The Academic Forum for Investor-State Dispute Resolution was established through the University of Geneva (incidentally, an institutional partner of USydney) to provide input from (now around 120) professors expert in international investment law, mainly for the ongoing UNCITRAL deliberations into potential reforms of the ISDS system. Six working groups and related “Concept Papers” were published in April 2019, on topics that have attracted growing concern from the public and now various policy-makers. For each of the six topics, papers succinctly considered how particular concerns might be addressed by further targetted improvements to ISDS, the addition of an appellate review mechanism, the adoption of multilateral investment court (along EU lines), or abandoning ISDS (relying on domestic courts and/or inter-state arbitration).
Professors Chester Brown and Luke Nottage at USydney join with three others from Australian universities on the Forum. Chester co-chaired with Federico Ortino the working group (including Julian Arato) that wrote the paper addressing possible inconsistency or incoherence in ISDS awards, while Luke contributed (with Chiara Giorgetti and others) to the paper on independence, impartiality and neutrality of arbitrators or other adjudicators of international investment disputes. Below we reproduce (without hyperlinks) the introductions to short summaries of each paper written for the European Journal of International Law blog.
“Independence and Impartiality of Arbitrators in Investor-State Arbitration: Perceived Problems and Possible Solutions“
Author: Chiara Giorgetti
The principle that adjudicators must be independent and impartial is at the core of any adjudicatory mechanism, whether domestic or international, and is a basic principle of the rule of law. It plays an important role in Investor-State arbitration (ISA), where arbitrators typically sit for a short amount of time in specific cases and are not career judges.
The requirements that arbitrators be independent and impartial are usually found in the applicable rules of procedures to the arbitration, including UNCITRAL Arbitration Rules (2010) and the ICSID Convention.
However, concerns over the possible or perceived lack of independence and impartiality of arbitrators have been raised by diverse ISA stakeholders, including parties and the general public. In this context, this post first identifies the issues that may rise concerns about the independence and impartiality of ISA arbitrators. It then explains how some of the reform proposals under possible consideration at UNCITRAL would or would not solve the identified problems.
“Lack of Consistency and Coherence in the Interpretation of Legal Issues“
Author: Chester Brown, Federico Ortino and Julian Arato
This post is the product of the work of the UNCITRAL Academic Forum’s (own) “Working Group 3” whose focus is on the lack of consistency and coherence in the interpretation of legal issues. Lack of consistency has been identified in UNCITRAL Working Group III (WGIII)as one of the concerns with regard to the current system of investor State dispute resolution.
In the view of WGIII, the most glaring cases of unjustifiable inconsistency are cases “where the same investment treaty standard or same rule of customary international law was interpreted differently in the absence of justifiable ground for the distinction” (UN Doc No A/CN.9/935 (14 May 2018), para. 21). Other apparent inconsistencies may be wholly justifiable, where tribunals are interpreting similar, but materially different treaty texts – or interpreting the same treaty in relation to materially different facts. Usually, however, inconsistencies in the case-law fall somewhere between these poles. Indeed, there may be problematic inconsistencies where tribunals make too much of formal differences in treaty texts, where different interpretations may nevertheless prove materially unjustifiable. Not every difference in drafting across thousands of investment treaties necessarily signals a divergent meaning.
Rather than focus on only the glaring cases, we have sought to push further into analyzing the incidents, causes, and varied harms produced by discrete inconsistencies in the ISDS case law. In approaching our task, we have focused on three discrete issues:(1) the obligation to provide full protectionand security (“FPS”); (2) the treaty / contract relationship; and (3) the scope of the most-favoured-nation (“MFN”) clause. In determining whether there are unjustifiable inconsistencies with respect to these issues, we have explored the following questions: (a) what is the inconsistency?; (b) what is the cause of that inconsistency?; (c) what is the harm being caused by this inconsistency?; and (d) what is the solution for this inconsistency (if one can be identified)?
We have found that a fruitful distinction can be drawn between two kinds of unjustifiable inconsistencies: inconsistent interpretations of basic substantive obligations (e.g. FPS) and inconsistent interpretations of more structural “rules of the game” (e.g. MFN and the treaty / contract issue). The former phenomenon can be problematic, but such inconsistencies are to some extent endemic to any legal system. The life of the law is, everywhere, one of change and development. Moreover, such inconsistencies are relatively manageable. For example, should States worry about inconsistent interpretations of FPS, they can clarify the meaning of such treaty terms through treaty drafting, amendment, and/or joint interpretations. Governments and investors can also, in theory, manage such inconsistencies through private agreement, by contracting for what they consider important.
Unjustifiably inconsistent interpretations of the rules of the game are more problematic, insofar as they create severe uncertainty and unpredictability inthe making of investments and for national regulatory choice. Where there is uncertainty as to whether States and investors can contract around investment treaty rules, efficient private ordering is off the table, leaving price as the best lever to reduce uncertainty. Similarly with MFN, uncertainty about whether such clauses allow importation of substantive treaty rules from treaties with third-parties, procedural rules, or neither, creates severe ex ante uncertainty for all parties about the nature and extent of the regime applicable to the investment. In both cases, uncertainty as to the rules of the game creates harms ex ante and ex post. To the extent that States and investors are aware of these problems, they can lead to bargaining and price inefficiencies in the making of investments. To the extent they are unaware, such inconsistencies can lead to unfair and unjustifiable surprise ex post.
For the purposes of this short blog post, we draw out this distinction by sketching our analyses of inconsistencies in the case law on FPS, treaty / contract, and MFN.