Negotiators working on multilateral reform solutions to ISDS reconvened in Vienna in January 2020 to resume their 38th session, holding talks around the possibility of an appellate mechanism, the benefits and challenges of setting up a permanent court on investment issues, and the process around choosing arbitrators and adjudicators.
The meeting, held under UNCITRAL’s Working Group III on ISDS Reform, built on earlier discussions held in Vienna in October 2019. It is part of the third phase of a years-long process to identify concerns involving ISDS and possible reform options. According to an advance copy of the meeting report, the discussions around the above-mentioned reform options were “preliminary” in nature, looking to better understand their potential merits and pitfalls before going into further detail.
On the subject of the appellate mechanism or a stand-alone review mechanism—the reform option that gained the most attention at the meeting, according to some observers—negotiators considered the impact on how long cases take and what they currently cost. They also asked whether this mechanism could lead to a more coherent or more fragmented system, and whether having one body tasked with cases under multiple treaties could “result in endowing too much interpretative power to such a body.” These questions will be considered again at a later stage, pending further discussion on the “main elements of an appellate mechanism.”
Other points raised on the appellate mechanism included the nature and scope of appeals that it would consider, such as how extensive the grounds would be for appealing a tribunal decision, and what decisions might be eligible for appeal and what actions an appellate mechanism could take.
The subject of an appellate mechanism will be examined in more detail in subsequent working group sessions, with the UNCITRAL Secretariat tasked with preparing a table that would capture the issues involving “the nature, scope, and effect of appeal” and related draft provisions. The other option for the secretariat, aside from a table, would be to name which considerations require answers from the working group going forward.
Another open question is how decisions taken by “a permanent appellate mechanism or a standing first-tier body” might be enforced, and what this would mean for those states that do choose to take part in such mechanisms, as well as those which do not. How this enforcement might work relative to the systems currently in place, such as the ICSID Convention and New York Convention, was also raised, among various other questions. (Editor’s note: Professor N Jansen Calamita discusses these matters in an Insight published in this issue of ITN: “UNCITRAL Working Group III Debate: Enforceability of awards by an appellate mechanism or an investment court under the ICSID and New York Conventions.”)
Regarding the other issues tackled in Vienna in January, one key issue considered was how much a permanent court or MIC might cost, along with where this money may come from and what financial demands this could place on developing states in particular. As with the appellate mechanism, the UNCITRAL Secretariat has been tasked with analyzing possible options and preparing related documents for the working group to consider.
Meanwhile, the discussion on adjudicators and arbitrators dealt largely with whether to set up a “roster of qualified candidates and the setting up of a permanent body composed of full-time adjudicators,” looking at questions such as party appointment and how it affects issues of independence and impartiality, as well as what lessons could be drawn from the arbitral institutions already in place. If a permanent body of full-time adjudicators is established, where it may be located and hosted remains an open question, among other issues. (Editor’s note: This issue of ITN includes as an Insight the full text of the intervention made by Professor Jane Kelsey on these matters at the meeting in Vienna: “Diversity of Adjudicators in a Reformed ISDS Regime: Is the WTO a good model for developing countries to follow?”)
The UNCITRAL Secretariat has been asked to conduct further analysis on all issues raised under this agenda item, including the interaction of these options with other issues already under consideration, as well as how potential reforms could be integrated into current treaties “or any other relevant instrument.”
It was also acknowledged that the comments and suggestions made on either option (ad hoc or permanent appeal mechanism, or MIC) do not imply a prior or definitive choice in favour of any option. Indeed, participants recognized that there several issues that are common to all of the options discussed, though these could have very different implications depending on the option involved.
The next Working Group III session was slated for March 30–April 3, 2020, in New York, but has since been postponed due to the COVID-19 situation. An annotated provisional agenda is available online, together with a series of secretariat documents and government submissions. The secretariat documents cover dispute prevention, mitigation and mediation; treaty interpretation by state parties; security for costs and frivolous claims; multiple proceedings and counterclaims; and a multilateral instrument on ISDS reform, all of which are on the meeting agenda, together with government submissions.