Department of Law Spring Term 2019
Master Programme in Investment Treaty Arbitration Master’s Thesis 15 ECTS
An Investment Court System – Perpetuating or Reforming the Legitimacy Crisis in
Investor-State Arbitration?
Author: Tadhg Rush
Supervisor: Hannes Lenk
Dedicated to Dr. Michael Rush – Father, Friend and Mentor
Abstract
For the last two to three decades there has been an on-going legitimacy debate surrounding Investment Treaty Arbitration. States, scholars and public opinion argue that reform is needed. The European Union proposes the reform of Investor- State Arbitration through the creation of an Investment Court System. This is exemplified by recent European Union negotiated trade agreements such as the EU- Canada Comprehensive Economic Trade Agreement and the EU-Vietnam Investment Protection Agreement. This thesis discusses whether an Investment Court System is a step towards solving the legitimacy concerns or whether an Investment Court System will thrust Investor-State Arbitration into the relative unknown, exacerbating the validity questions enveloping Investor-State Arbitration.
The thesis observes the criticisms raised by eminent scholars, States and campaigners against Investor-State Arbitration and the reforms proposed by the European Union Commission and European Union Parliament, in the form of an Investment Court System. Finally, the study looks briefly at how certain countries who have become disenfranchised with Investor-State Arbitration are approaching reform internationally, and comparatively discusses whether these options would be more beneficial to the Investor-State Arbitration community, rather than the European Union proposed Investment Court System.
Demosthenes speech on the Rhodians, 351 BC1:
“It was necessary for those who wished to be free to keep away from treaties which were imposed upon them because such treaties were almost the same as slavery.”
1 Hugo Grotius, “The Freedom of the Seas” (Umass EDU) (1609)
<http://www1.umassd.edu/euro/resources/dutchrep/4.pdf> accessed May 12, 2019
Table of Contents i. List of Abbreviations
1) Introduction 1
I. Aim of the Study 2
II. Research Question and Methodology 3
2) Investor-State Arbitration and Its’ Legitimacy Crisis 4 I. A Brief History of Investor-State Arbitration 4 II. The Legitimacy Crisis – An Overview 6 a) Eroding National Sovereignty 8 b) The Length and Cost of Arbitration and
the Call for Appeals 9
c) Pro-Investor Party Appointed Arbitrators 11 III. European Union Response to the Criticisms 13 3) An Investment Court System – Structure and Procedural Reforms 17
I. Constitution of the Tribunal 17
a) Removing Party Appointed Arbitrators 19 b) The Nationality and Impartiality of
Permanent Adjudicators 19
c) The Direct and Indirect Cost of Permanent
Adjudicators 21
d) Gender and Socio-Economic Diversity 22 II. Appellate Tribunal, Jurisdiction and Transparency 24 a) An Appellate Tribunal and Associated Costs 25
III. Justifiable Differences 27
IV. An Investment Court System is it the Answer? 29 4) An Investment Court System as a Reform Initiative 30
I. Hypothetical Concerns with an Investment Court
System 31
II. Enforcement of Unenforceable Awards 33 III. Incremental Reform Rather than a Complete
Transformation 36
IV. Current Institutional Alternatives 39
5) Conclusion 42
i. LIST OF ABBREVIATIONS
ABA American Bar Association
BIT Bilateral Investment Treaty
CETA Comprehensive Economic Trade Agreement
CJEU Court of Justice of the European Union
ECT Energy Charter Treaty
EP European Parliament
EU European Union
EUMFTA European Union-Mexico Free Trade Agreement
EUSIPA European Union-Singapore Investment Protection Agreement
EUVIPA European Union-Vietnam Investment Protection Agreement
FTA Free Trade Agreement
ICS Investment Court System
ICSID International Centre for Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of Other States (March 1965)
IIA International Investment Agreement
ISA Investor-State Arbitration
MIT Multilateral Investment Treaty
NAFTA North American Free Trade Agreement
NYC New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards TTIP Transatlantic Trade and Investment Partnership UNCITRAL United Nations Commission on International Trade
Law
UNCTAD United Nations Conference on Trade and
Development
WTO World Trade Organisation
1) INTRODUCTION
Investor-State Arbitration (ISA) has been overwhelmed by a legitimacy crisis for the last three decades.2 Numerous concerns have been raised regarding the validity of ISA, its procedure and its participants. Calls for reform have reverberated internationally both within the arbitral community and from external observers. This study analyses the proposals for an Investment Court System (ICS) as the next evolutionary step in ISA, exploring European Union (EU) proposals and designs for an ICS as evidenced in recent trade negotiations. With a specific focus on the EU- Canada Comprehensive Economic Trade Agreement (CETA)3 and the EU-Vietnam Investment Protection Agreement (IPA)4.
The study highlights and discusses the current legitimacy concerns5 being raised internationally by scholars and states with regards to ISA. In particular, focusing on whether an ICS is simply a fallacious and naïve move to abate the continuing legitimacy concerns regarding ISA or whether an ICS can effectively address the legitimacy crisis that is threatening to engulf ISA. Concluding that current institutions, such as the International Centre for the Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL), are the logical and most effective systems for the advancement, growth and progression of ISA. Finally, the thesis looks at whether reform of ISA could be modelled on incremental reform initiatives such as has been seen in some Latin American countries.
2 Inayet Aydeniz Baytas, 'A Permanent Investment Court: The Future of the International Investment Regime? | Keep Calm Talk Law' (Keep Calm Talk Law, 2018)
<http://www.keepcalmtalklaw.co.uk/a-permanent-investment-court-the-future-of-the-international- investment-regime/> accessed 18 May 2019.
3 Laura Puccio and Roderick Harte, 'From Arbitration to the Investment Court System - The Evolution of CETA Rules' (European Parliamentary Research Service 2017
4 Catherine Li, ‘The EU’s Proposal Regarding the Establishment of the Investment Court System and the Response from Asia’, Journal of World Trade 52, no. 6 (2018): 943-966
5Daniel Behn, ‘Legitimacy, Evolution, and Growth in Investment Treaty Arbitration: Empirically Evaluating the State-of-the-Art’, 46(2) Georgetown Journal of International Law (2015) 363
I. AIM OF THE STUDY
The aim of the current study is to examine if an ICS will unify ISA, by instilling confidence in the countries who have lost faith in the current ISA system, and, thus, bring its most critical states back in from the cold, returning said states to the international theatre of ISA. Alternatively, will an ICS unduly strain international relations, re-politicising ISA, and potentially returning ISA to a modern form of gun- boat diplomacy. It is argued that ISA is a system in need of reform and certain reformers believe an ICS to be the solution. However, it is a contention that an ICS will re-politicise ISA, by creating a court of politically motivated judges with national interests underlying their decisions.6
It has been 60 years since the first Bilateral Investment Treaty (BIT) was signed between Germany and Pakistan in 1959.7 ISA has come a long way since then, with over 3,000 BITs in existence today.8 Currently, ISA is in the midst of a legitimacy crisis, and it is important to review how best to resolve this crisis, consequently, ensuring that ISA remains a significant form of international dispute resolution in the future. Since 1959, ISA has grown and developed, benefiting from, and contributing to globalisation 2.0,9 a term coined by Thomas L. Friedman, to define the period of international growth between 1800-2000.10 Nonetheless, it is hard to ignore the recent international retreat from globalisation. A retreat that is epitomised by the United Kingdom and Brexit and the anti-globalisation policies of
6August Reinisch, ‘Will the EU’s Proposal Concerning an Investment Court System for CETA and TTIP Lead to Enforceable Awards? The Limits of Modifying the ICSID Convention and the Nature of Investment Arbitration’, Journal of International Economic Law, Volume 19, Issue 4, December 2016, Pages 761–786, https://doi.org/10.1093/jiel/jgw072
7Germany - Pakistan BIT (1959) (Investmentpolicyhubold.unctad.org, 2019)
<https://investmentpolicyhubold.unctad.org/IIA/country/78/treaty/1732> accessed 7 May 2019.
8'Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey' (Oecd.org, 2012)
<http://www.oecd.org/investment/internationalinvestmentagreements/50291678.pdf> accessed 7 May 2019.
9Bob Swarup, 'It's too Late for Hand-Wringing – Globalisation is Already Dead' The Guardian (2 December 2016).
10Thomas L Friedman, ‘The World is Flat – A Brief History of the Twenty-first Century’ (Farrar, Straus and Giroux 2015) page 9
Donald Trump.11 As Secretary General of the United Nations Ban Ki-Moon declared, “protectionism is on the rise internationally.”12
Nations who previously held neo-liberal attitudes towards attracting investors, have become conservative and protective of their economy. There is evidence that nations wish to move away from the current ad hoc style of arbitration and there have been some States who have denounced their BITs and multilateral investment treaties (MITs). However, it is imperative we look at the individual criticisms of ISA and whether an ICS will solve or perpetuate these individual accounts of criticism.
II. RESEARCH QUESTION AND METHODOLOGY
The research question for this study is; will the EU proposed ICS improve the legitimacy of ISA? The dissertation, under constructivist epistemology, uses the method of conceptual analyses to investigate the proposed reforms of ISA. The method of conceptual analysis deals with the properties that constitute a certain thing,13 in this case the composition of the EU proposed ICS. The dissertation includes a review of how reform initiatives are motivated by empirical evidence, a discussion of policy documents and analyses the institutional and procedural features of traditional ISA with the versions of the ICS under CETA and the EUVIPA.
This study proposes a progressive reform based on the ad hoc style of ISA with relevant adjustments, rather than constructing a new framework of ISA through the EU proposed ICS. The thesis will examine whether the current ad hoc style of arbitration is operating effectively. Analysing whether this traditional ad hoc style of arbitration is in line with current international; moral, political and economic aims and whether the current international consensus is supporting a shift from traditional
11Susan D. Franck, Between Myth and Reality: The 9th John E.C. Brierly Memorial Lecture (July 6, 2018). McGill Journal of Dispute Resolution, Vol. 5, No. 1, 2018-2019. Available at
SSRN: https://ssrn.com/abstract=3222792 page 10
12Simon J. Evenett and Johannes Fritz, 'FDI Recovers?' Centre for Economic Policy Research, (CEPR Press 2016).
13Kenneth Einar Himma, ‘Conceptual Jurisprudence’ Journal for Constitutional Theory and Philosophy of Law (Revus Online 2015) https://journals.openedition.org/revus/3351
ad hoc arbitration to an area of global reform14 in the settling of disputes between investors and States, in the form of an ICS.
2) INVESTOR-STATE ARBITRATION AND ITS’ LEGITIMACY CRISIS
This Chapter explains what ISA is, and where ISA derives from. Including some of the important institutions that govern ISA and an outline of the current legitimacy crisis surrounding ISA. By evaluating the concerns raised by governments and scholars, this section investigates the EU proposals for an ICS as an answer to the legitimacy concerns. In, examining the propositioned reforms, this section concludes that an ICS and its connected transformations could return ISA to a modern-day version of gun-boat diplomacy.
I. A BRIEF HISTORY OF INVESTOR-STATE ARBITRATION
Modern day ISA was realised in the early twentieth-century as an effort to replace the use of force by states (gunboat diplomacy) with arbitration. This international reform for the settlement of investment disputes came as a result of the decline of the colonial era. As colonialism began to collapse, with “the Spanish Empire the first to dissolve, followed by the German, Ottoman and Russian Empires after World War 1 and the British and French after World War 2”15, newly independent colonies began to question why foreigners residing in their countries should not be governed by the laws of their countries. As Collins argues “The international minimum standard of protection of aliens did not sit well with these new nation states eager to assert their own autonomy.”16
Effectively describing negotiation backed by the conspicuous threat of force, gunboat diplomacy was in essence the antecedent to diplomatic protection or
14Opinion 1/17 Request for an opinion by the Kingdom of Belgium [2019] ECLI:EU:C: 2019:72 Opinion of AG Bot, para 8
15David Collins, An Introduction to International Investment Law (Cambridge University Press 2017). Page 10
16Ibidem
sovereign immunity.17 It was a dogmatic tool used by imperial powers on weaker nations. Gunboat diplomacy “highlights the extent to which capital exporters were willing to use military coercion to secure private actors’ property rights abroad.”18 Strezhnev provides the example of the United States deploying military interventions in Latin American states for the purpose of collecting the private debts of U.S. citizens.19 A more recent incident, in the form of the Anglo Iranian oil dispute, underlines the extent to which former colonial powers were willing to go for private investments. The Anglo Iranian oil dispute concerned the British government, who sent gunboats to Iran as a result of an Oil Nationalisation Act.20 Subsequently the British government asked the United Nations Security Council, the International Court of Justice (ICJ), and the World Bank to step in, before ultimately staging a coup.21 This was a considerable turning point in the international consensus on how investment disputes should be settled. Taylor St John concludes that the Anglo Iranian crisis “made capital-importing governments wary and led many officials to believe the world needed a new instrument to resolve disputes between investors and states.”22 As a result, modern day Investor-State Arbitration was born.
Since the first BIT was signed between Germany and Pakistan in 1959 there have been over 3,000 BITs signed internationally. There are multilateral investment treaties, such as the Energy Charter Treaty (ECT) and the North American Free Trade Agreement (NAFTA). The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the ICSID Convention on the Settlement of Investment Disputes between States and Nations of Other State (ICSID Convention) are regarded as two of the most widely ratified commercial conventions in the world. It’s fair to say ISA has grown since its
17David Collins, An Introduction to International Investment Law (Cambridge University Press 2017). Page 10
18Anton Strezhnev, 'Detecting Bias in International Investment Arbitration' [2016] Harvard Scholar EDU
<http://scholar.harvard.edu/files/astrezhnev/files/are_investment_arbitrators_biased.pdf?m=145952 4441> accessed 8 May 2019.
19Ibidem.
20Akhtar Adil Razwy, ‘The Anglo-Iranian Oil Dispute’ Pakistan Horizon 6, no. 2 (1953): 75-85.
http://www.jstor.org/stable/41392569 page 75
21Taylor St. John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences (Oxford Scholarship Online 2018).
22Ibidem
inception. However, ISA in its’ purest form is not a politicised dispute settlement mechanism, but was seen as a step away from the imperial use of gunboat diplomacy as a form of dispute settlement.23 Parties to ISA can pick the forum (country and institute) for the dispute and can pick impartial arbitrators with expertise in the designated field of the dispute. Moreover, the New York Convention, signed by 140 states under the auspice of the UN, ensures the effective enforcement and recognition of investment awards outside of the home state. Proponents of ISA have worked hard to formulate ISA in a way in which it is not political, moving disputes away from potentially biased national courts. Removing the “fear of foreign investors of being placed at a disadvantage as compared with national investors when they bring proceedings before national courts.”24 With the formulation of an ICS, and a move away from traditional ad hoc arbitration, ISA would be devolving.
The ICS as proposed by the EU Commission would mean ISA would essentially be returning to those very national courts from whence it came, consequently, the idea that larger countries can assert their dominance over smaller nations may return.
II. THE LEGITIMACY CRISIS – AN OVERVIEW
This section outlines the concerns that have given rise to the current legitimacy crisis surrounding ISA.25 Providing context for the international condemnation of ISA and highlighting the reasons for certain countries departure from ISA.
The end of the twentieth century was arguably the peak of the first evolutionary cycle for ISA, "more than 200 BITs with access to ISDS were signed in each of 1994, 1995 and 1996.”26 Since then, the international arbitral world has seen a steady decline or mistrust beginning to permeate ISA. Countries all over the
23See generally, Taylor St. John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences (Oxford Scholarship Online 2018), Anton Strezhnev, 'Detecting Bias in International Investment Arbitration' [2016] Harvard Scholar EDU
<http://scholar.harvard.edu/files/astrezhnev/files/are_investment_arbitrators_biased.pdf?m=145952 4441> accessed 8 May 2019
24Opinion 1/17 Request for an opinion by the Kingdom of Belgium [2019] ECLI:EU:C: 2019:72 Opinion of AG Bot, para 76
25Section II of Chapter 2 is a further elaboration of Tadhg Rush, ‘The Mauritius Convention’, Course Paper on Procedural Aspects of Investment Treaty Arbitration in the Master Programme in Investment Treaty Arbitration
26Tarald Laudal Berge, 'Reforming Investment Treaties: Does Treaty Design Matter?'
<https://www.iisd.org/itn/2018/10/17/reforming-investment-treaties-does-treaty-design-matter- tarald-laudal-berge-wolfgang-alschner/> accessed 17 April 2019
world have begun to denounce bilateral and multilateral investment treaties. In 2009 Russia denounced and withdrew from the ECT, with Italy following in 2016.27 Other EU countries who have terminated or began renegotiating their international investment agreements (IIAs) as a response to defending themselves against ISA include; the Czech Republic, Romania and Poland.28 Internationally, countries in Latin American such as Bolivia, Ecuador and Venezuela, have been some of the most vocal critics of ISA, with each country either denouncing or declaring their intention to denounce the ICSID Convention and some of their IIAs.29
The core criticisms that give rise to the legitimacy concerns, and consequently the proposal for reform through an ICS, can essentially be broken down into two main categories. The first category, is perhaps the area of ISA which attracts the most criticism, and concerns the decision makers of the arbitral process.
This includes the arbitrators and to a lesser extent the arbitral institutes.30 The second area of criticism which has given rise to the legitimacy crisis, is the process of ISA itself, its structure, the outcomes, and decisions of the arbitral tribunals.31 This second category can be broken down further into; lack of consistency with regards to outcomes and awards, the length and cost of the arbitral process, the current lack of an appropriate appeals mechanism and a lack of transparency.32 This thesis focuses on the criticism of the arbitrators within ISA, the length and cost of the ISA process, including a look at the Appellate Tribunal envisaged under an ICS and finally, the contention that ISA negatively affects host states’ rights to regulate and is a method of dispute resolution in need of reform.
27'Energy Charter Treaty - Energy Charter' (Energycharter.org, 2015)
<https://energycharter.org/process/energy-charter-treaty-1994/energy-charter-treaty/> accessed 5 January 2019
28Malcolm Langford, and Daniel Behn, Managing Backlash: The Evolving Investment Treaty Arbitrator? (September 6, 2016). European Journal of International Law, Forthcoming; Pluri Courts Research Paper No. 16-14. <https://ssrn.com/abstract=2835488> page 8
29Gabrielle Kaufmann-Kohler and 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?' [2016] CIDS - Geneva Centre for International Disputes
30Gabrielle Kaufmann-Kohler and 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?' [2016] CIDS - Geneva Centre for International Disputes. Para 20
31Ibidem.
32Ibidem.
a) ERODING NATIONAL SOVEREIGNTY
It is argued ISA erodes national sovereignty by granting special rights to foreign claimants, and the arbitrators, are a narrow pool of faceless, corporate men; and that ISA is biased in favour of investors.33 Sovereign States, eminent scholars and journalists argue that a clique of public international lawyers urge companies to sue states, and encourage elastic concepts of fairness in panels that traditionally meet in secret.34 These secret, faceless, corporate lawyers, who decide on public issues, that can have economic and political consequences, can and have, come to conflicting decisions on similar points of law.35
Referring to the comments of Charles C. Brower regarding the reaction of host states to ISA and Susan D. Franck regarding the ongoing international anxieties being exhibited towards ISA. The following comments help to provide context and an alternative assessment of why ISA has faced a backlash over the last three decades.
Brower suggests that as ISA is a tool which allows foreign investors to challenge the normal political process of a host state, allowing “foreign investors to challenge the subjective preferences of domestic stakeholders in host states.”36 Consequently, ISA is unlikely to attract popular support as it creates a threat to said stakeholders’ political preferences. Brower argues that as a result of these stakeholders’ narratives, ISA is articulated as a “menace to the public interest.”37
Franck proposes that ISA is “currently caught within a larger geo-political maelstrom which includes a backlash against globalisation, the popularisation of populism, and a turn towards nationalism and isolation that rejects the reality of our
33Stefanie Garber, 'Investor-State Disputes: The Philip Morris Case' (Lawyersweekly.com.au, 2016) <https://www.lawyersweekly.com.au/opinion/19211-investor-state-disputes-the-philip- morris-case> accessed 11 March 2019.
34Alan Beattie, 'Arbitration on Trial: The US and UK’S Fear of the Supranational' The Financial Times (2017) <https://www.ft.com/content/e607c6b2-28f5-11e7-bc4b-5528796fe35c> accessed 11 March 2019.
35Susan D. Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions, 73 Fordham L. Rev. 1521 (2005) Page 1522
36Charles H. Brower II, Politics, Reason, and the Trajectory of Investor-State Dispute Settlement, 49 LOY. U. CHI. L.J. 271, 298 n.117 (2017) Page 286
37Ibidem.
globalised world.”38 Franck surmises that the ISA community should not allow itself to be effected by this current backlash, based on these recidivist practices, but rather, one must proceed with “rationality, data analysis, and with an eye towards establishing evidence based reform of international dispute settlement.”39 Perhaps some of the hysteria surrounding ISA is over exaggerated, or rather, driven by the aforementioned domestic stakeholders of host states or a growing international trend of economic nationalism.
b) THE LENGTH AND COST OF ARBITRATION AND THE CALL FOR APPEALS
The length and cost of arbitration has also been raised as a point of contention. The cost of arbitration can be broken down into two categories, the institutional costs of the arbitration, which includes the tribunals fees, and secondly the legal costs.40 A specific criticism of ISA, is arbitrators accept jurisdiction, and find in favour of investors, in order to increase their fees and perpetuate growth within ISA. However, Baetens maintains that this argument has never been “substantiated”41, but it is still a common issue mentioned by critics of ISA. The length and cost, and how an ICS proposes to reform these areas is discussed in more detail in Chapter 3 (I) (c) and Chapter 3 (II) (a).
There have also been calls for an appeals mechanism within ISA, a recurrent feature of the debate regarding consistency and correctness in decisions rendered by arbitral tribunals.42 The Appellate Tribunal in an ICS has been proposed as a potential reform for this area of ISA, with the EU Commission believing an appellate
38Susan D. Franck, Between Myth and Reality: The 9th John E.C. Brierly Memorial Lecture (July 6, 2018). McGill Journal of Dispute Resolution, Vol. 5, No. 1, 2018-2019. Available at
SSRN: https://ssrn.com/abstract=3222792
39Ibidem.
40Neil Newing, Ryan Cable, Johnny Shearman, ‘Costs in International Arbitration – Are Changes Needed?’, Kluwer Arbitration Blog, January 1st 2019,
http://arbitrationblog.kluwerarbitration.com/2019/01/01/costs-in-international-arbitration-are- changesneeded/ accessed 28 May 2019
41Freya Baetens, The European Union's Proposed Investment Court System: Addressing Criticisms of Investor-State Arbitration While Raising New Challenges (August 9, 2016). Legal Issues of Economic Integration 43, no. 4 (2016): 367-384. Available at
SSRN: https://ssrn.com/abstract=3017171 page 15
42See generally, Christopher H. Schreuer, Andrea de la Brena "Does ISDS Need an Appeals Mechanism?" (2018) (TDM, ISSN 1875-4120) November 2018,
mechanism will ensure consistency of judicial decisions.43 However, it could be argued that an Appellate Tribunal will in fact elongate proceedings, proceedings that can already have a substantial timeframe. This discussion is furthered, and the proposed reforms through an ICS are dealt with in Chapter 3 (II).
c) PRO-INVESTOR PARTY APPOINTED ARBITRATORS
Critics claim that ISA is pro-investor,44 and that there is systemic bias inherent within the process of ISA.45 Advocate General Bot of the Court of Justice of the European Union, in his consideration of whether an ICS is compatible with EU law, submits that there is a “lack of legitimacy and of guarantees that the arbitrators are independent.”46 Furthermore, AG Bot argues that there is a “lack of consistency and foreseeability of the awards.”47 Van den Berg, somewhat concurring with this opinion, argues that party-appointed arbitrators are biased in favour of the parties whom appointed them. Van den Berg concludes that nearly 100 percent of dissenting opinions are in favour of the party that the dissenting opinion would favour and comes from the arbitrator appointed by the favouring party.48
However, there is a need for arbitration. Without arbitration investors would be left to submit claims to the potentially biased domestic courts. Alternatively, an investor may seek diplomatic intervention by their home states,49 however, this could be perceived as a return to modern day gunboat diplomacy. Therefore, it is an
43European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 8 May 2019
44Pia Eberhardt, Cecilia Olivet, Tyler Amos and Nick Buxton, “Profiting from Injustice: How Law Firms, Arbitrators and Financiers are Fuelling an Investment Arbitration Boom” [2012] Corporate Europe Observatory (CEO). <http://corporateeurope.org/sites/default/files/publications/profiting- from-injustice.pdf>, accessed 7 May 2019.
45Gus Van Harten, "Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration." Osgoode Hall Law Journal 50.1 (2012) 211-268.
46Opinion 1/17 Request for an opinion by the Kingdom of Belgium [2019] ECLI:EU:C: 2019:72 Opinion of Advocate General Bot, para 13
47Ibidem.
48 Albert Jan van den Berg, 'Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration', Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (Koninklijke Brill 2009) Page 824
49Leon E. Trakman, 'Choosing Domestic Courts Over Investor-State Arbitration: Australia's Repudiation of the Status Quo' (2012) 35 UNSW Law Journal Page 982
“established principle of [public international] law”50 that parties have a right to appoint an arbitrator. Brower argues that this right “has existed for decades, even centuries.”51 The appointment system envisaged within the EU proposed ICS would be an effort to move away from this established principle of law.
A study concluded by Van Harten based on a “content analysis of arbitrators’
resolutions of contested issues of jurisdiction and admissibility in investment treaty law”52 repeatedly found inconclusive proof of an inherent bias within ISA. Van Harten came to the conclusion that given the differing approaches to assessing this bias, “it is not surprising that there is mixed (often inconclusive) evidence regarding possible bias in investment arbitration.”53 The evidence could be inconclusive as a result of the strict rules that govern arbitration. Arbitration rules, such as the UNCITRAL Arbitration Rules, ensure that if a party so believes they have been subjected to an unfair process, particularly at the hands of an individual arbitrator, they can bring adequate action against the prejudiced member of the arbitral tribunal.54
Furthermore, a study of an empirical evaluation of recent decisions provided by Daniel Behn, shows that; of the 147 cases partially or fully resolved between September 2011 and September 2014, 29% upheld the claimants claims on the merits (34 cases), 23% declined jurisdiction (25 cases), 17% dismissed the claims on the merits (18 cases), 18% were discontinued (19 cases), and 13% were settled (14 cases).55 Not taking into account the cases which were settled and discontinued, this evidences that the tribunal’s decision went in favour of the Claimant/Investor 29% of the time and went against the Claimant/Investor 40% of the time. A 2017
50Charles N. Brower and Charles B. Rosenberg, The Death of The Two-Headed Nightingale: Why the Paulsson—Van Den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded (2009) <https://www.international-arbitration-attorney.com/wp-
content/uploads/arbitrationlawCharles_Brower_The_Death_of_the_Two- Headed_Nightingale_Speech_2.pdf> accessed 17 April 2019.
51Ibidem.
52Gus Van Harten, "Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration." Osgoode Hall Law Journal 50.1 (2012) 211-268.
53Ibidem.
54Gloria Alvarez et al, 'A Response to the Criticism Against ISDS' [2015] European Federation for Investment Law and Arbitration. Page 18 Para 4.3
55Daniel Behn, ‘Legitimacy, Evolution, and Growth in Investment Treaty Arbitration: Empirically Evaluating the State-of-the-Art’, 46(2) Georgetown Journal of International Law (2015) for a full breakdown of Behn’s workings see pages 6-9
report by Matthew Hodgson and Alastair Campbell came to the conclusion that Claimants win some or all of their claims approximately 41%56 of the time and Respondents (States) win approximately 59%57 of the time, with roughly one- quarter of claims being dismissed for lack of jurisdiction.58
Of course, these figures can vary, as, in many instances disputes remain confidential. A report filed by the United Nations Conference on Trade and Development (UNCTAD) in 2015 found that 37% disputes had been decided in favour of the State, with all claims dismissed either on jurisdictional grounds or on the merits; 28% had been settled; 25% were found in favour of the investor, with monetary compensation awarded; and 8% had been discontinued for reasons other than settlement or for unknown reasons.59
Consequently, the individual figures provided by Behn, Campbell, Hodgson and UNCTAD, would appear to show an objective and balanced arbitral system.
Similarly, Van Harten (although a proponent of an MIC)60 has concluded that there is simply inconclusive proof that there is an inherent bias within arbitration. In fact, the figures demonstrate that investors are not favoured over states. As a result, it is probable that arbitrators approach each individual arbitration with an unbiased and impartial opinion of the matter, assessing the legal facts of each dispute distinctly and coming to a rational legal conclusion.
56Matthew Hodgson and Alastair Campbell, “Investment Treaty Arbitration: Cost, Duration and Size of Claims All Show Steady Increase” (2017) <http://www.allenovery.com/publications/en- gb/Pages/Investment-Treaty-Arbitration-cost-duration-and-size-of-claims-all-show-steady- increase.aspx> accessed May 12, 2019
57“Damages and Costs in Investment Treaty Arbitration Revisited” [2017] The International Journal of Commercial and Treaty Arbitration
<http://www.allenovery.com/SiteCollectionDocuments/14-12-
17_Damages_and_costs_in_investment_treaty_arbitration_revisited_.pdf>
58Aceris Law, 'Introduction to Investment Arbitration' (International-arbitration-attorney.com, 2015) <https://www.international-arbitration-attorney.com/investment-arbitration/> accessed 6 March 2019.
59United Nations Conference on Trade and Development, 'Recent Trends in IIAS and ISDS' (2015).
60Gus Van Harten, A Case for an International Investment Court (June 30, 2008). Society of International Economic Law (SIEL) Inaugural Conference 2008 Paper. Available
at SSRN: https://ssrn.com/abstract=1153424 or http://dx.doi.org/10.2139/ssrn.1153424.
III. EUROPEAN UNION RESPONSE TO THE CRITICISMS
It is apparent that there are several areas of criticisms that have been raised against ISA and as Baetens contends, “many would agree that reforms to the existing ISA system are necessary.”61 This section outlines the particular concerns which the proposal of an ICS undertakes to overcome.
Concerns regarding the state of international arbitration began in 1990.62 While over the years numerous articles have been written regarding the reform of ISA, the legitimacy debate really came to prominence in the public eye, as a result of the much discussed, negotiated and now completely defunct Transatlantic Trade and Investment Partnership (TTIP).63 Although TTIP was invariably an international political failure, the proposition for an ICS was brought to the fore of the public debate.64 During the negotiations of TTIP, the EU Commission drafted a proposal for an Investment Protection and Resolution of Investment Disputes and Investment Court System.65 The aim of which is to address, among other aspects, the criticisms of consistency and the absence of an appropriate appeals mechanism within ISA.66 Since the proposal of an ICS, in the TTIP negotiations, the EU has made it apparent that it wishes to move away from the traditional style of ad hoc arbitration.
It is worth clarifying here that since the Lisbon Reform, Article 218 TFEU requires the consent of the European Parliament (EP) for trade and investment agreements.
61Freya Baetens, The European Union's Proposed Investment Court System: Addressing Criticisms of Investor-State Arbitration While Raising New Challenges (August 9, 2016). Legal Issues of Economic Integration 43, no. 4 (2016): 367-384. Available at
SSRN: https://ssrn.com/abstract=3017171
62Inayet Aydeniz Baytas, 'A Permanent Investment Court: The Future of the International Investment Regime? | Keep Calm Talk Law' (Keep Calm Talk Law, 2018)
<http://www.keepcalmtalklaw.co.uk/a-permanent-investment-court-the-future-of-the-international- investment-regime/> accessed 18 May 2019.
63Christian Leathley, 'A Shake-Up of the System of Investment Treaty Arbitration: What Does the Future Hold?' (Herbert Smith Freehills | Global law firm, 2018)
<https://www.herbertsmithfreehills.com/lang-ko/latest-thinking/a-shake-up-of-the-system-of- investment-treaty-arbitration-what-does-the-future-hold> accessed 6 March 2019.
64Charles H. Brower II, Politics, Reason, and the Trajectory of Investor-State Dispute Settlement, 49 LOY. U. CHI. L.J. 271, 298 n.117 (2017) Page 290
65European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 8 May 2019.
66Recommendation for a Council Decision Authorising the Opening of Negotiations for a Convention Establishing a Multilateral Court for the Settlement of Investment Disputes (COM/2017/0493 final) Page 2
Meaning the EU can only conclude agreements after the EP has consented. Initially CETA and the EU-Singapore (then) FTA included traditional ISDS provisions but after the resolution they were transformed into the ICS. The EP resolution, though legally non-binding, reflects the position of the EP, which was that no consent will be given to traditional ISDS provisions.
The EU has begun to replace traditional ISA in their current treaty negotiations with an ICS, as evidenced in the recent CETA negotiations,67 EU- Vietnam IPA (EUVIPA),68 EU-Singapore IPA (EUSIPA)69, EU-Mexico FTA (EUMFTA).70 Of course this invariably means that the countries with whom these IIAs were signed with, are also either willing, or show indifference to the promotion of an ICS. Perhaps their willingness to enter into this new form of dispute settlement with regards to investment disputes is partly because EU Member States as a whole are the largest collective of signatories to BITs, with a total of nearly 1,500 BITs.71 The EU Commission, believes traditional ad hoc arbitration does not sufficiently guarantee impartiality and predictability.72 Judging that an ICS is the logical next step in creating a more transparent, coherent and fair system to deal with complaints under investment protection agreements.73 The EU Commission wants to offer
67Inayet Aydeniz Baytas, 'A Permanent Investment Court: The Future of the International Investment Regime? | Keep Calm Talk Law' (Keep Calm Talk Law, 2018)
<http://www.keepcalmtalklaw.co.uk/a-permanent-investment-court-the-future-of-the-international- investment-regime/> accessed 8 March 2019.
68Catherine Li, ‘The EU’s Proposal Regarding the Establishment of the Investment Court System and the Response from Asia’, Journal of World Trade 52, no. 6 (2018): 943-966
69Krisztina Binder, Trade and investment agreements with Singapore (European Parliamentary Research Service 2019) PE 633.183
70European Commission, 'EU and Mexico Reach New Agreement on Trade' (2018)
<http://trade.ec.europa.eu/doclib/press/index.cfm?id=1830> accessed 8 May 2019.
71Recommendation for a Council Decision Authorising the Opening of Negotiations for a Convention Establishing a Multilateral Court for the Settlement of Investment Disputes (COM/2017/0493 final) Page 11
72'Fact Sheet on the Multilateral Investment Court - A New System for Resolving Disputes' (Trade.ec.europa.eu, 2017)
<http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156042.pdf> accessed 7 March 2019.
73'Fact Sheet on the Multilateral Investment Court - A New System for Resolving Disputes' (Trade.ec.europa.eu, 2017)
<http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156042.pdf> accessed 7 March 2019. page 13
investors a “modern…System for resolving investment disputes”74 that “will replace an old system for dealing with conflicts known as ISDS.”75
The Commission has argued that an ICS would mean that Governments’
right to regulate would be guaranteed in the provisions of the trade and investment agreements.76 However, this comment presupposes that the current ISA system inhibits Governments from regulating their own countries. Which of course is not the case. Indeed, a government’s right to regulate is enshrined in modern IIAs, with an acknowledgement of a “number of legitimate public policy goals, such as the protection of public health, the environment, competition, human rights, and social values.”77 While there have been ISA disputes based on government enacted legislation, such as the Phillip Morris78 and the Methanex79 cases, the tribunal in each of these individual cases found in favour of the State, upholding the State’s right to regulate for legitimate purposes.
The elements of reform mentioned below are reflected in European Commission’s Communication on the ICS.80 The EU Commission’s proposal for a new ISA court system includes a public ICS composed of a First Instance Tribunal and an Appeal Tribunal. The ability of investors to take a case before the new Appeal Tribunal would be precisely defined and limited to cases such as “targeted
74European Commission, 'Guide to the EU-Singapore Free Trade Agreement and Investment Protection Agreement' (2018) page 13
http://trade.ec.europa.eu/doclib/docs/2018/may/tradoc_156885.pdf#page=13 accessed 8 May 2019
75European Commission, 'Guide to the EU-Singapore Free Trade Agreement and Investment Protection Agreement' (2018)
<http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156042.pdf> accessed 7 March 2019. page 14
76European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 8 May 2019
77Vera Korzun, The Right to Regulate in Investor-State Arbitration: Slicing and Dicing Regulatory Carve-Outs (April 10, 2017). Vanderbilt Journal of Transnational Law, Vol. 50, No. 2, 2017, pp.
355-414; Fordham Law Legal Studies Research Paper No. 2950939. Available at SSRN: https://ssrn.com/abstract=2950939
78Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No.
2012-12 Award on Jurisdiction and Admissibility, Philip Morris Brand Sàrl, Philip Morris Products S.S. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. Arb/10/7 Final Award
79Methanex Corporation v. United State of America, UNCITRAL, 2015, Final Award on Jurisdiction and Merits
80European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 8 May 2019
discrimination on the base of gender, race or religion, or nationality, expropriation without compensation, or denial of justice.”81 The EU Commission wants the ICS to build on what they consider their existing approach to ISA, which ensures:
“proceedings will be transparent, hearings open and comments available on-line, and a right to intervene for parties with an interest in the dispute will be provided.”82
The EP recommends the following reasons for a departure from the traditional ad hoc ISA system: to ensure that foreign investors are treated in a non- discriminatory fashion, while benefiting from no greater rights than domestic investors.83 The creation of an ICS in the eyes of the EP is meant to be a new system for resolving disputes between investors and states, a system which is subject to democratic principles and scrutiny. Arguing that an ICS will allow potential cases to be treated in a transparent manner by publicly appointed, independent professional judges in public hearings.84 Which includes an appellate mechanism, where apparently, consistency of judicial decisions will be ensured. However, it has been noted that if the UNCITRAL Transparency Rules are observed there is an assertion that ISA is more transparent than court proceedings in many countries.85
An integral part of the EP’s argument is to allow the jurisdiction of courts of the EU and of EU Member States to be respected, meaning, in the words of the EP,
“private interests cannot undermine public policy objectives.”86
The EU as proponents of an ICS believe that if not all, at least most of the questions regarding the validity of ISA can be solved by the organisation of an ICS, however, this study will show why these claims are unsubstantiated and how, as a
81Ibidem.
82Ibidem.
83European Parliament, 'European Parliament Resolution Of 8 July 2015 Containing the European Parliament’s Recommendations to the European Commission on the Negotiations for the
Transatlantic Trade and Investment Partnership (TTIP) (2014/2228(INI))' (2015)
<http://www.europarl.europa.eu/doceo/document/TA-8-2015-0252_EN.pdf> accessed 6 May 2019.
84Ibidem.
85 Kaj Hobér, – Investment Treaty Arbitration and Its Future – If Any, 7 Y.B. Arb & Mediation 58 (2015) Page 6
86European Parliament, 'European Parliament Resolution Of 8 July 2015 Containing the European Parliament’s Recommendations to the European Commission on the Negotiations for the
Transatlantic Trade and Investment Partnership (TTIP) (2014/2228(INI))' (2015)
<http://www.europarl.europa.eu/doceo/document/TA-8-2015-0252_EN.pdf> accessed 6 May 2019.
consequence of an ICS, ISA will be thrust into the relative unknown causing further legitimacy concerns.
3) AN INVESTMENT COURT SYSTEM – STRUCTURE AND PROCEDURAL REFORMS
This chapter takes a closer look at the logistical and administrative composition of the ICS as per the Dispute Settlement provisions of CETA, the EUVIPA and EUVFTA. Including an outline of the disputes which an ICS would have jurisdiction over, and the constitution of the Tribunal. As well as the appointment system and costs of the adjudicators envisaged within the aforementioned EU trade agreements.
I. CONSTITUTION OF THE TRIBUNAL
The ICS envisaged in the recently finalised trade agreements between the EU and Canada and the EU and Vietnam depart substantially from the traditional ISA model.
The two main differences, between traditional ISA and the EU proposed ICS, that this section will focus on are the Appellate Tribunal and the fixed adjudicators. First, under the rules of conventional arbitration the decision of a Tribunal is final and binding, however, under CETA and the EUVIPA the EU has proposed the creation of an Appellate Tribunal. Meaning parties may appeal the decisions of tribunals in specific circumstances, as outlined below. Second, an established feature of ISA is that disputing parties are able to each choose an arbitrator to reside on the panel of arbitrators. Under the formation of an ICS this party autonomy would be removed, fixed term adjudicators would instead take their place.
The ICS is to be constituted in a two-tier system, consisting of a First Instance Tribunal and an Appellate Tribunal.87 Parties to the dispute will not be able to choose the arbitrators who constitute the First Instance Tribunal. The selection will instead be made on a rotational basis.88 The dispute settlement provision of
87European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 8 May 2019
88Opinion 1/17 Request for an opinion by the Kingdom of Belgium [2019] ECLI:EU:C: 2019:72 Opinion of AG Bot, para 8
CETA outlines that the CETA Joint Committee will choose the arbitrators from a group of judges who will be appointed for a specified period of time. The Joint Committee will establish a list of at least 15 individuals, chosen on the basis of objectivity, reliability, and sound judgement, who are willing and able to serve as arbitrators.89 The arbitrators included on the list must have expertise or experience in financial services law or regulation or in the practice thereof, which may include the regulation of financial service suppliers.90 The arbitrators acting as chairpersons must also have experience as counsel, panellist, or arbitrator in dispute settlement proceedings. Arbitrators shall be independent, serve in their individual capacity, and shall not take instructions from any organisation or government.91
The EU Commission states that the adjudicators of the First Instance Tribunal, will possess “high qualifications”92. Which the Commission compares to those required for the members of permanent international courts, such as the ICJ and the World Trade Organisation (WTO) Appellate Body.93 However, a number of questions have been raised concerning how the EU plans to attract such qualified adjudicators and “whether and how adequate gender and geographical distribution will be ensured.”94 Chapter 3 (I) (c) and (d) of this thesis elaborates on, and analyses the qualifications and diversity of the proposed adjudicators in an ICS.
In order to ensure the availability of the adjudicators, the Members of the Tribunal will receive a retainer fee95 that may be turned into a salary if workload justifies it.96 The EU’s main argument for a retainer system is the relatively low
89Art. 13.20 para 3, CETA Chapter on Dispute Settlement, Art. 15.23 para 1-2, EUVFTA Chapter on Dispute Settlement
90Art. 13.20 para 4, CETA Chapter on Dispute Settlement, Art. 15.23 para 3, EUFTA Chapter on Dispute Settlement
91Art. 13.20 para 4, CETA Chapter on Dispute Settlement, Art. 15.23 para 3, EUFTA Chapter on Dispute Settlement
92European Commission, 'Commission Proposes New Investment Court System for TTIP and Other EU Trade and Investment Negotiations' (2015) <http://europa.eu/rapid/press-release_IP-15- 5651_en.htm> accessed 18 April 2019
93Ibidem.
94Freya Baetens, The European Union's Proposed Investment Court System: Addressing Criticisms of Investor-State Arbitration While Raising New Challenges (August 9, 2016). Legal Issues of Economic Integration 43, no. 4 (2016): 367-384. Available at
SSRN: https://ssrn.com/abstract=3017171 page 8
95Art. 8.27 para 12, CETA Chapter on the Constitution of the Tribunal Available at http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf
96Laura Puccio and Roderick Harte, 'From Arbitration to the Investment Court System - The Evolution of CETA Rules' (European Parliamentary Research Service 2017).
annual average of cases brought under investment agreements. Ancillary to this claim; the North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty (ECT), two international multilateral treaties with the largest total number of investor-state disputes, averaged respectively 2.7 and 6.6 cases per year.97 However, similar to the current ISA system, adjudicators would be entitled to fees and expenses, to be allocated for such things as meetings and additional work surrounding the dispute,98 these fees would be determined pursuant to Regulation 14(1) of the Administrative and Financial Regulations of the ICSID Convention.99 Alternatively, in the EUVIPA, under Chapter 4 Annex 11, members of the Tribunal are told to keep a record and render a final account of the time devoted to the procedure and of the expenses incurred.100
a) REMOVING PARTY APPOINTED ARBITRATORS
The current proposition of an ICS being the saviour of ISA is rather atavistic. While there are many proponents of an ICS, there is a portion of arbitrators and scholars who believe an ICS would return ISA to modern day gun-boat diplomacy, criticising the appointment system of the fixed adjudicator system envisaged within an ICS.
Critics make specific reference to their impartiality, experience, cost and diversity.
These criticisms are analysed further in the next three sub-sections of this Chapter.
b) THE NATIONALITY AND IMPARTIALITY OF PERMANENT ADJUDICATORS
While countries may not be able to use the diplomatic intervention concept, larger States and corporations that have invested in high-risk countries could have
97Ibidem
98Freya Baetens, The European Union's Proposed Investment Court System: Addressing Criticisms of Investor-State Arbitration While Raising New Challenges (August 9, 2016). Legal Issues of Economic Integration 43, no. 4 (2016): 367-384. Available at
SSRN: https://ssrn.com/abstract=3017171 page 13
99Art. 8.27 para 14, CETA Chapter on the Constitution of the Tribunal Available at http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf
100 Art. 8, EUVIPA Chapter on Expenses, Annex 11
“considerable bargaining strength.”101 As a result of the stronger lobbying powers that would be a consequence of the permanently appointed judges (rather than the current party appointed system) envisaged within the current proposals for an ICS.
Comparatively, a common criticism of arbitrators within ISA are that they are incentivised to hand down favourable awards to investors in order to promote ISA, thereby generating further employment opportunities. Beatens maintains that an ICS adjudicators’ main source of income would still result from actual case work, rather than the retainer fee associated with their position.102 Thus meaning this supposed incentive, of adjudicators being biased in favour of investors to generate further occupational opportunities, would still occur, only now it would be limited to the narrow pool of fifteen judges envisioned within each trade agreement.103 Once again, this could worsen the legitimacy crisis rather than resolving critics concerns.
Article 38 of the ICSID Convention, which contains the nationality requirements regarding the constitution of the tribunal, states that
“Arbitrators…shall not be nationals of the Contracting State party to the dispute or of the Contracting State whose national is a party to the dispute.”104 Under the guidelines for the adjudicator appointment system envisaged within EUVIPA and CETA two of the three judges in a dispute could breach this rule. Thus, if the ICS reform of ISA breaches the current checks and balancing methods of ISA, regarding the impartiality of arbitrators, this could bring into contention the legitimacy of this proposed reform of ISA. Moreover, it could re-politicise ISA, which has a history of inherently being a de-politicised form of dispute resolution.105
101Charles N. Brower and Charles B. Rosenberg, The Death of The Two-Headed Nightingale:
Why the Paulsson—Van Den Berg Presumption that Party-Appointed Arbitrators are
Untrustworthy is Wrongheaded (2009) <https://www.international-arbitration-attorney.com/wp- content/uploads/arbitrationlawCharles_Brower_The_Death_of_the_Two-
Headed_Nightingale_Speech_2.pdf> accessed 17 April 2019. Page 819
102Freya Baetens, “The EU’s Proposed Investment Court System (ICS): Addressing Criticisms of Investor-State Arbitration While Raising New Challenges” (2016) 43 Legal Issues of Economic Integration 367-384 Page 15
103Art. 13.20 para 3, CETA Chapter on Dispute Settlement, Art. 15.23 para 1-2 EUVFTA, Chapter on Dispute Settlement
104'International Centre for Settlement of Investment Disputes' (Icsidfiles.worldbank.org)
<http://icsidfiles.worldbank.org/icsid/icsid/staticfiles/basicdoc/parta-chap04.htm#s02> accessed 15 May 2019.
105Investor State Dispute Settlement - A Sequel: UNCTAD Series on Issues in International Investment Agreements II, (2014) United Nations Conference on Trade and Development
<https://unctad.org/en/PublicationsLibrary/diaeia2013d2_en.pdf> Page 13
Alternatively, this modification could create an atmosphere of discontent for disputing parties, who would be entering a lotto when choosing to use the ICS. As Brower and Rosenberg contend, “the party appointment of arbitrators ensures that the decision-making process is not perceived as something external to the parties.”106 By appropriating the decision-making process, and removing party appointed arbitrators, scepticism may arise and parties may begin to feel alienated from the ISA process.
c) THE DIRECT AND INDIRECT COST OF PERMANENT ADJUDICATORS
The EU Commission proposed a 2,000 euro a month retainer fee for residing judges within TTIP107 and while “no concrete amount can be found in CETA”108 the Commission may struggle to guarantee qualified adjudicators with such an incentive. Specifically, as arbitrators presiding over ICSID arbitral proceedings can earn US$3,000 a day109 and many arbitrators may be involved in multiple proceedings at any given time. Thus, a week as an ICSID arbitrator is the equivalent of 6 months of a fixed ICS adjudicators retainer fee. Of course, one would be precluded from earning this daily rate if one were to reside as a permanent ICS adjudicator, and while there are fees and expenses associated with being a fixed adjudicator there is no guarantee the figure will be enough. To summarise, the monetary incentive of a monthly retainer fee offered to an ICS adjudicator may not be competitive enough to attract experienced international public law practitioners.
Furthermore, the EU is proposing to appoint the judges from several different Member State. However, there may be significant differences regarding the
106Charles N. Brower and Charles B. Rosenberg, The Death of The Two-Headed Nightingale:
Why the Paulsson—Van Den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded (2009) page 3
107Hannes Lenk, ‘An Investment Court System for the New Generation of EU Trade and Investment Agreements: A Discussion of the Free Trade Agreement with Vietnam and the Comprehensive Economic and Trade Agreement with Canada’ (2016) 1 European Papers 665-677
108Marc Bungenberg and August Reinisch, ‘From Bilateral Arbitral Tribunals and Investment Courts to a Mulitlateral Investment Court, (Springer 2018) para 146
109Diana Rosert, ‘The Stakes are High: A Review of Financial Costs of Investment Treaty Arbitration’ (2014) International Institute for Sustainable Development Page 12
qualifications for judicial offices between different EU Member States.110 Potentially meaning newly appointed arbitrators would have vastly varying expertise in international public law or could in an extreme circumstance have no experience of public international law. As the ABA notes, “persons qualified to hold judicial office in their home jurisdiction are often specialists in domestic law and are often with no demonstrated expertise in public international law.111 Article 8.27 of CETA does say that “it is desirable”112 that adjudicators have expertise in
“international investment law, in international trade law and the resolution of disputes arising under international investment trade agreements.”113 Baetens argues that “in a technical matter such as international investment law, it should be more than merely ‘desirable’ that judges have satisfactory experience in that specific field.”114 The negligent use of the word desirable creates an uncertainty regarding the specific requirements that an adjudicator must possess to be appropriate for the position.
d) GENDER AND SOCIO-ECONOMIC DIVERSITY
M. Sornarajah determines that the idea of an International Investment Court, although slightly different to the EU proposed ICS, “it is best to stop the idea at the outset.”115 Sornarajah focuses on an a questioned raised by the ABA working group of how the judges are to be appointed in an ICS. Citing Baroness Hale, Deputy President of the United Kingdom Supreme Court, who “has observed that most top English judges are white, male, attended the same elite universities, and specialized in commercial law.”116 Sornarajah’s argues that these judges are likely to have the same ideological predispositions, concluding, that their appointment, will affirm
110Investment Treaty Working Group of the International Arbitration Committee, 'Investment Treaty Working Group: Task Force Report on The Investment Court System Proposal' (American Bar Association Section on International Law 2016). Page 7
111Ibidem.
112Art. 8.27 para 4, CETA Chapter on the Constitution of the Tribunal
113Art. 8.27 para 4, CETA Chapter on the Constitution of the Tribunal
114Freya Baetens, “The EU’s Proposed Investment Court System (ICS): Addressing Criticisms of Investor-State Arbitration While Raising New Challenges” (2016) 43 Legal Issues of Economic Integration 367-384 Page 7
115Muthucumaraswamy Sornarajah, ‘An International Investment Court: Panacea or Purgatory?’
Columbia FDI Perspectives, No. 180, (August 15, 2016) page 135
116Ibidem.
