient floor time is reserved for state delegations as opposed to non-state delegations.

The week started and ended with clashes over time allocation, but the middle contained many hours of substantive deliberations. In these deliberations, the role of power recedes, and many middle powers and smaller states shine—as we saw this week. This constructive role of small and middle powers accords with Deitelhoff’s observations on islands of persuasion.

Shifts in the Range of Legitimate Arguments

When persuasion occurs, it has two outcomes: first it shifts the range of legitimate arguments, and second it alters the scope of possible outcomes. Persuasion is often a slow-moving process and tricky to observe, but we see two areas in which the range of legitimate arguments is now markedly different from what it was when the process started: relevant comparisons for ISDS and relevant previous experiences for adjudicators.

First, what are relevant comparators for ISDS reform? In 2017, it was still relatively unusual to draw comparisons to permanent international courts. The European Union and its member states were pulling in that direction, but in a preliminary way, and being met by vocal forces pulling in the opposite direction, to anchor ISDS in arbitration and recognize its historical ties to commercial arbitration. In 2022, by contrast, comparisons to permanent international courts are common and recognized as legitimate arguments within the negotiations.

For instance, the Armenian delegate referenced his experience as a judge ad hoc on the European Court of Human Rights and drew lessons about ad hoc judges, selection panels, and other points from that experience. Sierra Leone’s delegate has experience with the appointment procedures of the International Criminal Court, which informed his view that requiring a slate of candidate judges to have multiple, specific types of expertise was sensible. The Secretariat produces papers for the Working Group that are framed as comparative studies of international courts.

While in previous sessions, a few private sector actors contested the comparisons to international courts as inappropriate, this contestation has largely fallen away. A new range of legitimate comparisons has been established. 

Second, what are relevant previous experiences for adjudicators of investment disputes? Contestation on this point has not fallen away. This week it emerged in response to a question in WP 213, which asked delegates if they supported a reference to experience working in or consulting for governments. Singapore connected this question to broader concerns about the of ISDS:

“One of the factors contributing to the perceived lack in the current ISDS system is the perceived unfamiliarity of adjudicators or arbitrators with issues of public policy and policymaking. Therefore, we think that it is important for adjudicators in this body to be adequately sensitized to issues and considerations underlying public policymaking. And therefore we consider that an explicit reference to this element is useful as a signaling matter.

That said, Singapore is flexible on the approach, on how exactly we achieve this objective. For example, we can consider elaborating in the commentary to explain that familiarity with public policymaking would go toward demonstrating overall competence in international investment law or toward demonstrating that one is a jurist of recognized competence.”

While states expressed a variety of views on this point, Singapore was echoed by others. South Africa, for instance, agreed that:

“Jurists need to be of recognized competence and ultimately we believe this also includes elements such as Singapore had emphasized in their intervention, that jurists should be conversant with issues around governments, interacting with governments, and so forth. Public policy issues are very important and people that have experience in this area certainly would have an advantage.”

The actor who contested this view most directly was Corporate Counsel International Arbitration Group (CCIAG):

“On the requirement that candidates for the court must have experience working in or consulting governments, I would submit including this language would compound and would in fact make plain the crisis of legitimacy of an investment court. Not only are all of the adjudicators to be appointed by the states who are respondents, which in itself is a fundamental problem for the proposed court, but we are now considering that the adjudicators must have an express government background. I would submit that an entirely rational approach would be that prior government service or government consulting experience might be viewed as disqualifying a candidate due to the high risk of bias.”

But private sector observers do not appear to be holding sway in these negotiations. This week we saw more confidence from small states in going into bat against interventions from private sector observers that they considered unhelpful. In one memorable exchange, the US Council on International Business (USCIB) challenged a point Armenia had made, only to be taken to task by Armenia, in a refutation that demonstrated detailed knowledge of International Court of Justice and WTO Appellate Body rules and procedures. Some other delegations privately relished this exchange, cheering Armenia for holding its own.

Working Group III is turning into a long-term relationship. As it does, states and their delegates develop confidence, learn from each other and from their deliberations, and may even come to see their interests differently. Will islands of persuasion continue to emerge at UNCITRAL Working Group III and, if so, will they alter the scope of possible outcomes? We look forward to finding out. 

Note: the United Nations website is undergoing maintenance as this blog goes to publication, which means that some of the links above may re-direct to the main UN page, which are currently covering Security Council meetings about Russia’s invasion of Ukraine. We will replace the old links if they are changed permanently, but also recognize this temporary re-direction as appropriate given recent events. 

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Monica Garcia-Salmones says

April 6, 2022

Many thanks to the authors for a great contribution and a timely reminder of the real possibilities of a more democratic international law.