Young ISDS Club – Corona pandemic investment disputes

by Suksham Chauhan, International Arbitration Trainee, Quinn Emanuel Urquhart & Sullivan, Paris

I was invited by Alexander Leventhal (Quinn Emanuel Urquhart & Sullivan) to participate in a webinar conducted by Young ISDS Club on 26 May 2020. Knowing Alexander’s undefined love for discussions on all things in investment arbitration, I was certain that the webinar would be intellectually stimulating. However, to my immediate surprise, it was not like the typical webinar where one could simply sit back and absorb the information. To the contrary, the webinar was interactive and made me think on my feet.

This is typical of Young ISDS Club. It is a club where members are expected to engage, think on their feet and at times be called upon to share their views and contribute ideas. Throughout the seminar, I sheepishly couched in my seat, with this write-up comprising my only contribution to what was otherwise a very engaging discussion.

  1. Introduction

Aron Skogman (Mannheimer Swartling) welcomed the participants and introduced the topic – Corona pandemic investment disputes. The focus of the discussion was on the potential for State measures passed in response to Covid-19 to violate protections in international investment agreements (“IIA”) and the potential investment claims and the defenses arising therefrom.

Thereafter, Laura Halonen (WAGNER Arbitration) introduced the speakers and explained their roles as discussion leaders to familiarize the legal concepts along with some concrete examples to ignite the discussion to follow. She introduced the speakers and their roles:

  • The first speaker (Isabella Cannata, Lalive) discussed the State measures in response to Covid-19 and various standards which may be invoked by the investors against these measures.
  • The second speaker (Aaron de Jong, HANEFELD) discussed various defenses which the State may invoke to justify the measures.
  • The third speaker (Alexander) gave concrete examples of various measures that the States have taken and may result in potential investment claims.
  1. First Speaker (protections stipulated in international investment agreements)

The first speaker gave a brief overview of the various kinds of measures which the States have taken in response to Covid-19. She categorised the States’ actions into (a) measures responding to public health emergency (b) measures tackling the immediate economic consequences (tax discounts, suspension of loans or direct cash injection); and (c) measures aimed at easing the mid-term economic consequences (bailouts and sovereign debt restructuring).

At outset, she stated that the first wave of investment claims seems already on its way – investors are already considering bringing claims against Mexico after the government restricted the production of renewable energy production due to a fall in demand.

Thereafter, she stated that protection granted to the investors may vary from treaty to treaty and will depend on the exact language of the treaty. However, in the context of Covid-19, the following standards are likely to be invoked: fair and equitable treatment (“FET”), full protection and security standards (“FPS“), expropriation, and national treatment.

Under the FET standard, the investor may challenge the State’s decision in defining which business are essential on the grounds that it is arbitrary and/or disproportionate, if investors are left out. The State actions may also be challenged for failing to accord due process by passing the measure without any legislations or legislating in haste without any transparency. There is also a possibility that FPS may be invoked to argue that the State’s response has been untimely (e.g. if lockdown persists for longer in one State than in another).

The State’s measures of seizing assets for a long time without any adequate compensation may give rise to indirect expropriation. State’s measures may amount to indirect expropriation where business categorised as “non-essential” during the lockdown results into permanent closing of a business. Similarly, series of State measures over a period of time amounting to the closure of business or permanent harm to investment can also constitute indirect expropriation in the form of a “creeping expropriation”. State measures which benefit only national companies but not foreign companies can be potential investment claim for breach of the national treatment standard. Furthermore, where issues of nationality are not involved, investors may seek to rely on the discriminatory measures standard, both in situations where investors within the same sector have been treated differently and where investors within different sectors have been treated differently, without any justifiable reason.

  1. The second speaker (State Defenses)

The second speaker discussed the defenses available to the State under customary international law and as express treaty exceptions, together with the question of the state’s general right to regulate.

Customary International law

At the outset, Aaron noted that the defenses under customary international law were to a large extent codified under the International Law Commission’s Articles on Responsibility of States for Internationally Wrongful Acts (2001) (“ILC Articles“). In relation to measures enacted in response to COVID-19, he considered that the defences States were most likely to invoke were necessity (Article 25) and force majeure (Article 23).

Aaron then briefly discussed the main elements required to establish necessity (Article 25). Of those, he suggested that States may struggle to establish that a specific measure was the “only way” to safeguard an essential interest from an imminent peril; in this case, a State’s population from a dangerous pandemic. If other lawful ways to address the threat existed, even if those were more costly or inconvenient, necessity would conceivably fail.

Aaron then discussed the defense of force majeure (Article 23), which covers events beyond a State’s control and which in effect compel it to act in a way inconsistent with its international law obligations. Aaron opined that force majeure was potentially even more difficult to prove than necessity as the State was required to demonstrate that it effectively became impossible for it to perform the particular obligation in question. Such could cause particular difficulty where a State has – necessarily without compulsion – elected to enact an affirmative measure that has violated a foreign investor’s treaty rights.

Treaty exceptions

Aaron then briefly touched on some of the prominent treaty-based exceptions. He noted that these varied from treaty to treaty, and encompassed so-called “essential security clauses” providing States latitude to enact measures, for example, “necessary for the public order”.

More recently, he noted that CETA had included a provision that provides that non-discriminatory regulatory measures designed and applied to protect legitimate public welfare objectives, including public health, would not constitute indirect expropriations, except in “rare circumstances”. Similarly, he noted that the recent China-Australia Free Trade Agreement had potentially gone further, providing that non-discriminatory measures for “legitimate public welfare objectives of public health … shall not be the subject of a claim” by an investor. He noted this could well insulate Covid-19 measures from a broader range of treaty claims than only indirect expropriation.

Aaron concluded by stating that in the circumstances it was potentially going to be difficult for States to establish the narrowly defined customary international law defenses once liability had already been established, and that States may be more successful in arguing for their police powers in times of emergency. It was furthermore noted that if a respondent State were to be successful in arguing that its measures were excusable under ILC Articles 23 or 25, the State may still be held liable to compensate the investor in accordance with ILC Article 27 for any “material loss caused by the act in question”.

  1. Third Speaker (Specific State measures)

Alexander commenced by speaking about State emergency measures and investment arbitration in the context of the 1998 Argentina economic crisis (“Argentina crisis”). He stated that about 15 investment cases resulted from the Argentina crisis. The majority of these cases dealt with one measure i.e. the emergency law that changed the tariff payments from US dollars to Argentine pesos. In all these cases (except in one or two) there was no question that the State’s measures gave rise to breach but the question was whether Argentina’s necessity defense was valid or not.

In the majority of these cases, the following was held: (a) Argentina’s essential interest was not at play, notwithstanding how bad the crisis was; (b) the emergency measure was not the only option available to Argentina, and (c) Argentina’s budgetary practices and policies at the relevant time had a major contribution to the crisis. He stated that Covid-19 and Argentina were similar in as much as the States have taken emergency measures. However, Covid-19 is different as there is no one single measure that has been applied by States as in the Argentina crises.

Thereafter, Alexander reflected on the State measures mentioned by Isabella by giving concrete examples:

  1. Measures responding to the public health emergency

The definition of essential has been different from country to country e.g. eateries shops in Belgium, wine shops in France, and marijuana coffee shops in Netherland are treated as essentials. United States of America’s response to health crises has been the most confusing. The state of Michigan introduced complicated measures by exempting certain critical business. What is interesting is that not only the critical business but its suppliers and further suppliers’ suppliers’ were also exempted. Eventually, it became confusing to assess which business was concerned by confinement and which were not allowed. Similarly, Georgia considered that bowling, gyms, tattoos, hairdressers were all essential.

  1. Immediate responses to the economic impact

There have been various bailouts and state aids e.g. France has announced 10 billion for Air France-KLM and the Dutch government’s proposed 2-4 billion aid package fo KLM. France has granted the moratorium period to pay rents and utilities for small businesses. There have been temporary expropriation of health care facilities in Spain and France.

  1. Long-term measures

The long term measures can be only speculative at this stage. What can be expected is discriminatory bailouts, obligatory bail-ins, sovereign debt default, forced capital restructuring, and nationalization.

He also reflected on the EU Screening guidelines for foreign direct investment which provides for a mechanism that enables member States to define sectors that are essential to national security to protect them from foreign shareholdings. At the end of March 2020, the EU Screening guidelines were extended to the healthcare sector to ensure that any such foreign direct investment does not have a harmful impact on the EU’s capacity to cover the health needs of its citizens.

  1. Discussions

This section incorporates the questions, queries, and moot issues raised throughout the discussion. Some of the issues raise pertinent legal questions – it would be nice to have the views of EFILA members on these issues.

  1. Police power

In the context of State’s Police Power, to what extent can a State negate the allegation of liability by arguing the classic law defense that there was no obligation under the treaty itself e.g. there was no violation of FET standards or expropriation to start with.

  1. Compensation under Article 27 of the ILC

How will compensation as stipulated under Article 27 of the ILC differ from the compensation otherwise owed to the investor in case of a treaty violation? Compensation under Article 27 appears to be narrower than in cases where a treaty violation is not excusable under Article 23 or 25, as the compensation is not intended to achieve full reparation but merely to compensate for “material loss[es]”.

  1. Issue of due process

It was observed that some countries (e.g. Germany) are transparent and explains the reasons/economics behind the measures taken. While some other countries are very secretive and do not provide for a well-reasoned measure. In view of this, the questions were raised on tribunal’s approach in the case where measures are passed transparently in consultation with investors as opposed to measures that are mere dictum and passed secretively without any consultation. Will there be fewer investment claims in jurisdictions where a transparent process is followed while passing the measure as opposed to jurisdictions where measures are mere dictum without any consultations?

  1. Protection of economy under the BITs

In the majority of the BITs, there are no specific provisions which allow the State to take measure to save the economy. The state may take measures for public interest but whether saving the economy comes under public interest is debatable. Further, under the FET standards, there is no coherent view on the State’s role at safeguarding public interest or public welfare. It would be interesting to see how the measures for protecting the economy will be justified under the BITs or MITs.

  1. Discrimination based on nationality

The Swedish government has enacted various measures to provide relief to various businesses. Compensation for loss of revenue over a certain threshold has been announced for certain businesses on criteria that may be perceived as discriminatory and result in treaty claims. Similarly, loans that are being guaranteed to airlines which have their main business in Sweden or seats in Sweden may be perceived as discriminatory, and examples of discontent among investors have already emerged.

It would be interesting to see how discrimination is being judged within sectors or sub-sectors e.g. restaurant are forced to close and not hotels. Some countries have decided that the companies which are based in tax havens will not gain access to certain support schemes. This may give rise to treaty claims for discrimination based on nationality.

Aron summarised by observing that it would be interesting to see how the cases alleging discriminatory measures shape up. States are likely to argue that they must be excused since – in the unusual circumstances – measures that could otherwise be perceived as discriminatory measures within the meaning of the treaty impairment standards are justifiable for public policy reasons. In such cases, however, tribunals are likely to consider whether there is a clear connection between the discriminatory element and a (valid) public policy goal that must be achieved by way of such discrimination. He observed that the consequences of the measures will be dealt with for many years to come. What measure can be excused and what cannot be excused is yet to be seen.

Report on the 5th EFILA Annual Conference held on 30th January 2020 in London

by Dr. David Pusztai (Quinn Emanuel Urquhart & Sullivan, LLP

The European Federation for Investment Law and Arbitration (EFILA) held its 5th Annual Conference on 30 January 2020 in London, with a focus on Investment Arbitration in the EU: Alternatives to Intra-EU BITs”. As the Secretary-General of the International Centre for Settlement of Investment Disputes, Meg Kinnear, noted in her keynote speech, there is no small irony in alternative dispute settlement” today being understood as a reference to alternatives of investment arbitration. Arbitration has traditionally been perceived as the epitome of alternative dispute settlement mechanisms, yet today the attention shifts to its alternatives: back to domestic court proceedings, to conciliation, mediation and fact findings.

The Secretary-General stressed that ICSID responds to the call for alternatives. Kinnear discussed proposed changes to the ICSID Conciliation Rules, as well as the proposed mediation and fact-finding rules in great detail. The upshot of consultation with stakeholders at the ICSID level was that parties expect less formalism, more flexibility in procedures, and more available procedural options. These considerations have been key pointers in articulating the new rules for ADR at ICSID. The Secretary-General also highlighted the inevitable challenges of bringing a project of alternative investment dispute resolution to success. Among these challenges, Kinnear pointed to the unique combination of skills expected from an investment dispute mediator or conciliator. Both a deep understanding of investment disputes and their legal framework, and experience and suitability as a mediator will be required from individuals mediating investment disputes. As several contributors also underscored during the conference, States need to form an official position as to whether they are willing to engage in ADR processes. In most cases, this would require implementing changes to domestic regulatory and institutional frameworks which have been designed for invesment arbitrations, and cannot accomodate other forms of investment dispute resolution.

The keynote speech was followed by a discussion between Monty Taylor of Arnold & Porter, Professor Stephan Schill of the University of Amsterdam, Dr Paschalis Paschalidis of Shearman & Sterling and Arne Fuchs of McDermott Will & Emery, moderated by Lord Goldsmith QC. Whilst endorsing the development of alternatives to arbitration, the participants voiced several concerns that put into doubt the feasibility of ADR in the investment dispute resolution context. It was raised whether governmental officials tasked with decision-making in the course of investment dispute mediations can realistically be expected to undertake full responsibility for the outcome of the dispute settlement process. Incentivising both government officials and ultimate political decision-makers to approach ADR processes in an efficient manner was described as a potential hurdle for ADR to succeed as an investment dispute settlement tool. The panelists also discussed whether alternative dispute settlement procedures risk contracting out” of public law structures and accountability mechanisms, and stressed the need for adequate safeguards against corruption tainting the process. The extent to which ADR can substitute (as opposed to complement) investor-State dispute settlement for EU investors was considered doubtful as long as third State investors retain the leverage of potential investment treaty claims against European Governments.

Three further panels addressed alternatives to investment arbitration from various angles throughout the day. The panel discussions were opened by Professor Loukas Mistelis, the Chair of the Executive Board of EFILA, who commented on contours of the emerging new era of investment protection: investment law being potentially submerged in international trade law, and the potential return of contract-based investment disputes. The first panel, chaired by Judge Christopher Vajda of the Court of Justice of the EU, considered investment protection under EU law. Judge Vajda outlined the pertinent case law of the Court of Justice, and explained the Court’s interpration of the scope of the Charter of Fundamental Rights, which is expected to be a potential legal basis for investment claims pursued before courts of Member States in the future. The panelists, Alejandro Garcia of Clyde & Co, Dr. Patricia Nacimiento of Herbert Smith Freehills Germany LLP and Dr. Alexandra Diehl of White & Case addressed the status quo of investment protection post-Achmea. The discussion covered the competing theories on the nature of investor rights and whether the termination of sunset clauses can pre-empt recourse to investment tribunals; the leaked draft of the Plurilateral Agreement” being negotiated by EU Member States with a view to terminating intra-EU investment treaties; and changes required in the system of judicial protection under EU law from the perspective of investment protection.

The second panel of the day, moderated by Professor Nassib G. Ziadé (CEO of the Bahrain Chamber for Dispute Resolution (BCDR- AAA)), focussed on Alternative tools for effective investment/investor protection”. The panel, comprising Mark Appel, Mélida N. Hodgson of Jenner & Block, Eloïse M. Obadia of the International Finance Corporation and Professor Gerard Meijer of Linklaters, discussed in particular the ongoing reform process at ICSID. The central point of the debate, with several contributions from the audience, was how to reconcile the public demand for greater transparency and accountibility in investment dispute settlement with the indispensable confidentiality that mediation or conciliation processes require. A halfway house” approach was considered by the panelists, whereby the fact of the dispute settlement would be public, third party interests would be chanelled into the process, all the while preserving the confidentiality of the proceedings strictly speaking. Echoing the concerns discussed in Meg Kinnear’s keynote speech, the panelists shared the view that awareness and readiness of governments to accomodate ADR at a regulatory level is paramount for ADR to succeed.

The third and final panel discussion of the conference was dedicated to the future of the Energy Charter Treaty and energy investment disputes more broadly. Dr. José Ángel Rueda García of Cuatrecasas presided the panel, with the participation of Robin Rylander of Mannheimer Swartling, Dr. Wojciech Sadowski of KL Gates, Luciana Ricart of Curtis, Mallet-Prevost, Colt & Mosle and Quentin Declève of Van Bael & Bellis. The conversation spanned the overview of pending challenges to ECT awards (specifically SCC awards under challenge before Swedish courts), the ongoing reform of the Energy Charter Treaty (ECT), whether the current system of energy dispute settlement is broken and whether the ECT permits the termination of intra-EU ECT protections. Contributions from the audience triggered further discussion of whether the future regulation of the energy sector, in particular of fossil fuels or nuclear energy, raises public policy concerns analogous to industries where consensus recognises that it is appropriate to afford policy makers and regulators more discretion in interfering with proprietary rights (such as gambling or the tobacco industry).

The conference concluded with Professor Nikos Lavranos, Secretary General of EFILA, and Professor Loukas Mistelis, Chair of the Executive Board of EFILA, thanking the participants for their contributions, announcing the winner of the 2019 EFILA Young Practitioners and Scholars Essay Competition, and inviting submissions for the 2020 round.

Stakeholder meeting on a possible future Multilateral Investment Court: Establishment of a Multilateral Investment Court (Brussels, 15 January 2020)

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.

Stakeholder meeting on a possible future Multilateral Investment Court: Establishment of a Multilateral Investment Court (Brussels, 9 October 2019)

José Rafael Mata Dona[1]

 A week before the autumn session in Vienna of the UNCITRAL Working Group III, the EC held a Stakeholder meeting in Brussels on the subject of the establishment of a Multilateral Investment Court. The initiative took place as part of the EC Commitment to Transparency.

During the introductory speech, Collin Brown (Dispute Settlement and Legal Aspects of Trade Policy, Directorate General for Trade, European Commission) traced the history of the proposal for a multilateral court for the settlement of investment disputes back to September 2017. This was followed by Collin’s general comments on UNCITRAL discussions, mandate and the content covered through its three distinct phases of progress, the last of which ‘Development of relevant solutions for the reform of ISDS’ started on the 4th of April 2019 and is still ongoing in two parallel tracks: one focusing on structural reforms and another involving other types of solutions. Collin highlighted the celebration of inter-sessional meetings, as in September 2019 in Conakry, Guinea.

The EC’s expectation for the 14–18 October 2019 meeting is that the WG will agree to discuss substantive issues and proceed as per the UNCITRAL Secretariat paper on reform options. Also, the EC expects the WG to develop relations to other international bodies e.g. OECD and UNCTAD. Among the submissions to UNCITRAL WG III on possible reform of ISDS, Collin said particular attention should be paid to China’s proposal of a permanent appellate mechanism. He generally commented on the UNCITRAL Secretariat thematic papers and the multidisciplinary approach of the Academic Forum papers. Along those lines, he specifically mentioned the proposal for the creation of ‘An Advisory Centre on International Investment Law’ (See here and here). The slides of the presentation and the video of the meeting are available here.

All the foregoing led to the exchange of views described below.

 

In the first round of questions, participants asked about (i) the role of the USA in the WG (ii) the jurisdiction of the Multilateral Court (iii) the maintenance of the term ‘arbitrator’ in the EC proposal for a multilateral court (iv) the status of the EC in the WG and (v) any particular contribution the EU is or is not willing to support.

In reply to those questions, Collin clarified the US has not submitted a paper but takes a fairly active role in the WG with more focus on reforms already put in place.

He said the EU view on the jurisdiction of the MIC is that it should be kept fairly open, though that debate is yet to happen. Further, he mentioned the EC does not refer any longer either to ‘arbitrators’ nor ‘judges’ in its proposal. It now refers to ‘adjudicators’ as a more neutral term.

Collin signalled accreditation to the WG is directly handled by the UNCITRAL Secretary. The EC submitted a paper on behalf of both, the EU and EU Member States.

For the EC, the WG is not the appropriate forum to discuss about withdrawal of consent. On the contrary, the EC sees coming as a genuine part of the discussions the use of domestic remedies, which in its opinion should be encouraged but not necessarily exhausted.

In the second round of questions, participants asked about (i) the use of an opt-in clause (ii) the level of consent expressed by African groups during the regional meeting in Conakry (iii) expectations in Vienna regarding the two parallel tracks of work streams (iv) the support behind the MIC and how long it could take, (v) how many EU countries have ratified the Mauritius Convention and applied it (vi) the applicability of the New York Convention to the enforceability of the MIC decisions (vii) EU Law conformity in regard with Opinion 1/17 of the CJEU, and (viii) the ability of third parties to have more extended rights than an amicus curiæ.

Collin explained the idea of the opt-in clause is to create an umbrella treaty and remarked there is a discussion as to whether it would be automatically applicable or not. As previous examples of implementation, he quoted the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (the ‘Mauritius Convention’) and the Convention on Mutual Administrative Assistance in Tax Matters developed jointly by the OECD and the Council of Europe.

Collin argued he could not speak on behalf of any African groups. Allegedly, there was a concern on costs, duration of proceedings, how to address more the use of Conciliation, Mediation and other ADRs, cultural diversity in arbitration and the difficulties developing countries face in managing to defend themselves.

As to the two parallel tracks of work streams, the EC will actively participate in both. However, its priority is to work more on a permanent structure. Collin said the idea of the multilateral court has found not only support but also interest. Countries realize there is an opportunity to engage in significant reform and are keen to do that. Obviously, it is quite difficult to predict how long this will take despite the celebration of intersectional sessions to accelerate the process to move forward.

Collin said the number of countries that have ratified the Mauritius Convention is growing steadily, but international law does not move very quickly. So, it takes time. During the last 4 years, the EU has been discussing a Council decision on the adoption of the Convention, but a very small number of EU States does not want to get there. Once that decision is made, it will open the door for EU Member States to ratify the Mauritius Convention, which already many EU Member States have signed.

On enforceability, Collin distinguished two elements. On the one hand, there should not be the ability for domestic courts to review a decision which has been subject to appeal. These rules should be modelled or similar to ICSID enforceability rules. On the other hand, the EC foresees an argument on the enforceability of the decisions of the MIC in third countries. According to the EC, the solution to the latter is to apply the New York Convention. And in this regard, the Iran-United States Claims Tribunal is quoted as an example of the applicability of the New York Convention to the enforceability of the decisions of a permanent body. This does not properly clear the fact that equality of the parties in the appointment of arbitrators constitutes a principle of international public policy. Article V(2)(b) of the New York Convention is understood as providing grounds for nonrecognition of awards for a lack of due process or violation of public policy.

As to EU Law conformity in regard with Opinion 1/17 of the CJEU, the EC envisions to ensure it in part in the MIC itself but much more likely also in the underlying treaties with non-binding decisions on EU Law and the same for the type of remedies.

For the EC, the question on the ability of third parties to have more extended rights than an amicus curiæ is not on the horizon of the discussions that will take place in Vienna from 14 to 18 October 2019. It is a subject for future discussion in a later stage of the reform.

Finally, during the last round of questions Collin observed that it is not immediately clear the Multilateral Court should be a specific structure or have a particular relation to the International Court of Justice.


[1] Member of the Brussels, Barcelona and Caracas Bars.

Norton Rose Fulbright and EFILA: Investor-State Disputes, What Will Change Post-Brexit?

by Cara Dowling, Norton Rose Fulbright (London)*

On Wednesday 29th March 2017, the UK government triggered Article 50 formally beginning the process of withdrawing the UK from the European Union. On that historic day, the London office of Norton Rose Fulbright and EFILA co-hosted a panel discussion with distinguished experts from industry, trade policy and investment treaty arbitration to discuss the impact of Brexit.

Deborah Ruff, international arbitration Partner at Norton Rose Fulbright chaired the discussion, which centred on such topics as what would change post-Brexit for trade, foreign direct investment and investor-state dispute settlement. The panel was comprised of Chris Southworth, Secretary General of the ICC UK, Norah Gallagher, Academic Director, Energy and Natural Resources Law Institute and EFILA board member, Ali Malek QC of 3 Verulam Buildings, and Milagros Miranda Rojas, special advisor on WTO and International Trade, Norton Rose Fulbright.

The evening quickly turned into a lively and engaged discussion amongst the panellists each of whom offered a unique perspective on the impact of Brexit from their respective fields of expertise. Members of the audience, many of whom hailed from different European countries and/or represented companies with a global or pan-European footprint, also passionately engaged with the panel, offering their own thoughts on both the issues and possible outcomes.

There was a general consensus that negotiating Brexit and future trade deals between the EU and UK would be complex not least because negotiating positions will be influenced by factors beyond simple economic considerations. The mood however was generally positive with all expressing a hope for constructive discourse leading to a trade agreement or at least an investment agreement providing states and foreign direct investors with effective dispute resolution mechanisms.

The session was, somewhat reluctantly, brought to a close, allowing panel members and guests to enthusiastically continue the conversation and debate over networking drinks on Norton Rose Fulbright’s terrace overlooking Tower Bridge. Thank you to all who participated in this thought-provoking evening.


Cara Dowling, Senior knowledge lawyer, Norton Rose Fulbright, London

What’s the value of investment treaties?

by Dr. Dominic Beckers-Schwarz, Lawyer, Paris

 

On 7 March 2017, one day after the OECD Global Forum on International Investment, over one hundred stakeholders from businesses, trade unions, academics and OECD member states gathered for the one-day “3rd OECD Annual Conference on Investment Treaties”. The conference addressed issues concerning “evaluating and enhancing outcomes of investment treaties”.

How to measure the societal costs and benefits of investment treaties?

Following the previous day’s call for a new globalization narrative, the OECD opened the first conference panel by addressing the need to measure the societal costs and benefits of investment treaties.

Academics first explained the challenges of measuring the effects of investment treaties. While it may be easy to measure the economic exchange between two states, such a quantification is limited to bilateral interactions and does not necessarily address the global cross-fertilization of today’s investment treaties. The panel expressed doubt regarding the possibility of measuring in figures the societal costs and benefits of, for example, investor-state dispute settlements (ISDS) and the political benefits of depoliticizing international investment disputes.

The panel turned to the, sometimes unwritten, fundamental goal of international investment treaties—depoliticizing investment disputes and enhancing international investment flows through clear, stable and enforceable investor rights—a sort of rule of law codification.

But international investments occur frequently, even where no international investment treaties exist. International investment agreements often are not part of national investment promotion programs. However, smaller states especially see the need to conclude investment treaties to enhance cross-border investment.

When an NGO representative asked whether ISDS could cause populist resistance, due to misuse of the system, panelists denied the possibility of potential abuse of ISDS through cherry-picking. Costs of investment arbitration procedures and anti-treaty-shopping clauses in international investment treaties would prevent misuse of the system.

In sum, academics and government officials from OECD and non-OECD countries agreed that the connection between international investment treaties and economic dynamics needs continuing assessment. Further work includes defining more standardized approaches to measuring the effects of investment treaties. The OECD could be an optimal organization to conduct a cost-benefit analysis.

In my view, that governments are seeking out careful analysis of the costs and benefits of the investment treaty approach together is a positive sign to continue and enhance global cooperation in responsible investment policy.

Joint government interpretation of investment treaties—achievements and obstacles

The second panel addressed the topic of governments jointly interpreting international investment treaties in situations where no treaty clause permits the governments to do so (unlike NAFTA).

In general, the panel viewed earlier interpretations as better and more authoritative, since the later an interpretation, the more it may look like a hidden amendment.

Some state representatives explained that joint interpretations are a good way to avoid costly, lasting and complicated renegotiations. Participants mentioned fair and equitable treatment (FET) as a good joint interpretation example. Joint interpretations within the boundaries of the Vienna Convention of the Law of the Treaties might, for example, clarify or adjust an international investment treaty’s broad standards. Evolving views on what international investment treaties should address and how they should function lead to the need for such interpretations.

Another approach to enhancing the certainty and predictability of international investment treaties is a joint interpretation of certain investment treaty standards at the time of the treaty’s conclusion. For example, several provisions of CETA are subject to a joint interpretative instrument in CETA’s annex, which the parties agreed on at the time of signature. Such an expression of the parties’ intent might ensure greater clarity. However, conference participants cautioned that such joint interpretations must be clearly worded, because bad drafting could inspire further confusion rather than clarifying treaty standards.

Discussion participants further agreed that the non-disputing party of a treaty should always be informed about interpretations made by the disputing parties. Some provisions, namely Art. 5 of the UNCITRAL Rules on Transparency in Treaty-based Investor State Arbitration, even enable the non-disputing party to intervene in interpretations, such as by attending the hearings.

Panel members also expressed their interest in working on a plurilateral basis when interpreting standard investment treaty clauses. They saw this as the only way to maintain a common understanding of what an investment treaty covers.

Two participant questions especially showed the need for further work on the topic: (1) How far can a joint interpretation go, and when does it turn into an amendment? (2) As of when is a joint interpretation valid: the moment of the conclusion of the treaty or the moment of the formation of the joint interpretation?

In my view, joint interpretation can be a useful method of clarifying the contracting parties’ intent. However, retrospective joint interpretations might lead to back-door amendments, exceeding the reasonable bounds of the treaty. Further work in this area might seek to establish a clearer understanding of the barrier between legitimate interpretation and unwanted amendment and the impact of such a delineation in the field of international investment law.

Enhancing investment treaty outcomes and addressing globalization concerns

Though shorter in time, the closing panel drew on the Global Forum’s emphasis on “better” globalization from the day before and linked it to the discussions of this conference. Among international organizations—represented in this panel by UNCTAD and OECD—government representatives and NGOs, there is broad consensus on the necessity of further international cooperation and the global exchange of goods and investments. But ideas of whether the system is sufficiently inclusive, or how to make it more inclusive, still differ. The question, how to access the exact societal costs and benefits of these treaties showed the need for further work.

The panel showed, that OECD and UNCTAD both do substantive work on the topic and continue to do so by especially by reviews, reports, analysis and statistics. Governments endorse that work, since it is an important basis for their politics. NGOs use it to point out what may be improved in their view. This OECD conference gave governments as well as NGOs an opportunity to exchange their views on what the problems are and how to tackle them.

In my view, the OECD’s work—especially on topics like inclusive growth and responsible investment—can help promoting a form of broadly beneficial globalization in the investment context and in general. Let’s not ask whether globalization is crumbling away; let’s work on a globalization which fits everyone’s needs.

ICC: Policy Statement Foreign Direct Investment

The ICC Commission on Trade and Investment Policy has just issued a Policy Statement on Foreign Direct Investment arguing the necessity of FDI and of ISDS mechanisms for ensuring economic growth in our global society.

Investment, including foreign direct investment (FDI), plays an important role in determining a country’s economic prospects. ICC strongly supports FDI as an effective tool to foster economic growth and sustainable development, and calls on governments to both maintain and strengthen investment protection and promotion agreements.

In the short and medium term, this can be don through high-standard bilateral and regional investment agreements, and in the longer term through an equally high-standard multilateral framework on investment. Investment agreements should continue to include strong dispute resolution provisions, through investor-state dispute settlement (ISDS) with independent proceedings to settle investment disputes.

The full document can be consulted here.

Report on EFILA’s Annual Conference

by  Blazej Blasikiewicz and Juan Pablo Valdivia Pizzaro

Maison du Barreau, Paris

February 5th 2016

I. Introduction

The European Federation for Investment Law and Arbitration (EFILA) set out for a promising year with its Inaugural Conference in London in January of 2015. Last year proved to be full of notorious developments in the area of investment arbitration, especially as the TTIP negotiations and proposals evolved and materialized regarding the implementation of specific Investor State Dispute Settlement (ISDS) mechanisms. The ensuing months were characterized by a rich and often polarized debate on both specific aspects of investment arbitration and on the fundamentals, nature and aims of ISDS mechanisms.

In this context of agitated waters and contrasting ideas, once again EFILA brought together world-class dispute resolution practitioners, prominent arbitration experts, European government officials, leading scholars and representatives from market participants and international organizations in its 2016 Annual Conference entitled “Investment Arbitration 2.0?” which took place on February 5th, at La Maison du Barreau, in Paris.

The framework in which ISDS is being argued is characterized by controversy, heavy criticism and an imperative necessity for an open debate and innovative ideas. Therefore, the venue served as a meeting point for such a wide array of stakeholders to join in an analytical assessment of ISDS and exchange views on the many challenges and opportunities of investment arbitration. In doing so, not only some new features of investment arbitration regarding the EU policy on International Investment Agreements were discussed, but the speakers and participants engaged in a thought-provoking debate on diverse topics such as the pros and cons of investment arbitration, the rule of law and other complex issues such as transparency, states’ right to regulate, protection of property rights and democratic deficits.

This stimulating discussion was led by four panels, which critically explored some of the roots and primary issues of investment arbitration and presented provocative views on several of the most up-to-date issues on ISDS, with the objective of setting the ground for an improved and more robust framework of investment arbitration in the future.

II. Panel 1: Setting the scene: pros and cons of Investment arbitration

Prof. Dr. Gerard Meijer, Partner and Head of Arbitration team at NautaDutilh

Andrew Cannon, Partner at Herbert Smith Freehills LLP

Prof. Dr. Hans van Houtte, President of the Iran-United States Claims Tribunal

Prof. Dr. Robert Howse, Professor of International Law, New York University School of Law

Marie Talašová, Head of International Legal Services Department, Ministry of Finance, Czech Republic

Kamil Zawicki, Partner at Kubas Kos Galkowski

The first panel, acknowledging the importance of taking a step back in order to examine the roots and analyse some of its main traits, explored the pros and cons of investment arbitration. A refreshing view of its history and development was provided through the evolution of the International Centre for the Settlement of Investment Disputes (ICSID). Important emphasis was given to the revolutionary characteristics the system presented when it was introduced – it made the general rule of international law apply also to domestic investor-state contracts and it disconnected arbitration from domestic law – and to some remarkable victories that the system has achieved. The speakers recognized that many current features of the system represent an arguably unexpected feat, such as its importance for international law, the success of the system in relation to the number of cases brought to it, and its adaptation to a truly global era where the burgeoning number of BITs has shaped much of its evolution. In this respect the panel gave an interesting insight regarding ICSID being created primarily as an op-in system to be included in contracts between States and investors, and that it was not until the mid 1970s that BITs began including ICSID clauses. This practice has become standard and one of the main sources of ICSID arbitration.

However, it was also acknowledged that the system faces several important challenges, such as the trend to move towards broader regional economic agreements, the higher number of stakeholders involved (such as NGOs and supranational or regional organizations), new states’ policies regarding investment arbitration and foreign investment, and a growing opposition from different sectors of society. These issues, among others, have lead several States – such as Indonesia, South Africa and more than one South American country – to dramatically reassess their positions on BITs due to the perceived adverse impact that certain matters – e.g. treaty and forum shopping, lack of transparency, limitations to States’ right to regulate on issues of public interest and high costs of the proceedings – have in their internal affairs. This trend of criticism has also been materialized in the adoption of Model BITs by different countries, which reflect States’ policies regarding arbitration and foreign economic investment.

Speakers analysed the issue of contradictory case law in investment arbitration and the differences in the basis and instruments upon which such decision are made. The disparities among the wording or context of certain BITs was presented as one potential explanation for the different interpretations that arbitral tribunals have on arguably similar issues. The panel also put forward the view that time is of essence in the clarification of tendencies that constantly arise in investment arbitration.

There was agreement as to the importance of reforms regarding certain standards of protection, the controversial nature of the differentiated treatment between domestic and foreign investors, and the relevance of the wording of the related instruments and the role of states in shaping their content. Nevertheless, pertinent questions were raised as to the effectiveness of current attempts to solve part of the problem, like the establishment of appeal mechanisms in ISDS. In this regard, the limited success of somewhat similar mechanisms (such as the ICSID annulment mechanism) raises valid doubts as to the effectiveness of appeal bodies or instances within the framework of ISDS.

 The panel also addressed the criticisms as to the lack of transparency and rising costs in investment arbitration, the alleged pro-investor bias and the role of the media, both from the arbitration practitioner’s and the state’s point of view. The relationship between investment arbitration, the media and public opinion, and the suggested lack of empirical evidence to support a claim for pro-investor bias gave rise to an encouraging debate among the panel and the audience. The speakers pertinently pointed out the necessity of embarking upon reforms that would not lead to “killing” a system that, being far from perfect, has proven to be of vital importance.

III. Panel 2: Rule of Law and Investment Arbitration: promoting or holding back its advancement?

Prof. Dr. Loukas Mistelis, Clive M Schmitthoff Professo of Transnational Commercial Law and Arbitration at the Queen Mery University of London

Sir David Baragwanath KNZM QC, Appellate Judge and former President of the Special Tribunal for Lebanon

John Gaffney, Senior Associate, Arbitration at Al Tamimi & Company

Dr. Richard Happ, Partner at Luther LLP

Barton Legum, Head of Investment Treaty Arbitration Practice at Dentons

Dr. Patricia Nacimiento, Partner at Norton Rose Fulbright LLP

Prof. Dr. Mathias Wolkewitz, Head of Legal Affairs, Tax and Insurance at Wintershall Holding

The second panel engaged in a fruitful discussion arising from the necessity of examining investment arbitration as a dispute resolution mechanism from three different – but equally important – perspectives: the point of view of the investors, the recipient state and the citizenship. The panel highlighted that the interplay among these actors is currently characterized by a growing gap, which is reflected in the public disquiet in seeing arbitration as an appropriate means for adjudication of issues relating to public interests. These concerns have echoed in specialized and reputable media, which has also championed the case against the necessity or convenience of using BITs at all. The panel advocated the importance of a prompt and adequate response from the investment arbitration system in order to bridge the gap between the ISDS mechanisms and the public interests from which it cannot be detached.

The panel also discussed the alleged thorny relationship between ISDS, the rule of law and public perception. Transparency, once again, was given a central role in the debate. However, the effectiveness of the mechanisms to achieve transparency was put into question, since their success is often related to the specific interests of the parties involved. Speakers also advanced views highlighting the power of the States and their influence on the media in order to impact public opinion. The current tension between the ISDS system, States and public perception was provocatively referred to as “BITs biting back”.

The panel also provided an enlightening historical account of the “international minimum standard of treatment” (IMST) as the predecessor of investment law and its protection mechanisms, as known today. The difference between standards of protection for foreign and domestic investors brought forward the complex and fundamentally undemocratic nature of investment law as a limit for state action. By putting the relationship between investment law, the IMST, state regulatory powers and the rule of law under the spotlight, a heated debate ensued as the panel presented the argument that the inherent undemocratic nature of investment law does not diminish its contribution to the rule of law. In this regard, the speakers raised an interesting comparison between the IMST, investment law and human rights, as setting the limits for sovereign regulatory power.

The panel also examined the tension between the alleged lack of legitimacy of investment arbitration and its position within a system of check and balances governed by general and legitimate legal rules. Speakers underlined the systemic need to have effective foreign investment protection, the fact that investment treaties increase legal certainty, that investment arbitration is not placed in a vacuum beyond general rules of law and the importance of applying the rule of law as an equal standard to all parties involved. In addition, they recognized the contribution of investment arbitration in levelling the playing field and ultimately upholding the rule of law.

IV. Panel 3: Evolution in dispute resolution: third party funding, the role of secretaries and security of data in investment arbitration

Dr. Daniella Strik, Partner at Linklaters LLP

Dr. Andrea Carlevaris, Secretary General, ICC International Court of Arbitration (Paris) and Director of Dispute Resolution Services of the ICC.

Anya George, Senior Associate at Schellenberg Wittmer Ltd.

Charles Nairac, Partner at White & Case LLP

Prof. Dr. Stavros Brekoulakis, Professor in International Arbitration and Commercial Law, Queen Mary University of London.

Jurriaan Braat, Partner at Omni Bridgeway

 

The following panel looked at several specific issues in investment arbitration. On third party funding, the panel carefully pointed at the main challenges this issue posts regarding matters of confidentiality, conflict of interests, security for costs, and the question of who ultimately owns the claim and makes the decisions of the funded party. Questions were raised by the speakers and participants as to the proper approach to be taken in relation to a party that is being funded on the merits, the presumptions that may arguably be placed on the funded party’s ability to pay, the difficulty in the determination of the “real party” in the arbitration and the responsibilities to be placed on the parties to the proceeding. On the specific topic of providing security for costs, it was discussed if the existence of a third party funding arrangement should affect the outcome of an application for such security and if a presumption against the funded party could be validly placed regarding its potential inability to pay. It was recognized that the current general approach to the issue is to grant such application only in specific and extreme circumstances. It was acknowledged that the increasing number of parties that have sought or secured third party funding in investment treaty claims, the unregulated nature of this issue and the difficulty to determine the content and the extent of disclosure obligations on the funded party are pressing matters in investment arbitration.

Regarding the issue of arbitral secretaries, it was recognized that the main debate revolves around the issue of tasks and duties that secretaries may fulfil without interfering with the nature of the obligations placed on the arbitrators by the parties, often cited as intuito personae. The controversial issue of the core content and scope of the arbitrators’ mandate and the issues of parties’ expectations in relation to the conduct of the arbitration tribunal and the transparency in fulfilling its duties were addressed by the speakers as well. Reference was made to seminal articles on this issue (such as Partasides’ “The Fourth Arbitrator?”), and the importance of the distinction between the decision-making process (which would arguably not be a pre-defined matter of personal mandate) and the decision-making function (which would be much more closely related to the personal mandate entrusted upon the tribunal). Cultural differences between arbitral tribunals – and among the members of the tribunals themselves – were also given a place in the debate, an aspect often overlooked when analysing this issue. The panel underlined the importance of disclosure and strict supervision of the duties of the tribunal’s secretaries. The challenges that the notably large grey area in this topic represent, were also discussed by the speakers and the audience.

Finally, on the issue of data protection, the significant practical implications of the issue were argued and recognized by the panel. The main issues set forth in the debate related to transparency, data integrity protection and data manageability. Speakers encouraged the audience to engage in proper data protection techniques within the setting of investment arbitration despite the technical challenges that this may entail. Attention was drawn into the potential conflict between data protection, confidentiality and the right of free access to information in investor-state disputes.

V. Panel 4: Towards Institutionalization and Judicialisation. The Proposal for a Permanent Court

Dr. Erhard Böhm, Partner at Baier Rechtsanwälte

Yves Derains, Founding Partner at Derains & Gharavi

David Gaukrodger, Senior Legal Advisor, Investment Division, OECD Directorate of Financial and Enterprise Affairs

Dr. Nikos Lavranos, Secretary General of EFILA

Andrea Menaker, Partner at White & Case LLP

Yasmin Mohammad, Senior Counsel at Vannin Capital

 

The final panel analysed one of the hot topics of investment arbitration nowadays in the European arena. In an energizing fashion and through a more informal and open debate among the speakers and the participants in the audience, the panel set out to touch upon many of the issues related to the EU Commission’s proposal for the creation of the Permanent Court for ISDS. The panel put forward a critical analysis of the structure, traits and alleged objectives and benefits of the creation of such a Permanent Court; of the interplay between the proposed system, EU law and the Court of Justice of European Union; and of the effectiveness of the proposed alternative in solving the problems facing the ISDS system.

The problem of recognition and enforcement of awards rendered under the proposed system was critically assessed, including the potential problems that such decisions may face in being recognized as “awards” under and as referred to in the New York Convention of 1958. The panel and the participants also examined the interplay between the proposed alternative and the ICSID system, especially in relation to issues of jurisdiction. In this regard, the proposed mechanism was elegantly criticised as a “medicine being given to the wrong patient”.

The panel also referred to a common perception of an alleged trend of investment arbitration not truly resembling arbitration after the several significant changes that the system has undergone. The perceived standardization, judicialization and lack of adaptability may be seen as drawbacks by investors and may decrease the amount of trust that economic agents may be willing to place in the system.

Also, questions were framed regarding the legitimacy of such a drastic change in the way of dealing with potential investment claims, specifically arguing that a possible cause for such significant deviation could be found in the shift in the position of several countries from usual “claimants” to potential “defendants” in investment disputes. Speakers and the audience advanced provoking arguments on the financial incentives that the judges of such court would have, as well as on possible issues on conflict of interests, political independence, level of required expertise and the challenge of legitimately having both investors and states resorting to a system that enjoys the benefit of their confidence.

VI. Conclusion

The controversial nature of many of the topics presented and discussed during the Conference gave rise to a rich variety of opinions, positions and further debates on related issues. The diversity in the background of the speakers and the participants during the session gave the all parties the opportunity to argue and analyse the most salient matters in investment arbitration from a wide range of angles. Speakers and participants agreed on the importance of strengthening the investment arbitration’s legal framework through properly founded and necessary reforms, of assuring a more transparent relationship between ISDS system and the citizenship, of reaffirming investment arbitration as a vital means for upholding the rule of law and of recognizing and confronting the challenges and drawbacks of the system that have lead to a widespread emergence of social opposition and resistance.

The current state of affairs regarding the future of investment arbitration in the European Union made it important to go back to the fundamentals of investment arbitration with a critical view in order to thoroughly assess the new trends, latest proposals and pressing matters regarding ISDS. The legitimacy and effectiveness of the proposal of the EU Commission regarding the Permanent Court under the TTIP were heavily debated and the complex relationship between investment arbitration, states’ regulatory powers, public opinion, transparency and the rule of law has proven to be a fertile field for further debate and much-needed reforms. Despite the many different positions confronted during the debate regarding the current attempts to modify the framework of investment arbitration, it was generally agreed that amendments must take place in order to reinforce the position of investment arbitration as a modern, legitimate and efficient means for the resolution of investor-state disputes.

The quality and depth of the debate during the session, the presence of many of the top investment arbitration experts, practitioners and authorities, and the wide array of topics covered, keep placing EFILA at a unique position as an open and stimulating meeting point for future debates that are to shape the policies that will impact the ISDS system, its evolution and improvement in the years to come.