José Rafael Mata Dona1
As in the previous session of the stakeholder meeting organized by the European Commission (see here), this roundup started with a brief recap of the whole process of the UNICTRAL Working Group III (for a more detailed review of the EU’s proposal for a MIC and ISDS reform under the auspices of UNCITRAL see here) and with the clarification that the possibility of identifying new concerns and solutions is not excluded from its current state.
The EC was represented in the stakeholder meeting by Collin Brown (Dispute Settlement and Legal Aspects of Trade Policy, DG TRADE), Blanca Salas Ferrer (Dispute Settlement and Legal Aspects of Trade Policy, DG TRADE) and André von Walter (Team Leader, Investment Dispute Settlement, DG TRADE).
State of play of the latest developments
The proposal for an advisory centre, the discipline for third party funders and ethical rules for adjudicators dominated the discussions of the WG in Vienna during its 38th session October 14–18, 2019 (for the official report of the WG see here).
The 38th session (resumed) of the WG will be held next week 20–24 January 2020 in Vienna. The expectation of the meeting is to further deepen understanding of the following three structural proposed reforms (i) the proposal for the establishment of a multilateral investment court (ii) the selection of its adjudicators and (iii) the establishment of an appeal mechanism. Then, the 39th session 30 March – 3 April 2020 will be held in New York and will focus on (i) dispute prevention and mitigation as well as other means of alternative dispute resolution (ii) treaty interpretation by States parties (iii) security for costs (iv) means to address frivolous claims (v) multiple proceedings including counterclaims and (vi) reflective loss and shareholder claims based on joint work with OECD.
Exchange of views with stakeholders
First set of interventions
A representative of the European Public Health Alliance (EPHA) showed concerns over the risk of a multilateral investment court co-opted to serve industrial interests.
A representative of the European Shippers’ Council (ESC), a non-profit European organization representing cargo owners, questioned the EC on the expected timeframe for the finalization of the whole process at the WG. Additionally, the ESC wanted to know how the outcome of the WG could influence already existing Free Trade Agreements.
Representatives of the European Economic and Social Committee (EESC), the Rapporteur and the Co-Rapporteur of the Opinion of the EESC on the ‘Recommendation for a Council Decision authorizing the opening of negotiations for a Convention establishing a multilateral court for the settlement of investment disputes’ wished to know (i) if the Commission Staff Working Document Impact Assessment (see here) of the Council Decision was still ‘alive’ (ii) more detailed information about the advisory center, its role in terms of capacity building and help to SMEs, location and appointment of advisors and (iii) what has been the level of participation of the United States and the concerns of developing countries in the WG.
A representative of the European trade Union Confederation (ETUC) showed concern about the transparency of the inter-sessional regional meetings that so far have taken place in Guinea, Korea and Dominican Republic and wondered about the expectations of the EU and its Member States from the next meeting in Vienna.
Replies of the EC
The multilateral investment court will build up consistency and predictability over time. The EC argued that the ad hoc system made it very difficult for states and stakeholders to have certainty as to how their cases were going to be decided. The lack of certainty is what a regulated industry uses to protect itself from criticism and interventions that might better advance the public interest.
On the question regarding the expected timeframe for the finalization of the whole process at the WG, the EC first alluded to the current increased regularity of the meetings of the WG per year, expressing desire for even more regular meetings. On that premise, the EC sustained that the WG could relatively quickly arrive at the stage of working on a detailed text by the end of 2020 or 2021 and finalize the whole process one or two years later.
In terms of how the outcome of the WG could influence already existing Free Trade Agreements, the EC stated that at the EU level the multilateral investment court would replace the bilateral investment court system negotiated with other countries. For Member States agreements, the idea is that they can create a single multilateral agreement amending a large number of existing agreements to apply the multilateral investment court to all. However, the EU and its Member States are not at the stage of discussing the details of the latter.
As to the question regarding the concerns identified in phase one of the WG, the EC sustained they largely corresponded to those previously identified in the EU context, except for certain concerns which specifically came up from the multilateral context. For instance, the regional diversity of the adjudicators. Further, the EC observed that this was true not only as to those concerns identified in the 2017 impact assessment, but also as to those which came up from EU previous public consultations dating back to 2013 and 2014. The former to a lesser extent than the latter due to the very specific concerns addressed in the impact assessment.
As to the questions regarding the advisory center, there are a lot of issues that still have to be sorted out, notably the nature of the center. In this sense, the EC remarked that the Advisory Centre on WTO Law (ACWL), suggested as a possible model to follow, was not exactly what developing countries wanted at the 38th session of the WG, as they themselves would like to handle the cases. This discussion will be even certainly enriched by the detailed scoping study being finalized by the Columbia Center on Sustainable Investment (CCSI) on behalf of the Ministry of Foreign Affairs of the Netherlands (for more information on this study see here).
The EC observed that there had been no submission paper from the Government of the United States, one of the biggest delegations within the group, which was very engaged in the discussions but was rather sceptical about the multilateral instrument on investment dispute settlement. To a certain extent, the United States does not need to make a government submission since now the focus is on working through the Secretariat papers. Certainly, some of the American ideas are there. Finally, the EC noticed developing countries shared many of the concerns of the EU delegation. This is the case, for instance, of issues related to costs, duration, predictability and consistency.
On the inter-sessional regional meetings, the EC clarified that these meeting had been organized until now only to raise awareness in different regions of the world. Regrettably, none of them have been thematic.
The EU delegation expects from the inter-sessional meetings, and eventually from the creation of subgroups, to go in greater in-depth and informal thinking on how particular issues should be addressed. Importantly, inter-sessional meetings are not decision binding. They are not necessarily chaired by the chairperson of the WG and not all countries have to be represented either. Lastly, there was supposed to be one regarding the advisory center, but it did not happen.
As a good example of a topic that would be better treated first in an inter-sessional meeting, Collin specifically stressed the one related to shareholder claims for reflective loss due to the fair complexity of the matter (for an OECD paper on this subject see here). In general terms, the EC observed that UNCITRAL usually went from broad conceptual work to more detailed work to legislative or non-legislative instruments, which could be adopted or endorsed by the UNCITRAL Commission and, ultimately, the General Assembly of the United Nations (for an overview of all UNCITRAL texts see here).
Next week, the EU delegation expects the Secretariat to be given instructions to go farther into depth, possibly to the extent of already developing text on different issues.
Second set of interventions
A representative of the Centre for Research on Multinational Corporations (SOMO) questioned how the EU proposal for a multilateral investment court sought to approach the identified concerns within the WG in relation to damages and methods used to calculate compensation thereof, suggesting the exclusion of lost future profits and the implementation of compensation caps.
The representatives of the EESC wished to know the minimum number of countries that should accept the proposal to enter into force.
A representative of Agoria asked whether the model for the multilateral investment court is equal to the WTO approach.
Replies of the EC
As to the question of damages, the EU delegation expects that the permanent character of the multilateral investment court will contribute to greater consistency, correctness and expertise in developing methods of calculation of damages and their implementation, but it may be desirable for treaty parties to develop this subject nonetheless. A Secretariat paper on damages is expected for the discussions in April.
To put the multilateral investment court in place, the EC asserted it basically depended on the countries concerned, the investment flows between them or, inter alia, the expected number of disputes that they may generate. Indeed, a large number of countries is not a precondition for the establishment of the multilateral investment court.
As to the model, the EC sustained it was closer to the WTO approach but was not exactly the same. There are certainly lessons to learn from the current crisis of the appellate body of the WTO model to sharpen any new body. Additionally, the EC highlighted the submission of China for the creation of an appellate mechanism (see here).
Last set of interventions
The ETUC wondered about the desirability of considering questions related to the obligations of investors by the WG and whether the same level of transparency of the WG meetings should apply to the inter-sessional meetings i.e. public reports and audio recordings, invitations to participate, etc.
A representative from the Energy Charter Secretariat asked if amicably dispute resolution mechanisms, and in particular mediation, were taken into account at the WG discussions.
Replies of the EC
Inevitably, there have been decisions on prioritization of issues and the priority is now on dispute resolution mechanisms. Some have argued that there is a need to work on substantive rules, others on obligations of investors but the decision for the moment is that delegations should focus their work on the UNCITRAL mandate, which is on the dispute settlement mechanism.
On the transparency of inter-sessional meetings, the EC observed that for each inter-sessional meeting there had been a report. These reports were respectively submitted by the hosts in Korea, Dominican Republic and Guinea and are publicly available at the website of the WG. The EC shares the view that certain basic standards of transparency must be respected, although without the informal character of the inter-sessional meetings being altered.
On the question of amicable dispute resolution mechanisms, it is one of the issues which are going to be discussed in April. It has the support of the EU and of a number of other delegations. The question for the EC is how to align them to a permanent structure. Also, a Secretariat paper is expected on that issue before the 39th session of the WG.
The EC invited any stakeholder participating next week in Vienna to attend the side event on Monday.
To conclude, the EC recalled that delegates from developing and least developed states, who have been nominated for the Working Group III session, were eligible to request financial assistance for travel and accommodation to The UNCITRAL Trust Fund by means of a specific request to be routed to the UNCITRAL Secretariat through the delegate’s Permanent Mission.
1 Member of the Brussels, Barcelona and Caracas Bars.