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Home EJIL Analysis UNCITRAL and ISDS Reforms: What Makes Something Fly?

UNCITRAL and ISDS Reforms: What Makes Something Fly?

Published on February 11, 2020        Author:  and
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When conducting an international negotiation, the Chair has to ask him or herself: what makes something fly? This question really has two parts. The first concerns the negotiations themselves. Once you’ve taken off and achieved a certain cruising speed and altitude, how do you keep the momentum going? Will some flight paths be smoother than others? Are you moving toward a safe landing zone, even if it is some distance away? The second concerns the products you are developing in those negotiations. Are some options more aerodynamic than others? Are some more likely to achieve lift off? What component parts need to be designed and built? Is there an overall plan about how the pieces might be put together in the end?

These are questions we thought about as we watched the UNCITRAL process unfold in late January. On one level, it might have been the week when one could have expected to see some turbulence. Since the process started three years ago, this was the first time that the Multilateral Investment Court was formally on the agenda for discussion and it is clear that the views of states are divided on its merits. But on Monday, the Chair adeptly steered the group from high level questions (Is an investment court better than ISDS? Is a particular state for or against such a court?) to more technical engineering work (e.g., What are the ways of constructing an appeal? Which options are available for financing a permanent body? What issues need to be resolved regarding enforcement? What are the options for appointments?).

This approach meant that, instead of being an arena in which states rethink the system’s fundamentals (eg what are the purposes of investment treaties) or engage in high level policy positioning (eg do they support a court or arbitration), the Working Group began to feel a bit like a team of engineers breaking down a complex design challenge into its component parts. Each part undergoes preliminary analysis and troubleshooting in the Working Group, with states suggesting potential models or raising design concerns and considerations with the Secretariat, and tasking the Secretariat with further research and with creating prototypes for each part. Many delegates proved themselves to be serious engineers, coming well-prepared to engage in technical questions. In the process, momentum toward a panoply of reforms seems to be building as participants work collectively on individual design issues.

A smooth flight path

In previous meetings, it was agreed that this week would be devoted to three issues: an appellate mechanism; an investment court; and selection and appointment of adjudicators. But, as the Chair explained at the start of day 1, many states felt that they could not say whether they were for or against a particular reform option because they don’t know what the ‘it’ is that they are supposed to be for or against. So he refined the agenda slightly to allow states to develop more detailed understandings of different reform options. The agenda thus became consideration of an appeal mechanism, enforcement, financing, and selection of adjudicators.

This procedural refinement was subtle but significant. It meant that states were not asked to take a public position on whether or not they would support a particular reform, or whether a court or ISDS was better. This reduced tensions between different camps. No undeclared states were pressured to take sides and many states began their interventions by noting that they were speaking without prejudice to their final decision. It also tasked the group with acting more like highly trained engineers: if one were to construct something, what sorts of problems need to be considered? How could these design problems be resolved? What additional research needed to be done? The debate shifted from ‘if’ questions, which tend to be more politically charged, to ‘what’ and ‘how’ questions, which tend to be more technical.

These sorts of institutional design questions shifted the group of highly competent lawyers and negotiators into a new mode in the process, which many seemed to enjoy as a form of collegiate, technical work. In this engineering mode, the diversity of viewpoints and experiences in the room were utilized for identifying potential problems and suggesting creative solutions. These sorts of differences are critical for building good products as they help to ensure that multiple perspectives are considered and overly homogenous group think is avoided. And while discussion on design options mostly hummed along, certain questions — notably if states should pay for a permanent mechanism or if users should pay some or all of the costs — revealed clear differences of views on optimal design.

Aerodynamic options

In weighing up various design options, it becomes clear that some options are likely to be more aerodynamic than others. Some seem to have more support in order to achieve lift off. Others seem more clunky, at least for now. There was relatively widespread support again for an appellate mechanism – a large coalition is ready to help get an appellate mechanism off the ground. Some delegates, including those for and against structural reform, even expressed privately that an appellate mechanism felt like a bit of an inevitability. (The irony of this happening at the same time as the WTO AB has gone into abeyance was not lost on members of the group.) While the agenda meant that states were not asked to weigh in on a first-instance court directly, there did not seem to be a similarly sized support coalition for a court.

Given these different aerodynamic qualities, and since the week began with the appellate option, it feels like a change is in the offing. Instead of asking ‘do you want a multilateral investment court with an optional appellate mechanism?,’ the question may effectively come to be reversed: ‘do you want an appellate mechanism with an optional first-instance court?’ Think of this new structure like a fighter jet. The appellate mechanism is like the nose of the jet that has the aerodynamic qualities to push through the air and generate momentum. Various first level mechanisms – ISDS, ISDS reformed (e.g., a roster system) and a first-instance court – would then come in on the wings or the slipstream as options from which states could choose. This changes the calculus somewhat. States that find it easy to argue against a standalone Multilateral Investment Court may find it more difficult to argue that a court should not be one among multiple options available at first instance for those that wish to choose it.

A potential landing zone

So where is all this taking us? Is a potential landing zone in sight or, at least, somewhere proximate over the horizon? This is an important question for the process. States need to feel that they are making progress toward something that could be broadly accepted. But they also need enough flexibility built into the process that they don’t have to work out now what they are for and against. That is where the issue of open architecture and flexible frameworks become important, as we examined previously, as have Stephan Schill and Geraldo Vidigal, and which are discussed in a new note on a multilateral instrument prepared by the Secretariat for discussion in April.

Chile, Israel, Japan, Mexico, and Peru hosted an informal lunch session on the idea of using a multilateral procedural instrument in order to bring together some of these reforms. It would be flexible, they stressed, and would be a vehicle for many types of reform. It would have room for an optional appellate mechanism and/or first-instance court. It would allow different options to be developed piece-by-piece. And it would provide different states with the freedom to choose which elements to join. Views differed on whether it would only cover procedural issues or might also cover some substance, though the emphasis was clearly on the former. But a broad and inclusive outline existed.

There was a flicker of discord in the question and answer session about whether some reforms would be ready – and could be adopted – sooner than others. It is hard to imagine the European Union and other supporters of an appellate mechanism or first-instance court supporting this instrument going forward unless it included a place for these sorts of structural reforms. Yet it was also noted that discussing such an instrument was important because it allowed members of the Working Group to bring together reforms holistically and reflect on common concerns, while retaining the individual choice for each state on what to ultimately accept.

A flexible instrument that allows different reforms to be developed and docked into a common framework now seems to be a likely potential outcome. States could be given the ability to mix-and-match different structural and non-structural reforms (e.g., an appellate mechanism and a code of conduct) as well the ability to select different options within structural reforms (e.g., a first-instance court or ISDS with a roster) and within non-structural reform (e.g., a code of conduct and/or rules on third party funding). If states believe that a flexible framework convention is their likely landing zone, then we may see the working group in engineering mode more in the future.

If states know that they will ultimately have a choice on which options to join, they may feel more comfortable spending their time developing options so they will have a good menu of reforms from which to choose later. Although this approach takes time, it is much more inclusive than having one or more delegation provide a fully developed prototype and it is likely to ensure greater buy in to the process overall.

Conclusion

When we look at the concrete outputs from the week (summarized by Julian Arato in this IELP blog post), an overall shift from policy positioning toward an engineering-mode is what we see. This shift suits those states that want to move expeditiously toward particular reforms, but works less well for actors that would like the process to ask more foundational questions of policy and principle first – a point we pick up in the next blog. Yet the engineering-mode is likely to continue for a while. States have tasked the Secretariat with doing more work on some of the individual components, e.g., what options exist for appeal grounds, what models are available for appointments, what models could be adopted for financing? This will allow various parts to be developed on a piece-by-piece or block-by-block basis. It will focus the group on technical tasks where they can deploy their skills on drafting and structures. Although many high level policy questions and design challenges remain unresolved, it seems as though states are developing a better sense of an eventual safe landing zone and moving towards it.

 

 

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2 Responses

  1. Thank you for a very informative and insightful text! Really look forward to the next one because, as you say, the real question is who really need this “airplane” in the first place, and what for? Would other “means of transport” get us all where we want to be w/o all the side-effects? Could all this creative energy be better spent elsewhere?

    The risk is – once you have all happily spent so much time, energy and creativity building it, have you not fallen in love with the beautiful design just a little bit? Can this now closer knit team of happy engineers look critically at your own creation and say “this should never take off the ground”? How much might you compromise from those original qualms, from before all the building-work just to see it fly?

  2. Kishor Dere

    It may not be an exaggeration to say that “Engineering-mode” will also have to be accompanied or followed by “social engineering” mode to minimize friction and ensure smooth functioning of the system. This only can prevent the flight from being hijacked or crash-landed.

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