Modernization of the Investor-State Dispute Settlement System: reform or revolution?

INTRODUCTION. The UN Commission on International Trade Law established Working Group III in 2017. Within the framework of this Working Group, States’ delegations and representatives of international governmental and non-governmental organizations seek to work out solutions to the identified problems of the investor-State dispute settlement system. Such problems include: lack of consistency and predictability of arbitral awards, lack of independence and impartiality of arbitrators, cost and duration of proceedings. Part of the ways suggested by the UNCITRAL Secretariat and States to remedy problems could be estimated as reform of the system, but several proposals seem to be a revolution.

MATERIALS AND METHODS. The authors researched the provisions of bilateral investment treaties, case law of tribunals demonstrating the problems of the ISDS system, as well as the works of Russian and foreign scholars. The methodological basis of the research contains general scientific and special methods.

RESEARCH RESULTS. The authors have analyzed several ways of the ISDS system reform overviewed by the Working Group III. Firstly, the authors have considered the draft code of conduct for arbitrators, provisions on third-party funding and an advisory center in the ISDS system. It has been stated that each of these initiatives is able to solve certain problems of the system. Secondly, the authors have analyzed the documents on the creation of an appellate mechanism and a standing multilateral mechanism for the settlement of investment disputes. The authors have concluded that initiatives may bring the fundamental changes to the system.

DISCUSSION AND CONCLUSIONS. The authors have concluded that the identified shortcomings of the ISDS system can be remedied only by its reform. Every problem of the system can and should be rectified through consistent work, and not by radical changes. The revolutionary ways considered, such as the appellate instance and the court, not only will not solve existing problems, but rather will add new ones. For example, such a “revolution” of the system may result in establishment of the two parallel regimes of investorstate dispute resolution.

1. Alvarez G.M. [et al.]. A Response to the Criticism against ISDS by EFILA. – Journal of International Arbitration.2016. Vol. 33. Issue. 1. P. 1-36.

2. Brekoulakis S., Rogers C. Third-Party Financing in ISDS: A Framework for Understanding Practice and Policy. –Academic Forum on ISDS Concept Paper. 2019. Vol. 11. P. 1-33.

3. Bungenberg M., Reinisch A. From Arbitral Tribunals to a Multilateral Investment Court: The European Union Approach. – Handbook of International Investment Law and Policy. Ed. by J. Chaisse, L. Choukroune, S. Jusoh. Singapore: Springer. 2021. P. 2285-2319. DOI: https://doi.org/10.1007/978-981-13-3615-7_109

4. Calamita N.J. The (In)Compatibility of Appellate Mechanisms with Existing Instruments of the Investment Treaty Regime. – The Journal of World Investment and Trade. 2017. Vol. 18. Issue 4. P. 585-627. DOI: https://doi.org/10.1163/22119000-12340053

5. Chaisse J., Eken C. The Monetization of Investment Claims Promises and Pitfalls of Third-Party Funding in Investor-State Arbitration. – Delaware Journal of Corporate Law. 2020. Vol. 44. Issue 2–3. Р. 113-166.

6. Feldman M. Investment Arbitration Appellate Mechanism Options: Consistency, Accuracy, and Balance of Power. – ICSID Review – Foreign Investment Law Journal. 2017. Vol. 32. Issue 3. P. 528-544. DOI: https://doi.org/10.1093/icsidreview/six009

7. Giorgetti C., Dunoff J. Ex Pluribus Unum? On The Form and Shape of a Common Code of Ethics in International Litigation. – American Journal of International Law Unbound. 2019. Vol. 113. Р. 312-316. DOI:10.1017/aju.2019.39

8. Güven B.S. [et al.] Regulating Third-Party Funding in Investor-State Arbitration Through Reform of ICSID and UNCITRAL Arbitration Rules: Holding Global Institutions to Their Development Mandates. – The Investor State Dispute Settlement System: Reform, Replace or Status Quo? Ed. by Alan M. Anderson and Ben Beaumont. Alphen aan den Rijn: Kluwer Law International. 2020. P. 287-318.

9. Joubin-Bret A. Establishing an International Advisory Centre on Investment Disputes?. 2015. 19 p. URL: https://e15initiative.org/wp-content/uploads/2015/09/E15-Investment-Joubin-Bret-Final.pdf (accessed 25.11.2022)

10. Kabra R. Return of the Inconsistent Application of the Essential Security Interest’ Clause in Investment Treaty Arbitration: CC/Devas v India and Deutsche Telekom v India. – ICSID Review - Foreign Investment Law Journal. 2019. Vol. 34. Issue 3. P. 723-753. DOI: https://doi.org/10.1093/icsidreview/siz021

11. Katsikis D. Necessity due to COVID-19 as a Defence to International Investment Claims. – ICSID Review – Foreign Investment Law Journal. 2021. Vol. 36. Issue 1. P. 46-69. DOI: https://doi.org/10.1093/icsidreview/siab009

12. Kaufmann-Kohler G., Potesta M. The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards. 2017. 127 p. URL: https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3457310_code2210890.pdf?abstractid=3457310&mirid=1 (accessed 25.11.2022)

13. Laird I., Askew R. Finality Versus Consistency: Does Investor-State Arbitration Need an Appellate System. –Journal of Appellate Practice and Process. 2005. Vol. 7. Issue 2. Р. 285-302.

14. Langford M., Behn D. Managing backlash: The evolving investment treaty arbitrator?. – European Journal of International Law. 2018. Vol. 29. Issue 2. P. 551-580. DOI: https://doi.org/10.1093/ejil/chy030

15. Lavranos N. The ICS and MIC Projects: A Critical Review of the Issues of Arbitrator Selection, Control Mechanisms, and Recognition and Enforcement. – Hand-book of International Investment Law and Policy. Ed. By J. Chaisse, L. Choukroune, S. Jusoh. Singapore: Springer 2021. P. 841-863. DOI: https://doi.org/10.1007/978-981-13-3615-7_81

16. Lifshits I.M, Shatalova A.V. Epokha COVID-19: ogranichitel'nye mery gosudarstv i trebovaniya inostrannykh investorov [The Era of COVID-19: Restrictive Measures of States and the Claims of Foreign Investor]. – Moscow Journal of International Law. 2022. No. 1. P. 113-127. (In Russ.). DOI: https://doi.org/10.24833/0869-0049-2022-1-113-127

17. Lifshits I.M, Shatalova A.V. Tretii lishnii? Finansirovanie tret'ei storonoi v investitsionnykh sporakh: razrabotki YuNSITRAL [Three is none? Third-party funding in investment disputes: The UNCITRAL working document]. – Mezhdunarodnoe pravosudie. 2022. No. 2. P. 113-131. (In Russ.). DOI: 10.21128/2226-2059-2022-2-113-131

18. Pohl J., Mashigo K., Nohen A. Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey. 2012. 58 p. URL: https://www.oecd.org/investment/investment-policy/wp-2012_2.pdf (accessed 25.11.2022)

19. Salacuse J. W. BIT by BIT: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries. – International Law. 1990. Vol. 24. Issue 3. P. 655-675.

20. Sauvant K. P. An advisory centre on international investment law: Key features. – University of St. Thomas Law Journal. 2021. Vol. 17. Issue 2. P. 354-372.

21. Van den Berg J. A. Appeal Mechanism for ISDS Awards: Interaction with the New York and ICSID Conventions. –ICSID Review - Foreign Investment Law Journal. 2019. Vol. 34. Issue 1. P. 156-189. DOI: https://doi.org/10.1093/icsidreview/siz016

22. Van den Bossche P., Zdouc W. The Law and Policy of the World Trade Organization, Text, Cases and Materials. 5th ed. Cambridge: Cambridge University Press. 2022. 1170 p.

23. Van der Borght K. The Advisory Center on WTO Law: Advancing Fairness and Equality. – Journal of International Economic Law. 1999. Vol. 2. Issue 4. Р. 723-728.

24. Viktorova N.N. Osparivanie arbitrazhnykh reshenii po Vashingtonskoi konventsii 1965 g. [Annulment of arbitration awards under the ICSID Convention]. –Vestnik Universiteta imeni O. E. Kutafina. 2019. No. 10. P. 101-108. (In Russ.). DOI: https://doi.org/10.17803/2311-5998.2019.62.10.101-109