Are states at UNCITRAL on the brink of agreeing the creation of an investment court system to replace investment arbitration?
As discussions at UNCITRAL Working Group III pick up pace, fundamental reforms to investor-state dispute settlement (ISDS) are closer than ever, with a new code of ethics for adjudicators anticipated, in addition to the potential for a multilateral investment court system.
With more than 80 States and numerous inter-governmental and non-governmental organisations contributing, the United Nations Commission on International Trade Law (UNCITRAL) Working Group III on Investor‑State Dispute Settlement Reform (WG III) has been working on a wide-ranging reform initiative for the current ISDS system since late 2017.
In the earlier stages of WG III’s mandate, it sought to identify issues in the current system requiring reform. These included (i) the independence and impartiality of tribunal members, (ii) the coherence, predictability and correctness of outcomes, and (iii) the costs and duration of ISDS proceedings. On the third issue, A&O’s study on costs, damages and duration in investor-state arbitration (co-authored with the British Institute of International and Comparative Law) was frequently cited in deliberations. The third edition of this study, published in 2021, can be found here.
In May 2021, WG III finalised a work plan for 2021 to 2025, divided into eight key streams of work, namely: (i) ADR mechanisms and dispute prevention; (ii) selection and appointment of arbitrators; (iii) Code of Conduct for adjudicators; (iv) ISDS procedural rules reforms; (v) multilateral advisory centre; (vi) appellate mechanism; (vii) multilateral permanent investment court; and (viii) multilateral instrument to implement reforms.
The eight streams of work at WG III reflect extensive negotiations among the participating States, which have different perspectives on how the ISDS system ought to be reformed: a number of States have expressed a preference for reforms based upon the existing party-appointed, ad-hoc structure of ISDS, while others, notably the EU Member States, prefer reforms that would more radically alter the existing ISDS framework through the creation, for example, of a multilateral investment court system.
In 2022, WG III will conduct first readings of draft solutions on the appellate mechanism and the multilateral investment court. It remains unclear whether there is sufficient support for these proposals. If adopted, however, these developments would represent the most significant reform of the ISDS landscape to date. In recent years, the EU has taken the first steps towards the adjudication of investment disputes by bilateral investment courts, through its investment protection agreements with a number of States, including Canada, Vietnam and Singapore. Whether the courts created by these EU treaties work as desired and are effective in addressing concerns such as excessive costs and delay will be closely followed by WG III.
It is also expected that WG III will finalise a Code of Conduct for adjudicators, which seeks to provide ethical guidance to arbitrators (in the existing ISDS system) and judges (in any investment court(s)), and the finalised draft may be incorporated in the drafting of future investment treaties.
Download the International Arbitration Review
