Volume 11 - Issue #01 - January 2014 - 1

Table of Contents

» Introduction

» Chapter I - Setting the Stage for Reform

» Chapter II - Methodological Approaches

» Chapter III - Regional Experiences with ISDS

» Chapter IV - Strengthening the Role of States

- Section I - Treaty Interpretation

- Section II - Revising Treaty Language

- Section III - State-State Procedures and a Standing Investment Court

» Chapter V - Further Advancing the Reform of ICSID

» Chapter VI - An Appellate System

» Chapter VII - Investor-State Mediation

» Chapter VIII - Reforming From Within

TDM is supported by the IBA and CEPMLP

E D I T O R I A L

Introduction TDM Special issue on "Reform of Investor-State Dispute Settlement: In Search of a Roadmap"

Anna Joubin-Bret Avocat à la Cour

Jean E. Kalicki Arnold & Porter LLP

Introduction

International arbitration to resolve investor-State disputes has increased dramatically over the past two decades. Flows of foreign direct investment have skyrocketed, outgrowing trade flows in the mid-1990s. These flows have been accompanied by an exponential increase of the network of Bilateral Investment Treaties (BITs) and Free-Trade Agreements during this same period. But the growth in international investment agreements (IIAs) has brought a major expansion in the filing of claims.

Designed to depoliticize investment disputes and to provide a neutral and specialized forum to hear disputes arising between foreign investors and the host State of their investment, treaty-based investor-State dispute settlement (ISDS) has given rise to over 550 cases as of the end of 2013, and involved over 90 States as respondents. [1] With the first investment treaty case in 1994, the system established by IIAs is now reaching its adult years and lends itself to an assessment and considerations about the way forward.

The increase in the number of cases as well as the amounts at stake in several cases, and the use of ISDS mechanisms to challenge public policy measures taken by States in areas such as environment or public health, has generated a strong debate and identified concerns among a broad range of different stakeholders, usually framed by complaints about a perceived lack of legitimacy, consistency and predictability. Almost every State has its "horror case" that has crystallized discontent among authorities and elements of civil society who support broad discretion to regulate in the public interest. At the same time, investors are increasingly criticizing the system for lacking the qualities of predictability, efficiency and economy generally considered as among the key advantages of international arbitration.

In an Issues Note published in May 2013, the United Nations Conference on Trade and Development (UNCTAD), a UN think-tank leading the debate on investment policy issues, identified several concerns that have been repeatedly discussed in various fora, including the complexity of IIAs, the persistence of decisions perceived as infringing upon States' regulatory powers

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or awarding investors unrealistic or unfair damages,contradictions between arbitral awards leading toinconsistent interpretation of investment protectionstandards and unpredictability of outcomes,difficulties in correcting "erroneous" arbitraldecisions, and questions about the independence andimpartiality of arbitrators and the costs and time ofarbitral proceedings. This list of concerns, qualifiedby James Crawford in his "Foreword" to ZacharyDouglas' The International Law of Investment Claims(Cambridge University Press 2009) as "an erraticpattern of decisions, with reasoning oftenimpressionistic and displaying a certain disregard forstate regulatory prerogatives," has led to severalproposals for reform of the ISDS system. TheUNCTAD Issues Note identified five broad pathstoward reform of the system, as follows:

Promoting alternative dispute resolution;

Tailoring the existing system throughindividual IIAs;

Limiting investor access to ISDS;

Introducing an appeals facility; and

Creating a standing international investmentcourt.

Earlier papers and discussions also identifiedpossible reforms, including supporting access to ISDSfor small and medium enterprises, establishing anadvisory center for small economies patterned on theWTO Advisory Centre, and better control of thirdparty funding. [2] Numerous conferences andmeetings of the arbitration community havediscussed the backlash against investment arbitrationand the benefits and drawbacks of various proposedcorrective measures and reforms. [3]

Some of the proposals offered thus far aresystemic in nature, i.e., would respond to issuesrelating to the ISDS system per se, as it is currentlyestablished and operating. Others are more technicaland procedural and address issues such as repeatappointments of arbitrators, party versus institutionalappointment, how to deal with issues conflict and toaddress the need for reasoned decision, the utility ofdissenting opinions and the skyrocketing of costs.

One common thread arising from the experiencegathered during the last two decades is theperception that when designing the mechanisms tosettle disputes involving private investors andsovereign States, the founding fathers of the currentISDS system did not pay sufficient attention to thepublic international law dimension of these disputes,and the inherent tensions that would arise when aState's sovereign right to regulate for publicpurposes would be challenged by private investors.Many of the concerns expressed to date - be theyover duration, costs, issue conflict, predictability ofoutcomes, legitimacy or consistency - actually stemfrom the inherent public nature of one of the partiesto the dispute and the fact that internationalarbitration, patterned on commercial arbitration in itscurrent form, does not adequately address thesedistinct features of ISDS.

Notwithstanding these criticisms, it is widelyaccepted that recourse to international arbitrationunder investment treaties is here to stay, at least forthe foreseeable future. At the same time, the systemis not without flexibility to adapt. There are ways andmeans to address shortcomings, to developalternative approaches, to develop rules andguidelines to ensure that the system works better.This Special Issue aims particularly at paving the wayforward.

When we launched the TDM Special Issue at theinvitation of its publishers, we were determined tohear as many voices as possible. To this end, weinvited participation from a broad range ofstakeholders. We sought the views of experiencedpractitioners and end-users of the ISDS system,arbitrators, academics, public officials and policy-makers, emphasizing to all our request that theymake concrete proposals for reform andimprovement of ISDS, including but not limited tothe paths that UNCTAD and others have identified.Our goal was to widen the dialogue beyond the usualadvocacy pieces seeking broadly either a "call foraction" or to "defend the castle." We sought toprivilege practical ideas over hand-wringing, toencourage submissions that proposed a constructiveway forward rather than simply debated existingshortcomings, growing pains or failures ofinvestment arbitration. It is easy to criticize a pasttribunal for "getting it wrong," or a line of doctrine asperhaps not ideally thought out, but that was not thepurpose of this Special Issue, and we declined someproposals that seemed focused entirely on the past,without offering concrete suggestions for the future.With regard to such suggestions, we also encouragedcontributors to take a pragmatic rather than purelytheoretical approach towards the reality ofinvestment treaty arbitration, which to date has beenbased on an atomized network of investmenttreaties, in the absence of any universally acceptedmultilateral investment agreement.

We have been hugely gratified by the response toour Call for Papers. The more than 65 papersfeatured (after we received an even greater numberof initial proposals and abstracts) make this thelargest TDM Special Issue to date. The interest in thistopic, and the breadth of proposals offered by ourcontributors, demonstrates both the importance ofholding this dialogue and the creativity of astuteusers and observers of the present system.

Necessarily, the outpouring of contributions forthis Special Issue created challenges of both timingand organization. In the interests of a timely launch,we did not seek to harmonize the style or the formatof the papers. We also provided some leeway tocontributors who required additional time to finalizetheir contributions, and have offered others thepossibility of contributing to a second batch of papersto be uploaded hereafter. We also struggled with howto group the papers into "chapters" or "sections,"since so many of them offer cross-cutting analysesthat could fall into many different baskets. Inparticular, it became apparent that it would be bothdifficult and unfair to some of the papers to simplyforce them into boxes defined by UNCTAD's five"paths" forward. Each of the papers is unique in itsapproach. Some discuss proposals that have beentabled or debated already with a novel perspective,while others make thoughtful proposals for otherpaths of reform, which easily could be characterized

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as a sixth or a seventh path, employing the UNCTADnomenclature. The issues at stake warrant allcreative approaches, whether systemic or technical,procedural or substantive. This collection of papers isprecisely designed to deepen the debate, to come upwith innovative solutions, to generate discussions,reactions, responses and possibly concrete outcomesin treaty making, in institutional reform or fromwithin the arbitration tribunals.

* * *

While any organizing system will be somewhatarbitrary, we have chosen to group contributions ineight basic "chapters." The first is an introduction(Chapter I - Setting the Stage for Reform) thatallows several authors to set the stage of the call forreform. We start with the article by Chris Campbell,Sophie Nappert and Luke Nottage, "AssessingTreaty-based Investor-State Dispute Settlement:Abandon, Retain or Reform?", which was contributedto the OECD's Freedom of Investment RoundtablePublic consultation held from 16 May to 23 July 2012,and which compiled the results of a broad onlineconsultation of the members of the OGEMID networkof practitioners. The authors identify the areas ofreform that received strongest support at that time(and others that appeared less popular). Thisbackground piece provides a useful backdrop fortoday's debate.

We continue our background chapter with aworking paper by the OECD Secretariat in support ofthe FOI Roundtable, prepared by David Gaukrodgerand Kathryn Gordon. Entitled "Inter-GovernmentalEvaluation of Investor-State Dispute Settlement:Recent Work at the OECD-hosted Freedom ofInvestment Roundtable," it provides a brief overviewof Roundtable scoping-level work on ISDS in a fewselected areas: enforcement of arbitral awards;remedies and the impact of investment law on a levelplaying field for investors; the characteristics,selection and regulation of arbitrators; and issues ofconsistency. The paper then briefly outlines currentissues of further work by the Secretariat relating toconsistency, including shareholder claims in ISDS,and the issue of government "exit and voice" withregard to investment treaties. It should be noted thatDavid Gaukrodger has authored an in-depth researchpaper on shareholder claims and issues ofconsistency in international investmentagreements.[4]

Our third introductory contribution is a paper byChristoph Schreuer, asking "Do We NeedInvestment Arbitration?" Schreuer argues thatdespite its critics, the current ISDS system servesthe interest of host States as well as investors byproviding impartial and effective dispute settlement,and in so doing, enhancing security as an incentiveto increased investment, which, in turn, wouldstimulate economic development. He concludes thatdespite certain weaknesses, at present there is nosubstitute for investment arbitration for the orderlysettlement of investment disputes, and accordinglythat calls for its significant restriction should beresisted.

In his paper entitled "Perspectives for InvestmentArbitration: Consistency as a Policy Goal?", RudolfDolzer draws lessons from the evolution ofinvestment arbitration over the last two decades and

highlights how it has become the modern field ofarbitration par excellence, observed by specialists ofneighboring disciplines of international law with silentenvy. He compares the perception from the outsidewith the critical negative climate on the inside.Business as usual on the ground of investmentarbitration is accompanied by loud voices of criticismthat he analyzes in his paper. He particularly focuseson the call for consistency and wonders whether it isactually called for and if so, how it can be achieved.

J.J. Saulino and Josh Kallmer's paper, entitled"The Emperor Has No Clothes: A Critique of theDebate of Reform of the ISDS 'System'", follows. Theauthors suggest that there is no ISDS "system" assuch, only the illusion of one, given that there is nounified body of applicable law, but rather afragmented collection of bilateral and regionaltreaties negotiated based on individualizedcircumstances over the span of several decades.They conclude that while investment law "experts"have been focused on the need for consistency,States have not shown a particular appetite for amore unified global system or regime for investorprotection, preferring to focus more flexibly on theirsovereign economic policy choices.

In his piece, entitled "Making impossible investor-State reform possible", Luis Alberto GonzalezGarcia discusses all five of the paths for reformproposed by UNCTAD and suggests that most ofthese involve fundamental changes to investmenttreaties that he considers impracticable or evenimpossible at this stage. He focuses instead onpossible ways to reform the system without makingchanges to the current treaties, such as developingnew ways of selecting arbitrators; adopting clearerethical standards for arbitrators, counsel and expertsin investment arbitration; and creating anInternational Investment Law Commission to seek toharmonize legal doctrine and guide tribunals in theirwork.

Our introductory chapter concludes with a paperby Silvia Constain, entitled "ISDS growing painsand responsible adulthood." The author argues thatinternational investment arbitration is growing in adisorganized and inconsistent manner that is notconvenient for the system, investors, governments orother stakeholders, and that governments shouldprovide leadership in several ways. The best pathforward, she believes, would be concerted action toagree on a single model treaty text to individuallyreplace existing bilateral and regional IIAs thatfeature inconsistent, overlapping and divergingprovisions, together with an ISDS system featuring astanding pool of highly qualified arbitrators and astanding appellate body to ensure consistent andcoherent interpretation and application of the rules.

* * *

The second chapter of this Special Issue(Chapter II - Methodological Approaches)focuses on methodological approaches to reform ofthe ISDS system. Antonio Parra, former DeputySecretary General of ICSID, reminds us of theexperience of a first set of amendments proposed bythe Administrative Council of ICSID in 2006, after anourished debate among other things over thedesirability of reform of transparency rules, enhancedpublic access and/or an appellate system. In his

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paper, entitled "Advancing Reform at ICSID", hereviews this first stage of reforms to ICSID, andsuggests further steps forward, including thepossibility of offering mediation services and the ideaof establishing a permanent consultative body.Of course, Parra's paper is also relevant to thediscussion of specific reform of ICSID that isdiscussed in Chapter V, but we include it in ChapterII as an interesting illustration of one method ofdiscussing and conducting reform.

As a counterpoint to this focus on themethodology of reforming the ICSID system, thenext contribution examines the negotiation of ruleson transparency for international investmentarbitration at UNCITRAL. Julia Salasky and CorinneMontineri take us inside "UN Commission onInternational Trade Law and multilateral rule-making- Consensus, sovereignty and the role ofinternational organizations in the preparation of theUNCITRAL Rules on Transparency." Their paper isillustrative of a different methodology and approachto reform. In addition to a detailed account of theprocess that led to the adoption of the TransparencyRules and the expected way forward, the paperanalyses the role of international organizations,including inter-governmental and non-governmentalorganizations in the process and the consensusbuilding required to achieve a universally acceptedstandard.

The next paper by Andrea Kupfer Schneider,entitled "Error correction and dispute system designin investor-State arbitration", is particularly relevantin the analysis of an issue specific to ICSIDarbitration. It reviews annulment committeeprocesses and decisions and then offers proposals forchanging ICSID - both the law and the process -using dispute system design theory. In itsconclusions, it argues strongly that any changesmust be stakeholder-driven. Like Antonio Parra'scontribution, this paper is relevant also for Chapter Von Further Advancing the Reform of ICSID. However,by including this paper in Chapter II, we wished todraw on the proposed methodology and the use ofdispute system design when approaching reform ofthe ISDS system.

An interesting approach is presented byCatherine Rogers in her study of "The Politics ofInternational Investment Arbitrators." She discussesempirical research that has been used to evaluateselected reform proposals in investment arbitration,including Albert van den Berg's study of dissentingopinions by party-appointed arbitrators (and relatedproposals to dramatically reduce if not eliminatedissenting opinions), and Gus Van Harten's study ofjurisdictional rulings (and related proposal for apermanent International Investment Court). Shehighlights the risks of linking empirical research tospecific reform proposals; recommends futureempirical research; and calls for evaluatingquantitative empirical findings through comparativeanalysis with other international tribunals, and forgreater dialogue between empirical research andother forms of qualitative scholarship.

Finally, Locknie Hsu, in her paper entitled"Investor-State Dispute Settlement Reform -Examining the Formative Aspect of InvestmentTreaty Commitments: Lessons from Commercial Lawand Trade Law", draws several parallels between

reform of the international investment regime andthe evolution of the international trading system andcommercial arbitration. She suggests, for example,that several of the underlying concerns areperpetuated in the system because negotiators ofnew agreements habitually refer to provisions ofprior agreements for 'templates', akin to commercialparties using 'standard form' contracts rather thannegotiating tailored provisions. Similarly, investors,host States and their counsel could learn from thegrowing use of ADR clauses in the commercial worldand of preliminary consultations in WTO disputes.Finally, treaty negotiators should consider thepossible inclusion of risk-allocation provisions withrespect to regulatory areas with broad public policyramifications, akin to liquidated damages clauses incommercial agreements. Her paper reminds us thatthe search for paths forward for the ISDS systemdoes not occur in a vacuum, and lessons may belearned from other dispute resolution systems,notwithstanding their considerable differences.

* * *

Some of the contributions we received werefocused primarily on regional experiences - in LatinAmerica, Asia and Africa, as well as the continuingchallenge in Europe of allocating competence for IIAsand ISDS between the EU and its Member States -and our third chapter is devoted to these (ChapterIII - Regional Experiences with ISDS). We beginby taking a close look at the experience of LatinAmerica, where much of the debate over possiblereform avenues by States has been born. LatinAmerica was the last region to embrace widespreaduse of BITs but also the first to be hit by investor-State disputes in substantial numbers, and severalauthors focus their submissions on "lessons learned"in the region, including through attempts atreforming investment treaties and proposed regionalalternatives to existing ISDS avenues.

First, in her paper entitled "Proposal of changesto the system of investment dispute resolution: acontribution from South America", HildegardRondón de Sansó analyses the concrete pathstaken by a number of Latin American countries,members of UNASUR, to reform the ISDS systemand particularly to create a regional investmentcourt, region-specific dispute settlement rules and anadvisory centre for countries of the region. Her paperoffers some insight into the challenges faced by LatinAmerican countries when designing a system to caterfor their concerns and specificities.

Next, Rodrigo Polanco Lazo in his paperentitled "Is There a Life for Latin American CountriesAfter Denouncing the ICSID Convention?", studiesthe reasons why some Latin American countries haveterminated IIAs and denounced the ICSIDConvention. He focuses on the alternatives to treaty-based investor-State arbitration that these countriesare pursuing. The author concludes, however, thatthis path of reform will not necessarily achieve thepurpose that inspired the denunciation andtermination of investment treaties, unless theconcerned States appropriately manage their "newly"available options that go beyond a mere return todomestic courts to settle investment disputes.

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Alvaro Galindo also offers a paper, soon to beuploaded to the Special Issue, about the experienceof Ecuador with investment treaties and disputes andthe various actions taken to correct the course. Healso addresses the UNASUR initiative that Ecuadorhelped promote.

Latin America with its record number of ISDScases is also a region where new players arebecoming involved in investment disputes and wheretheir role, as part of the system, needs to beassessed. This is what William Shipley seeks to doin his paper entitled "What's Yours is Mine: Conflictof Law and Conflict of Interest Regarding IndigenousProperty Rights in Latin American InvestmentDispute Arbitration", which analyses the interests ofindigenous peoples whose rights may be adverselyaffected as a result of an investment dispute butwhose perspectives may not be adequatelyrepresented by their States, whose interests maydiverge from those of particular constituencies. Heargues that investment arbitration should allowprocedural measures to incorporate the perspectivesof (and possible claims by) third party indigenouspeoples, failing which the issue should be addresseddirectly through treaty amendment.

As a counterpoint to these articles focusing onthe Latin American experience, several authorsaddress regional experiences and approaches amongASEAN countries and the specificities of investmentdisputes in Africa. First, in a paper entitled "AResilient Boat Sailing in Stormy Seas: ASEANInvestment Agreements and the Current Investor-State Dispute Settlement Regime", TeerawatWongkaew reviews the changes in the investmentframework brought by the ASEAN ComprehensiveInvestment Agreement, that consolidates theexperience of other regions in ISDS and thespecificities of ASEAN member countries. The authorcontrasts the "investment-protective" dimension ofASEAN instruments with their "sovereignty-preserving" dimension, and suggests that thesedimensions are being more effectively balanced inrecent treaties than in the past, although certainchallenges remain for the current ASEANarchitecture.

Next, an interesting proposal is made by ThanhTu Nguyen and Thi Chau Quynh Vu in their paperentitled "Investor-State Dispute Settlement from thePerspective of Vietnam: Looking for a 'Post-Honeymoon' Reform", where the authors examinethe Vietnamese network of investment treaties anddomestic regulations as well as cooperation andcoordination mechanisms for investor-state disputesettlement and prevention, and three treaty-basedcases in which Vietnam has been respondent. Theauthors identify the drawbacks and concerns raisedby this experience, and propose a gradual butsystematic re-negotiation of investment treaties, toachieve a harmonization of investment rules andpolicies and improvement of cooperation andcoordination mechanisms for investor-state disputesettlement and prevention. In terms of regionalefforts in the context of the establishment of theASEAN Economic Community in 2015, their papersuggests the establishment of an ASEAN advisorycenter for ISDS, a facility for countries in the regionalto respond to claims brought by investors. All ofthese present initial steps in finding a clearer pathtoward an effective and fair system for investor-state

dispute settlement and prevention from theperspective of a developing country like Vietnam.

The next two papers look into the specificities ofISDS in Africa. The paper by Won Kidane asks thequestion of "ICSID's Relevance for the Resolution ofChina-Africa Disputes." The author notes that whileAfrican countries were among the earliest and mostenthusiastic supporters of the ICSID system, thatsystem has not served such countries well. TodayAfrica's largest infrastructure financier is no longerthe World Bank; it is China, and China does not haveas much experience with ICSID as Africa. In order tostay relevant for Africa and its new economicpartners, the author argues, ICSID must make aconscious effort to address the diversity deficit,encourage hearings to take place outside of thetraditional venues, and consider revised approachesto cost allocation and other factors. At a deeperlevel, ICSID must move beyond a past history of"benevolent imposition and effective exclusion frommeaningful decision making," and attempt to remedyperceived inequities of the last half century of arbitraljustice.

The paper by Uche Ewelukwa Ofodile, entitled"Africa and the System of Investor-State DisputeSettlement: To Reject or Not to Reject?" examinesboth the stated position of, and the realities of actionby, countries in Sub-Saharan Africa (SSA) regardingISDS reform proposals. The author argues thatthrough sub-regional level instruments like theInvestment Agreement for the COMESA CommonInvestment Area, the SADC Bilateral InvestmentTreaty Template, and the SADC Protocol onInvestment, countries in SSA appear to express adesire for a radically transformed ISDS system.However, their actions have not kept pace, and intheir BITs and related treaties, SSA countries stillcling to the traditional approach to ISDS and BITs.The paper suggests that the inconsistent position ofSSA countries on the ISDS question deserves closerstudy, as do the myriad factors that limit thecapacity of African countries to negotiate tailored anddevelopment-oriented IIAs and undermine theireffective participation in the international investmentlaw regime more generally.

Finally, our chapter on regional experiencestravels back to Europe, and includes a contributionfrom Jan Asmus Bischoff, entitled "Initial hiccupsor more? About the efforts of the EU to find its futurerole in international investment law." Focusing on theinterplay between public international law and EUlaw, and on improvements to the ISDS systemenvisaged by European institutions, the authoridentifies the practical difficulties that the internalallocation of competences between the EU and itsMember States poses for future IIAs, and outlineswhat ISDS mechanisms in future EU IIAs might looklike, in a post-Lisbon Treaty world. The contributionis particularly timely in light of the European Unionpublic consultation on investor-state disputesettlement and the Transatlantic Trade andInvestment Partnership just begun by EU TradeCommissioner Karel De Gucht.[5]

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Not surprisingly, the focus of a majority ofproposals for reform is on the role of States, sinceinvestment treaties are economic policy instrumentsdevised and negotiated by States. Internationalinvestment law is created by States and States arethe masters of their agreements and their use. Ourlargest Chapter (Chapter IV - Strengthening theRole of States) therefore features proposals tostrengthen the involvement of States, both ininterpreting existing treaty language (Section I) andthrough revising specific treaty text or negotiatingnew treaties (Section II). We also include papersexamining the possibility of establishing regional orinternational courts and a renewed interest in State-State procedures (Section III).

We begin by compiling contributions oninterpretation of treaties by the State parties to thetreaties or by joint commissions or technicalcommittees established under these treaties(Section I - Treaty Interpretation). In her paperentitled "Delegating Interpretative Authority inInvestment Treaties: The Case of JointCommissions," Anne van Aaken suggests that inthe debate over alternative approaches for reformingthe ISDS system, an important point has beenneglected, namely the role of joint commissions ofthe State parties in resolving certain problems ininvestment treaties. She identifies various alternativeauthorities to which interpretative authority could betransferred, as well as criteria such as credibility ofcommitment and relevant expertise against which tobenchmark the outsourcing of interpretation, andproceeds with a comparative analysis betweenoutsourcing to a joint commission and outsourcing toan arbitral tribunal.

Another approach is taken by Joshua Karton inhis paper on "Reform of Investor-State DisputeSettlement: Lessons from International UniformLaw." It describes the answers yielded by theexperience of the international uniform lawmovement and identifies which non-binding aids tointerpretation are most effective in promoting qualityand consistency, without necessarily theestablishment of centralized administrative orappellate bodies.

Michael Ewing-Chow and Junianto JamesLosari, in their paper "Which is to be the Master?:Extra-Arbitral Interpretative Procedures for IIAs",take the reader beyond the textual interpretativeprocess and interpretation based on a State-Statearbitration, such as in the case between Ecuador andthe United States on interpretation of a provision ofthe Ecuador-US BIT. The authors suggest that thereare alternative methods of interpretation, forexample through joint interpretation procedures suchas under NAFTA, or implicitly through theincorporation of customary rules of interpretationthat could go beyond a binary adjudicative processand help develop an "epistemic community" thatwould be able to think about the issue in a moremultifaceted way.

Interpretation by the State parties to the treaty isalso the proposal advocated by Tomoko Ishikawain her paper entitled "Keeping interpretation ofinvestment treaty arbitration on track: the role ofState parties." Starting with a review of recent casesinvolving sovereign debt instruments and aperception that tribunals have adopted an overbroad

approach to jurisdiction that goes beyond the treatyframework acceptable to both of the State parties,the paper then analyses the difficulty in determiningthe objective intentions of the contracting Stateparties, and argues that there are situations wherethis difficulty (arising from a lack of explicitlanguage) leads to unforeseen and unacceptabletribunal interpretations. Bearing in mind the need torespect investors' legitimate expectations, the articleproposes the inclusion of a formal mechanism forusing joint interpretative statements as a way toachieve balance between the interpretative power ofthe States and investors' rights to due process.

A novel voice in investment treaty interpretationcomes from Ugur Erman Özgür and his paper "Insearch of consistency and fairness in investor-Statearbitration: an institutional approach to interpretingthe doctrine of legitimate expectation." The paperemploys the New Institutional Economics frameworkto assess the role of the State's municipal andinstitutional reality. It reviews several cases broughtagainst Argentina and highlights the divergentunderstanding by various tribunals of the institutionaland administrative developments in Argentina. Itfocuses on the analysis of the concepts of regulatoryfairness and regulatory certainty in the Total award,and draws lessons for a codification of institutionalprinciples into IIAs or at the disposal of an arbitraltribunal. The paper's analysis is also relevant to thediscussion of reform of the ISDS system throughrevisions of treaties addressed in the next subsectionof this Chapter.

Our next authors, Baiju S. Vasani andAnastasiya Ugale, address the role of the "TravauxPréparatoires and the legitimacy of Investor-StateArbitration." Starting with the assessment that theinvestor-State arbitration system is not indefectiblebut also that is it not flawed to the extent that callsfor its wholesale abolition need be givendisproportionate prominence, the authors suggestthat the ISDS system should be molded carefullywith a scalpel rather than attacked with asledgehammer. To do so and as one way forward instrengthening the interpretation of consent, theyadvocate a more thorough and systematic recourseto the treaty's travaux préparatoires to elucidate theterms of the State parties' consent and theirintentions regarding substantive treaty standards.

As a conclusion to this section on interpretationand on the role of State parties in interpretation, weinclude the paper by Anthea Roberts entitled"Power and Persuasion in Investment TreatyInterpretation: the Dual Role of States", where theauthor discusses how analysis of subsequentagreements and practice can help treaty parties andtribunals engage in a constructive dialogue aboutinterpretation. The paper examines why and how thisevidence is applied in public international law,including human rights law, so as to develop a theoryabout its use and its limits in the investment context.It takes up the practical challenge of providing anillustrative list of the types of subsequentagreements and practices most readily available inthe investment context, and provides a road-map forStates wishing to generate and plead, and tribunalswishing to identify and assess, such evidence.

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The next section of this Chapter on Strengtheningthe Role of States features contributions focusing onrevisions to treaty language (Section II -- RevisingTreaty Language). This responds directly to two ofUNCTAD's suggested paths for reform, consisting oflimiting access to ISDS through treaties and revisingtreaties more broadly to clarify their scope ofapplication and limit the extent of their coverage.

To begin this section, we acknowledge theleadership of the government of the United States forspearheading debate about reform of investmenttreaties, by substantially revising its model treaty totake into account its experience with investmentdisputes under NAFTA and seeking to rebalance theState's rights and obligations under investmenttreaties. A paper by Karin Kizer and JeremySharpe, entitled "Reform of Investor-State DisputeSettlement: the US Experience", draws on the U.S.experience with ISDS and focuses on how reformscan be achieved through the negotiation ofagreements. It discusses the periodic review by theUnited States of its BIT program, and the way itsModel BIT has been revised and clarified in importantrespects, including by emphasizing the preservationof appropriate regulatory discretion for host States topromote legitimate public welfare objectives, aimingat greater precision in obligations, reform of ISDSmechanisms through transparency and thenegotiation of an appeal mechanism, and thenarrowing of claims and claimants.

Somewhat as a counterpoint, we next featureSimon Lester's contribution, "Liberalization orLitigation? Time to Rethink the InternationalInvestment Regime." The author argues that therules contained in U.S. international trade andinvestment agreements are not always aboutliberalization of foreign investment as it is usuallyunderstood (i.e., encouraging and welcoming foreigninvestment, and treating it like domesticinvestment), but in many instances about givingspecial legal protections to American companies thatinvest abroad. He suggests that liberalization offoreign investment would be better served byeliminating vague legal principles that providenumerous opportunities for litigation, and in so doingundermine the more basic principle of treatingforeign and domestic investment equally. Hecontends that if international rules are to be used atall in this area, a focus on nondiscrimination, and amore flexible legal framework, would be preferable tothe existing system.

Several papers explore the notion of limitingtreaty protection through revision of treaty text.First, in her paper entitled "Rethinking Rights andResponsibilities In Investor-State DisputeSettlement: Some Model International InvestmentAgreement Provisions", Elizabeth Boomer revisitsearlier proposals of model treaties, such as by theIISD, the Commonwealth Secretariat or UNCTAD'sIPFSD. She focuses on rebalancing rights andobligations of States under investment treaties andplaces emphasis on novel approaches to safeguardthe State's right to regulate for public policyobjectives.

Next, the paper by Daniel Kalderimis, "Back tothe Future: Contemplating a Return to theExhaustion Rules", reminds us of the historicalcontext of recourse to international arbitration ininvestment treaties, and emphasizes in particular itsnature as an exception to the requirement underpublic international law of prior recourse to domesticcourts and exhaustion of local remedies. He askswhether developed countries should considerreintroducing the exhaustion rule to ISDS claims byinvestors of other developed countries. His responseis that they should, but only if exhaustion rules areapplied in a more modern form, which requiredinvestors to prosecute, and also empowereddomestic courts to rule upon, internationalinvestment claims by applying BIT standards as wellas domestic law rules.

Mara Valenti's paper on "Restricting the Scopeof International Investment Agreements as a Meansto Set Limits to the Extent of Arbitral Jurisdiction"focuses on the definitions of investor and investment,and the way in which investment treaties could beused to limit access to international arbitration forfrivolous or unmeritorious claims.

In their paper entitled: "Limiting Investor Accessto Investment Arbitration - A Solution without aProblem?" Liang-Ying Tan and Amal Bouchenakidiscuss the efficacy and other consequences of themechanisms used to limit access by investors toISDS vis-à-vis their intended outcomes and assesswhether they adequately respond to criticisms thatISDS has become too easily accessible by investorswith unmeritorious claims, resulting in onerousburdens of time and expense on respondent States,and even worse, unjustifiable awards. They analyseboth the treaty practice and the outcomes of awardswhere access has been denied and where limits havebeen found not to apply. They then ask the questionwhether, if access can be effectively policed throughmore robust implementation of the existing limits,new limitations are called for and explore how theexisting limits (if they are truly insufficient) can bemade more effective while still preserving the valuesof the system- and the system itself.

Our next contribution, "Exclusion from Within theAmbit of a Protected Investor, a Fair Price to Pay forthe Act of Abusive Treaty Shopping" by VidushiGupta, discusses changes to investment treatylanguage to limit investor access to ISDS absentsignificant connections to the purported State ofnationality. He examines various drafting techniquessuch as the inclusion of a restrictive definition of an'investor' and/or a 'denial of benefits' clause, andidentifies circumstances under which tribunals havenot permitted purported investors to pursue claims,despite the absence of such restrictions in treatylanguage.

"A Few Pragmatic Observations on How BITsshould be Modified to Incorporate Human RightsObligations", by Patrick Dumberry and GabrielleDumas-Aubin, observes that while international lawas it now stands does not impose any direct legalobligations on corporations (except for jus cogensnorms), nothing prevents countries from signing BITsimposing human rights obligations uponcorporations. They examine concretely how suchBITs could be drafted (and existing ones beamended), including where non-investment

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obligations should be located in BITs; what type oflanguage should be used; which internationalinstruments should be referred to in BITs and why;and which enforcement mechanisms should beadopted.

Finally, in his article "On Genealogy of Proposalsto Reform Investor-State Arbitration", Ahmad AliGhouri starts from the proposition that whiledemands have grown for greater incorporation ofnon-investment public law values in the internationalinvestment regime, the overall structure of theregime is unlikely to change. In light of this reality,he explores three different "models" of how publicinterest issues might be integrated more significantlyinto investor-State arbitration: a "contract" model,an "institutional capacity building" model, and an"arbitral activist" model. He posits that the first twomodels eventually fall-back on the third,necessitating that the investor-State arbitral systemdevelop indigenous principles of systemic self-governance. He offers a preliminary sketch of thepossible roadmap for formulation of such indigenousprinciples.

As the many papers collected in these Sectionson interpretation and revision demonstrate, theexisting ISDS system is not static and is capable ofreform. The driving forces for reform are and remainthe States themselves, and the authors offerconcrete examples of interpretation, clarification andrevision to ensure that treaty language responds tothe primary objective of the treaties, of protectinginvestors while ensuring a balance with the State'sright to regulate for public purposes. At the sametime, some observers have proposed morefundamental structural reforms to strengthen the roleof States, including expanding recourse to State-State procedures in the resolution of investor Statedisputes and/or fostering the creation of aninvestment court. The final Section of this Chapterfocuses on those issues (Section III- State-StateProcedures and a Standing Investment Court).

We begin with a paper by Theodore R. Posnerand Marguerite C. Walter entitled "The abiding roleof State-State engagement in the resolution ofinvestor-State disputes", which analyses the roleState-State interaction can play when the host Statein an investment dispute resists enforcing an arbitralaward against it or resists going to arbitration in thefirst place. Taking the example of dispute settlementproceedings in the WTO, the authors discuss the rolethat clarification of a particular obligation through aState-State process can have in informing theexpectations or the objectives of investors. They alsoassess possible uses of State-State disputesettlement as an alternative to investor-State disputesettlement.

A second paper by Anthea Roberts, entitled"State-to-State Investment Treaty Arbitration : aHybrid Theory of Interdependent Rights and SharedInterpretative Authority", bridges the gap withSection I as it discusses both the re-emergence ofState-State arbitration and the allocation ofinterpretative authority among the treaty parties,investor-State tribunals and state-to-state tribunals.The paper suggests a progressive mechanism bywhich treaty parties can re-engage with the systemin order to correct existing imbalances and helpshare its development from within.

Tim Feighery, in his paper "In search of aRoadmap: Lessons for the ISDS Regime in the U.S.Experience of Lump-Sum Claims SettlementProcesses", suggests that there may be a newly-emergent role for diplomatic protection as asupplement to, or indeed for some States, areplacement of the ISDS regime. Drawing upon theU.S. experience with several commissions to addressinternational mass claims, he argues that unlessStates have a greater sense of control andpredictability in the system, they inevitably willwithdraw or reduce participation in the regime.

Two papers look more closely at the possibility ofestablishing a regional or a multilateral investmentcourt. While the example of the Arab InvestmentCourt has not been picked up by contributors for thisSpecial Issue, no doubt it will contribute to furtherthinking about the feasibility of a regional approach.In his paper entitled "Permanent InvestmentTribunals: the Momentum is Building Up", OmarGarcia-Bolivar describes the options taken bycountries in Latin America to set up a permanentinvestment court under the auspices of UNASUR, andidentifies the features of such a permanent tribunal.Lessons can be learned from this experience whenthinking about establishing standing tribunals to hearinvestment disputes.

In his paper on "The Challenges of Creating aStanding International Investment Court", EduardoZuleta discusses the challenges of elaborating amultilateral treaty to establish a Court, issues ofimpartiality and independence of adjudicators as wellas concerns of predictability, party autonomy andtransparency.

Several other papers are relevant to this Section,such as Roberto Echandi's paper on "Investor-StateConflict Management: A Preliminary Sketch", whichhighlights the preventive role of State authorities andproposes elements of dispute prevention policies.However for a better flow of various papers, it hasbeen included in Chapter VII on Investor-StateMediation.

* * *

Chapter V focuses specifically on reform of ICSIDas the cornerstone of the current ISDS system(Chapter V- Further Advancing the Reform ofICSID). Our contributors offer several concreteproposals for reforming, streamlining, and simplifyingICSID rules, both for original arbitration proceedingsand for annulment and other post-award procedures.

First, in a piece entitled "Achieving a FasterICSID", Adam Raviv takes a practical approachbased on empirical data. He examines the length ofICSID arbitrations as they are currently practiced andanalyses why they take so long. He reviews eachstage of an ICSID proceeding and offers a variety ofsuggestions to speed them up, focusing onamendments to the ICSID Rules and institutionalpractices.

On a similar note, "Streamlining ICSID," byJoongi Kim, also starts with an in-depth analysis ofvarious stages of the arbitral proceedings at ICSIDand provides comprehensive statistical informationon key stages. The paper then examines the dispute

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settlement processes of other internationalinstitutions to gain insight from a comparativeperspective into ways to reform ICSID arbitration tostreamline the process and assure parties a moreexpeditious settlement of the disputes at hand.

Roberto Castro de Figueiredo addresses adifferent challenge at ICSID, namely "Fragmentationand Harmonization in the ICSID Decision-MakingProcess." He contends that the functionality of theICSID system is threatened by the inherentfragmentation of the ICSID decision-making process,which leads to inconsistent analyses of corejurisdictional issues that potentially affect not justthe parties to a particular dispute, but all ContractingStates. He suggests that harmonization could befostered by the adoption of interpretative resolutionsby the Administrative Council, as a source of theintention of the Contracting States.

Four contributors tackle the issue of ICSIDannulment and other post-award remedies. First,Nikolas Tsolakidis's paper, entitled "ICSIDAnnulment Standards: Who has finally won theReisman vs Broches debate two decades ago?",reengages with the spirited debate between MichaelReisman and Aaron Broches and tries to assess, byreference to subsequent decided annulment cases,which analysis has been more successful or whetherboth have been ignored. The paper concludes with anassessment of the perceived shortcomings of ICSID'sannulment process and ways it can be remedied orreformed.

Mallory Silberman asks: on "ICSID AnnulmentReform, are we looking at the right problem?" Sheargues that while some have complained that thereis an overabundance of annulment, the probleminstead might be an overabundance of annulmentclaims, which present significant costs that theparties and the system must bear without any realrelief. The paper details the apparent and hiddencosts associated with annulment petitions andexamines potential avenues for reducing the numberof unmeritorious claims, thereby reducing the costsborne by the parties and the system.

Vanessa Giraud Martinelli's paper on "Thetrembling legitimacy of the ICSID annulment systemin the light of decisions by Ad Hoc Committees"starts by observing the increase in annulmentproceedings after 2001, and posits that some ad hoccommittees have, through their extensiveinterpretation of underlying legal issues in thedispute, stretched the purposes of the ICSIDannulment system to the limit. In order to safeguardthe essence of annulment procedures under ICSID,she proposes the amendment of the ICSIDArbitration Rules by introducing a scrutiny of theaward by a permanent body (akin to the scrutinyfunction performed by the ICC Court of Arbitration),and the creation of Guidelines for the Conduct of AdHoc Committees to help steer them towards bestpractices.

Finally, Diego Gosis in his paper focuses on"Addressing and Redressing Errors in ICSIDArbitration." He starts with the assessment that theICSID Convention and Rules allow remedies forawards that contains petty errors, but the systemseems to limit itself to the correction of small ratherthan significant errors, through an inadequate

reading of the applicable texts. Gosis discusses theproper interpretation and use of the remedial devicesavailable in ICSID arbitration to cure defectiveawards, and proposes certain improvements aimedat bringing the investment arbitration system up topar with the current developments in this rapidlyexpanding area of law.

* * *

Our next chapter is devoted to the ongoingdebate about an appeals mechanism, whether treaty-based or through a multilateral facility such as anappeal facility proposed by ICSID (Chapter VI - AnAppellate Mechanism). As suggested by AntonioParra in his paper in Chapter II, the debate is notnew and indeed has been ongoing for a number ofyears, particularly after the United States included inits free trade agreements with several countries(most recently the Korea-US Free Trade Agreement(KORUS)) a commitment to negotiate an appellatemechanism. The early initiatives lost momentumafter encountering strong resistance from otherOECD countries 10 years ago, but the pendulum isswinging back now, with the negotiation of mega-IIAs such as the Trans-Pacific Partnership Agreement(TPP) and the EU-US FTA. The EU is also includinginto its negotiating mandate the design of anappellate system.

Chapter VI opens with a paper by Bart Legum,revisiting his earlier skepticism about an appellatemechanism reflected in several prior papers. In"Appellate Mechanisms for Investment Arbitration:Worth a Second Look for the Trans-PacificPartnership and the Proposed EU-US FTA?", he re-examines appellate mechanisms in light of the TPPand the EU-US FTA ,and suggests that a second lookmight be warranted.

Next, Eun Young Park addresses "AppellateReview in Investor State Arbitration", and identifiesthe pros and cons of an appellate mechanism. Theauthor argues that while such an appellate reviewprocess may be necessary in order to promoteconsistency and predictability in legal interpretation,such process would need to be devised so as not toundermine the basic underlying pillar of investor-State arbitrations, namely party autonomy.

Gabriel Bottini, in his paper entitled "Reform ofthe Investor-State arbitration regime: the appealproposal", argues that notwithstanding the failure ofprior proposals, the creation of an appeal mechanismis still generally suggested as one of the ways toimprove the functioning of investment arbitration andstrengthen its legitimacy. The author argues thatobjections to an appeal mechanism are based onquestionable assumptions, and that an appellatemechanism could play an important role in alleviatingconcerns expressed about the current ISDS system.

Jaemin Lee places the debate about anappellate mechanism in the broader context ofexperience with the WTO dispute settlementmechanism. In his paper entitled "Introduction of anAppellate Review Mechanism for InternationalInvestment Disputes - Expected Benefits andRemaining Tasks", he examines the pluses andminuses of an appeals system. In particular heexamines the issue from the perspective of States,

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particularly those with limited resources andcapacity, in terms of their participation ininternational investment arbitration.

Finally, Kristina Andelic's thought-provokingpaper examines "Why ICSID Doesn't' Need anAppellate procedure, and What to do Instead." Theauthor argues that there should be no appellateprocedure under ICSID because the lack ofconfidence in the system is based not onimperfections of the prescribed mechanisms forsettlement of disputes, but rather on changedcircumstances in economic relations. Consideringthat in times of crisis, there is a greater need forstability of existing institutions, the author arguesthat changing a functional procedure would becounter-productive. But she suggests instead theadaptation of existing procedures in a way to providegreater legitimacy to the ISDS system.

* * *

Chapter VII addresses momentum in the push forexpanded investor-State mediation, with the recentlyadopted IBA Investor-State Mediation Rules and theactual recourse to these rules in the investor-Statecontext (Chapter VII - Investor-StateMediation). This chapter dovetails nicely with theICSID Review of January 2014 [6] entirely focusedon investment mediation, where several authorscontribute to an in-depth analysis of mediation as aviable alternative to investment arbitration andexplore the role of institutions such as ICSID inadministering mediation processes. Although theavailability of mediation as an alternative toarbitration is not new and existing treaties do notprevent parties from seeking assistance to settletheir dispute before or during the course of anarbitration,[7] to date any treaty language on theissue remained rather vague. A new generation oftreaties - spearheaded by the US Model BIT, thetemplates for negotiation used by the EU and severalregional arrangements - specifically proposesmediation as an option to settle investment disputeseither before or in parallel to an arbitrationprocedure. This chapter focuses on investor-Statemediation as a practical means to respond to a callfor faster and cheaper dispute resolution mechanismsthat in particular facilitate preservation ofrelationships between foreign investors and hostStates.

The papers in this chapter should be readtogether with the contributions in earlier chapters byAntonio Parra, who discusses mediation ofinvestment disputes under ICSID, and Locknie Sue,who discusses mediation as a viable option forinvestors. In addition:

Fatma Khalifa in her paper entitled "Mediationuse in ISDS" identifies the role of mediation in aninvestment dispute, compares it with other disputesettlement mechanisms, and explains the mediationprocess before making proposals for a way forward,strengthening the recourse to mediation ininvestment disputes.

Wolf von Kumberg, Jeremy Lack and MichaelLeathes contend that "The time to introducemediation has come", in their paper on "EnablingEarly Settlement in Investor-State Arbitration." They

review the current status of mediation in ISDS,including the contribution of the IBA's 2012 Rules forInvestor-State Mediation, examine what parties needand how mediation can deliver, and offer tenpractical suggestions to aid the implementation ofthe IBA Rules, to enable the "systematic adoption ofmediation in ISDS, alongside, and dovetailed into,the arbitral process."

Edna Sussman's paper, "The Advantages ofMediation and the Special Challenges to its Utilizationin Investor-State Disputes", likewise responds toUNCTAD's call for an increasing resort to alternativesdispute resolution methods and the IBA's issuance ofits 2012 Rules for Investor-State Mediation. Itoutlines the many benefits that a mediation processoffers, reviews the possible use of mediation in theinvestor-State context and discusses the manyunique obstacles that are presented when a State isa party.

Nancy Welsh and Andrea Kupfer Schneidertake a systemic approach in their paper entitled"Integrating Mediation Into Investor-StateArbitration." Taking stock of the U.S. domesticexperience to identify elements of the mediationprocess that can be made compulsory and the effectsof this choice, their paper recommends theintegration of a default model of mediation into theinvestor-State context. This model would begin in afacilitative manner, in order to increase trust-buildingand information exchange regarding underlyinginterests, but certain elements of mediation could bemade compulsory.

An interesting use of ADR is proposed in thepaper by Nicolas Angelet on "Post-Award ADR andRestitution," where the author argues that thepurpose of the investment protection regime tocreate stable relations and promote economicdevelopment warrants greater attention torestitution, which is the primary means of reparationunder international law and the best means to get aninvestor-State relationship back on track. The authoraddresses a number of real or perceived obstacles torestitution in international law and argues in favor ofpost-award ADR to be used after or on the basis ofan arbitral decision on wrongfulness.

Also of interest is Roberto Echandi'sexamination of the non-contentious use of disputeprevention policies to avoid disputes altogether, inhis paper entitled "Investor-State ConflictManagement: a Preliminary Sketch." The paperintroduces the concept of conflict management andanalyses some "best practice" cases wheregovernments set up mechanisms to prevent andefficiently manage conflicts arising with foreigninvestors.

* * *

As many of our contributors recognize, anotherpath for reform may be from within the existingsystem, rather than through structural reforms thatseek fundamental change to it. The articles includedin Chapter VIII - Reform from Within suggestthat arbitral tribunals can meaningfully contribute toa reform of the system from within by a variety ofmeans, including for example applying standards ofreview or methods such as capacity-limitation to

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distinguish investors from exporters; allowing forcollective action; by re-conceptualizing investor-State arbitration as a form of public law-basedjudicial review; by revisiting the notion of a "marginof appreciation" or conceptualizing jurisdiction as abalancing test rather than application of formalisticrules; or by employing basic procedural tools alreadyavailable to them, such as interim costs orders. Theyalso suggest that it is up to the parties to requestarbitrators to make use of comparative public lawmethodology and also that there is room even withinthe existing ICSID system for States to bringcounterclaims against investors in certain appropriatecases.

To begin, Stephan Schill in his paper "The SixthPath: Reforming Investment Law from Within"sketches out a path for investment law reform that isbased on an internal-system reconceptualization ofinvestor-State arbitration as a form of public law-based judicial review. He argues that public law ideasand comparative public law methodology can bebrought into investment arbitration in its presentform, and suggests that arbitrators have an interestin conforming to these standards even in the absenceof fundamental institutional reform.

In his paper "The Margin of Appreciation inInternational Investment Law", Julian Aratodiscusses the suitability of the margin of appreciationin the adjudication of investment disputes. The paperstarts with the assessment that investment treatiessay nothing about the appropriate standard of reviewand do not address whether States should beafforded any deference in their own assessment oftheir treaty obligations, or alternatively whetherState action must be strictly reviewed. The paperfurther questions the suitability of the margin ofappreciation and a unified a priori doctrine ofdeference. But it concludes instead that the desiredcertainty can be achieved only gradually, throughjudicial practice and dialogue over the medium tolong term.

Frederic Sourgens suggests, in his paper "ByEqual Contest of Arms: Jurisdictional Proof inInvestor-State Arbitrations", that common criticismsof the ISDS system start from the wrong place,namely a focus on creating better formalinternational investment law rules. In his view, thesecritics do not address the legitimacy problem ininvestor-state arbitration, they (unwittingly, perhaps)are the legitimacy problem, because they lose sightof the purpose of dispute resolution at publicinternational law, which at heart has always involved"a balancing act." He proposes that a balancing testbe used to determine the jurisdiction of investor-state tribunals, and that doing so will ultimately mootcomplaints that investor-state arbitration lackslegitimacy.

Next, in their paper on "Interim Costs Orders:The Tribunal's Tool to Encourage ProceduralEconomy", Jeff Sullivan and David Ingle reviewthe complaint that investment arbitration hasbecome a slow and expensive process. They analysethe source of the problem, notably the fact that thesystem allows parties to bring frivolous claims andemploy dilatory tactics because there is no effectivedeterrent for such conduct. Their paper argues thattribunals already have the tools necessary toencourage procedural economy by using interim

costs orders to deter nefarious tactics while alsobalancing the two seemingly irreconcilable goals ofdue process and procedural economy.

In his paper on "Reforming the Approach to Costsin Investment Treaty Arbitration", MatthewHodgson discusses the fact that despite theconsiderable costs of the investment arbitrationprocess, the vast majority of investment tribunalsdevote just a few paragraphs of their award to thesubject of cost allocation and many fail to enunciatea clear starting point for their analysis, or takedivergent approaches. Drawing on a recent survey ofcosts in investment treaty arbitrations, this articleargues for a more reasoned and consistent approachto costs. Establishing a default position as to costswould promote consistency and predictability acrossthe field of treaty arbitration. Such an approachcould be achieved by wording in bilateral investmenttreaties or a change to the ICSID rules to bring theminto line with the UNCITRAL position; the authorargues that the most appropriate default position is"loser pays."

In an insightful paper entitled "DistinguishingInvestors from Exporters Under InvestmentTreaties", Mark Feldman makes tworecommendations based on the NAFTA ChapterEleven cases. He suggests first that whendistinguishing investors from exporters, tribunalsshould look primarily to the capacity limitation,rather than the causation limitation (which lackseffectiveness) or the territorial limitation (which lacksflexibility). Second, he contends that when applyingthe capacity limitation, tribunals should be guided bythe nature of a claimant's global business.

Stephan Wilske, in his paper entitled "CollectiveAction in Investment Arbitration to Enforce SmallClaims Justice to the Deprived or Death Knell for theSystem of Investor-State Arbitration", discusseswhether collective action can be a way to seek justicefor small investors, or would rather be the "strawthat breaks the camel's back" and damages thesystem of investment arbitration. After pointing outthe challenges faced by small claimants in bringingan claim against a State, the author introduces somesuggestions to overcome these challenges, includingthrough collective action. The author concludes thatthe system is robust enough to deal with collectiveaction and may find its own tools to make it fair andworkable.

Finally, in his paper entitled "ICSID TreatyCounterclaims: Case Law and Treaty Evolution",Jose Antonio Rivas argues that futurejurisprudential and investment treaty developmentsmay shape expanded use of counterclaims by Statesin ICSID treaty cases. There may be voices ofconcern discouraging the practical use ofcounterclaims, and any development that wouldincrease their use might create a disincentive toinvestors for launching claims in the first place. Yet,a considerable part of making counterclaims anoperative alternative involves realizing that undercertain lines of authority and existing investmentarbitration instruments - including the ICSIDConvention, the Rules of Arbitration and certaininvestment treaties - the tools for effectivesubmission of counterclaims already exist.

* * *

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Conclusion

The Call for Papers that began this process, andthe Special Issue that resulted from the enormousefforts of all involved, has not been an end in itself.We encourage the submission of more papers andmore discussion to nourish the debate and supportinitiative by States and relevant institutions. Inaddition to further publications in TDM - whetherthrough later upload to this Special Issue or asstand-alone articles in future issues - we wouldwelcome sustained attention to these topics throughonline discussions, including a possible OGEMIDdialogue that is in the works. We also believe there isno substitute for face-to-face discussion, andencourage the organization of live symposia on theseimportant issues. It is our hope that this publicationcontributes to an ongoing constructive dialogueabout ways to strengthen and refine the ISDSsystem to meet its many important goals, withoutlosing the many advantages the system alreadyoffers over the alternatives that predated it.

Also available as an individual paper here

Anna Joubin-BretCabinet Joubin-Bret

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Jean E. KalickiArnold & Porter LLP

and GeorgetownUniversity Law Center

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_______________

Footnotes

[1] UNCTAD IIA Issues Note N° 1 March 2013 - RecentDevelopments in Investor-State Dispute Settlement (ISDS) -www.unctad.org/diae

[2] Michael Waidel et al. (eds.), The Backlash againstInvestment Arbitration: Perceptions and Reality (Kluwer LawInternational, 2010); David Gaukrodger and KathrynGordon, "Investor-State Dispute Settlement: A ScopingPaper for the Investment Policy Community", OECD WorkingPapers on International Investment, No.2012/3; K.P.Sauvantand F.Ortino, "Improving the International Investment Lawand Policy Regime: Options for the Future", Seminar onImproving the International Investment Regime, Helsinki, 10- 11 April 2013 (hosted by the Ministry of Foreign Affairs ofFinland).

[3] 2014 ICCA Congress (XXII) entitled "Legitimacy:Myths, Realities, Challenges"

[4] David Gaukrodger, "Investment Treaties asCorporate Law: Shareholder Claims and Issues ofConsistency" (2013), a background paper for the initialRoundtable discussion of shareholder claims. OECD papers(2013).

[5] "Commission to consult European public onprovisions in EU-US trade deal on investment and investor-state dispute settlement" - European Commission - IP/14/5621/01/2014 europa.eu/rapid/press-release_IP-14-56_en.htm

[6] ICSID Review January 2014, forthcoming.

[7] Indeed, ICSID statistics show that 39% of casesbrought before ICSID settle before a final award is rendered.See ICSID Caseload Statistics 2013-1https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocument&CaseLoadStatistics=True&language=English41 - accessed 1 January 2014.See further R. Echandi & P.Kher "Can International Investor-State Disputes be Prevented? Evidence for Settlements inICSID arbitration" ICSID Review, Forthcoming 2014.

C H A P T E R I - S E T T I N G T H ES T A G E F O R R E F O R M

Assessing Treaty-based Investor-StateDispute Settlement: Abandon, Retain orReform?

Sophie Nappert3 Verulam Buildings

Professor Luke NottageSydney Law School

Christian Tyler CampbellCenter for International Legal Studies

Abstract

As a constructive contribution to the OECD'sFreedom of Investment (FOI) Roundtable Publicconsultation held from 16 May - 23 July 2012, theauthors created an online form asking for views onwhether ISDS should be left as is, abandonedcompletely, or adapted in various listed ways. Thisarticle summarizes the responses received, notingstrong support for investor-State mediation, greatertransparency and measures to reduce delay and cost,and less interest in other possible reforms.

Full article here

Inter-Governmental Evaluation ofInvestor-State Dispute Settlement: RecentWork at the OECD-hosted Freedom ofInvestment Roundtable

David GaukrodgerKathryn Gordon

Investment Division, OECD

Introduction

The OECD-hosted "Freedom of Investment" (FOI)Roundtable helps governments to preserve andexpand an open international investment systemwhile also implementing effective policies to addressother public interests. The Roundtable is a uniquevenue for governments to explore together the policyand legal issues raised by investment treaties andISDS. Supported by fact finding studies on dispute

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settlement and treaty practice, the Roundtable hasbeen exploring a wide range of investment lawissues.

The Roundtable makes available a variety ofdocuments on its website to inform the public aboutits discussions and to encourage public debate aboutthe issues under consideration. Secretariatbackground papers and expert input considered bythe Roundtable are frequently made available.Following each Roundtable meeting (which aregenerally held twice a year), the OECD Secretariatprepares a summary of the discussion.

This paper first gives a brief overview ofRoundtable scoping-level work on ISDS in a fewareas (enforcement of arbitral awards; remedies andthe impact of investment law on a level playing fieldfor investors; the characteristics, selection andregulation of arbitrators; and issues of consistency).It then briefly outlines current issues of interest tothe Roundtable relating to consistency includingshareholder claims in ISDS and the issue ofgovernment "exit and voice" with regard toinvestment treaties.

Full article here

Do We Need Investment Arbitration?

Professor Christoph H. SchreuerWolf Theiss

Introduction

Investment protection in general and investmentarbitration in particular are often portrayed as one-sided and as serving the interest of investors whomostly represent big business. In actual fact, theprocedural rights granted to foreign investors in ourcurrent system of investment law represent abalanced system that serves the interest of hoststates as well as investors.

For the investor, the risks of investing in aforeign country are considerable and quite differentfrom those of a trader. Investment disputes, unliketrade disputes, are usually highly individualised. Aninvestor typically must commit considerableresources before it can hope to reap the expectedprofits. In doing so, it makes itself dependent on thebenevolence of the host state. This situation ofdependence calls for strong legal protection.

After having made the investment, the investor isexposed to a number of non-commercial risks at thehands of the host state. These include regimechange, a change of general or sectorial economicpolicy, economic or political emergencies in the hoststate including public violence, to name just a few.Whereas large multinational corporations maysometimes be in a position to pursue their claimsthrough a variety of strategies, medium sized andsmaller investors are particularly vulnerable. Formany, investment arbitration will constitute the onlymeans of protection.

From the host state's perspective, the mostobvious advantage of investment protection is theimprovement of its investment climate. That climate

consists of a variety of elements, economic andpolitical. The legal framework for foreign investors isone important factor in determining the investmentclimate. A key element of this legal framework is thesettlement of disputes between host states andforeign investors. Impartial and effective disputesettlement is an essential aspect of the protection ofinvestments.

The idea of investment arbitration as an incentiveor at least a safety net for foreign investment wasthe inspiration for the ICSID Convention. It washoped that the added security thus obtained wouldtranslate into increased investment which, in turn,would stimulate economic development.

Full article here

Perspectives for Investment Arbitration:Consistency as a Policy Goal?

Professor Rudolf DolzerUniversity of Bonn

Introduction

Judging by the evolution of its caseload, ICSID istoday widely accepted and firmly established;ratification of the ICSID Convention by Canada onNovember 1, 2013, confirms this impression. Indeed,no other domain of contemporary international law ischaracterized by the same degree of acceptance ofarbitration as the mode of settlement and of theactual use of arbitration in practice. Within twodecades, investment arbitration has become themodern field of arbitration par excellence; specialistsof neighboring disciplines of international law havemostly observed this development with silent envy.

This is the perspective from the vantage point"outside" of the realm of investment arbitration.Looking from the "inside" (the investmentcommunity, in particular), in the views of somestates and some academic commentators, thebalance sheet is much more nuanced, perhaps evennegative. We hear about a backlash, aboutdiscontent and about open issues.

In other words, we seem to observe a gulfbetween the reality of investment arbitration as afascinating success story, and a critical, negativeclimate surrounding this success which has come todominate the perception of investment arbitrationfrom the viewpoint of prominent commentators.Business as usual on the ground of investmentarbitration is accompanied by loudly voiced clustersof criticism.

The article is based on a lecture held at the WorldTrade Forum in 2011 on New Directions andEmerging Challenges in International Investment Lawand Policy; published in a book by CambridgeUniversity Press with Roberto Echandi and PierreSauvé as Editors in June 2013 and previously in TDM3 (2012).

Full article here

Volume 11 - Issue #01 - January 2014 - 14

The Emperor Has No Clothes: A Critiqueof the Debate Over Reform of the ISDS"System"

James J. SaulinoJonathan S. Kallmer

Crowell & Moring LLP

Introduction

Current calls for a debate over reform of theInvestor-State Dispute Settlement (ISDS) system arebased upon a flawed premise. Specifically, theyassume as a starting point that there already existsan ISDS "system" or "regime" that is capable ofbeing reformed (let alone treated as a single entity).The reality is that there is no system or regime ofinvestor protection or ISDS at present. There is nounified body of applicable law, only a fragmentedcollection of bilateral and regional treaties negotiatedbased on individualized circumstances over the spanof several decades.

Put differently, there is no "system," only theillusion of one.

There is a simple reason why there is no globalsystem or regime for investor protection: states havenot up to this point wanted one. InternationalInvestment Agreements (IIAs) do not exist outside ofthe political context and the political entities thatdecide that they will exist and what they will contain.Any debate over reform of an ISDS system iscounterproductive to the extent that it does notinternalize the fact that IIAs, by definition, emanatefrom the policy choices of sovereign states. Goingforward, those sovereign economic policy choices willcontinue to drive the debate over whether to create amultilateral ISDS system and what features it shouldhave.

Efforts to modify IIAs, or to move toward acoherent multilateral system, must thereforeacknowledge and work within the unique, complex,and often ugly political and policy environmentscharacterizing the economies that negotiate theagreements. There may indeed be several good ideasfor how to improve the bilateral and regionalagreements that do exist, as well as how to improvethe limited areas of multilateral agreement in thisfield-for example, the ICSID Convention. But thesesuggestions will be useful and practical only to theextent that they respond effectively to the validpolicy preferences of governments and theirpopulations, and not because they contribute to anindependent notion of reform developed bysubstantive investment law experts but untetheredfrom the political and commercial dynamics of states.

Full article here

Making impossible investor-state reformpossible

Luis González GarcíaMatrix Chambers

Abstract

The purpose of this paper is to set forth theconsiderations which I believe must be taken intoaccount in framing any workable reform to theinvestor-state dispute settlement system and offermy comments to UNCTAD's five main reform paths.In this paper it is suggested that most of UNCTAD'sreform paths involve treaty changes which areneither practicable nor will improve the presentsituation. However, an attempt will be made to showthat it is nevertheless possible to reform theinvestor-state arbitration system without makingchanges to current treaties.

Full article here

ISDS growing pains and responsibleadulthood

Silvia Constain

Introduction

Voices promoting reform of the current investor -State dispute settlement (ISDS) system seem to begrowing louder, and calls for change more frequentand from a broader set of actors. Many refer to a"crisis", and point out "challenges" and "concerns",when explaining why ISDS reform is necessary orconvenient, and should be imminent.

The current system is made up by well over3,000 international investment agreements (IIAs)and an unknown number of contracts betweeninvestors and States with international investmentdispute settlement provisions, underpinning an ever-increasing number of disputes. Despite what could bedescribed as the growing popularity of ISDS as amechanism for addressing investor-Statecontroversies, it is hard to find someone (other thanlawyers) completely content with the current system.

The IIA universe is a patchwork of agreements,some of which were concluded over half a centuryago, and none of which is identical to another. It isno wonder, then, that the shortcomings identified byUNCTAD and others exist. These include a "perceiveddeficit of legitimacy and transparency; contradictionsbetween arbitral awards; difficulties in correctingerroneous arbitral decisions; questions about theindependence and impartiality of arbitrators, andconcerns relating to the costs and time of arbitralprocedures". All these concerns are legitimate andarise from the practical experience of the system,especially since the mid 1990s when most of theISDS cases have taken place.

The author argues that the best path forwardwould be concerted action to agree on a single modeltreaty text to individually replace existing bilateraland regional IIAs that feature inconsistent,overlapping and diverging provisions, together withan ISDS system featuring a standing pool of highlyqualified arbitrators and a standing appellate body toensure consistent and coherent interpretation andapplication of the rules.

Full article here

Volume 11 - Issue #01 - January 2014 - 15

C H A P T E R I I -

M E T H O D O L O G I C A LA P P R O A C H E S

Advancing Reform at ICSID

Antonio R. ParraInternational Council for Commercial Arbitration (ICCA)

Introduction

This paper considers amendments of the ICSIDRegulations and Rules and Additional Facility Rulesand other improvements at ICSID as a distinctfurther "reform path." The most recent amendmentswere those approved by the Administrative Council in2006. They contributed significantly to enhancing theefficiency and transparency of ISDS at ICSID,Section II of this paper describes the process leadingup to those amendments as well as the amendmentsthemselves. As part of the process, ICSID raised thepossibility of offering a mediation service andexplored in detail the idea of establishing aninvestor-State arbitration appeals facility. Thoseaspects of the process are also described in sectionII.

Since the adoption of the 2006 amendments,ICSID has continued to innovate and introduceimprovements benefiting its ISDS facilities. SectionIII of the paper looks at those developments andsuggests some possible future amendments of theRegulations and Rules.

Footnotes omitted from this introduction.

Full article here

UN Commission on International TradeLaw and Multilateral Rule-making -Consensus, Sovereignty and the Role ofInternational Organizations in the Preparationof the UNCITRAL Rules on Transparency

Julia SalaskyCorinne Montineri

UNCITRAL

Introduction

International arbitration is unique as a disputeresolution process insofar as it relies on the consentof parties to submit disputes not to a nationalframework, but to an adjudicative process theparameters of which are themselves the subject ofnegotiation. That such a process works cross-border,cross-culturally and in relation to complex and simpledisputes alike is in part a function of the globalframework established by the instruments developedby the United Nations and the UN Commission onInternational Trade Law ("UNCITRAL" or the"Commission"), including the Convention on theRecognition and Enforcement of Foreign ArbitralAwards (New York, 1958), the UNCITRAL Model Lawon International Commercial Arbitration, and theUNCITRAL Arbitration Rules.

There are parallels to be drawn betweeninternational arbitration as a process, and thedevelopment of UNCITRAL texts in the field ofinternational arbitration: in relation to the latter,there is putative consent that multilateral rule-making in the UNCITRAL forum confers legitimacyupon a text (cf., in the former, consent to arbitrationas a system), and there is specific negotiation of thetext itself (cf., in the former, the negotiation of thearbitral procedure in each arbitration). Howeverwhereas in an arbitration, the final boundaries areset by the arbitral tribunal based on parties'agreement, in the negotiation of a multilateral text, itis the stakeholders themselves that must arrive at aconsensus.

That consensus is achieved at the end of amultilateral process whereby UNCITRAL Member andobserver States, as well as internationalorganizations ("IOs", which include inter-governmental and non-governmental organizations),together debate, negotiate and consult, to achieve auniversally accepted standard. This feat of politicaland legal diplomacy comprises not only an outcome,but indeed a process that contributes to thelegitimacy of the resulting texts.

The recently concluded UNCITRAL Rules onTransparency in Treaty-based Investor-StateArbitration (the "Rules on Transparency" or the"Rules") mark a watershed moment in suchmultilateral rule-making, because harmonization ofpractice in this respect was seen not only to benefitthe main actors of the arbitral process, but also thepublic interest at large. Thus the role of IO observersto UNCITRAL, and the willingness of States toaccommodate the public interest, were both criticalcomponents to the successful completion of theRules.

This note sets out to provide (a) a background onthe rule-making process at UNCITRAL; (b) the role ofboth governmental and non-governmental IOs, andStates, in the genesis and development of the Ruleson Transparency; and (c) the content of the Rules onTransparency in light of compromises achievedduring the consensus-making process.

Full article here

Error Correction and Dispute SystemDesign in Investor-State Arbitration

Professor Andrea Kupfer SchneiderMarquette Law School

Introduction

The current crisis in investor-state arbitrationunder the International Centre for Settlement ofInvestment Disputes (ICSID) system is the subject ofcommentary by both practitioners and scholars in thefield. This Article first reviews the current status ofICSID arbitration by specifically using theArgentinean cases as examples of the ongoinglegitimacy concerns that many countries have aboutICSID. This Article seeks to explain the current crisisusing theories of judicial review to understand howthe annulment committee process and decisions arecontributing to this crisis. The judicial theory of error

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correction, when utilized to review the recentannulment committee decisions, illuminates thedebate in the appropriate use of the appellatefunction for ICSID. Then the Article will use disputesystem design theories of legitimacy andsustainability to suggest potential avenues of movingforward. Through the lens of stakeholderparticipation, the Article examines concerns with thelaw applied by the arbitral tribunals and thestandards of review used by the annulmentcommittees. Finally, the Article uses dispute systemdesign theory to examine proposals for changingICSID- both the law and the process-and argues thatany changes must be stakeholder-driven.

Schneider, Andrea Kupfer, "Error Correction andDispute System Design in Investor-State Arbitration"5 Yearbook on Arbitration and Mediation 194 (2013).

Full article here

The Politics of International InvestmentArbitrators

Professor Catherine A. RogersUniversità Commerciale Luigi Bocconi

Introduction

Part I of this paper begins with a brief sketch ofsome of the most significant methodologicalchallenges raised by this genre of empirical research,including how some of those challenges affectempirical research regarding investment arbitrators.The assessment of empirical methodology provides abackdrop to the analysis of issues in the remainder ofthe paper.

Part II offers an evaluation of selected reformsthat have been proposed for investment arbitrationbased, in part, on some findings in empiricalresearch. In Section A, I examine Albert van denBerg's study of dissenting opinions by party-appointed arbitrators, and related proposals todramatically reduce if not eliminate dissentingopinions. Section B examines Gus Van Harten's studyof jurisdictional rulings, and related proposal for apermanent International Investment Court. I useboth studies to examine more specifically some ofthe methodological challenges identified in Part I,and the risks of linking empirical research to specificreform proposals. Part II also analyzes, incomparison with other adjudicatory models, somequestions about system design features ofinvestment arbitration critiqued by the two studies.

Based on the findings in Part II, Part III examinesthe risks of allowing substantive policy preferences toaffect empirical analysis. It also argues forintegration of research about investment arbitrationinto a comprehensive theory of internationaladjudication as a neutral and law-bound process, andin relation to other forms of public internationaladjudication that imposes limitations on State power.

To this end, Part III also provides somepreliminary recommendations for future empiricalresearch regarding investment arbitrators.Acknowledging the need for continued assessment ofthe basic tenets of the field's features and functions,

it nevertheless calls for caution in giving excessiveweight to or predicating proposed reforms on alimited set of findings. Finally, it calls for evaluatingquantitative empirical findings through comparativeanalysis with other international tribunals, and forgreater dialogue between empirical research andother forms of qualitative scholarship.

Footnotes omitted from this introduction.

Catherine A. Rogers, "The Politics of InternationalInvestment Arbitrators", 12 Santa Clara J. Int'l L.___ (2013)

Full article here

Investor-State Dispute Settlement Reform -Examining the Formative Aspect ofInvestment Treaty Commitments: Lessonsfrom Commercial Law and Trade Law

Associate Professor Locknie HsuSchool of Law, Singapore Management University

Abstract

Criticisms of the current investor-State disputesettlement system stemming from a large number ofbilateral investment treaties are well known. Theseinclude a lack of consistency in arbitral reasoningamong tribunals, the lack of an appellate mechanism,selection and choice of arbitrators, costs and arbitraldecisions affecting matters of public interest.Criticisms are directed at the process, the outcomesas well as the players. In order to address these,solutions or changes need to be directed at theformative process leading to the treatycommitments. This article focuses on this formativeaspect. Commercial and trade law can offer usefulideas toward this end, in terms of provisions that canbe negotiated.

First, the system currently perpetuates several ofthe underlying concerns partly because negotiatorsof new agreements habitually refer to provisions ofprior agreements for 'templates'. While this canfacilitate and speed up the treaty negotiationprocess, it also imports existing ambiguities andproblems. By analogy, commercial parties may use'standard form' contracts, or template contracts;these too may import recurrent issues, and partiesoften would be better served by negotiating tailoredprovisions. The need for clearer, customized,negotiated investment provisions/agreements,particularly in highly contentious areas, is urgent, ifwe are not to continue perpetuating existingproblems and outcomes. This article first examinesthis aspect of current negotiation processes.

Second, the use of ADR clauses has been growingin the commercial world and methods such asmediation are now often agreed to be a requisite firststep, before litigation may be initiated. In state-to-state trade disputes of the World Trade Organization,too, members are required to engage in"consultations" (i.e. negotiations) before the morelitigious panel procedure is triggered. In investor-State disputes, the use of ADR can provide a meansof settlement that accommodates the interests of

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both parties, probably much more than in acontentious, highly publicized internationalarbitration. For mechanisms such as mediation totake root in this field, a mindset shift is required onthe part of investors, host States and their legalcounsel, just as it has been necessary in commercialarrangements. Such means must also be tailored tomeet the needs of both investors and host States. Tothis end, the rules of the WTO and otherorganizations which encourage settlement may alsooffer useful ideas for treaty negotiators.

Third, given that numerous treaties providing forarbitration between investors and States exist, sucharbitrations are unlikely to disappear any time soon.Commercial parties negotiate and enter intoagreements that carry acceptable risks to them, withone common contractual risk-allocation device beingthe use of liquidated damages clauses. Such clausesaim to better define the damages payable shouldparticular breaches of their agreement occur.Similarly, treaty negotiators may, when pressed toaccept investor-State arbitration, consider whetherthey may negotiate risk-allocation provisions withrespect to regulatory areas with broad public policyramifications, such as health regulation. The finalpart of this article examines the feasibility ofincorporating such clauses in new investmentagreements or chapters.

Full article here

C H A P T E R I I I - R E G I O N A LE X P E R I E N C E S W I T H I S D S

Proposal of changes to the system ofinvestment dispute resolution: a contributionfrom South America

Dr. Hildegard Rondón de Sansó

Introduction

There is a strong and wide perception that thesystem of international investment arbitration hasserious flaws. In Latin America we know of themthrough direct experience. Although it is not theregion of the world that attracts the majority offoreign direct investment, it is the one that holds thatholds a sad record of investment arbitration againstcountries of the region and this in spite of the factthat we are ruled by democratically electedgovernments where institutions are well establishedand rules well developed, which shows that it is aregion where the rule of law is respected andpromoted.

However, most countries in the region have beenunder attack -and others are about to experience-through an inefficient and highly criticized system ofinvestment dispute resolution brought against States'sovereign decisions devoted to regulate publicinterest matters. Those attacks have beenperpetrated through investment arbitration and morespecifically through the arbitrators. Ostensibly thoseattacks have extremely negative consequences to thecountries with respect to social and economicsustainable development, country image andgovernance, inter alia due to multi billion dollars

compensation awards which could exceed their grossdomestic products.

Perhaps because of that, respectableorganizations such as the United Nations Conferenceof Trade and Development (UNCTAD) and theTransnational Institute have joined the critics thatsome countries have made in the past which havemotivated specific moves against the system ofinvestment arbitration. Along with those organizationwe could say that the doubts about the legitimacyand transparency of the system arise fundamentallyfrom the arbitrators whose independence andimpartiality are just an illusion, mainly due to theirconstant change of roles (as they are arbitrators insome cases, counsel or experts in others).

A summary of the main problems found on thecurrent system of international protection of foreigninvestment can be summarized as follows:

Frequent conflict of interest of arbitrators,

Numerous decisions against the interest ofthe States;

Inconsistency of the arbitral awards;

Questionable methods used to calculate theinterests;

Timing used for calculation of thecompensation;

Confusion -- according to the temporaryconvenience of the claimants-of thesovereign States with the operativegovernment controlled companies; and

Third party financing of arbitration claimsspecially through "vulture funds" which hascaused an exponential growth of thenumber of investment arbitration claims inthe recent years.

Full article here

Is There a Life for Latin AmericanCountries After Denouncing the ICSIDConvention?

Professor Rodrigo Polanco LazoWorld Trade Institute

Abstract

This paper studies the reasons why some LatinAmerican States have recently decided to denounceand terminate international investment agreementsand the ICSID Convention. It analyses theconsequences of that choice, focused especially onthe alternatives to treaty-based Investor-Statearbitration that those countries are pursuing. Afterexamining these new avenues for dispute settlementbetween the host State and foreign investors, theauthor concludes that this pathway will notnecessarily achieve the purpose that inspired thedenunciation and termination of investment treaties,unless the concerned countries appropriately managetheir "newly" available choices that go beyond amerely return to sole domestic jurisdiction forinvestment disputes.

Full article here

Volume 11 - Issue #01 - January 2014 - 18

Ecuador's Contribution to the Reshapingof the Protection of Foreign Investment ...

Alvaro GalindoDechert LLP

Introduction

This paper will added to the special Special Issuevery soon. It is about the experience of Ecuador withinvestment treaties and disputes and the variousactions taken to correct the course. The author alsoaddresses the UNASUR initiative that Ecuador helpedpromote.

Full article here

What's Yours is Mine: Conflict of Law andConflict of Interest Regarding IndigenousProperty Rights in Latin American InvestmentDispute Arbitration

William ShipleyCentre for International Sustainable Development Law

(CISDL)

Abstract

An assumption implicit to the internationalinvestment dispute arbitration regime is that stateparty respondents will adequately represent theinterests of citizens whose rights may be adverselyaffected as a result of an investment dispute.However, for a variety of reasons, states cannot bereasonably expected to adequately represent theproperty rights of indigenous peoples whose disputedland claims are adverse to the economicdevelopment plans of states and investors both. Inthe Western Hemisphere in particular, this conflict ofinterest threatens the adequate preservation ofmandatory human rights obligations incumbent uponstates subject to the jurisdiction of the Inter-American Court of Human Rights within the contextof international investment arbitration. Theinadequate preservation of indigenous rights claimsover territories subject to an investment dispute isexacerbated by the procedural advantages accordedto the resolution of investment disputes vis-à-vis theproperty and human rights claims of indigenouspeoples. Yet the Vienna Convention and generalprinciples of international law suggest thatinvestment treaty law cannot be applied in such away as to permanently deprive indigenous peoples oftheir fundamental human rights. Because theproperty rights of indigenous peoples arefundamental to all other human rights claims ofindigenous peoples, the failure of internationalarbitration dispute resolution mechanisms to properlyaccount for this conflict of interest in state partyrepresentation may nullify the competing claims ofindigenous peoples and thereby exacerbate conflictaround disputed territories subject to claims by bothinternational investors and indigenous peoples, inviolation of international law.

Using the example of one such dispute in Mexico,the author examines the ways in which thesubstantive and procedural application ofinternational investment law conflict with the

international human rights obligations that arguablyapply to the same subject matter of the dispute. Theapplication of public international law to this problemmay provide space for arbitrators to adopt proceduralmeasures to incorporate claims by third partyindigenous peoples whose perspectives are otherwiseunlikely to be presented by either party to aninvestment dispute, and to choose betweencompeting interpretations of substantive internationalinvestment law that preserve adequate protectionsfor the state regulation of disputed territory on behalfof indigenous peoples. Absent such consideration ininvestment dispute arbitration, investment treatiesmay need to be amended in order to provide for theproperty claims of third party indigenous peopleswhose fundamental human rights may otherwise beadversely affected.

Full article here

A Resilient Boat Sailing in Stormy Seas:ASEAN Investment Agreements and theCurrent Investor-State Dispute SettlementRegime

Teerawat WongkaewGraduate Institute of International and Development Studies

Introduction

After the introduction section, the article isorganized as follows. Section 2 examines the'planning and designing' process with a view tounderstanding the objectives of those agreements inthe broader context of regional economic integrationand ASEAN Community building process. Section 3focuses on the 'tailoring and customizing' process ofcreating agreements to serve the desired objectives.Section 4 analyzes one aspect of the versatile ASEANarchitecture (its investment-protective dimension),and Section 5 examines the other aspect (itssovereignty-preserving dimension). Section 6provides a brief analysis of ISDS trends in ASEANregion, in particular lessons learnt for the future.Section 7 offers some reflections on the keychallenges for the current ASEAN architecture.

Full article here

Investor-State Dispute Settlement from thePerspective of Vietnam: Looking for a "Post-Honeymoon" Reform

Thanh Tu NguyenInternational Law Department, Ministry of Justice of Vietnam

Thi Chau Quynh VuLegal Affairs Department, Ministry of Planning and

Investment of Vietnam

Abstract

The increasing number of investor-state disputeshas, particularly in the recent period of economiccrisis, created significant burden on host countries,both developed and developing ones. For developingcountries, such burden is often multiplied due to theirlimited resource and experience. Many developing

Volume 11 - Issue #01 - January 2014 - 19

countries, after a long "honeymoon" with foreigninvestors, have been re-considering the pros andcons of the investor-state dispute settlementmechanism and more cautious on their negotiationsof bilateral investment treaties or investmentchapters in free trade agreements. Through theexperience of Vietnam, this paper discusseschallenges and difficulties faced by developingcountries in dealing with investor-state disputes. Byexamining Vietnamese network of investmenttreaties, domestic regulations as well as cooperationand coordination mechanism for investor-statedispute settlement and prevention, and three treaty-based cases in which Vietnam has been respondent,the paper identifies relevant drawbacks andconcerns. It then proposes a gradual but systematicre-negotiation of investment treaties, harmonizationof investment rules and policies, improvement ofcooperation and coordination mechanism forinvestor-state dispute settlement and prevention. Interms of regional effort in the context of theestablishment of the ASEAN Economic Community in2015, it suggests to set up an ASEAN advisory centerfor investor-state dispute settlement. All of thesepresent initial steps in finding a clearer path towardan effective and fair system for investor-state disputesettlement and prevention from the perspective of adeveloping country like Vietnam.

Full article here

ICSID's Relevance for the Resolution ofChina-Africa Disputes

Professor Won KidaneSeattle University School of Law

Introduction

The International Center for the Settlement ofInvestment Disputes (ICSID) was created at a timewhen most African countries had just gainedindependence and foreign investment required amore legitimate protection in the former colonies.The ICSID Convention, which set up the Center,came into force on October 14, 1966 when thetwentieth instrument of ratification was depositedwith the Secretariat of the United Nations.Significantly, fifteen of the original deposits of theratification instruments came from African states.Naturally, the very first respondent state in ICSIDproceedings was also an African state.

Examination of the history of the ICSIDconvention suggests that the African States'instantaneous and overwhelming acceptance ofICSID was solely propelled by the perception thatdoing so would increase the flow of badly neededforeign direct investment (FDI) from the North intothe newly independent continent, although theConvention itself makes no such express promise.Structurally, however, ICSID's close affiliations withthe World Bank never sat very comfortably with theAfricans from the very beginning. The history is fullof examples of expressions of misgivings about theestablishment of a dispute settlement mechanismunder the auspices of Africa's principal financier.

Excerpted from an article forthcoming in theUniversity of Pennsylvania Journal of InternationalLaw, Vol. 35.3

Full article here

Africa and the System of Investor-StateDispute Settlement: To Reject or Not toReject?

Professor Uché Ewelukwa OfodileUniversity of Arkansas School of Law

Abstract

This paper examines the position of countries inSub-Saharan Africa (SSA) regarding proposals toreform the investor-State dispute settlement (ISDS)system. Despite their silence on ongoing discussionsabout the future of the ISDS system and possiblepathways for reform, SSA countries are making theirposition on the issue known. The paper argues thatthe position of SSA countries can be gleaned frominstruments that these countries have pushed for atthe sub-regional level. In particular, in theInvestment Agreement for the COMESA CommonInvestment Area (CCIA), in the SADC BilateralInvestment Treaty Template (SADC Model BIT), andeven the SADC Protocol on Investment, countries inSSA appear to express a desire for a radicallytransformed ISDS system.

However, closer inspection suggests that SSAcountries are inconsistent in their actions when itcomes to reforming the ISDS mechanism. Althoughthese countries espouse a vision of an ISDSmechanism that is different from the existingmechanism, their actions tell a different story. Forexample, the CCIA is not operational, the SADCModel BIT is not binding and very few countries, ifany, have taken steps to model their bilateralinvestment treaties (BITs) after it, and in their BITsand related treaties, SSA countries still cling to thetraditional approach to ISDS and BITs moregenerally. Furthermore, while SSA countries wouldprefer to limit investor access to ISDS, the demise ofthe SADC Tribunal in the wake of Mike Campbell(Pvt) Ltd and Others v. Republic of Zimbabweundermines efforts to project domestic and regionalinstitutions in Africa as credible alternatives tointernational arbitration. The paper suggests that theinconsistent position of SSA countries on the ISDSquestion deserves closer study. Also deserving closerstudy is an assessment of the experience of SSAcountries with the ISDS system since the systememerged some forty years ago.

Finally, attention must be paid to the myriadfactors that presently limit the capacity of countriesin Africa to negotiate tailored and development-oriented international investment agreements (IIAs)as well as factors that undermine their effectiveparticipation in the international investment lawregime more generally.

Full article here

Volume 11 - Issue #01 - January 2014 - 20

Initial Hiccups or More? About the Effortsof the EU to Find its Future Role inInternational Investment Law

Dr. Jan Asmus BischoffM.M.Warburg & CO

Summary

In the following article the author outlines howISDS mechanisms in future EU IIAs could look like.This on the one hand includes questions that willarise as a consequence of the interplay betweenpublic international law and EU law. On the otherhand, this also concerns the improvementsenvisaged by the European institutions based on thedocuments just mentioned. In order to do so, first ashort introduction on the status quo ante Lisbon, i.e.the role mostly the EU Member States played in thisfield of law before the Treaty of Lisbon entered intoforce (infra II.). Then, the status quo will beaddressed by discussing the effects Treaty of Lisbonon the competences and the attempts of the EU andits Member States to avoid these consequences (infraIII.). Considering the new legal framework, theauthor seeks to show the practical difficulties theinternal allocation of competences between the EUand its Member States - which the author argues isshared between the EU and its Member States - hasfor future EU IIAs (infra IV.). Based on theseelaborations, the author discusses how future EUIIAs and in particular ISDS mechanisms might looklike (infra V.) and then conclude with some finalremarks (infra VI.).

Full article here

C H A P T E R I V -

S T R E N G T H E N I N G T H E R O L E O FS T A T E S

Section I - Treaty Interpretation

Delegating Interpretative Authority inInvestment Treaties: The Case of JointCommissions

Prof. Dr. Anne AakenUniversity of St. Gallen

Abstract

ISDS is at a crossroads and many alternativesolutions have been proposed for reforming thesystem. One has been neglected in the discussion:the role of joint commissions of the state partiesresolving certain problems in investment treaties.This alternative 'withdraws' interpretative authorityfrom tribunals and directs it to state agencies;tribunals gain interpretative authority only as adefault rule. In order to answer the question ofwhether this alternative is viable and extendable, thiscontribution draws on rationalist approaches foranswering the question of why and to whominterpretation of investment treaties should bedelegated. The current system of ISDS is used as abenchmark against which other possibilities of

outsourcing interpretation are judged on certaincriteria (credibility of commitment and relevantexpertise). A comparative analysis between thissolution and the current delegation of interpretationto arbitral tribunals is offered.

Full article here

Reform of Investor-State DisputeSettlement: Lessons From InternationalUniform Law

Assistant Professor Joshua KartonQueen's University, Faculty of Law

Introduction

This article is organized around three "questionsasked" with respect to Investor-State DisputeSettlement (ISDS). For each, it describes the"answers" yielded by the experience of theinternational uniform law movement, and proposeshow the insights gained might be put into practice inISDS. The first two questions are doctrinal incharacter. Part II poses the question: what degree ofconsistency between ISDS tribunals should be thegoal? Part III asks: what should be the role ofprecedent in a decentralized, non-hierarchicalinterpretive community? On both of these issues, theinternational uniform law literature providesdoctrines that are both normatively attractive andfeasible in ISDS.

The third question is more practical. Part IV asks:which non-binding aids to interpretation are mosteffective in promoting quality and consistency? Awide range of interpretive aids exist for variousinternational uniform law instruments, providing anopportunity to identify best practices. In general, theinternational uniform law experience shows thatsubstantial improvements in consistency and qualityof decision-making can be realized even without theestablishment of centralized administrative orappellate bodies.

Footnotes omitted from this introduction.

Full article here

Which is to be the Master?: Extra-ArbitralInterpretative Procedures for IIAs

Professor Michael Ewing-ChowJunianto James Losari

Centre for International Law (CIL)

Abstract

Certainty and clarity in the law is critical.Unfortunately, most International InvestmentAgreements (IIAs) were drafted with vague languagethat allows for multiple reasonable interpretations oftheir provisions.

The textual interpretative process is usuallytriggered by investors requesting Investor-StateDispute Settlement (ISDS). The case brought before

Volume 11 - Issue #01 - January 2014 - 21

the Permanent Court of Arbitration between Ecuadorand the United States in which Ecuador requestedthe interpretation of a clause in the Ecuador-US BITthrough state-to-state arbitration highlights thepossibility of yet another, albeit rare, interpretativeprocedure. Both these methods produceinterpretations that are not binding on futuretribunals though ISDS awards are often enoughreferred to by other tribunals, and this suggests thatthe interpretation carries weight even if it is notunderstood to be de facto binding. Even asprecedents with limited persuasive authority, theseinterpretations are often binary and usually onlyenough to decide the case before them and thereforerepresent less than optimal methods of systemicinterpretation.

As an alternative to these arbitral methods ofinterpretation, the authors seek to explore the extra-arbitral methods of interpretation provided in IIAs,either explicitly such as the well-known jointinterpretation procedure in NAFTA Article 1131(2) orimplicitly through the incorporation of the customaryrules of interpretation in international law. Then, theauthors explore how such interpretations should bereceived by arbitral tribunals and how they couldaffect the interpretations of the relevant IIA.

The authors believe that these extra-arbitralalternative interpretative procedures could be usefulin two ways. First, states would not feel bound byobligations that they did not envisage when theydrafted the IIA. Second, the process of attempting tocome up with an interpretation freed from thelimitations of a binary adjudicative process could helpdevelop an "epistemic community" that would beable to think about the issue in a more multifacetedway.

Full article here

Keeping Interpretation in InvestmentTreaty Arbitration 'on Track': The Role ofStates Parties

Tomoko IshikawaWaseda Institute for Advanced Study

Introduction

Recent investment arbitration cases suggest atendency towards an ever-broader subject-matterjurisdiction of tribunals over disputes betweeninvestors and the host state. Firstly, in a series ofcases bearing on government debts/debts of a stateowned enterprise, tribunals confirmed that securityentitlements deriving from sovereign bonds, andrights under derivative contracts, fall within thescope of an 'investment' covered both by Article25(1) of the ICSID Convention and the relevantinvestment treaties: Abaclat v. Argentina, Ambientev. Argentina and Deutsche Bank v. Sri Lanka.

Although cases on public financial instrumentsare not new in investment arbitration (e.g. Fedax v.Venezuela and CSOB v. Slovak Republic), the debtinstruments at issue in the former category of casesare distinguished from those in the latter category,because for such debt instruments, the host statestood on an equal footing with the creditor in the

contractual relationship (as will be examined inSection II). Secondly, in the recent EDFI v. Argentinacase, an ICSID tribunal allowed an investor to'incorporate' an umbrella clause into the applicableinvestment treaty via the most-favoured-nation('MFN') clause in the treaty.

As will be demonstrated in Section IV, thecombination of these developments in investmentarbitration indicates that now there is a realpossibility for allegations of a breach of anyobligation of the host state, including that the stateundertook as a party to commercial contracts or as amarket actor, to satisfy subject-matter jurisdictionalrequirements. A natural question follows: is this inline with the intention of the contracting statesparties to the relevant investment treaty? Theexistence of the controversies over these cases itselfindicates that there may well be situations wheresuch dramatic expansion of the subject matterjurisdiction goes beyond the treaty framework'acceptable to both of the State parties'. Against thisbackground, this article addresses the question ofwhat states may - and should - do in order to avoidsuch consequences.

The structure of this article is as follows. SectionII examines the treatment of two issues by recentarbitral tribunals that points to a tendency towardsbroad jurisdiction in investment arbitration: thescope of the term 'investments' and the scope of theapplication of an MFN clause. It first provides anoverview of the approach of the majority of theAbaclat, Ambiente and Deutsche Bank tribunals onthe question of whether the financial instruments atissue qualify as 'investments' under Article 25(1) ofthe ICSID Convention and the relevant investmenttreaties, and criticisms of this approach by dissentingarbitrators as well as by scholars (Sections II.1 andII.2). It then examines the approach adopted by theEDFI tribunal to broadening the scope of a treatythrough an MFN clause (Section II.3). Section IIconcludes by arguing that the combination of theinterpretation of the term 'investments' and of the/anMFN clause by these tribunals may well result in adramatic expansion in the scope of subject matterjurisdiction in investment treaty arbitration (SectionII.4). Against this background, Section III turns tothe examination of the vexing question of whethersuch consequences are in line with the intentions ofthe contracting states. It demonstrates the difficultyin finding 'objectified intentions' of the contractingstates in investment treaty arbitration, and arguesthat there are situations where this difficulty/lack ofexplicit language actually causes 'unforeseen andunacceptable' interpretation by investmentarbitration tribunals. Section IV proceeds to examinewhat states may - and should - do in order toprevent such overly broad interpretations fromoccurring, focusing on the states' active role ininterpreting investment treaties. Bearing in mind theneed to respect the investors' legitimate expectationswith respect to interpretation and their rights to dueprocess, this article proposes the inclusion of aformal mechanism for issuing 'joint interpretativestatements' by the states involved in investmenttreaties as a way to achieve balance between theinterpretive power of the states and the disputinginvestor's rights to due process.

Full article here

Volume 11 - Issue #01 - January 2014 - 22

In Search of Consistency and Fairness inInvestor-State Arbitration: An "Institutional"Approach to Interpreting the Doctrine ofLegitimate Expectations

Uğur Erman ÖzgürCEPMLP, University of Dundee

Introduction

This paper attempts to explain issues of fairnessand inconsistency in investor-state arbitration withthe New Institutional Economics (NIE) framework. Itargues that the NIE correlates to internationalinvestment regime in two ways: First, municipalinstitutions are direct determinants in locationaldecisions of investors. Second, internationalinvestment law helps entrenching municipalinstitutional rights promised to foreign investors. Thispaper questions whether arbitral tribunals areresponsive to institutional settings when theyinterpret treaty standards. It revisits some of thecontroversial Argentine cases examining whetherarbitral tribunals were sensitive to concreteinstitutional realities in the interpretation of doctrineof legitimate expectations. The paper shows that, asa result of the tribunals' divergent understanding ofinstitutional and organisational developments inArgentina, there are contradictions between theearlier set of awards including CMS, Enron, Sempraand LG&E, which established host-state obligation byapplying the concept of stability, and the Totalaward, which introduced the concept of "regulatoryfairness or regulatory certainty". Consequently, thispaper argues that tribunals could be provided withinterpretative tools in order to overcome suchinconsistencies. It proposes that the NIE couldprovide a useful framework to strike a fair balance ininvestor-state arbitration and to promoteestablishment of consistent arbitral jurisprudence.Consequently, it discusses codification of institutionalprinciples in individual clauses and/or annexes toIIAs as an option for reform.

Full article here

Travaux Préparatoires and the Legitimacyof Investor-State Arbitration

Baiju S. VasaniAnastasiya Ugale

Jones Day

Introduction

The investor-state arbitration system, still in itsrelative infancy, is not indefectible. But neither is itflawed to the extent that callers for its wholesaleabolition need be given disproportionate prominence.As a community of users, participants, and observersof the system, we should be seeking to debate andpropose structural tweaks with a scalpel, not with asledgehammer. This article proposes one such tweak,which, the authors submit, will enhance thelegitimacy of the investor-state system without theneed for across-the-board reform.

It is trite to state that consent is a foundation ofarbitration. But in investor-state arbitration, thatnotion is particularly true. It is inherently linked withthe notions of fairness and legitimacy, and the failureof arbitral tribunals to breathe life into the parties'original consent - and their originally intendedmeaning of the treaty terms - inevitably leads tobacklash. In recognition of this danger, severalrecent discussions have focused on the ways stateparties may clarify the meaning of the original termsand voice disagreement with tribunal interpretations.In the present article, we revisit the role of a treaty'spreparatory works - travaux préparatoires - as ameans of elucidating the scope of the parties'consent and their intentions crystallized in the text ofthe treaty.

Part B of the article explores the linkage betweenthe concepts of fairness, legitimacy, and consent inthe process of treaty interpretation. Part C identifiesthree major schools of treaty interpretation anddiscusses the approach adopted by the ViennaConvention on the Law of Treaties as it applies totravaux préparatoires. Part D proceeds by analyzingthe practice of arbitral tribunals applying the travauxin the process of interpretation and the challengesthey encounter as they balance multiple competinginterests and principles. Finally, Part E concludes witha summary of suggested reform for the use oftravaux in treaty interpretation in this modest butcritical exercise of arbitral procedure.

Full article here

State-To-State Investment TreatyArbitration: A Hybrid Theory ofInterdependent Rights and SharedInterpretive Authority

Anthea RobertsLondon School of Economics, Department of Law

Abstract

Most investment treaties contain two disputeresolution clauses: one permitting investor-statearbitration for investment disputes and the otherpermitting state-to-state arbitration for disputesconcerning the treaty's interpretation and/orapplication. Despite this duality, the potential role ofstate-to-state arbitration, and its proper relationshipwith investor-state arbitration, have largely beenignored. However, recent cases, including Peru v.Chile, Italy v. Cuba and Ecuador v. United States,demonstrate the need to examine the potential andlimits of this form of dispute resolution and toconsider its implications for the hybridity of theinvestment treaty system as a whole.

One reaction to the re-emergence of state-to-state arbitration has been to view it as a dangerousdevelopment that threatens to infringe uponinvestors' rights and to re-politicize investor-statedisputes. This has led some to suggest radicallycurtailing the scope and availability of state-to-statearbitration in favor of investor-state arbitration. ThisArticle argues that these attempts are inconsistentwith the text, object and purpose, and history ofinvestment treaties. The co-existence of these twoforms of arbitration without a clear priority

Volume 11 - Issue #01 - January 2014 - 23

mechanism reflects the system's essential hybridityand cannot be wished away. This duality helps todemonstrate that the goals of investor protection andthe depoliticization of investor-state disputes areimportant, but not absolute.

Instead, the re-emergence of state-to-statearbitration represents an important step toward anew third era of the investment treaty system inwhich the rights and claims of both investors andtreaty parties are recognized and valued, rather thanone being reflexively privileged over the other. Theinvestment treaty system has evolved from its firstera, which focused exclusively on states' rights andstate-to-state arbitration, to its second era, whichfocused primarily on investors' rights and investor-state arbitration. Instead of being an illegitimate orregressive development, the re-emergence of state-to-state arbitration represents a permissible andpotentially progressive mechanism by which treatyparties can re-engage with the system in order tocorrect existing imbalances and help shape itsdevelopment from within.

More generally, the co-existence of investor-stateand state-to-state arbitration requires a hybridtheory about the nature of investment treaty rightsand the allocation of interpretive authority. ThisArticles argues that: investment treaty rights shouldbe understood as being granted to investors andhome states on an interdependent basis, such thateither-but usually not both-may bring arbitral claims;and interpretative authority should be understood asbeing shared between the treaty parties, investor-state tribunals, and state-to-state tribunals. Thishybrid theory has the potential to help resolve othercontroversial issues within the field.

Anthea Roberts, State-to-State InvestmentTreaty Arbitration: A Hybrid Theory ofInterdependent Rights and Shared InterpretiveAuthority, 55 Harv. Int'l L. J. (forthcoming Winter2014).

Full article here

Section II - Revising Treaty Language

Reform of Investor-State DisputeSettlement: the US Experience

Karin L. KizerJeremy K. Sharpe

U.S. Department of State

Introduction

By drawing on the U.S. experience with investor-State dispute settlement, the authors' commentsfocus on how reforms can be achieved through thenegotiation of agreements. The authors will not dealseparately with alternative dispute resolutionmethods, which offer a viable avenue for resolvingdisputes in addition to arbitration (particularly forinvestors seeking to continue their investments inthe host State), and are encouraged in all U.S.international investment agreements.

Similarly, the authors will not delve into broaderinstitutional reforms, such as the introduction of anappellate mechanism or the establishment of astanding international investment court. In thispaper, the authors will touch briefly on severalsignificant developments concerning how the UnitedStates structures its IIAs. These reform efforts mightprove useful to other States that are consideringreforming their own investor-State disputesettlement mechanisms.

Footnotes omitted from this introduction.

Full article here

Liberalization or Litigation? Time toRethink the International Investment Regime

Simon LesterWorldTradeLaw.net

Summary

Private investment is the great driver of economicgrowth. Despite this positive economic impact,however, there are sometimes objections toinvestment when it comes from foreign sources.These objections are misguided. Aside fromoccasional national security concerns, foreigninvestment offers all the same benefits as investmentfrom domestic sources. A liberal and open policytoward foreign investment is clearly the optimal one.Governments should allow foreign companies toinvest in the domestic market and should also allowdomestic companies to invest abroad.

The United States has used international tradeand investment agreements to promote foreigninvestment. However, if we examine the actualobligations in these agreements, we find the rulesare not always about liberalization as it is usuallyunderstood. Rather than simply encouraging andwelcoming foreign investment, and treating it likedomestic investment, many of the rules are designedto give special legal protections to Americancompanies that invest abroad. The United States is inthe process of negotiating investment rules in severalof its trade initiatives and is also considering newinvestment treaties. This recent activity in the areaof investment rules provides an opportunity forreevaluation.

The current rules are not well calibrated toliberalizing foreign investment. Instead of offering asimple and direct policy of liberalization, theyincorporate vague legal principles that providenumerous opportunities for litigation, and in doing sothey undermine the more basic principle of treatingforeign and domestic investment equally. Ifinternational rules are to be used at all in this area, afocus on nondiscrimination, and a more flexible legalframework, would be preferable to the existingsystem.

CATO Institute Policy Analysis No. 730 July 8,2013 - Republished with permission.

Full article here

Volume 11 - Issue #01 - January 2014 - 24

Rethinking Rights and Responsibilities inInvestor-State Dispute Settlement: SomeModel International Investment AgreementProvisions

Elizabeth BoomerMIDS

Introduction

This paper attempts to identify model treatylanguage for international investment agreements,with the particular goal of rethinking the Investor-State Dispute Settlement (ISDS) regime. SinceIISD's 2004 model investment agreement, andinformed by UNCTAD's Investment Policy Frameworkfor Sustainable Development and the COMESACommon Investment Area Agreement, a movementtoward incorporating sustainable development intoinvestment treaty language is emerging. In addition,many arbitral tribunals have rendered awards thatgive states further insight into what provisions theycould safely include in a treaty to preserve policyspace and allow for a careful balancing of investorrights, public policy, and State obligations in amanner that is legitimate, transparent andaccountable.

The framework, analysis and accompanyingmodel text and commentary focus on recentscholarly writings and arbitral awards to rethink therights and obligations of States and investors in theISDS regime. The analysis is also timely as morethan one third of the world's existing BITs will be upfor termination or renegotiation by the end of 2013,as Trans-Pacific Partnership negotiations continue toadd new members, and as the European Union opensnegotiations on its investment treaties with theUnited States, Canada, and China.

The proposed model treaty language offersclauses designed to promote sustainabledevelopment while encouraging investment byaddressing the potential importance of the preamble,definitions, the level of protection offered againstexpropriation, the applicable national treatmentstandard, the importance of the substantiveminimum standard of treatment, the scope of themost-favored nation clause, home state obligations,investor-state dispute settlement provisions, thepotential importance of exceptions, the use ofcounterclaims, and the potential creation of acooperation commission.

Full article here

Back to the Future: Contemplating aReturn to the Exhaustion Rule

Daniel KalderimisChapman Tripp

Introduction

The so-called "backlash" against investor-statedispute settlement (ISDS) has been well-documented. The extent and validity ofdissatisfaction with ISDS, and the investment treatyarbitration (ITA) system of which it is the operative

mechanism, remains a hotly contested subject. Thispaper does not delve into these debates, but takesfor granted that the ITA system, having developedapace over the past two decades, is undergoing aperiod of reappraisal - which is involving intensescrutiny from various quarters as to its conceptualfoundations, normative basis, substantive nature,and internal processes. In other words, thehoneymoon is well and truly over.

This is perhaps unsurprising. The InternationalCentre for the Settlement of Investment Disputes(ICSID) was, in 1966, expected to derive itsjurisdiction from specific contractual agreements toinvestor-state arbitration. Indeed, the Preamble tothe ICSID Convention expressly recognises that"while [international investment disputes] wouldusually be subject to national legal processes,international methods of settlement may beappropriate in certain cases".

In other words, international investment disputeswere to be the exception, and domestic settlement ofsuch disputes the norm. That anticipated context hasbeen exploded. Instead we have witnessed a vastproliferation of bilateral investment treaties (BITs)and investment chapters of free trade agreements(FTAs) which - in place of international arbitration byspecific agreement - have supplied arbitrationwithout privity. Arbitration without privity has in turnbecome a standard mechanism - sometimes inaddition to and sometimes in replacement of specificarbitration agreements - for the resolution of foreigninvestment disputes.

The author asks whether developed countriesshould consider reintroducing the exhaustion rule toISDS claims by investors of other developedcountries. His response is that they should, but onlyif exhaustion rules are applied in a more modernform, which required investors to prosecute, and alsoempowered domestic courts to rule upon,international investment claims by applying BITstandards as well as domestic law rules.

Full article here

Restricting the Scope of InternationalInvestment Agreements as a Means to SetLimits to the Extent of Arbitral Jurisdiction

Dr. Mara ValentiUniversità degli Studi di Milano

Introduction

Investor-State Dispute Settlement (ISDS) hasbeen one of the major achievements of internationallaw, especially if one looks at it from the perspectiveof the status of the individual according tointernational law. The power to initiate an arbitralproceeding directly against the host State hasbecome a strong tool in the hands of foreigninvestors around the world.

In the field of the protection of human rights, wemay find a similar right of access to an internationaljurisdiction. Yet such a right remains subject tocertain conditions, which highlight the traditionalattitude of States towards adjudication. The

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exhaustion of the domestic remedies rule, which istypical of many treaties on the protection of humanrights, well illustrates the opinion that the primaryresponsibility for the ascertainment of an allegedviolation of human rights lies on States and theirorgans.

ISDS, on the contrary, has been originallyconceived as a direct remedy of redress for theaggrieved investor. It is symptomatic, under thisrespect, that the ICSID Convention requires thecontracting parties to waive their right to exercisediplomatic protection on behalf of their nationals whohave initiated a proceeding under the Convention.

In other fields of international law there has beenquite recently a proliferation of courts and tribunalsestablished to ascertain the alleged violations of thetreaty concerned. Let's take international trade lawand the dispute settlement procedure administeredby the WTO, for example.

Full article here

Limiting Investor Access to InvestmentArbitration - A Solution without a Problem?

Amal BouchenakiHerbert Smith Freehills LLP

Liang-Ying TanGibson Dunn

Abstract

The investor-state dispute settlement (ISDS)regime, premised upon the right of investors to bringarbitration proceedings directly against a host statepursuant to an investment treaty between the hoststate and the investor's home state, has beencredited with making a significant contribution to thepeaceful - and potentially more economical -settlement of investment disputes, by doing awaywith the need for diplomatic protection and thus de-politicizing such disputes. However, as such treatiesand claims proliferate, and in particular as awardshave been rendered that are perceived to infringeupon states' sovereign power to legislate on issues ofpublic policy, or to award unrealistic and unfairdamages to claimants with insufficient regard tonational security and other extraordinary extenuatingcircumstances (as in the Argentine crisis), thependulum of public opinion in some sectors hasswung back in favor of limiting investor access tothese arbitration proceedings.

This paper examines the extent to which therehas been a discernible trend of limiting investoraccess to ISDS through various means over the pastfew decades, including (i) evolving investment treatylanguage to specifically exclude certain substantiveclaims from arbitration, (ii) statements and acts ofStates in refusing to abide by awards or inwithdrawing from ISDS altogether, and (iii) thefindings and reasoning of arbitral tribunals in ISDSawards as regard both jurisdictional bars toarbitration and the interpretation of substantiveprotections.

In analyzing the current mechanisms in place tolimit investor access, we will evaluate the efficacyand other consequences of these mechanisms vis-à-vis their intended outcomes, and assess whetherthey adequately respond to criticisms that ISDS hasbecome too easily accessible by investors withunmeritorious claims, resulting in onerous burdens oftime and expense on respondent States, and evenworse, unjustifiable awards.

In this regard, we will analyze existing limitsincluding: (i) treaties excluding claims relating tocertain subject matters, such as claims concerningfinancial institutions (Canada-Jordan BIT), claimsrelating to intellectual property rights and toprudential measures regarding financial services(China-Japan-Republic of Korea investmentagreement), claims arising out of measures toprotect national security interests (India-MalaysiaComprehensive Economic Cooperation Agreement),claims limited to disputes over compensation amount(Albania-China (1993), Bulgaria-China (1989),Belgium-Poland BIT (1987)); (ii) the definition of an"investor", including denial of benefits clauses, whichexclude investors who do not have substantialbusiness activities in their alleged home State, andissues of dual nationality; (iii) the requirement toexhaust local remedies and other preconditions toarbitration; and (iv) any otherjurisdictional/admissibility limits.

We will also evaluate, by surveying awards thathave reviewed the issue of investor access (bothwhere access has been denied and where limits havebeen found not to apply), whether discontent withthe existing limits to investor access has reached thelevel of endangering the existence of the system as awhole, or whether the more extreme reactions canbe attributed to vocal outliers that paradoxicallyshow the healthy development of ISDS - specificallyas investment-exporting states start receivingsignificant foreign investment themselves. Theplaying field has significantly changed from the timewhen ISDS was dominated by investors from theNorth-Western hemisphere bringing claims againsthost states in the developing world.

Today, as more disputes are brought against theUS and EU member states, will one see a morerobust implementation of the limits to investoraccess? The question then is, if access can beeffectively policed through more robustimplementation of the existing limits, are new anddistinct limitations called for? Finally, if the problemswith the system are not in the first placefundamentally attributable to excessive ease ofinvestor access, then the solutions may not be tolimit investor access; we explore how, in light of thelegal theories in place, the existing limits (if they aretruly insufficient) can be made more effective whilestill preserving the values of the system - and thesystem itself.

Footnotes omitted from this introduction.

Full article here

Volume 11 - Issue #01 - January 2014 - 26

Exclusion From Within the Ambit of aProtected Investor, a Fair Price to Pay for theAct of Abusive Treaty Shopping?

Vidushi GuptaDr. Ram Manohar Lohia National Law University, Lucknow

Abstract

The investor-state dispute settlementmechanism, which is a unique feature of BilateralInvestment Treaties (BITs) is often described as adouble edged sword. It gives investors the right tobring a claim against a state for breach of treatyprovisions, thereby giving them direct means to seekredress. On the other hand, such a mechanism mayalso open the floodgates for frivolous claims whichmay result in a waste of public funds, and threatenthe state's power as a sovereign to regulate and toimplement reforms within its territory.

In some cases, investors seek treaty protectionby restructuring their investment through thirdcountries for the various reasons. Such restructuresare at least partly influenced by the aim of gainingthe right to initiate an investor state dispute underthe garb of legitimate corporate nationality planning.Such an act is in essence a paradox to the purpose ofBITs which is to secure a stable legal environment forinternational investment. Thus, it is imperative toexclude such investors from obtaining protectionunder the scheme of the treaty.

This paper deals with the need to limit investoraccess to the investor-state dispute settlementmechanism in light of situations where protection issought through the practice of treaty shopping.Various drafting techniques such as the inclusion of arestrictive definition of an 'investor' and/or a 'denialof benefits' clause to exclude purported investorsfrom within the ambit of BITs will be examined in thispaper. Further, through an analysis of cases, thepaper identifies circumstances under which purportedinvestors have not been permitted to bring a claimagainst the host state, despite the absence ofexpress mention of such exclusion in the words ofthe treaty. The author seeks to offer a holistic viewof the situations in which there can be a restrictionon the range of covered investors to protect theobject and purpose of the treaty from being violated.

Full article here

A Few Pragmatic Observations on HowBITs should be Modified to IncorporateHuman Rights Obligations

Professor Patrick DumberryGabrielle Dumas-Aubin

Faculty of Law, University of Ottawa

Abstract

The authors observe that while international law,as it now stands, does not impose any direct legalobligations on corporations (except for jus cogensnorms), nothing prevents countries from signing BITsimposing human rights obligations upon

corporations. They examine concretely how suchBITs could be drafted (and existing ones beamended), including where non-investmentobligations should be located in BITs; what type oflanguage should be used; which internationalinstruments should be referred to in BITs and why;and which enforcement mechanisms should beadopted.

This article reflects facts current as of February2012. The article is a modified version of an articleoriginally published by the authors: P. Dumberry &G. Dumas-Aubin, "How to Impose Human RightsObligations on Corporations under InvestmentTreaties?", 4 Yearbook on International InvestmentLaw and Policy, 569-600 (2011-2012).

Full article here

On Genealogy of Proposals to ReformInvestor-State Arbitration

Dr. Ahmad GhouriUniversity of Turku, Faculty of Law

Abstract

Investor-State arbitration cases involving publicinterest regulation have been understood asstruggles between advocates of the free movementof investment capital, such as multinationalcorporations, and environmental or human rightsinterest groups. The critical questions have beenframed as follows: should the competing values andinterests in public interest regulatory disputes bereconciled through investor-State arbitration? Shouldarbitrators be permitted to incorporate non-investment international norms into investment lawand interpret investment treaties by applyinginternational law generally? Is the development ofinternational law better served by States, asrepresentatives of their peoples, determining thebalance of protection and costs by concludingconsensual agreements through political processes?

These are questions of institutional competenceand democratic legitimacy, the allocation of decisionmaking authority among States and the variousavailable investor-State arbitration rules andinstitutions. The manner in which these questionshave been addressed in the existing literaturesuggests a genealogy based on the following three"models" of how public interest issues might beintegrated into investor-State arbitration: 1) thecontract model; 2) the institutional capacity buildingmodel; and 3) the arbitral activist model. Theprimary argument of this paper is that the first twomodels, namely the contract model and theinstitutional capacity building model, eventually fall-back on the third model, namely the arbitral activistmodel, implicating arbitral activism and necessitatingthat the investor-State arbitral system developsindigenous principles of systemic self-governance.

Full article here

Volume 11 - Issue #01 - January 2014 - 27

Section III - State-State Procedures and aStanding Investment Court

The Abiding Role of State-StateEngagement In the Resolution of Investor-State Disputes

Theodore R. PosnerMarguerite C. Walter

Weil, Gotshal & Manges LLP

Introduction

In Part I of this paper the authors discuss the roleState-to-State interaction can play when the hostState in an investment dispute resists enforcing anarbitral award against it or resists going to arbitrationin the first place.

In Part II, the possible interplay between State-State dispute settlement mechanisms and investor-State dispute settlement mechanisms and, inparticular, how the former might be used to advancean investor's objectives in the latter is discussed. Theparadigm we have in mind here is a State-Statedispute settlement proceeding in the WTO, forexample, that serves to clarify a particular obligation(say, under the WTO Agreement on Trade-RelatedAspects of Intellectual Property Rights), whichclarification then becomes relevant in other contexts(e.g., because of the incorporation of "internationallaw" into BITs and other treaties) and is used by aninvestor in an investor-State dispute settlementproceeding under a BIT.

In Part III addresses possible uses of State-Statedispute settlement as an alternative to investor-Statedispute settlement. Although it may seem counter-intuitive, it is possible to envision scenarios in whichan investor would prefer to have a dispute resolvedthrough State-State dispute settlement even thoughinvestor-State arbitration is an option, and eventhough the investor inevitably will have less controlover the State-State process. This might be the casewhere there is a persistent pattern of harmfultreatment of foreign investments, but where the sizeof the harm to each individual investor is relativelysmall, making it difficult for aggrieved investors toseek resolution through investor-State arbitration. Itmay also be the case if the investor is impeded fromentering a market to which it should have accesspursuant to a BIT (in which case, quantifyingdamages might be impractical), or the investor wantsto stay in a market and would prefer removal of aproblematic measure to payment of monetarydamages, or fears retaliation if it were to bring aclaim on its own. We project such scenarios tobecome more common with the advent of BITsbetween major commercial actors with significantlydifferent views on the role of government, such as aneventual U.S.-China BIT.

Full article here

Power and Persuasion in InvestmentTreaty Interpretation: The Dual Role of States

Anthea RobertsLondon School of Economics, Department of Law

Introduction

Part I sets out the theoretical framework,examining the nature of investment treaties, theinterpretive balance of power between treaty partiesand tribunals, and the likelihood of stra- tegicinteractions between these actors. Part II turns tolegal doctrine to consider how analysis of subsequentagreements and practice can help treaty parties andtribunals to engage in a con- structive dialogue aboutinterpretation. It examines why and how thisevidence is applied in public international law,including human rights law, so as to develop a theoryabout its use and its limits in the investment context.Part III takes up the practical challenge of providingan illustrative list of the types of subsequentagreements and practices most readily available inthe investment context. This list aims at providing aroad map for states wishing to generate and plead,and tribunals wishing to identify and assess, suchevidence.

This article is reproduced with permission fromthe April 2010 issue of the American Journal ofInternational Law © American Society ofInternational Law. All rights reserved. www.asil.org

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In Search of a Roadmap - Lessons for theISDS Regime in the U.S. Experience ofLump-Sum Claims Settlement Processes

Timothy J. FeigheryArent Fox LLP

Introduction

In considering reform of the investor-Statedispute settlement (ISDS) regime, a fundamentalquestion - aside from the question of whether reformis needed, and if so what form it should take -- iswhether that reform is likely to come from within (inthe form of proactive "self-policing") or without (byoutside pressure from a more attractive alternative).Generally, this forum represents the former; I wouldlike in this particular paper to consider the latter. Thevery name, "investor-State dispute settlement,"indicates the direct settlement between investors andthe States in which they invest, whether thatsettlement is through arbitration or some other formof dispute resolution. ISDS has become so much apart of the international legal landscape over the pastfew decades that it is sometimes hard to recall thatits original purpose was to replace an existingcustomary international law regime - the law ofdiplomatic protection - that worked well enough inthe context of investment disputes to havepredominated in this area from the latter part of theeighteenth century well into the twentieth century.

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Volume 11 - Issue #01 - January 2014 - 28

Permanent Investment Tribunals: TheMomentum is Building Up

Omar E. Garcia-BolivarBG Consulting, Inc

Introduction

One of key elements of international investmentlaw is the dispute settlement mechanism whereexceptionally under the standards of publicinternational law disputes can be submitted againstStates in international fora by parties other thanStates themselves.

That mechanism of dispute settlement has beenconsidered in and by itself as one of the mainadvantages of international investment law as itdepoliticizes potential disputes between investors andhost States by providing a neutral venue to settle thedifferences. But although arbitration has filled thegap of the venue where investment disputes can besettled, the neutral venue where disputes betweeninvestors and States are to be settled does notnecessarily have to be arbitration.

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The Challenges of Creating a StandingInternational Investment Court

Eduardo ZuletaGómez-Pinzón Zuleta Abogados S.A.

Abstract

This paper explores the challenges of adding astanding international investment court - assuggested in UNCTAD's "Reform of Investor-StateDispute Settlement: In Search of a Roadmap" - tothe existing investment dispute resolution system.The author addresses challenges on the elaborationof a multilateral treaty to establish the Court, issueson impartiality and independence of adjudicators, aswell as concerns for predictability, party autonomyand transparency.

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C H A P T E R V - F U R T H E R

A D V A N C I N G T H E R E F O R M O FI C S I D

Achieving a Faster ICSID

Adam RavivWilmer Cutler Pickering Hale and Dorr LLP

Abstract

This article examines the length of ICSIDarbitrations as they are currently practiced andanalyzes why they take as long as they do. It reviewseach stage of an ICSID proceeding and offers avariety of suggestions for how to speed them up,focusing on amendments to the ICSID rules and

institutional practices. If you don't appreciate theirony of a very long article that decries very longcases, the author provides a summary of hisrecommendations.

Full article here

Streamlining the ICSID Process: NewStatistical Insights and Comparative Lessonsfrom Other Institutions

Professor Joongi KimYonsei Law School

Introduction

A central issue with the current investor-Statedispute settlement system (ISDS) concerns theconsiderable time required for cases to reach aconclusion. The interval from the request forarbitration until the rendering of an arbitral awardtypically takes years, with several cases lasting overa decade.

For ICSID cases, parties have been known tothen bring annulment proceedings not only tochallenge awards but also to further prolong theprocess in the hopes of forcing a settlement.Excessive delays can undermine the credibility of thesystem to the detriment of all parties involved.Protracted legal contests burden states, particularlywhen they face questionable claims and when theylack sufficient resources, and deny recoveries forinvestors with legitimate grievances, exactingenormous costs for both sides.

This article will first offer in-depth analysis of thevarious stages of the arbitral proceedings at ICSID,the primary venue for ISDS. It providescomprehensive new statistical information on keystages that was previously unknown. It thenexamines the dispute settlement process of otherinternational institutions to glean insight from acomparative perspective as to what might beconsidered to streamline the process so that partiescan receive more expeditious awards.

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Fragmentation and Harmonization in theICSID Decision-Making Process

Roberto Castro de FigueiredoTauil & Chequer Advogados Associado a Mayer Brown LLP

Introduction

Since the end of the 1990s, internationalarbitration has become one of the main mechanismsfor the settlement of disputes between foreigninvestors and host States. This phenomenon seemsto be directly linked to the proliferation, in the sameperiod, of international treaties entered into byStates for the protection and promotion of foreigninvestments, most of them bilateral investmenttreaties, but also bilateral and regional free tradeagreements containing investment protection rules,such as the North American Free Trade Agreement -

Volume 11 - Issue #01 - January 2014 - 29

NAFTA, and sectorial multilateral investment treaties,such as the Energy Charter Treaty. In addition to thesubstantive rules of protection, most investmenttreaties grant foreign investors the option to pursuetheir claims against host States before internationalarbitral tribunals as an alternative to recourse tolocal courts and to diplomatic protection afforded bythe foreign investors' home States. As a result, thenumber of disputes between foreign investors andhost States referred to international arbitration hasincreased dramatically in the last years.

The investment arbitration phenomenon brought,on the other hand, new challenges to internationalarbitration practice, rooted in its commercial disputetradition. Arbitral tribunals constituted for thesettlement of investment disputes becameaccountable to a much wider audience. Differentlyfrom the traditional commercial arbitration, wherethe decisions rendered by arbitral tribunals havelittle, if any, publicity and their relevance is, in mostcases, essentially limited to the disputing parties, theoverwhelming majority of decisions rendered ininvestment arbitration are made public and theircontent has consequences not only to the disputingparties, but to a worldwide community. Ininvestment arbitration, arbitrators have to beconcerned not only with the outcome of theirdecisions and their consequences for the disputingparties, but also, and perhaps more relevant, theymust give much more attention to how the decisionsare reached. The decisions rendered in investmentdisputes contribute directly to the consolidation andunderstanding of the relatively new field ofinternational investment law.

Footnotes omitted from this introduction.

Full article here

ICSID Annulment Standards: Who HasFinally Won the Reisman vs Broches DebateTwo Decades Ago?

Nikolaos TsolakidisWhite & Case LLP

Abstract

From the very first cases, Klöckner I and Amco I,prominent scholars and practitioners have debatedand commented the scope of Article 52 and its actualapplication by ad hoc Committees. The debatecontinues. In fact, ICSID itself recently released abackground paper on its annulment process inresponse to a request by the Solicitor General of thePhilippines. This essay will reengage with the spiriteddebate between Professor Michael Reisman andAaron Broches of two decades ago. It will try toassess, by reference to subsequent decided cases,which analysis has been more successful or whetherboth have been ignored. Finally, this essay will brieflyaddress whether and to what extent the perceivedshortcomings of ICSID's annulment process need tobe remedied.

Full article here

ICSID Annulment Reform: Are WeLooking at the Right Problem?

Mallory B. SilbermanArnold & Porter LLP

Introduction

Professor Schreuer noted in 2009, "[i]n everypublished annulment decision to date, ad hoccommittees have stressed th[e] distinction [betweenannulment and appeal]. They have stated repeatedlythat their functions are limited and that they do nothave the powers of a court of appeal . . . .Committees have insisted that a decision to annulhad to be based on one of the five reasons listed inArticle 52(1) and they could not review the awards'findings for errors of fact or law." Committees alsohave stressed the importance of evaluating eachclaim against the particular Article 52(1) standardinvoked, finding that "where a party objects to anyparticular aspect of a tribunal's process or decision, itmust relate that objection to a specific ground forannulment under Article 52(1), explaining how andwhy the objection falls within the specific groundinvoked," and that "[t]he fact that a particular set offacts may have a bearing on more than one groundof annulment does not, as such, render any error insupport of any one of those grounds of annulmentany the more manifest."

Naturally, there is room for debate regardingwhether particular committees or annulmentdecisions have adhered to these principlessufficiently. But the "systemic problem" withannulment lies not so much in (arguably)unmeritorious decisions to annul, but in thesubmission of patently unmeritorious claims, whichpresent significant costs that the parties and thesystem must bear without any real relief. Theremainder of this article (1) details the costsassociated with annulment petitions; and (2)examines potential avenues for reducing the numberof unmeritorious claims, thereby reducing the costsborne by the parties and the system.

Footnotes omitted from this introduction.

Full article here

The trembling legitimacy of the ICSIDannulment system in the light of decisions byAd Hoc Committees vis-à-vis the Ad HocCommittee decisions

Vanessa Giraud MartinelliMezgravis & Asociados

Introduction

Since 2001 there has been a considerableincrease in annulment proceedings. According to theICSID Convention, the annulment is an extraordinaryremedy designed for a limited scope of review of fivespecific grounds provided under Article 52 of theICSID Convention, which sets the general proceduralframework for annulment proceedings. The Ad HocCommittees are intended to review solely thearguments for annulment filed by the petitioning

Volume 11 - Issue #01 - January 2014 - 30

party and must only decide on aspects of five specificgrounds of the Tribunal award. However, theextensive interpretations of Ad Hoc Committees arein some ways stretching the purposes of the ICSIDsystem - such as legitimacy and adequacy - to thelimit. For instance, one Ad Hoc Committee exceededits mandate by criticizing the grounds for the awardor the conduct of the original Tribunal and anotherone attempted to lecture the arbitral tribunal on law.Such behavior on the part of the Ad Hoc Committeesundermines the system and threatens theenforceability of the award. Furthermore, Ad HocCommittees have identified errors in the reasoning ofthe award yet the awards have not been annulled.These findings put the credibility of the ICSID systemitself at risk, since, after all, the question is to whatextent must the principle of finality be safeguarded?

Full article here

Addressing and Redressing Errors inICSID Arbitration

Diego Brian GosisGomm & Smith P.A.

Introduction

Few among us - students, scholars, practitionersand arbitrators in the admittedly underpopulatedrealm of international investment law- would disputethat, in the context of the ICSID Convention andRules, an award that contains petty errors can easilybe remedied under the devices provided for in thesaid Convention and Rules.

As a result of what we suggest to be aninadequate reading of the applicable texts, which thispaper submits could be overcome through improvedinterpretation or drafting, the headcount of those inagreement is paradoxically prone to start thinning asthe size of the error increases.

This thinning effect is partially the result of Art.49(2) mandating that rectification requests beresolved by the same adjudicating body -tribunal orAd-Hoc committee- issuing the erring decision, whichseems to justify the fact that rectification is availableto remedy situations limited to "clerical, arithmeticalor similar error[s] in the award."

Footnotes omitted from this introduction.

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C H A P T E R V I - A N A P P E L L A T ES Y S T E M

Appellate Mechanisms for InvestmentArbitration: Worth a Second Look for theTrans-Pacific Partnership and the ProposedEU-US FTA?

Barton LegumDentons

Introduction

I count myself among the critics of the first roundof proposals for an appellate mechanism forinvestment disputes. When the idea was firstformally floated in 2003 or so, I published articlesnoting the many difficulties standing in the way of anappellate mechanism and noted that the case hadnot yet been made for its need.

Two important initiatives today provide adifferent context for an appellate mechanism.Together, the proposed Trans-Pacific Partnership andEU-US free trade agreement will join over half theworld's gross domestic product under agreementsthat are likely to resemble each other in keyrespects. While I am not yet persuaded that anappellate mechanism is needed, I argue in this shortopinion piece that these two initiatives provide acontext in which a second look at an appellatemechanism may be merited.

Full article here

Appellate Review in Investor StateArbitration

Dr. Eun Young ParkKim & Chang

Abstract

Because investor-state arbitral tribunals arecreated on an ad hoc basis for the purpose ofresolving a single dispute regarding a specificinvestment treaty, arbitral tribunals may reachinconsistent decisions on issues which at the outsetappear similar. While in some cases these divergingresults are attributable to meaningful factualdifferences or differing treaty provisions, in a growingnumber of cases separate tribunals have reachedcontradictory results that cannot be explained byfactual or legal differences in the claims.

This phenomenon can be clearly seen in theseries of investor-state arbitrations against Argentinain which Argentina raised the defense of necessityarising from Argentina's financial crisis. The tribunalsin these arbitrations reached significantly differentinterpretations on the application of the necessitydefense despite facing virtually identical factualcircumstances. Further, several of these awardsreflecting irreconcilable differences in theirinterpretation of the necessity defense were upheldin annulment proceedings.

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Such inconsistencies have caused a loss ofconfidence in the investment arbitration system andhave contributed to calls for the establishment of acentralized appellate review process for investmentarbitration awards. While such an appellate reviewprocess may be necessary in order to promoteconsistency and predictability in legal interpretations,such process would need to be devised so as not toundermine the basic underlying pillar of investor-state arbitrations, namely party autonomy.

Full article here

Reform of the investor-State arbitrationregime: the appeal proposal

Gabriel BottiniArbitrator and Advisor on Issues of Int'l Law and Int'l

Litigation

Introduction

The discontent with the current functioning ofinvestment arbitration is hard to measure. Andwhether the criticisms that are generally leveledagainst this type of arbitration are justified or not is,at least to some extent, in the eye of the beholder.But probably even the most optimistic views ofinvestment arbitration see room for improvement,particularly in certain areas. Further, after the firstdecade of (increasingly) intense recourse toinvestment arbitration, the view that its most acuteproblems were due to the system's infancy andwould somehow resolve themselves over time, isnow (more) open to question. Among the differentideas that have been put forward to resolve theseproblems, the creation of some sort of appealsprocedure is probably the most consequential one,short of a complete overhaul of the system.

The availability of appeals against decisions ofinternational tribunals is nothing new. Neither is thediscussion about the desirability to create an appealmechanism in the specific context of internationalarbitration or in the more specific one of investmentarbitration. But despite several initiatives in therecent years by some governments, in particular theU.S., and arbitral institutions such as ICSID, noappeals mechanism has so far been created orindeed appears imminent. This is so even if, forexample, several Free Trade Agreements concludedby the U.S.-CAFTA-DR, Chile, Colombia, Korea,Morocco, Oman, Panama, Peru, and Singapore-provide for negotiations to be held between theparties "to establish an appellate body or similarmechanism to review awards". Yet, as recentpublications by UNCTAD, the OECD and otherinstitutions show, concerns about the functioning ofinvestment arbitration linger in many quarters.Notwithstanding the failure of prior proposals, thecreation of an appeal mechanism is still generallysuggested as one of the ways to improve thefunctioning of investment arbitration and strengthenits legitimacy. Further, even more states, includingsome of the main capital exporting ones, appear tobe particularly interested in creating an appellatemechanism as one of the ways to improveinvestment arbitration.

This paper will first consider the merits of theICSID 2004 Proposal on an appeals facility. Secondly,it will discuss whether the creation of an appealmechanism in international investment law couldcontribute to address the main concerns recentlysummarized in UNCTAD's publication "Reform ofInvestor-State Dispute Settlement: In Search of aRoadmap". These concerns, which are consideredhere in the order set by this UNCTAD publication,include: deficit of transparency and legitimacy;inconsistent and erroneous decisions; lack ofindependence or impartiality of arbitrators; and costand duration of arbitrations. Finally, this paperconcludes by suggesting that some of the recurrentobjections to the creation of an appeal mechanismare based on questionable assumptions, and that thismechanism could considerably contribute to thelegitimacy of investment arbitration.

Full article here

Introduction of an Appellate ReviewMechanism for International InvestmentDisputes - Expected Benefits and RemainingTasks

Prof. Dr. Jaemin LeeSchool of Law, Seoul National University

Introduction

For a long time, international dispute settlementproceedings have not been receptive of the idea ofintroducing an appellate mechanism. For instance,the legal proceedings at the Permanent Court ofInternational Justice and the succeedingInternational Court of Justice have not had anappellate mechanism in place. Neither dointernational arbitration proceedings between twosovereign states conducted under public internationallaw. In fact, the World Trade Organization ("WTO")dispute settlement mechanism and some of recentFree Trade Agreement ("FTA") dispute settlementmechanisms represent rare instances in which anappellate mechanism is introduced in internationallitigation. As can be seen from the rarity of the priorexamples, an appellate mechanism in internationaldispute settlement proceedings seems to have bothpluses and minuses: by way of example, while anappellate mechanism obviously helps ensure theestablishment and spread of key jurisprudence, italso translates into mobilization of more time andresources to settle disputes. Also, the introduction ofan appellate mechanism would mean increasedcomplexities - both substantively and procedurally -regarding the issues being examined. This realitymay pose an additional hurdle to some sovereignstates, particularly to those with limited resourcesand capacity, in terms of participating in internationalinvestment arbitration.

Footnotes omitted from this introduction.

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Volume 11 - Issue #01 - January 2014 - 32

Why ICSID Doesn't Need an AppellateProcedure, and What to Do Instead

Kristina AndelicUniversity of Ni , Faculty of Law

Abstract

Due to the changes that have taken place in theinternational environment in the last decade, thesystem for settlement of investment disputes is now,more than ever, subject to public scrutiny, leading toquestioning its adequacy to current relations. Thefurther development of this system, as well as itssurvival, are both at stake. In addressing whatshould be done, this paper focuses specifically on theICSID rules. It concludes that there should be noappellate procedure under ISCID, because the lack ofconfidence in the system is based not onimperfections of the prescribed mechanisms forsettlement of disputes, but rather on changedcircumstances in economic relations. Consideringthat in times of crisis there is a greater need forstability of existing institutions, it argues that moreattention should be paid to creation of that specificsentiment in the international arena. Changing afunctional procedure does not contribute to thatcause. As a more appropriate solution responsive tothe circumstances, this paper proposes theadaptation of existing procedures in a way thatenables a shift towards greater social legitimacy.

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C H A P T E R V I I - I N V E S T O R -S T A T E M E D I A T I O N

Mediation use in ISDS

Fatma KhalifaEgyptian State Lawsuits Authority (ESLA)

Abstract

Investor State Dispute Settlement (ISDS) hasbeen largely dominated by arbitration as a means ofdispute settlement. The problems encountered byparties in ISDS cases and the concerns voiced bymultiple stake holders call for attempting newmechanisms, such as mediation, for settling InvestorState Disputes (ISD). Mediation in ISDS is rather anew combination of terms. In this paper the authorwill first identify mediation (1), compare it to otherdispute settlement mechanisms (2), identify theplayers in the mediation process and the consent ofthe Parties (3), briefly explain the mediation process(4), and finally conclude by shedding some remarkson the current status and proposals for a wayforward.

Full article here

Enabling Early Settlement in Investor-State Arbitration - The Time to IntroduceMediation Has Come

Jeremy LackIndependent ADR Neutral & Attorney-at-Law

Michael LeathesInternational Mediation Institute (IMI)

Wolf Juergen KumbergNorthrop Grumman Corporation

Introduction

In October 2012, Rules for Investor-StateMediation were published by the International BarAssociation's Mediation Committee. It is suggestedthat the investor-State arbitral forums find ways toadopt, encourage and enable the IBA Rules, withsome important support mechanisms mentionedbelow, to make mediation a far more practical andattractive option - whether making them part of theRegulations and Rules or operating in parallelalongside them. How can mediation beaccommodated into investment treaty disputeresolution, having regard to the particular features ofthis class of dispute? Are there ways that the specialchallenges presented by typical investor-Statedisputes can be addressed through mediation? Whatfurther steps would aid parties to achieve just andquick outcomes? The objective of the article is todemonstrate how investor-State disputes can benefitfrom mediation.

To note: This article will be added to the TDMspecial after publication in the ICSID Review.

© OUP 2014. Wolf von Kumberg, Jeremy Lackand Michael Leathes. Enabling Early Settlement inInvestor-State Arbitration. ICSID Review (Spring2014) 28 (3). By permission of Oxford UniversityPress on behalf of ICSID. ICSID Reviewicsidreview.oxfordjournals.org

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Integrating Mediation Into Investor-StateArbitration

Professor Nancy A. WelshPenn State Law

Professor Andrea Kupfer SchneiderMarquette Law School

Introduction

While the current system of investment treatyarbitration has definitely improved upon the"gunboat diplomacy" used at times to addressdisputes between states and foreign investors, thereare signs that reform is needed: states and investorsincreasingly express concerns regarding the costsassociated with the arbitration process, some statesrefuse to comply with arbitral awards, other stateshesitate to sign new bilateral investment treaties,and citizens have begun to engage in popular unrest

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at the prospect of investment treaty arbitration. As aresult, both investors and states are advocating forthe use of mediation to supplement investor-statearbitration.

This chapter examines the models of mediationthat have been shown to be effective, the importanceof ensuring that mediation offers something differentfrom the other procedural options available toresolve investor-state disputes, and the mechanismsthat increase the likelihood that disputing parties andstakeholders will perceive individual outcomes andthe larger system as fair. The chapter also examinesthe U.S. domestic experience to identify theelements of the mediation process that can be, andhave been, made compulsory and the effects of thischoice, as well as different approaches for ensuringthe quality of the mediation process and itsaccountability to the disputing parties and otherstakeholders. Ultimately, the chapter recommendsthe integration of a default model of mediation intothe investor-state context that begins in a facilitativemanner, in order to increase the likelihood of trust-building and information exchange regardingimportant underlying interests, but also permits bothevaluative interventions by the mediator anddiscussion of relevant legal norms.

The chapter further concludes that ifstakeholders' input is sought and consideredregarding mechanisms for the referral of disputes tomediation, some elements of mediation could bemade compulsory. More specifically, the disputeresolution clauses in investment treaties couldrequire the parties to participate in an initial meetingto discuss the potential use of mediation or otherconsensual procedures, with the parties themselvesthen choosing whether to proceed further, when, andwith what process. Finally, the chapter recommendsthe establishment of a small pool of well-known andwell-respected investment treaty mediators who willoffer a reasonably strong and pragmatic guarantee ofquality in the short-term and engender a heightenedperception of trust in the process. These mediatorsshould also possess the temperament and skills toprovide the default model of mediation. In the longterm, however, evaluation and mentoring must beput into place to permit thoughtful cultivation of boththe model of mediation that is best suited for theinvestor-state context and the next generation ofmediators.

This chapter is based on Nancy A. Welsh &Andrea Kupfer Schneider, "The ThoughtfulIntegration of Mediation into Bilateral InvestmentArbitration", 18 HARV. NEGOT. L. REV. 71 (2013).

Full article here

The Advantages of Mediation and theSpecial Challenges to its Utilization inInvestor State Disputes

Edna SussmanSussmanADR

Introduction

In June of 2013 UNCTAD released its IIA IssuesNote entitled Reform of Investor State DisputeSettlement: In Search of a Roadmap ("Roadmap").UNCTAD identified concerns with the current investorstate dispute settlement system: lack of legitimacyand transparency, inconsistent and erroneous arbitraldecisions, concerns about party appointments andundue incentives and the great cost and timeintensity of arbitration. While these concerns havereceived extensive attention in recent years, thegrowth of investor state arbitration has continuedunabated. In 2012 alone 58 new cases wereinitiated, the highest number yet filed in one year.

The Roadmap sketches out five main possibleavenues for reform and suggests as one pathincreasing resort to alternative dispute resolution(ADR) methods. The proposal that further utilizationof ADR be pursued as a path for addressing concernsabout investor state dispute settlement followsincreasing attention to the possibilities ADR offersand the issuance by the International Bar Associationin 2012 of Rules for Investor-State Mediation.

The subject first caught my attention in 2008when Arthur Rovine asked me to organize amediation program for the annual FordhamInternational Arbitration and Mediation Conference.In search of a subject, the idea of exploring theutilization of ADR in investor state disputes, then arelatively unexplored subject, came to mind and wasthe subject of my session and the genesis of thearticle that follows. The article outlines the manybenefits that a mediation process offers, reviewswhether mediation can usefully be employed forinvestor state disputes and discusses the manyunique obstacles that are presented when a state is aparty.

This article originally appeared in RevistaBrasileira de Arbitragem, vo. 27, jul/ago/set 2010,pgs. 54-67and is reprinted with permission. It isadapted from a chapter entitled Investor StateDispute Mediation: The Benefits and Obstacles,published in Contemporary Issues in InternationalArbitration and Mediation, The Fordham Papers 2009,Arthur W. Rovine Ed. (Martinus Nijhoff Publisher).

Full article here

Volume 11 - Issue #01 - January 2014 - 34

Alleviating the Disruptive Nature ofInvestment Arbitration: Some Remarks onRestitution and Post-Arbitration ADR

Professor Nicolas AngeletLiedekerke Wolters Waelbroeck Kirkpatrick

Introduction

The legitimacy of international investment lawand dispute settlement has been put to doubt forsome time. Many proposals to remedy this real orperceived lack of legitimacy consist, in substance, inarguing that it is now the time to move forward andto substantially revise the international investmentprotection system. Without disputing the intrinsicvalue of such proposals, the author will argue thatthere is also a case for looking back at somefundamentals of international law and disputesettlement. First, the author argues that the regime'spurpose to create stable relations and promoteeconomic development warrants greater attention forrestitution, which is the primary means of reparationunder international law and the best means to getthe investor-State relationship back on track. Thenthe author addresses a number of real or perceivedobstacles to restitution in international investmentlaw. Next, the author draws from the jurisprudenceof the Permanent Court of International Justice andthe International Court of Justice, as well as fromconflict theory, to argue in favour of post-awardADR, that is: investment ADR may usefully interveneafter and on the basis of an arbitral decision onwrongfulness, rather than as a tentative method ofsettlement preceding arbitration or as a full-fledgedalternative to it. To conclude, the author shows howthe outlined proposals may be of use for varioustypes of investment disputes - both those where themalfunctioning of the host State's legal systemultimately finds its basis in the State's poverty, andthose which result from the operation of theregulatory State. The article ends with indicating howthe proposals relate to UNCTAD's paths for reform ofthe international investment agreement system.

Full article here

Investor-State Conflict Management: APreliminary Sketch

Roberto EchandiInternational Finance Corporation, World Bank

Introduction

After the introduction this note includes fiveadditional sections. Section 2 provides a backgroundfundamental to frame the discussion on the need forconflict management mechanisms. Section 3 focuseson the clarification of the concept. Section 4 presentsa preliminary sketch of the key elements to enablegovernments to operate conflict managementmechanisms. Section 5 suggests some basic pointsthat an international agenda could address to enableconflict management mechanisms to further develop,and Section 6 presents some final reflections andconclusions.

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C H A P T E R V I I I - R E F O R M I N GF R O M W I T H I N

The Sixth Path: Reforming InvestmentLaw from Within

Dr. Stephan W. SchillMax Planck Institute for Comparative Public Law and

International Law

Introduction

In this paper the author sketches out a sixth pathfor investment law reform that is based on a system-internal reconceptualization of investor-Statearbitration as a form of public law-based judicialreview. It can be reformed, the author argues, byarbitrators and parties making increasing use ofcomparative public law methodology that allowsthem to draw on the experience of moresophisticated systems of public law adjudication atthe national and international level without the needfor institutional reform to investor-State arbitration.First the benefits of the existing system of investor-State arbitration will be pointed out again, in order toshow that investor-State arbitration is an institutionworth reforming from within (Part I). In Part II, thebasic framework to re-conceptualize investment lawas a system of public law and governance and pointout shortcomings in the currently prevailingapproaches to understanding investor-Statearbitration will be laid out. Part III will indicate themethodological consequences of a re-conceptualization of investor-State arbitration as apublic law system of governance, namely the needfor arbitrators to make increased use of comparativepublic law in resolving disputes. Finally, in Part IV itwill show how public law ideas and comparativepublic law methodology can be brought intoinvestment arbitration in its present form and whyarbitrators have an interest in conforming to thesestandards even without fundamental institutionalreform.

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The Margin of Appreciation inInternational Investment Law

Julian AratoColumbia Law School

Introduction

Investment treaties tend to say nothing, or onlyvery little, about the appropriate standard of reviewfor arbitrating disputes between sovereign states andforeign investors. Most treaties do not addresswhether states should be afforded any deference intheir own assessment of their treaty obligations.Neither do they specify the converse, that stateaction must be strictly reviewed. They are simplysilent-and their silence has been interpreted ininnumerable ways by different tribunals. Thisinterpretive chaos has generated calls for a unifiedapproach-one that would resolve the uncertain andfragmented status quo, while being sufficientlyflexible as to admit the application of differentstandards of review in different contexts. To some,

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the venerable doctrine of the margin of appreciationappears to fit just this bill-a solution finding growingfavor among tribunals and commentators, not tomention advocates for respondent states.

This Article challenges the suitability of themargin of appreciation in the adjudication ofinvestment disputes. This judge-made doctrine isfamously a product of Strasbourg, manufactured bythe European Court of Human Rights ("ECtHR"). Itshalting import into the global investment regime isonly a recent phenomenon. Through comparison tothe ECtHR, I suggest that certain key grounds foraffording the margin in its original context do notobtain within investment law-calling into question thedoctrine's propriety in its new setting.

Beyond questioning the suitability of the marginof appreciation within ad hoc investment disputes,this Article challenges the broader premise that theproblem of fragmented approaches to the standard ofreview among investment tribunals can be bestresolved through judicial recourse to a unified a prioridoctrine of deference. As evidenced by theadventures of the margin in several recent arbitralawards, such attempts tend to produce only apernicious illusion of unity. I argue, instead, that thedesired certainty can be achieved only gradually,through judicial practice and dialogue over themedium to long term.

Advance Draft. Please cite final version: 54(3)VA. J. INT'L L. (forthcoming 2014)

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By Equal Contest of Arms: JurisdictionalProof in Investor-State Arbitrations

Professor Frédéric G. SourgensWashburn University School of Law

Abstract

Much of the criticism of the ISDS system has acommon substantive focus: creating better formalinternational investment law rules. No matter theperspective of the critique, it appears agreed uponthat what we need is a different definition of the term"investment," a better substantive grasp of thejurisdictional reach of most-favored-nations clauses,or a rule-based approach to the incorporation ofinvestors in a foreign jurisdiction solely for thepurpose of obtaining treaty protection. Theperspective of most critiques merely proposesdifferent formal rules rather than questioning thatthe purpose of the critique is to arrive at such rules.The criticism thus tries to force substantive, rule-based reform either by seeking the redrafting oftreaties to reflect the new rules or indirectly byinstituting an appeals mechanism that would"harmonize" jurisprudence. This Article submits thatthese critics do not address the legitimacy problem ininvestor-state arbitration, they (unwittingly, perhaps)are the legitimacy problem. These critics, the Articlesubmits, lose sight of the purpose of disputeresolution at public international law; submission ofpublic international law disputes to courts andtribunals has always been a balancing act. On theone hand, courts and tribunals must be mindful of

the limitations placed upon their jurisdiction by thesimple fact that there are no international law courtsof general jurisdiction. The default manner in whichinternational legal disputes are resolved, for good orill, remains "diplomacy," or in the case of disputeswith non-state actors, "negotiation." Submission toadjudication or arbitration is the exception from thisrule.

As the Article will show, the formalist push of thecritics of investor-state arbitration has already donesignificant damage in several jurisdictional decisions.Tribunals have attempted to use live cases to createor strengthen formal legal rules consistent with thegoals of certain critics of investor-state arbitration.Dangerously, their manner of doing so was untenablein light of the record before the respective tribunals.This in turn is doing significant damage to thelegitimacy of investor-state arbitration in the eyes ofthe parties litigating their disputes as a form ofdispute resolution. It is this response by tribunals tothe critics of investor-state arbitration rather thanthe ordinary practice of investor-state arbitrationwhich presents the biggest threat to its long termsuccess.

This Article presents as a roadmap to reform thatdiffers from most approaches. It proposes a return tothe roots of investor-state dispute resolution as apublic international law form of dispute resolution.The International Court of Justice explained thatunder international law, "there is no burden of proofto be discharged in the matter of jurisdiction[,]" buta tribunal instead must determine from the record"whether the force of the arguments militating infavour of jurisdiction is preponderant." Inherent inthis explanation is that are no absolutely "correct"results, no perfect rules of adjudication. Instead ofimposing a rules-based paradigm, the InternationalCourt of Justice thus imposes a balancing test. Thistest takes into consideration (a) that exercise ofjurisdiction provides the claimant with the soleaccess to justice for claims against the respondentstate and (b) that the respondent state made apolicy decision to limit jurisdiction according to theterms of the consent instrument. This balance doesnot turn on the existence of any formal rule of lawbut rather upon the relative merit, or preponderance,of the positions of the parties viewed as a whole.

It is the application of an even-handed balancingtest to the jurisdiction of investor-state tribunals, notthe formulation of formal rules, that ultimately mootscomplaints that investor-state arbitration lackslegitimacy. Jurisdictional decisions precisely balancethe interests of each party in determining whichparty's jurisdictional case is closer to thejurisdictional equilibrium point. This analysis turnsexclusively upon the submissions of the parties anddoes not place the proverbial thumb on the scales toapproximate this equilibrium. A losing party, in short,generally should find fault in its own jurisdictionalcase, rather than in the ultimate conclusion reachedby a tribunal. A broad majority of investor-statedecisions follow this approach and future Tribunalsshould stay the course.

Previously published in North Carolina Journal ofInternational Law and Commercial Regulation, Vol.38, No. 4, 2013. Republished with kind permission.

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Volume 11 - Issue #01 - January 2014 - 36

Interim Costs Orders: The Tribunal's Toolto Encourage Procedural Economy

Jeffrey SullivanDavid Ingle

Allen & Overy LLP

Introduction

One of the chief complaints of investmentarbitration is that it has become a slow andexpensive process. It often requires States to expendhuge sums defending frivolous claims and, evenwhen it has won a case, a respondent State mayconsider it to be something of a pyrrhic victory afterthe vast legal fees and the huge administrativeburden have been taken into account. Equally,claimants that have been unfairly treated bygovernments have no option but to spend millions inlegal fees (and wait many years) to obtain a remedy,often in face of a State party that seeks delay atevery step. For investors without deep pockets, thisform of dispute resolution offers no real access tojustice.

These problems are not new and there have beenmany suggestions aimed at improving theinvestment arbitration system. Some commentatorshave argued that investment agreements must berenegotiated and redrafted to try to fend offunmeritorious claims. Others have suggested thatthe entire investment arbitration regime should bescrapped in favour of a world investment court.These are drastic changes and, even if they werecapable of being put into action, it would take manyyears before any benefit could be realised. It istherefore necessary to look for mechanisms currentlyavailable which may assist in improving theinvestment arbitration process.

The source of the problem must be understoodbefore a proper solution can be identified. One of thereasons parties to investment arbitration disputesbring frivolous claims and employ dilatory tactics isbecause there is no effective deterrent for suchconduct. Consequently, there is no immediatedownside for an investor in bringing a frivolous claim.Even a hopeless claim may put an inexperiencedgovernment under acute pressure to accede to theinvestor's demands. Equally, it is easy for arespondent State to delay or even derail arbitrationsentirely by simply running up costs for the investor.Both parties can be guilty of using nefarious tacticsto gain an advantage.

The authors argue that tribunals already have thetools necessary to encourage procedural economy byusing interim costs orders to deter nefarious tacticswhile also balancing the two seemingly irreconcilablegoals of due process and procedural economy.

Full article here

Reforming the Approach to Costs inInvestment Treaty Arbitration

Matthew HodgsonAllen & Overy LLP

Abstract

Despite the considerable costs of the investmentarbitration process, the vast majority of investmenttribunals devote just a few paragraphs of their awardto the subject of cost allocation and many fail toenunciate a clear starting point for their analysis.

Even where tribunals do adopt a particularstarting point, the approaches taken are divergent.Some tribunals assert that "pay your own way" is the"rule" for treaty cases, following the traditionalapproach of public international law, while otherssubscribe to the "costs follow the event" or "loserpays" principle. A third group, applying a morenuanced "hybrid" approach, determine costs by therelative success of the parties on particular issues.There is also a notable difference between theapproach to costs under the UNCITRAL and ICSIDrules which is, unsurprisingly, reflected in tribunaldecisions.

Drawing on a recent survey of costs ininvestment treaty arbitrations, this article argues fora more reasoned and consistent approach to costs.Establishing a default position as to costs wouldpromote consistency and predictability across thefield of treaty arbitration. Such an approach could beachieved by wording in bilateral investment treatiesor a change to the ICSID rules to bring them into linewith the UNCITRAL position.

It will be further argued that the mostappropriate default position is "loser pays". This is forseveral reasons. First, the broad aim of damages ininternational law is to wipe out the consequences ofthe unlawful act. Where an investor is forced toachieve its remedy for breach of treaty through acostly arbitration process, it will be left substantiallyout of pocket if it does not also recover itsreasonable costs. Further, a "loser pays" approachbenefits the smaller investor with a strong butmodest-sized claim for whom the costs of theprocess may otherwise make a claim uneconomic.Conversely, from the State's perspective suchapproach should discourage unmeritorious claimswhich are commenced merely to exert pressure aspart of a negotiating strategy. It is also notable that,whilst the majority of claims by investors aredismissed, successful States are considerably lesslikely than successful investors to be awarded theircosts. A default "loser pays" rule would redress thisimbalance.

Full article here

Volume 11 - Issue #01 - January 2014 - 37

Distinguishing Investors from Exportersunder Investment Treaties

Mark FeldmanPeking University School of Transnational Law

Introduction

This article makes two recommendations. First,when distinguishing investors from exporters,tribunals should look primarily to the capacitylimitation, rather than the causation limitation (whichlacks effectiveness) or the territorial limitation (whichlacks flexibility). Second, when applying the capacitylimitation, tribunals should be guided by the natureof a claimant's global business. The above tworecommendations can be applied not only in NAFTAChapter Eleven cases, but also more generally ininvestment treaty disputes under other agreements,so long as textual support for the limitation existsunder the applicable treaty. Many investment treatiesprovide such textual support, as illustrated by theCanada-China and ASEAN-Australia-New Zealandagreements, which are discussed below. Thus, thecapacity limitation can serve as a widely-availableand effective resource for tribunals facing challengingquestions concerning the proper application ofinvestment treaty protections to integratedinvestment and export operations of multinationalcorporations.

Full article here

Collective Action in Investment Arbitrationto Enforce Small Claims Justice to theDeprived or Death Knell for the System ofInvestor-State Arbitration?

Dr. Stephan WilskeGleiss Lutz Rechtsanwälte

Abstract

This paper deals with whether collective actioncan be a way to seek justice for small investors orwould rather be the "the straw that breaks thecamel's back" and damage the system of investmentarbitration. The author, first of all, points out thechallenges faced by small claimants in bringing aninvestment arbitration claim against a State, whichmostly concern the costs of investment arbitration.With respect to those obstacles, the author thenintroduces some methods to overcome suchchallenges, including collective action. Finally, theauthor suggests that the system of investmentarbitration will be robust enough to deal withcollective action and may find its own tools to makethe system fair and workable. Meanwhile, the authorsimply does not follow the skepticism with respect tothe future of investment arbitration, keeping in mindthat mechanisms declared dead by the pessimistsoften live considerably longer.

Stephan Wilske, "Collective Action in InvestmentArbitration to Enforce Small Claims Justice to theDeprived or Death Knell for the System of Investor-State Arbitration?" 5(2) CONTEMP. ASIA ARB. J. pp165 - 203. Republished with kind permission.

Full article here

ICSID Treaty Counterclaims: Case Lawand Treaty Evolution

José Antonio RivasArnold & Porter LLP

Introduction

This article analyzes the ICSID case law oninvestment treaty counterclaims, exploring howtribunals have interpreted the requirements forsubmission of counterclaims under the Conventionand the Rules of Arbitration. It also considers treatyand model investment treaty developments in anattempt to explore the evolution of investmentarbitration case law and new treaties that couldtransform the system into one where counterclaimsare practicably possible. In addressing this question,this article first sets out the provisions of theConvention and the Rules of Arbitration and explainshow a State can submit treaty counterclaims atICSID. Second, it analyzes ICSID case law oncounterclaims with particular emphasis on recentawards and decisions involving investment treatycounterclaims which do not reflect a consistent line ofcases. Third, it reviews language of existinginvestment treaties which include references tocounterclaims and interprets them in light of certainlines of ICSID cases on counterclaims. Recognizingthat international investment law is an evolvingsystem, this article also explores the direction thatcase law and investment treaties could eventuallytake for counterclaims to be heard by tribunals andto be substantially effective in cases involvingviolations of obligations by the investor. It alsoanalyzes investors' violations of investment treatyobligations (and their sources) which may constitutea basis for investment treaty counterclaims. Andfourth, it presents the conclusions acknowledging atension between a scenario of future treaties withrobust clauses on counterclaims and on obligations ofinvestors, versus a practical approach explaining thatStates can submit counterclaims pursuant to existingtreaties and consent clauses, current generalprinciples of law, and international investmentjurisprudence.

Certainly, international investment law oncounterclaims could dramatically evolve into asystem where sovereign States effectively usecounterclaims to demand compliance from investorswith their obligations if new treaties incorporatedexplicit language on disputing parties' consent tocounterclaims, and on investors' obligations.However, evolution through treaty negotiations isslow and it may not be necessary to wait long for aneffective use of ICSID treaty counterclaims. Already,there are treaties with consent clauses which, basedon existing ICSID case law, may be interpreted asgiving rise to an ICSID tribunal's jurisdiction to hearcounterclaims. In addition, currently investors mustcomply with general principles of law - e.g., theobligation no to incur in corrupt practices - even inthe absence of any treaty language to that effect.

Full article here

Volume 11 - Issue #01 - January 2014 - 38

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