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.

Ensuring Equitable Access to All Stakeholders: Critical Suggestions for the MIC (EFILA Submission to the UNCITRAL WG no. 3 on ISDS Reforms)

EFILA has recently submitted its suggestions to the UNCITRAL Working Group no. 3 on ISDS Reform. The entire document can be found here. An extract can be read below.

The European Federation for Investment Law and Arbitration (EFILA) believes that no discussion about the reform of the investor-State dispute settlement (ISDS) system should occur without taking stock of the interests of all stakeholders. This is particularly true for the proposal for a Multilateral Investment Court (MIC), which is currently being discussed and negotiated in UNCITRAL Working Group III. Without the active participation of all stakeholders (i.e. all potential users of the MIC) – including investors and their legal counsel – any ISDS system will lack legitimacy.

With this in mind, EFILA submits the following, non-exhaustive suggestions for ISDS reform and, in particular, for the MIC proposal:

The Appointment & Selection of MIC Judges: Central to the ISDS system’s ability to effectively resolve disputes between investors and States is the confidence of all stakeholders in their decision-makers. For this reason, EFILA believes that investors should continue to have a direct and indirect say in the choice of their decision-makers. The MIC should:

  1. Let a college of representatives chosen by the investors, as users of the system, participate in choosing candidates for the MIC;
  2. Give all stakeholders a right to strike out a given number of judges assigned to their panel; and
  3. Allow all stakeholders to retain the right to challenge MIC judges on the basis of clearly defined standards before an independent body.

Consistency of MIC Decisions: EFILA agrees that consistency in legal decisions is an important element of any well-functioning dispute resolution system. Consistency, however, must be objective. It cannot be used as a means to “correct” awards that arrive at unwelcome results. Any responses to consistency must respect the rule of law and the equality of the parties.

Accordingly, any final design of the MIC should:

  1. Not allow joint binding interpretations with potentially retroactive effect;
  2. Avoid unnecessarily reducing the material scope of the standards of investment and investor protection; and
  3. Limit exclusions of certain types of investors, investments and sectors to only to the
    extent objectively and reasonably necessary.

Access To Justice For SMEs: Small and medium sized enterprises (SMEs) are an integral part of the global economy. Any proposed reform of the ISDS system cannot disregard SMEs or discourage them from making full use of the ISDS system. The MIC, therefore, must include structural and systemic solutions that effectively ensure access to the system for SMEs. These include:

  1. Adopting cost-efficient rules that promote access to justice by SMEs;
  2. Establishing a process that informs and educates SMEs about the ISDS system and helps them to assess their claims; and
  3. Creating a financial support system for accessibility to the ISDS system for SMEs.

Enforcement of MIC Decisions: The application of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) to MIC decisions (even if just on an interim basis) raises serious potential obstacles to the enforceability of those decisions. Further thought should be given to ensuring that MIC decisions will be enforceable.

These suggestions, EFILA believes, will encourage confidence from all stakeholders in the MIC system and thus make the MIC a fair dispute settlement system for all users.

The entire document can be found here.

The first steps towards a Multilateral Investment Court (MIC)

by Prof. Nikos Lavranos, Secretary-General of EFILA

 

On the instigation of the EU, the UNCITRAL Commission adopted a broad mandate for a Working Group to:

  • identify and consider concerns regarding ISDS;
  • consider whether reforms are desirable in light of the identified concerns;
  • if the Working Group were to conclude that reform is desirable, to develop and recommend any relevant solutions;

This mandate was adopted after a heated debate in which the USA and Japan were the strongest opponents to such a mandate, while the EU, Canada, Mauritius, South Africa and several Latin American countries vigorously pushed for such a mandate.

The debate reflected the different views as to whether, and if so, to what extent the ISDS system needs to be reformed or even preferably replaced by a permanent multilateral investment court (MIC).

Eventually, all present states accepted to give UNCITRAL such a broad mandate.

Although, the proponents of this mandate repeatedly reassured each other that the outcome of the work of the UNCITRAL Working Group should not be prejudged and that all options should be on the table, it was obvious for everybody in the room that the only outcome will be the creation of the MIC.

Indeed, the template for the negotiation process and draft text for the MIC will replicate the ‘Mauritius Convention approach’, which was successfully adopted for the UNCITRAL Transparency Rules for investment treaty arbitrations adopted in 2014 and which will enter into force in October 2017. A detailed report by Gabrielle Kaufman-Kohler and Michele Potestà in which they describe how the Mauritius Convention approach could serve as a model for creating the MIC provided the basis for the discussion and the eventual adoption of the mandate.

The ‘Mauritius Convention approach’ allowed for an extraordinarily fast negotiation process and contains a flexible opt-in menu for the contracting parties. Accordingly, states are free to select whether or not the UNCITRAL Transparency Rules will also apply for disputes initiated under pre-existing BITs or only for BITs which entered into force after the Transparency Rules become applicable. In addition, the unusual low requirement of only 3 ratifications for the entering into force of the Mauritius Convention is another feature, which allows for turning a negotiated text into a formally applicable legal instrument.

Considering the fact that work on the MIC is slated to start already next November and assuming that the ‘Mauritius Convention approach is’ followed, a draft text for the MIC could be on the table by the end of 2018, so that the first signatures could be put under such a text in 2019, making the MIC a reality by 2020.

In sum, the EU has successfully managed to instrumentalize UNCITRAL for its MIC idea.

Only time will tell how much traction there actually will be among states for creating the MIC.

The debate on the mandate showed that there is not yet consensus for the MIC throughout the world. While the EU, most EU Member States, Canada, some Latin American countries and South Africa seem very eager to create the MIC, in the Asian and Pacific region there seemed to be considerably less appetite. In particular, Japan, China, Singapore, South Korea, NZ and Australia, but also the USA were much more cautious and less convinced about the urgent need to replace the current ISDS system with something completely new, which may very well create new legal and policy problems.

 

Multilateral Investment Court: A Realistic Approach to Achieve Coherence and Consistency in International Investment Law?

Shiva Ghahremani (Konrad & Partners)

Ivan Prandzhev (Konrad & Partners)

Against all odds, the idea of creating an investment court to replace arbitration tribunals hearing disputes between investors and states has so far made a remarkable career. It has been only 3 years since the idea of an international investment court surfaced in EU Trade Commissioner Malmström’s speech during the meeting of the International Trade Committee of the European Parliament, in which the idea was referred to as a “medium term objective”. Since then, it was transformed into what we know as the Investment Court System (ICS) and has made its way into EU’s agreement with Vietnam, as well as the negotiations on a Transatlantic Trade and Investment Partnership with United States. It has also attracted significant public attention by replacing the originally envisaged investment arbitration tribunals in the EU’s Comprehensive Economic Trade Agreement with Canada (CETA).

While CETA has not passed the tests of the 28 Member States’ parliaments yet, the European Commission is ready to move its investment court to the next level and is setting the stage for its multilateralization. The introduction of a Multilateral Investment Court (MIC) was the subject of an informal ministerial meeting hosted by the EU and Canada at the World Economic Forum in Davos earlier this year. The EU Commission has launched a public consultation to gather opinions from companies, scholars and civil society groups on this subject until the 15 March 2017.

The purpose of the MIC is to do away with the ad hoc nature of the current investor-state dispute settlement system, introducing a standing court with a permanent seat consisting of a first instance and an appellate body with highly qualified state-appointed arbitrators to serve at both tribunals.

The Commission does not lack ambition. A look into its “Inception Impact Paper” shows that its goal is to align the dispute settlement systems available under the existing EU Member States’ BITs and the ECT with the policy being negotiated in EU level trade and/or investment agreements. To put this into perspective, there are around 1400 EU Member States’ BITs and this represents a substantial portion of the overall 2329 BITs and 297 treaties with investment provisions currently in force according to the UNCTAD Investment Policy Hub data. If fully implemented, the Commission’s proposal may result in the most significant reform of investor-state dispute settlement since the ICSID Convention entered into force in 1966.

Even more remarkable is that this revolution is being announced at a time in which the original backlash against investment arbitration that has been there for a number of years is now turning into an outright rejection of multilateralism and globalization. Today’s political environment appears significantly more hostile than back in the period of 1995 to 1998, shortly after the coming into force of the Uruguay Round and the creation of the WTO when the last great attempt to reform investment protection failed with the end of the negotiations on the Multilateral Investment Agreement.

However, the domestic and international political problems are not the only challenges before the Commission’s MIC proposal. The Court of Justice of the European Union (CJEU) has yet to decide the faith of the European investment protection itself since it showed in its Opinion 2/13 of 18 October 2014 that it would not tolerate other courts and tribunals encroaching its exclusive jurisdiction to interpret and apply European Union law. While the law applied by arbitral tribunals is usually derived from investment treaties and trade agreements with investment provisions, domestic European Union law may sometimes be considered as part of the relevant “factual matrix” [Ioan Micula, Viorel Micula and others v. Romania (I), ICSID Case No. ARB/05/20] and require interpretation.

In addition to this, the ICS has not yet been put to the test of enforcement. Obviously, any treaty underlying the proposed MIC will have to ensure enforcement in all its signatories as CETA does for the EU and Canada. However, what will be the probable response of the enforcement authorities in third countries to the question whether the decisions rendered by a MIC, modeled on the ICS, are indeed arbitral awards enforceable under the New York Convention or the ICSID Convention? Even though recent publications [Reinisch, in J Int Economic Law (2016) 19(4): 761 et seq.] suggest parties will be able to rely on the New York Convention, the question will remain hanging as a sword of Damocles over the MIC initiative until coherent case law is established.

The purpose of the CJEU’s exclusive jurisdiction is to guarantee the coherent application of the EU law. Coherency also appears to be one of the central objectives which the European Commission is seeking to achieve with its MIC initiative. In its Inception Impact Assessment, the European Commission points at inconsistencies in interpretation – sometimes of the very same provisions in the same BITs – which naturally results in unpredictability. In addition to all the reasons why certainty is a highly desirable feature for any legal system, the lack of certainty in the field of investment arbitration needs to be seen in the light of criticism often voiced with respect to the substantive standards of investment protection as being vague. Vagueness has the potential to increase the regulatory chill on governments beyond what was originally envisaged in the treaty. The European Commission, therefore, is seeking to allow coherent case law to emerge under the guidance of MIC’s Appellate Tribunal.

The focus on the debate on the word “court” makes us forget that, in the past, different and more effective solutions had been proposed to address the issue of incoherence. Such is the mechanism of “preliminary ruling” which would allow arbitral tribunals to avoid divergent interpretations ex-ante rather than engaging in a complex and cumbersome appellate procedure. Once faced with a fundamental issue of investment treaty law, the competent arbitral tribunal would be required to suspend the proceedings and request a ruling by a central and permanent body set up for this purpose. After such preliminary ruling on the interpretation of investment law has been provided, the tribunal would apply it to the merits of the case pending before it. This solution is mainly modeled on the system of preliminary rulings which safeguard the uniform application of the European Union law and has been proposed for the domain of investment protection by Christoph Schreuer [Schreuer, Preliminary Rulings in Investment Arbitration, in: Appeals Mechanism in International Investment Disputes (K. Sauvant ed.) 207 (2008)].

None of the alternative policy approaches discussed in the Commission’s Inception Impact Assessment seems to include this option. Apart from the founding of the MIC, the paper addresses alternative approaches such as renegotiating the currently applicable BITs one by one, the creation of a permanent multilateral appeal instance and the introduction of an appeal mechanism into the ICSID Convention, which would require renegotiating it. Article 53(1) of the ICSID Convention expressly provides that “[t]he award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention”. The introduction of a mechanism providing for preliminary rulings, however, would be fully compatible with this provision and would leave the principle of finality of arbitral awards untouched. While suspending the arbitral proceedings until a preliminary ruling is provided would add to the time and costs of investment arbitration, this solution guarantees higher procedural efficiency than an appellate review of the award.

While the ambition of the European Commission deserves admiration even from those who may disagree with its proposed solutions and oppose the MIC initiative, a more moderate approach may prove more realistic and may come from a different place. The ICSID is accepting suggestions from members of the public as to how to amend its Rules. A decade ago, the process of updating the ICSID Rules took about two years and introduced third-party briefs and early dismissal of claims which are “manifestly without legal merit”. The introduction of a system of preliminary rulings may fit the size of a comparable reform, help investment arbitration achieve a long-desired coherence, ensure enforceability awards and address at least one of the European Commission’s concerns with respect to its Member States’ BITs.