Editor’s Note: This is the concluding post in this week’s series of several posts critically examining the UNCITRAL ISDS reform process, which held its latest Working Group III meetings in New York on April 2019. On Monday we featured the introduction from UNCITRAL Academic Forum Chair Malcolm Langford and our Contributing Editor Anthea Roberts, who summarized key points of contention raised by States as to the narrower procedural reforms to ISDS as the mandate of UNCITRAL Working Group III. Posts on Tuesday (see here and here) from our Contributing Editor Anthea Roberts and her co-author Taylor St. John addressed geopolitical and ideological issues that affect ISDS reforms. On Wednesday, we featured a response post on Costs, from Susan Franck, Academic Forum Member and author of the new 2019 book, Arbitration Costs: Myths and Realities in Investment Treaty Arbitration (OUP, 2019). EJIL:Talk! Editor Diane Desierto concludes this series, with observations drawn from her own public work today in Geneva, where she is serving as Resource Expert on Institutional Compliance with the Right to Development at the 20th Intergovernmental Working Group Session on the Right to Development, organized by the United Nations Office of the High Commissioner for Human Rights.
It would not have escaped our scrutiny from this week’s excellent posts by Malcolm Langford, Anthea Roberts, Taylor St. John, and Susan Franck that the UNCITRAL ISDS Reform debates of States are taking place with an occluded (if not opaque) understanding of the supposed position(s) of “developing countries”, or indeed, what their respective needs for reform and flexibility in UNCITRAL ISDS reforms are, as each developing country undertakes its desired reform path. As my colleagues rightly pointed out this week, one cannot approach “developing countries” with a monolithic understanding (or perceived understanding) of a regional, categorical, or group approach. The World Bank dropped the classification of “developing countries” in 2016, given the lack of agreement over the definition of this classification and the deep geographic, topographic, economic, and political diversity even within ‘developing country’ groupings themselves. It is thus entirely obsolete, in today’s international economic system, to even keep assuming that the G77 Non-Aligned Movement of the 1970s would have any degree of settled unanimity today among them as to their respective foreign investment interests, all the more so since there are more capital-exporting States within the “Global South” that are themselves heavily investing across and within the “Global South”.
On the one hand, some “developing countries” have a disproportionately outsized titanic impact on global investment, especially China, which now singularly dominates the writing of the future of the terms of global infrastructure investment through its Belt and Road Initiative (BRI). China’s leading role in global infrastructure investment was on full display at the 2nd Belt and Road Initiative International Forum in Beijing last week, attended by most world leaders, notwithstanding concerns about the new “colonization” seemingly emerging from BRI projects whose terms, as described recently in The Financial Times, are often bilaterally negotiated within an opaque “mish-mash” of debt-based infrastructure projects affecting about 62% of the world’s population but which still remain non-transparent to all investment affected stakeholders. On the other hand, some ‘developing countries’, such as low-lying island States comprising around 37 States and around 50 million people, face raging existential issues from the climate change onslaught, and continue to face investment treaty claims as respondent host States (e.g. Mauritius has 3 pending, Cabo Verde has 1 pending, Dominican Republic has 6, Barbados has 1, Guyana has 1, Trinidad and Tobago among many others in this UNCTAD list), while the low-lying island States remain just as beholden to take an ISDS system still largely being written by other States contributing to the very phenomenon causing their impending extinction.
We do not hear much about the economic, political, structural, resource, fiscal, and negotiating power inequalities and asymmetries between and among the “Global South” of “developing countries” in the UNCITRAL ISDS reform debates. The focus has been on identifying what “developing countries” supposedly think or prefer, rather than taking each State – at whatever stage of development – as they are in evaluating the impacts of the actual distributional decisions they are making today in the ISDS reform process, and particularly whether these decisions are consistent with their commitments to the right to development (and the full range of human rights capabilities encompassed by this right). Leaving it to States to do this kind of analysis through their respective investment treaty programs, in my view, does not solve any collective action problems arising from the globalization of our ISDS system. Neither does it significantly advance peoples’ right to development when we allocate ISDS reform into ‘procedural’ (for UNCITRAL) and ‘substantive’ (for States in their respective individual investment treaty programs), or characterize individualized State preferences for investment dispute decision-making in shorthand as ‘the West and the Rest’. The rigor demanded of us in our responsibility to realize the right to development should be an occasion for pause in our use of, and reliance on, all these constructs and dichotomies.
Problems with Archaic Dichotomies
As Malcolm Langford and Anthea Roberts showed in the introduction to this week’s series, the States in UNCITRAL Working Group III have a “narrow but deep mandate” that tends to focus primarily on “procedural” reforms, leaving States to tend to their substantive reforms through their respective international investment treaty programs. That is a difficult dichotomy to draw, since State preferences even on seemingly ‘narrow’ procedural issues such as ‘third-party funding’, ‘arbitral appointments’, ‘costs’, ‘consistency and coherence of investment arbitration decisions’, among others all reflect substantive understandings of the purposes and policies of international investment treaty law that cannot be easily left to a convenient ‘veil of ignorance’ when undertaking these sweeping reforms. When the States consider, for example, who gets to fund investor-State arbitration claims, how can they separate out how States (at any stage of development) have been deciding to broadly or narrowly define “covered investors” or “covered investments” who can access ISDS in their investment treaties? When the States consider the design of arbitral appointments vis-a-vis forming a multilateral investment court (MIC), how can they not consider that their distributional or fiscal choices today (e.g. whether to fund an MIC and how to avoid today’s disenchantment with the globally-funded international courts such as the International Criminal Court) will also impact their present and future resource capacities to serve the “right to regulate”, let alone any environmental, labor, or social standards and treaty commitments that States are now explicitly committing to “maintain” right alongside their investment treaty obligations (e.g. see for example the 2012 US Model BIT, CETA’s investment chapter, the 2016 Nigeria-Morocco BIT, among many other ‘new generation’ investment treaties that internalize environmental, labor, or social treaty commitments of host States). How can investment treaty reforms – on treatment standards, transparency, scope and coverage of investor protection, possible investor obligations, among others – be left to States to pursue on their own, when the ISDS system is also part of the “substantive” guarantees of investment protection (and possibly even the most substantive of them all)?
I fear that even buying into dichotomies such as the “procedural” v. “substantive”, the “West” v. “the Rest”, or “developed countries” v. “developing countries” in today’s UNCITRAL ISDS reforms does risk us replicating the many legitimacy concerns raised over the investor-State dispute settlement system in the last decade. Should this massive global effort still just involve the established voices and expertise of international lawyers, academics, and veteran diplomats of States around the world – who largely wrote the constellation of investment treaties and procedures that we are trying to reform today, or should we be inviting the voices, experiences, and expertise of social sciences, natural sciences, humanities, and/or multi-sectoral stakeholders of foreign investment? Should we even still live with the same polarizing dichotomies and asymmetries of participation – still relying on States to represent all stakeholders in foreign investment projects – that have brought the international investment system to this age of popular disrepute and such global mistrust by affected communities, indigenous peoples, and civilian populations? To what extent are we deeply interrogating whether the governmental representatives for our States today are even considering, let alone integrating, our basic human rights in the evolving new economic and political architecture ahead for ISDS reforms? And if we are looking at seriously reforming the investor-State dispute settlement system for future generations, to what extent do States in the UNCITRAL ISDS Working Group III consider their own comparative commitments and practices in various forms of international dispute settlement when now designing the scope of reforms to procedures, processes, remedies, and reparations for investor-State disputes? It baffles why this (borrowing from Bruce Ackerman’s famous theory of constitutional moments) “constitutionalizing moment” for historic ISDS reform is still being canalized into such archaic dichotomies, and why, even from the prism of Anthea Roberts’ and Taylor St. John’s apt declaration that “we are all system reformers now” – only some voices, disciplines, perspectives, interests, ideologies, and training for ‘system reform’ are more resonant in the UNCITRAL ISDS process. We are not asking why certain States, institutional design experts, social science experts, communities, among others are either silent (strategically or otherwise), or not being heard (effectively or accurately) in this global decision-making process.
Testing the Narratives of UNCITRAL ISDS Reforms Against the Right to Development
To this extent, I am more intrigued by the relative silence, insistence on flexibility, or minimalist approaches to substantive or procedural reforms in ISDS from various States that are styled as ‘developing countries’ during the April 2019 UNCITRAL Working Group III sessions on ISDS Reforms. Echoing Contributing Editor Michael Fakhri’s recent challenge to the continuing WTO-centric narratives of world trade law, I cannot help but wonder if our UNCITRAL ISDS Reform narrative may end up glossing over the emerging new hegemonies in international investment law and dispute settlement, simply due to the opacity or relative inscrutability of “developing country” positions.
In a nutshell, I propose that we should abandon the lens of seeking to identify “developing country” positions when staking out ISDS reforms (procedural OR substantive), but instead test the content and process of ISDS reforms (as with any economic reform undertaken by States, for that matter) from what the Right to Development would require:
1) a “people-centered development” that regularly evaluates how the human person is the central subject, participant, and beneficiary of foreign investment-driven development (and under what terms);
2) a “human rights based approach” to crafting the new procedural and/or substantive rules of ISDS reforms;
3) the “active, free, and meaningful” participation of peoples in these development decisions taken through granular ISDS reforms in certain procedural areas that may also have substantive implications;
4) examining the role of “equity” in the fair distribution of benefits (and who benefits, particularly, among all the stakeholders) from the ongoing process of ISDS reforms;
5) “non-discrimination” and “self-determination”, which spans scrutiny over the appropriateness of national and international development policies as they pertain to ISDS reforms; the effectiveness of international cooperation in the process of achieving such reforms; and the removal of obstacles to development that may be structurally created, perpetuated, or fomented within the ISDS system (such as by privileging some stakeholders over all others).
Admittedly, doing this kind of interdisciplinary, individualized, and integrative analysis is tedious on research capacities, resource-intensive, and time-draining, given the “slow haste” and many configurations of political interests within multiple constituencies in the UNCITRAL ISDS reform process. But these questions have to be asked, and not just because of the highly polarizing concerns over the “legitimacy” of ISDS. As much as the multi-year UNCITRAL reform process is a deeply significant era in the history of international investment law and governance, it is when we continue to collapse countries into unhelpful constructs such as “developing country positions”, “procedural v. substantive”, or “West v. the Rest” that we shade over the individual distributional decision consequences of what States – at whatever stage of development – are choosing today to change the contours, content, institutions, process, and governance architecture of investor-State dispute settlement. Social scientists theorize institutional design according to how social and political institutions “shape the patterns of individual interactions that produce social phenomena and with the ways in which those institutions emerge from such interactions.” (R. Goodin, Ed., Theories of Institutional Design, 1996). ISDS Reform is a ripe place to apply, test, and tailor theories of institutional design.
Of course, there aren’t any easy formulae for this kind of analyses. The UN is itself struggling with its own methodologies for human rights impact assessments and human rights due diligence for economic reform policies, but it is at least deliberately attempting it even in the particular space of foreign investment treaties. I remain quite baffled as to why the UNCITRAL ISDS reform process to date is heavily State-based, and does not have extensive relationships with the UN OHCHR, UNEP, environmental treaty bodies, and the rest of the constellation of international institutions who are implicated by the new generations of regional and bilateral investment treaties that simultaneously attempt to codify foreign investment protection alongside environmental, labor, social, and other human rights commitments of States. To the best of my knowledge, there is no dedicated effort to map and anticipate impacts on the right to development (especially as this right encompasses all capabilities to realize the full range of civil, political, economic, social, environmental, labor, and cultural rights) resulting from the many decisions States are now making in the UNCITRAL ISDS reform process. It is deeply troubling that we seem to be punting the hard questions for now to archaic dichotomies of “procedure v. substance”, “developing country position” v. “developed country position”, “West v. the Rest” – inviting more fragmented approaches rather than more intensive differentiated polycentric analyses to the collective action problems of achieving genuine justice, the fullest range of human rights compliance, and meaningful rule of law beyond the surface of symbolisms and selectiveness in the international investor-State dispute settlement system. There might be more promise for the UNCITRAL’s Academic Forum on ISDS to take on these interdisciplinary analyses and evidence-based approaches to all the hard questions that States are not taking for now. The ‘constitutional moment’ for historic ISDS reform certainly needs it.