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Home EJIL: Debate! UNCITRAL and ISDS Reforms: Concerns about Consistency, Predictability and Correctness

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

Published on June 5, 2018        Author:  and
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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.”

CANADA – on consistency and predictability in outcomes: “The issue of coherence and consistency and predictability goes to the very heart of the reasons why we are here gathered to discuss reform of the system. This is certainly one of the key concern that we have heard from civil society, that we as a government also feel are issues that need to be addressed. It is critical that governments know where they stand when it comes to how those treaties will be interpreted. Obviously, ideally, consistently with the intention of the parties to the treaty and maybe that’s another issue which would which we can address. We should have a better idea as government advisers of how investment tribunals will interpret the obligation in one treaty. Obviously if the treaty language is different as you’ve noted that’s another issue. But there are instances where it has not been the case, where the same treaty language has been interpreted differently and that is something that needs to be addressed.”

SPAIN – on abuse of proceedings and misuse of structures and the need for a multilateral solution: Spain referred to “the issue of abuse of proceedings and misuse of structures or the use of fund shopping or shell companies for abusive claims. We think that this issue is profoundly linked to the overall benefits of the system. We’ve seen such groups of companies being formed in third countries by domestic investors, the only goal being from that to be able to bring claims against the state by abusing an instrument conceived initially and exclusively for foreign investors. It is essential that these procedural issues be addressed in a multilateral context because they are intimately linked to the legitimacy of the whole system. And we should think and analyze multilateral instruments to prevent such abuses so that such issues are not even being registered by institutions or are addressed early on so that proceedings don’t drag out and prove expensive, so that they can be thrown out as early as possible in the course of proceedings.”

RUSSIAN FEDERATION – on the benefits of bilateralism and lack of consistency: “The system is not uniform, it’s a little bit fragmentary but these specificities are to a great degree determined by the nature of investment agreements. Any international investment agreement is the result of an agreement between the parties to that agreement. This explains the divergences that can exist in terms of the content of such agreements. But this is not a problem of the system per se. It’s a problem that has to do with the application of different sets of standards. You can have issues with respect to the quality of the arbitrators themselves, their professionalism, in relation particularly to arbitrators that have been appointed by the parties themselves. This is not either a problem of the system but rather a problem of the arbitrators.”

RUSSIAN FEDERATION – on non-uniformity as an advantage of the system: “The non-uniformity of systems for investment dispute settlement is at the same time its weak point but also its strong point. The absence of a universal system of dispute settlement enables us to take on board regional specificities and appropriately to take into account the positions of the states that entered into investment agreements. Because every single agreement of this kind is the result of a negotiation process. And here you have political questions coming into play, issues related to the trade system that’s in place of course, then the peculiarities of a national legal system. Overall in our view, this is an advantage of the system and not a disadvantage in any way.”

EUROPEAN UNION – on the link between lack of consistency and cost: “This lack of consistency brings significant cost. This is problematic because there is a lack of predictability when analyzing the potential legislative or regulatory activities. This also engenders disputes because it is very often the case that one or the other party in a potential dispute can point to at least one instance in which an interpretation that suits them has been adopted and therefore they are tempted to seek to bring a case when it might not be necessary. In our view, there are differences [among the treaties], but these differences should not be exaggerated. Many countries in the world have negotiated investment treaties on the basis of models and there is a high degree of similarity. Virtually all of these treaties have key core obligations – obligations that we’re all familiar with: the non-discrimination obligations, the expropriation obligations, fair and equal treatment and types of obligations.”

EUROPEAN UNION – on the lack of consistency being a systemic problem: “And in our view this problem is again a systemic problem because it’s a problem which flows from the ad hoc nature of the existing regime that there are always three individuals asked to hear a particular case and they may take a slightly different view or they may take a different view from their predecessors on any particular issue. And we also think that this is related to the fact that there is no broad appeal review that allows to establish some notions of hierarchy and authority within the system.”

MAURITIUS – on the importance of consistency and coherence for the system’s legitimacy: “This question of coherence and consistency is absolutely key. It is the major concern. There is an utter lack of predictability and therefore legitimacy in the framework as it exists today. There is no appeal there is no harmonization system and for that reason and contrary to other views that have been expressed we say it is absolutely a problem of the system because ISDS is by its very nature fragmented and incapable of harmonization in its current form.”

FRANCE – on the lack of coherence and its affect on arbitral appointments: “The absence of coherence in case law has an impact on the choice of arbitrators who are selected on the basis of their affinities for certain approaches. So this can lead to doubts, calls for recusal and can undermine the legitimacy of the system. So all of this justifies the argument that this working group should look at coming up with a global or systemic approach to resolving those issues.”

SPAIN – on the lack of consistency being a systemic problem: “We fully agree with the views that were expressed previously by other distinguished delegations to the extent that they consider that the issue of coherence and consistency of arbitral decisions is a systemic matter because the current system based on ad hoc tribunals creates this difficult issue.”

SPAIN – on the lack of consistency needing a systemic response: “It’s a systemic matter and that’s why it equally requires a systemic response in order to modernize the current system to ensure that coherence and consistency become values in and of themselves. And as a value in and of themselves that means that it is equally necessary to increase the legitimacy of the system in order to thus be able to deal with the criticisms that are being leveled against the system by civil society from states as well, and also in order to increase predictability for the investors themselves who are after all the users of the system.”

ISRAEL – on the drawbacks of aiming for consistency: Emphasized “the importance of allowing each country to fit the formulation of its investment agreements to its needs. Evidently this may cause certain variations regarding the level of protection expected from each agreement. However those variations represents the different approaches countries have towards protection and promotion of investment. Therefore aiming to a consistent system in place, unified standards of treatment which may have drawbacks.”

JAPAN – on the drawbacks of overly looking for consistency: “is that necessarily a bad thing to have three courts arrive at three different conclusions. If consistency is a fundamental quality relating to everything that’s been decided does it mean that the second and third courts should have followed and adopted interpretation already given by the first court. If the answer is yes then where does this unchallenged authority come from for this first court.” Further asked: “if we establish a permanent court of arbitration could we say that this permanent court always and without exception comes up with the appropriate and correct response from the very first instance.” Concluded: “I do think that sometimes an overt or undue search for consistency can have its drawbacks.”

THAILAND – on the negative implications of inconsistency on the credibility of the regime: Emphasized that “it is necessary to endeavor to address concerns related to the lack of consistency and coherence in international investment arbitration,” and noted that “inconsistency and lack of coherence in arbitral awards could have negative implications on the reliability, predictability, and credibility of the ISDS regime as a whole.” However, Thailand also stated that: “consistency may not be systematically desirable in all investment related cases”. “Consistency is not an absolute guarantee for accuracy of treaty interpretation. Let us all bear in mind that an emerging jurisprudence constante based on a defect in legal reasoning is definitely not something desirable. Whether such jurisprudence is incessantly repeated within and institutionalized structure such as an appellate body or by arbitral tribunals established on an ad hoc basis. Such flawed legal reasoning could ultimately lead to decreasing coherence in international investment law. For Thailand, “any attempt of ISDS reform should aim at promoting consistency of interpretation of true purposes of international investment agreements i.e. provide a proper protection of investors in accordance with acceptable international standards of protection as a possible way forward.” Thailand’s proposal for reform would focus on the “creation of procedural rules guiding arbitral tribunals in making appropriate use of joint interpretation mechanisms”, with an “increasing involvement of home state as master of the treaty in the interpretation process of IIAs.”

USA – on whether consistency is necessarily desirable: Noted that “the notion of similar treaty provisions always appropriately being interpreted in the same way is not in our view necessarily a desirable outcome. States have taken a great deal of care in crafting these obligations with great specific intent, and that minute differences in the way they have drafted correspond to very important differences in both legal and policy objectives. While the language may appear to be identical in the provision itself, the rules of treaty interpretation require looking at the broader context including the instrument within which the provision occurs, and the way that that provision may interact with other provisions in those treaties including exceptions, preambles, and other interpretive material. We’ve also noted that in certain cases you may have the same treaty, same provision, and you may have different treatment of it.” But noted that these are “matters of litigation and don’t necessarily point to a broader systemic problem but rather one that is inherent to all forms of litigation.”

EUROPEAN UNION – on lack of consistency where the same words are interpreted differently: “It is obvious that there may indeed be times that it is not intended that the same terms have the same meaning. But that issue as such is not a concern. The concern arises when it is intended that the same words have the same meaning and we have situations where tribunals arrive at different interpretations of those same words. It should be clear that there is an identified concern as regards this question of consistency.”

ROMANIA – on the necessity of a permanent adjudicatory body because of the difficulty of amending first generation BITs: “I would like to emphasize that in terms of consistency and predictability, the issue here is that too many investment treaties that are in force today are first generation BITs. That means that the language that is comprised in those BITs is vague. This vague language invites the tribunal to give an interpretation to the provision of the treaty that, in Romania’s opinion, goes beyond Article 31 of the Vienna Convention. Many would be tempted to say that the treaties themselves are the problem, and not the ISDS mechanism. Well the situation is that we have over 3000 treaties, many of them are first generation BITs. It is very hard, complex process, very time-consuming process to change those BITs and amend them. It often requires that not only both parties are willing to negotiate either in amending the treaty or just simply issuing an interpretive declaration. And the amendments and interpretive declarations need to be vetted and approved at the domestic level. This is a very time-consuming process and it’s almost impossible to solve this issue by amending the treaties. So the obvious solution would be to amend the ISDS mechanism to issue a set of procedural rules for a permanent adjudication body that will be able to interpret even first generation BITs in a manner that is consistent with both the interest of the investor but also with the interest of the states, the host states that receive those investments.”

AUSTRALIA – on consistency, correctness and the importance of striking the right balance: “But consistency is not an end, an objective in itself and one could say it has costs. Consistency does not equal correctness and perfect consistency may have costs in terms of length of proceedings and actual monetary costs. So we are talking about, in all of this, striking the right balance. I think from our perspective, digging down a little into the impact of inconsistency helps us to ensure when we go to the next step that we are focusing on getting the balance right, where we seek to address the inconsistency that there is no doubt exists.”

AUSTRALIA – on the importance of predictability with relation to perceptions: final comment related to “the credibility of this system which is a point Australia referred to in Vienna regarding the relevance of perceptions, the credibility of the system and this relates to all states. So, developed, developing countries that we’ve heard from today, also the investors that obviously is a very important piece of the puzzle and they need predictability as much as the states, but also society.”

CANADA – on the importance of consistency, predictability and correctness: The delegation of Canada does believe that the issue of consistency is “an important issue” and that the “importance is both predictability and correctness. And it is also both balancing the interest of the states and the interests of investors.”

CANADA – on impact of inconsistencies on perceptions: “But we need to consider whether this inconsistency affects predictability and at the very least there is a perception of inconsistency and a perception amongst stakeholders and states and investors that this can be an issue. It affects the legitimacy of the system, but also the ability of governments and investors to know how a tribunal will find what measures may be in contravention of investment treaty, whether it’s worth for an investor to bring a case or not, and also for governments to know what treaty language to use.”

URUGUAY – on the problem of lack of consistency: “We are worried about situations leading to cases where the states lose control of the investments and where things are going. A lack of consistency in interpretation of international treaties by arbitration tribunals means that the same clause can be differently interpreted from the way that was agreed upon in negotiation.”

GERMANY – on the need for systemic reform: “This is about a systemic issue that lies at the very core of ISDS, and that is that there is one tribunal per case that is dissolved after a decision and will not decide a case in the same constitution as before. From that follows that there is no consistency in awards and we have no systematic correction of awards. At the same time we note that consistency is something that is in everybody’s interest who is involved in ISDS proceedings.” The delegate for Germany then added that “the current system has quite considerable systematic disadvantages that we believe need to be corrected and it need to be corrected in a more systemic matter.”

MAURITIUS – on the lack of a system per se and need for systemic reform: “It is true that the law consistently applied to different facts will result in different outcomes. But that’s where the fact of multilateral proceedings comes in. And that’s why I think whenever we are discussing the issues we are discussing in this working group we need to come back to this question of the lack of a system. By its very nature, arbitration is fragmented. Each tribunal is its own master, it doesn’t report to anyone. It has no duty to a system. And for that reason, practitioners are very regularly faced with how to manage multiple proceedings. It can be similar facts being adjudicated by different tribunals You will often have multiple proceedings that are involving the same facts with tribunals with no coherent tool as to how to coordinate their proceedings as to how to make sure that they can all adjudicate on these facts to reach a consistent outcome which may well mean one case is won, one case is lost, but at least the factual findings will be coherent. If you’re a state nowadays you cannot be sure of even that. The existence of a system of review mechanisms which would be systemic have the ability to deal with most of these problems.”

USA – on the importance of correctness and consistency not being the ultimate goal in and of itself: “correctness seems to be the more important criterion. In other words the treaties are interpreted in accordance with the general rules of public international law. If that occurs, then the results will be more predictable and will be more consistent when appropriate. So consistency for its own sake shouldn’t be seen as a primary goal because interpretations that are consistent but wrong need to be avoided. But it’s not in our view necessarily linked to the lack of a review mechanism. Consistency and predictability are affected by many factors that a number of other delegates have mentioned not only differences in treaty drafting and in the facts of disputes but also in the evidence that has presented the tactical choices made by parties to the dispute which can explain differences in outcome even in those cases where there seemed to be facial similarities in the dispute.”

USA – on the importance of finality and enforcement: The delegate for the US stressed that “We need to pay attention to the importance of not undermining finality and ensuring finality helps to prevent further increases in additional costs and duration of cases.” And that “trying to make adjustments elsewhere might add further complexity and process further delays and costs”. For the US, “it’s not just about the perspective of review and the extent of the review but of the enforcement side. We think enforcement mechanisms are central to the resolution of investment disputes and the existing mechanisms generally work well.”

GREECE – on consistency and customary international law: “Starting with the role of precedent, the Greek delegation says that tribunals’ adopting a de facto doctrine of precedent is not uniform in the manner in which they take into account interpretations rulings by other tribunals. In the absence of the doctrine of precedent, prior arbitral awards should not serve as a substitute for legal analysis, including of state practice in the opinio juris, when it comes to standards of customary international law. Regrettably this has happened too many times in the past.”

GREECE – on consistency and joint interpretive statements: “Turning to the issue of joint interpretive statements the experience of arbitration under NAFTA shows that investment tribunals have retained considerable interpretive discretion even in cases where the relevant standards had been subjected to binding interpretive statements of the parties.”

EGYPT – on inconsistency as a consequence of a fragmented regime: “The problem of inconsistency and unpredictability will remain as long as there is this large part of overlapping treaties of international and investment treaties especially the old generations of bilateral investment treaties which involve inaccurate drafting, uncontrolled drafting and indefinite drafting of the rules of the protection of investment.” “If the remit of the work of the current working group does not allow it to address the problematic of the rules of substantive protection of investment, I propose as a minimum recommending at the end of the report of this meeting the importance of embarking on studying the possible solutions to tackle the problem of the fragmentation and plurality of the rules of substantive reflection included in bilateral investment treaties.”

SINGAPORE – on the importance adequate solutions to the inconsistency concern, regardless of what reform is adopted: “In the event that any of all reform efforts lead to a more systemic solution it bears repeating that such a solution must certainly also adequately address and enhance predictability, coherence and finality in the recognition and enforceability of ISDS outcomes and to do so in a more holistic and comprehensive manner than what is currently being achieved to date.”

BAHRAIN – on the importance of not overplaying the level of inconsistency: noted that “little attention was given to the fact that examples of such inconsistency are few in number when compared to the many instances of consistency among the awards and decisions referred to.” And that “it is important not to let the concern over a few cases of inconsistency to get out of proportion as to the causes of inconsistency.” Bahrain added that “I am not fully convinced that replacing the current system will lead to greater predictability.”

KENYA – on the appropriate level of consistency: “It is necessary to consider first the need for an applicable test in determining which decisions or class of decisions should or can be regarded as requiring consistency in an ad hoc system, which by design is fragmented and without a structure for correction. There are as many different views on what is inconsistent as there are legal systems. As it is, there are already various views from the present discussion on what is the perfect consistency, good or bad consistency.”

  1. Concerns about limited review and mechanisms to ensure correctness

USA – on using mechanisms like consolidation to ensure consistency: “In as much as concurrent and multiple proceedings are a challenge, they are a challenge that can be and have been quite effectively addressed in some treaties over the last decade through provisions that create the explicit ability of governments to both ensure that claims relating to the same subject matter cannot be brought in more than one form but also to help ensure that claims that are similar and brought under the same treaty can be consolidated.”

USA – on the importance of consistency compared to other strategic considerations that governments must confronted: “From a government’s perspective there are many strategic considerations that it takes into account when deciding how to manage its cases and that consistency of outcomes or consistency of interpretation might in fact in some cases not be paramount in the government’s considerations. Consistency among decisions is not necessarily a primary aim. The primary aim is consistency with the language of the treaty and consistency with the intent of the treaty parties consistent with an international law interpretation of treaties.”

USA – on the utility of joint interpretations and non-disputing party submissions: “The delegation of the United States, the delegation of Canada and Mexico have pointed out some of the tools that we’ve developed in our practice including in the NAFTA that we believe have helped move toward greater coherence in the jurisprudence. We have had some questions raised very fairly about whether these mechanisms are maximally effective. The distinguished delegate from Korea noted one of the challenges is that these mechanisms have not yet found widespread use in treaty practice, while countries like the United States, to my understanding Canada, Mexico, many in the Americas and in parts of Asia have for the last decade or so or been including provisions in their treaties that foresee binding interpretations, that permit expressly treaty parties to make submissions on issues of interpretation to tribunals. These type of provisions have yet to become more broadly used in treaties and other parts of the world. Their increasing utility, the increasing transparency of cases such that all states and stakeholders can actually have insight into the arguments, into the facts, all of these factors over time will possibly contribute to the greater use and therefore greater efficacy of these tools.”

EUROPEAN UNION – on the issue of inconsistency and costs: Speaking of a case involving a treaty signed by the Belgium/Luxembourg Economic Union, asked: “Do you engage in spending money, on hiring counsel, and preparing litigation when you have three possible interpretations of the same treaty?” Noted that “that there significant issues of cost” and “significant issues of predictability.”

EUROPEAN UNION – on the utility of joint interpretations: “There has been a discussion on the utility of binding interpretations. The European Union believes that binding interpretations are a useful tool amongst the tools that are available to states. Partners can always sit down together and agree that a particular provision that they have drafted in a treaty previously should be interpreted in a particular way. There is no need to pretend a particular clause in a treaty to provide that. But there is a question about how frequently and how effectively one can have binding interpretations that sufficiently deal with all of the issues that we are looking at. It is not something that we can effectively use as a mechanism in particular for disputes that are ongoing. Once we think the notion of binding interpretations is something which is useful we need to understand and accept that there are there its specific use on a day to day basis is in fact limited.”

EUROPEAN UNION – on an appellate mechanism being the most effective way to achieve consistency: establishing an appeal mechanism “is the most effective mechanism at a minimum in a bilateral contact context to provide consistency and coherence because we expect even without an explicit doctrine of stare decisis that nevertheless first instance tribunals will follow what is handed down and what is decided by an appeal mechanism. And so we think that is extremely useful in bringing about consistency. It makes sense in bilateral context. We think that it’s something that should be considered in good time in the context of other multilateral reform.”

AUSTRIA – on the importance of consistency: “There is no such thing as certainty in law. There is no adjudicative body where absolute certainty and consistency can be guaranteed. However we take the view that states as treaty parties should aim at creating environments where consistency is encouraged.”

EUROPEAN UNION – on the question of limited review: “For us it is clear that this question, limited review is a significant concern. We think this notion of limited review makes perfect sense of course when we are talking about commercial arbitration, when the two private parties want to get to a final result, to resolve the dispute and move on. We don’t think that limited review is effective and is appropriate. It raises concerns when we’re dealing with [the] type of public matters and public international law matters that arise in the context of investment treaties. One could cite many examples of concerns being raised. We think the most telling one is the decision of the annulment committee in CMS v. Argentina. There, the annulment committee itself says: “the award contained manifest errors of law”. Nevertheless the annulment committee cannot touch those matters because of course of the limited review provided for under Article 51 of the ICSID convention. And we don’t think that this limited scope of review is acceptable when we’re dealing with [the] type of public law matters that we are looking at here.”

CHINA – on the lack of an effective correction mechanism under the existing system: “Consistency is an important issue and it bears on the certainty and practicability of the rules and this is certainly very crucial, for the host country’s government and for the investors. When we come across with a specific problem, the government of the host country often requires that its own officials would conduct investigation that some of their practices are in line with the regulations and if the practices by the host country are in contravention of relevant rules and provisions. With regard to correction mechanism, we believe that it is relevant to consistency. Under specific conditions, inconsistency could be caused by a lack of a correction mechanism. The parties need to discuss and research if there is any effective correction mechanism under the current system. There are two mechanisms in the investment arbitration first, under the Washington regime and the second is under the UNCITRAL Convention.

Under the Washington Convention the correction mechanism is quite limited because it has only annulment procedure. The negotiation history also indicated that the parties, to establish this annulment committee, was not intended to establish an appellate mechanism. The arbitral tribunal also ruled on several occasions that the ad hoc annulment committee was not a court of appeal. Annulment procedure is not a remedy against an incorrect decision and the annulment procedure cannot substitute the tribunal’s rulings on the merits or substance.

Under the UNCITRAL arbitration rules, there’s also a lack of a correction procedure. The parties may rely on the domestic law of the place of arbitration to refer the arbitral award to domestic courts. And if there was an error due to the differences in applicable law, differences in interpretation rules on treaties and laws, and differences in rules of evidence, judgements of domestic courts, the ruling of the domestic courts thus made would cause widespread controversies and that is very difficult to have the certainty and the predictability. And often, conversely, it would accentuate this inconsistency.

Therefore in the view of the Chinese government, the current system, even if we have some correction arrangements, this is a defective arrangement. It cannot provide systematic and effective correction, institutionalized correction arrangement. China is of the view, with regard to the way forward, the parties should have an in-depth study assessment and make those effective correction mechanism as a focus of our attention. Of course what is more important, if we are to establish a new correction mechanism, then what type of mechanism it should take. And what are the practical problems that we need to resolve by this arrangement? We believe we need to have in-depth discussions into this process.”

SOUTH AFRICA – On the potential solutions to address the major concern of inconsistency: “For this delegation as for many others, consistency is also of grave concern. As we’ve heard from many of the interventions that there are many different reasons for the inconsistency. And we therefore feel that there should be a variety of solutions that is considered and that we look at. So many of the proposals that have been made in terms of joint interpretations by parties two to a BIT, or, as Pakistan has proposed, guidelines for interpretation of some general investment terms, we all think that these are all very valid proposals and that we can look at. Also in terms of domestic reforms that I think many of the delegates just referred to. South Africa has gone through a domestic process to look at our investment regime. We have started to cancel some of our first generation BITs. But what I want to really talk about is that in our view, many of the inconsistent findings are the result of errors of law or of facts by investment tribunals. And we are of the view that there should be a much bigger role for domestic courts in the system. And this is something that I think hasn’t been really raised and something that we need to also consider and there is a need to look at the scope of review and that is in our view currently very narrow. This is something that the EU has referred to, and Canada and some other delegations. As you are aware, arbitration awards can have a major impact on governments not only in terms of the financial impact but especially the impact on public policy development. For example in South Africa, our black economic empowerment policy has been challenged in an ISDS case before. Now that case did not go ahead in the end but if there was a finding against our black economic empowerment policies, that would have had a severe impact on government and also government’s ability to address some of the ills of apartheid. So in our view it is not acceptable that if errors of law or facts is made by an arbitration tribunal that this cannot be addressed and this is something that should be also looked at in this working group.”

FRANCE – on limited review and the need for systemic reform: “The French delegation believes that limited control in ISDS in its origins and practical consequences poses systemic problems which require reforms and solutions like that which is up to the work to be done in this group.”

JAPAN – on the importance of balancing the cost and benefits of a review mechanism: “the introduction of more extensive review needs to let disputing parties to have opportunities to rectify the decision made by tribunals. At this point, we’d like to echo the distinguished delegate from Australia from the viewpoint of emphasizing the need for careful examinations of cost and benefit brought by extensive review mechanism. We would like to note that there might be concerns that abandoning finality of arbitration inherently entails the risk of sacrificing the efficiency of the procedure and cause it to increase in costs. We are afraid that in some cases its function of reasons for review could invite the least that the mechanism could be abused by one of the disputing parties as a means of delaying tactics. We wouldn’t deny that there could be benefits of introducing a second instance. However we consider that such benefits need to be balanced with possible costs.”

VIETNAM – on costs and delay associated with a review mechanism and the importance of joint interpretations and not having errors in initial awards: “The review mechanism may prolong the process of dispute settlement and be more time consuming and more costly for both parties concerned. For the establishment of the review mechanism, we also need to consider the basis for review, the relation between the review mechanism and the current mechanism of annulment of the arbitration award and how to elect members of the review body. We also welcome another solution to correct the inconsistency which is joint statements of states and on interpretation of the relevant BIT. However it should be noted that this solution depends very much on the good faith of those concerned in the ISDS to respect the joint Interpretation is used by state members to the relevant BIT. As we can see the solutions have both pros and cons and my delegation is willing to participate in further discussion to find acceptable solutions to these concerns. It is more important that we should focus more on which is the appropriate mechanism of ISDS in order to ensure that the award will have no error and balance the legitimate interest of both the host state, the home state and the investor concerned.”

MOROCCO – on assuring consistency by establishing and investment court with an appellate level: “We think that consistency can be assured by the establishment of a multilateral body taking the shape of a permanent international investment court and we would favor an approach leading to this. It would provide a greater degree of impartiality and independence for the arbitration system, so that the system can be perceived as credible. We think it’s important that the two bodies involved an arbitration tribunal to have a primary level and then an appeal court.”

SPAIN – on the inadequacy of an appellate mechanism: “We do think it’s very important to underscore the economic factors analyzed in establishing any appellate mechanism. Establishing an appellate mechanism which would be juxtaposed on what we already have would be like having an elephant and an ant together. In economic terms, the transaction costs, the operating costs of the system would be vast and the system would fail to be efficient.”

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