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Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration

  • Anthea Roberts (a1)
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In Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, Sergio Puig and Gregory Shaffer introduce comparative institutional analysis to evaluate alternative processes for resolving investment disputes. The impetus for this article is clear: many states view investor-state arbitration as akin to a horse that has bolted from the barn. Wishing to close the stable door, a wide range of states are considering the merits of various reform proposals. Puig and Shaffer's comprehensive and balanced framework for assessing the tradeoffs involved in making different choices is thus a welcome and timely intervention in these (often highly polarized) debates.

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Footnotes
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I attend the UNCITRAL Working Group III meetings as a member of the Australian delegation but in my capacity as an independent academic expert. I am also a member of the Academic Group. The views in this essay should not be attributed to the Australian government.

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References
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1 Puig, Sergio & Shaffer, Gregory, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, 112 AJIL 361 (2018).

2 See Anthea Roberts, The Shifting Landscape of Investor-State Arbitration: Loyalists, Reformists, Revolutionaries and Undecideds, EJIL: Talk! (June 15, 2017), at https://www.ejiltalk.org/the-shifting-landscape-of-investor-state-arbitration-loyalists-reformists-revolutionaries-and-undecideds (for the same typology but with different nomenclature).

3 Rep. of the UN Comm'n on Int'l Trade Law of Its Fiftieth Session, at para. 264, UN Doc. A/72/17 (July 21, 2017), available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V17/058/89/PDF/V1705889.pdf?OpenElement (hereinafter July 21 UNCITRAL Report).

4 See id.

5 See UN Comm'n on Int'l Trade Law, Working Group III – 2017 to Present: Investor-State Dispute Settlement Reform, at http://www.uncitral.org/uncitral/en/commission/working_groups/3Investor_State.html; UN Comm'n on Int'l Trade Law, Archive of Working Group Audio Recordings, at http://www.uncitral.org/uncitral/audio/meetings.jsp.

6 This essay draws on publicly available materials; my observations from academic, expert, and intergovernmental meetings, including UNCITRAL; and interviews and discussions with actors in governments, international institutions, the arbitration industry, and nongovernmental organizations. As a participant-observer in these reform processes, I engage with and provide views to a wide range of stakeholders. I have attempted here to faithfully reflect the positions of different stakeholders, though I remain conscious of the impossibility of full neutrality for any participant or observer.

7 See Roberts, Anthea, Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System, 107 AJIL 45, 7883 (2013).

8 See Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, Arg.-U.S., Nov. 14, 1991, 31 ILM 124; U.S. Dep't of State, 2004 Model BIT (2004), available at http://www.state.gov/documents/organization/117601.pdf; Office of U.S. Trade Representative, 2012 U.S. Model Bilateral Investment Treaty, Arts. 24, 37 (2012), available at http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf.

9 See Schill, Stephan W., Tearing Down the Great Wall: The New Generation Investment Treaties of the People's Republic of China, 15 Cardozo J. Int'l & Comp. L. 73 (2007).

10 See Berger, Axel, Investment Rules in Chinese PTIAs–A Partial “NAFTA-ization,” in The Rise of Preferential Trade and Investment Agreements: Bridging the Gap? 297, 297 (Hofmann, Rainer, Schill, Stephan & Tam, Christian eds., 2013).

11 Cf. the literature on adaptation to climate change, which theorizes three reform strategies: incremental, systemic, and transformative. See Rickards, L. & Howden, S.M., Transformational Adaptation: Agriculture and Climate Change, 63 Crop and Pasture Sci. 240 (2012); Park, Sarah, Marshall, Nadine A., Jakku, Emma, Dowd, Anne Marie, Howden, S.M., Mendham, Emily Kate & Fleming, A., Informing Adaptation Responses to Climate Change Through Theories of Transformation, 22 Glob. Envtl. Change 115 (2011). I am grateful to Mark Howden for a presentation that included similar diagrams to the ones that follow.

12 As recordings of the UNCITRAL working group sessions are made available without a transcript, a compilation of relevant quotes, including ones used in this essay, can be found at Anthea Roberts & Zeineb Bouraoui, UNCITRAL and ISDS Reforms: What are States’ Concerns?, EJIL: Talk! (June 5, 2018), at https://www.ejiltalk.org/uncitral-and-isds-reforms-what-are-states-concerns; Anthea Roberts & Zeineb Bouraoui, UNCITRAL and ISDS Reforms: Concerns About Consistency, Predictability and Correctness, EJIL: Talk! (June 5, 2018), at https://www.ejiltalk.org/uncitral-and-isds-reforms-concerns-about-consistency-predictability-and-correctness; Anthea Roberts & Zeineb Bouraoui, UNCITRAL and ISDS Reforms: Concerns About Arbitral Appointments, Incentives and Legitimacy, EJIL: Talk! (June 6, 2018), at https://www.ejiltalk.org/uncitral-and-isds-reforms-concerns-about-arbitral-appointments-incentives-and-legitimacy; Anthea Roberts & Zeineb Bouraoui, UNCITRAL and ISDS Reforms: Concerns About Costs, Transparency, Third Party Funding and Counterclaims, EJIL: Talk! (June 6, 2018), at https://www.ejiltalk.org/uncitral-and-isds-reforms-concerns-about-costs-transparency-third-party-funding-and-counterclaims.

13 See European Comm'n, New EU-Mexico Agreement: The Agreement in Principle 10–11 (2018), available at http://trade.ec.europa.eu/doclib/docs/2018/april/tradoc_156791.pdf.

14 See In His Own Words: Lighthizer Lets Loose on Business, Hill Opposition to ISDS, Sunset Clause, World Trade Online (Oct. 19, 2017), at https://insidetrade.com/trade/his-own-words-lighthizer-lets-loose-business-hill-opposition-isds-sunset-clause.

15 Roberts & Bouraoui, States’ Concerns, supra note 12.

16 Roberts & Bouraoui, Concerns About Consistency, supra note 12.

17 Id.

18 Id.

19 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), available at http://www.trungtamwto.vn/sites/default/files/comprehensive-and-progressive-agreement-for-trans-pacific-partnership-cptpp-english.pdf.

20 Roberts & Bouraoui, States’ Concerns, supra note 12.

21 Id. Mauritius; see also South Africa and Austria.

22 See UN Comm'n on Int'l Trade Law, Possible Reform of Investor-State Dispute Settlement (ISDS), Submission from the European Union, at 2–3, UN Doc. A/CN.9/WG.III/WP.145 (Dec. 12, 2017), available at https://documents-dds-ny.un.org/doc/UNDOC/LTD/V17/088/32/PDF/V1708832.pdf?OpenElement.

23 See id. at 3–5.

24 See id. at 7–12.

25 Roberts & Bouraoui, Concerns About Consistency, supra note 12 (e.g., Egypt, France, Germany, Greece, Singapore, Spain, Thailand, and Uruguay); Roberts & Bouraoui, Concerns About Arbitrators, supra note 12 (e.g., Argentina, Australia, China, Colombia, Ecuador, and India).

26 Roberts & Bouraoui, States’ Concerns, supra note 12.

27 Roberts & Bouraoui, Concerns About Consistency, supra note 12.

28 Roberts & Bouraoui, States’ Concerns, supra note 12.

29 Roberts & Bouraoui, Concerns About Costs, supra note 12.

30 Roberts & Bouraoui, States’ Concerns, supra note 12.

31 Interview, Brazilian Investment Treaty Policy Maker (May 5, 2018) (on file with author).

32 Recording: United Nations Comm'n. on Int'l Trade Law, 50th Sess. (July 10, 2017), available at https://icms.unov.org/CarbonWeb/public/uncitral/speakerslog/1b00d406-0d09-4dec-a1ab-74cf6dcf8428 (hereinafter July 10 UN Meeting Recording).

33 Id.

34 Government of India, Ministry of Finance, Model Text for the Indian Bilateral Investment Treaty, available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/3560.

35 See Meg Kinnear, Secretary-General, Int'l Ctr. for Settlement of Inv. Disputes, 2018 Charles N. Brower Lecture on International Dispute Resolution: Policy and Progress: Seeking Consensus in ISDS Rules Reform at the ASIL Annual Meeting (Apr. 6, 2018).

36 Despite the 2004 U.S. Model BIT suggesting an interest in working toward an appellate body, the 2012 U.S. Model BIT walked back from that position. Compare 2004 U.S. Model BIT, Article 28.10 and Annex D with 2012 U.S. Model BIT, Article 28.10. Given its previous history with international courts, and its current position with respect to the World Trade Organization's Appellate Body, it seems unlikely that the United States would have the domestic constituency to support an investment court or appellate mechanism.

37 See Amendment of ICSID’s Rules and Regulations, Int'l Ctr. for Settlement of Inv. Disputes, at https://icsid.worldbank.org/en/Pages/about/Amendment-of-ICSID-Rules-and-Regulations.aspx.

38 For example, ICSID will act as the Secretariat for the investment courts contemplated in the EU's agreements with Canada and Singapore. See European Comm'n, Comprehensive Economic and Trade Agreement (CETA) Between Canada, of the One Part, and the European Union, Art. 8.27.16 (1994), available at http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf; European Comm'n, Chapter Three Dispute Settlement, Art. 3.9.16 (2018), available at http://trade.ec.europa.eu/doclib/docs/2018/april/tradoc_156731.pdf.

39 Everett M. Rogers, Diffusion of Innovations 403 (5th ed. 2003).

40 White, Judith B. & Langer, Ellen J., Horizontal Hostility: Relations Between Similar Minority Groups, 55 J. Soc. Issues 537 (1999); White, Judith B., Schmitt, Michael T. & Langer, Ellen J., Horizontal Hostility: Multiple Minority Groups and Differentiation from the Mainstream, 9 Group Processes & Intergroup Rel. 339 (2006).

41 See Adam Grant, Originals: How Non-conformists Move the World 117–22 (2016).

42 Id. at 118 n. 41.

43 Rosa-Luxemburg-Stiftung, A World Court for Corporations: How the EU Plans to Entrench and Institutionalize Investor-State Dispute Settlement 3 (2017), available at http://www.s2bnetwork.org/wp-content/uploads/2017/12/WORLDCOURT-UK-www.pdf.

44 Columbia Ctr. on Sustainable Inv., Position Paper in Support of Opinions Expressed in Response to the European Commission's “Public Consultation on a Multilateral Reform of Investment Dispute” Resolution 1 (2017), available at http://isdsblog.com/wp-content/uploads/sites/2/2016/05/THEPROPOSALSOFTHEEUROPEANCOMMISSION.pdf.

45 Anne-Karin Grill, Mind the Label: Loyalists and Reformists and ISDS, Kluwer Arb. Blog (Dec. 29, 2017), at http://arbitrationblog.kluwerarbitration.com/2017/12/29/uncitral-isds-working-group-vienna-11-12-2017.

46 Judge Stephen Schwebel, Remarks at Sidley Austin (May 17, 2016) (transcript available at http://isdsblog.com/wpcontent/uploads/sites/2/2016/05/THEPROPOSALSOFTHEEUROPEANCOMMISSION.pdf).

47 Rogers, supra note 39, at 343–52.

48 Anthea Roberts, UNCITRAL and ISDS Reform: Pluralism and the Plurilateral Investment Court, EJIL: Talk!, (Dec. 12, 2017), at https://www.ejiltalk.org/uncitral-and-isds-reform-pluralism-and-the-plurilateral-investment-court.

49 Rogers, supra note 39, at 306–08.

50 Cf. Jeremy Heimans & Henry Timms, New Power 47, 62 (2018).

51 July 10 UN Meeting Recording, supra note 32.

52 Peter Cai, Understanding China's Belt and Road Initiative, Lowy Inst. Int'l Pol'y (Mar. 2017), available at https://www.lowyinstitute.org/sites/default/files/documents/Understanding%20China%E2%80%99s%20Belt%20and%20Road%20Initiative_WEB_1.pdf.

53 Jerome A. Cohen, The Belt and Road Initiative (BRI) Courts? China's Attitude Towards Dispute Resolution, Jerry's Blog (Feb. 19, 2018), at http://www.jeromecohen.net/jerrys-blog/the-bri-courts.

54 Shaffer, Gregory & Gao, Henry S., China's Rise: How It Took on the U.S. at the WTO, 2018(1) U. Ill. L. Rev. 115, 157 (2018).

55 Roberts & Bouraoui, Concerns About Consistency, supra note 12.

56 Id.

57 Id.

58 Roberts & Bouraoui, Concerns About Arbitrators, supra note 12.

59 Id.

60 Id. Similar qualification requirements exist in the EU's court model in its agreements with Canada and Singapore. See supra note 38, Art. 8.27(4) (Canada); Art. 3.9(4) (Singapore).

62 See generally UN Comm'n. on Int'l Trade Law, A Guide to UNCITRAL: Basic Facts About the United Nations Commission on International Trade Law, available at http://www.uncitral.org/pdf/english/texts/general/12-57491-Guide-to-UNCITRAL-e.pdf.

63 Susan Block-Lieb & Terence C. Halliday, Global Lawmakers: International Organizations in the Crafting of World Markets 12, 38–40, 72–73, 80–82, 156, 257 (2017).

64 Id. at 83–84, 89, 156, 227–35.

65 UN Comm'n on Int'l Trade Law, United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (Feb. 2015), available at https://www.uncitral.org/pdf/english/texts/arbitration/transparency-convention/Transparency-Convention-e.pdf; UN Comm'n on Int'l Trade Law, UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (Jan. 2014), available at https://www.uncitral.org/pdf/english/texts/arbitration/rules-on-transparency/Rules-on-Transparency-E.pdf.

66 Block-Lieb & Halliday, supra note 63, at 83–85, 262.

67 Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, June 7, 2017, OECD, at http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm.

68 See Block-Lieb & Halliday, supra note 63; see also examples at 108–09, 120, 147, 200, 377.

69 Gabrielle Kaufmann-Kohler & Michele Potestà, Can the Mauritius Convention Serve as a Model for the Reform of Investor-State Arbitration in Connection with the Introduction of a Permanent Investment Tribunal or an Appeal Mechanism?, CIDS – Geneva Ctr. Int'l Disp. Settlement (2016), available at http://www.uncitral.org/pdf/english/CIDS_Research_Paper_Mauritius.pdf.

70 Anthea Roberts, UNCITRAL and ISDS Reform: Not Business as Usual, EJIL: Talk! (Dec. 11, 2017), at https://www.ejiltalk.org/uncitral-and-isds-reform-not-business-as-usual; Grill, supra note 45.

71 Recording: United Nations Comm'n. on Int'l Trade Law, 49th Sess. (July 8, 2016), available at https://icms.unov.org/CarbonWeb/public/uncitral/speakerslog/56d8ad62-9089-469b-b0a1-573dce6136da.

72 This announcement was made in October 2017. See Gen. Secretariat of the Council of the EU, Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) Between Canada and the European Union and its Member States, EU Doc. 13541/16, § 6(i) (Oct. 27, 2016), at https://eur-lex.europa.eu/legal-content/EN/TXT/?toc=OJ:L:2017:011:FULL&uri=uriserv:OJ.L_.2017.011.01.0003.01.ENG.

73 Eur. Comm'n Directorate General for Trade, Government of Canada, Discussion Paper: Establishment of a Multilateral Investment Dispute Settlement System (Dec. 14, 2016), available at http://trade.ec.europa.eu/doclib/docs/2017/january/tradoc_155267.12.12%20With%20date_%20Discussion%20paper_Establishment%20of%20a%20multilateral%20investment%20Geneva.pdf.

74 See, e.g., UNCITRAL-CIDS Government Experts Meeting, Geneva Ctr. Int'l Disp. Settlement (Mar. 2, 2018), at http://www.cids.ch/events/uncitral-cids-government-experts-meeting.

75 Interview, European Commission Official (May 21, 2018) (on file with author).

76 Interview, Staff Member of an International Arbitral Institution (May 28, 2018) (on file with author) (discussing the European Union and Canada's attempt to dilute the significance of a decision to move foward). See also text accompanying note 87 infra.

77 UN Comm'n on Int'l Trade Law, Working Group III, Possible Reform of Investor-State Dispute Settlement (ISDS), para. 3, UN Doc. A/CN.9/WG.III/WP.142 (Sept. 18, 2017), available at https://documents-dds-ny.un.org/doc/UNDOC/LTD/V17/067/48/PDF/V1706748.pdf?OpenElement.

78 July 21 UNCITRAL Report, supra note 3, para. 260.

79 See UN Comm'n on Int'l Trade Law, UNCITRAL Model Law on International Commercial Arbitration (1985), with Amendments as Adopted in 2006, at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html; UN Comm'n on Int'l Trade Law, UNCITRAL Arbitration Rules, at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2010Arbitration_rules.html.

80 Roberts, UNCITRAL and ISDS Reform, supra note 70.

81 See Roberts, Anthea, Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States, 104 AJIL 179, 189–91, 202 (2010).

82 Lindsey Pelucacci, Hon. Charles N. Brower Delivers Keynote Address at International Arbitration Conference, Fordham L. News (Nov. 27, 2017), at https://news.law.fordham.edu/blog/2017/11/27/hon-charles-n-brower-delivers-keynote-address-international-arbitration-conference.

83 Charles N. Brower & Jawad Ahmad, Why The “Demolition Derby” That Seeks To Destroy Investor-State Arbitration?, 91 S. Cal. L. Rev. (forthcoming 2018).

84 Id.

85 Id.

86 Gabrielle Kaufmann-Kohler & Michele Potestà, The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards: CIDS Supplemental Report (2017), available at http://www.uncitral.org/pdf/english/workinggroups/wg_3/CIDS_Supplemental_Report.pdf.

87 Nikos Lavranos, The First Steps Towards a Multilateral Investment Court (MIC), EFILA Blog (July 19, 2017), at https://efilablog.org/2017/07/19/the-first-steps-towards-a-multilateral-investment-court-mic.

88 Recording: UNCITRAL, Working Group III (Investor-State Dispute Settlement Reform), 35th Sess. (Apr. 24, 2018), available at https://icms.unov.org/CarbonWeb/public/uncitral/speakerslog/453b3b29-9c1f-4537-b99e-3c1930558cc7.

89 Recording: UNCITRAL, Working Group III (Investor-State Dispute Settlement Reform), 35th Sess. (Apr. 23, 2018), available at https://icms.unov.org/CarbonWeb/public/uncitral/speakerslog/f582d7c7-34ea-439d-be63-46230cbe8675.

90 Block-Lieb & Halliday, supra note 63, at 19; see also id. 317–18.

91 My own coding based on the participants list for the 2017 and 2018 Working Group III meetings.

92 Block-Lieb & Halliday, supra note 63, at 85.

93 UN Comm'n on Int'l Trade Law, Rep. of Its Forty-Third Session, at 101, UN Doc. A/65/17 (2010), available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V10/556/48/PDF/V1055648.pdf?OpenElement; UN Comm'n on Int'l Trade Law, Rep. of Its First Session, at 73, UN Doc. A/7216 (Feb. 26, 1968).

94 For an explanation, see UN Comm'n on Int'l Trade Law, UNCITRAL Rules of Procedure and Methods of Work, UN Doc. A/CN.9/638/Add.4 (Oct. 18, 2007), available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V07/875/89/PDF/V0787589.pdf?OpenElement.

95 July 21 UNCITRAL Report, supra note 3, para. 259.

96 Block-Lieb & Halliday, supra note 63, at 317–18.

97 Id. at 163, 187, 318.

98 My own coding based on the speakers’ log for the 2017 and 2018 Working Group III meetings.

99 Id.

100 Id.

101 Roberts & Bouraoui, Concerns About Arbitrators, supra note 12 (e.g., Indonesia and Colombia).

102 Puig & Shaffer, supra note 1, at 408.

103 Roberts, UNCITRAL and ISDS Reform, supra note 48.

I attend the UNCITRAL Working Group III meetings as a member of the Australian delegation but in my capacity as an independent academic expert. I am also a member of the Academic Group. The views in this essay should not be attributed to the Australian government.

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