EU Submission on ISDS Reforms at the UNCITRAL

By Pratyush Nath Upreti

Mandate of UNCITRAL Working Group III

On 19 January 2019, the European Union (EU) and its Member States put forward a submission to UNCITRAL Working Group III, which has the mandate to work on reforms on Investor-State Dispute Settlement (ISDS). The Working Group comprises the Member States, observer States, and observer inter-governmental and non-governmental organizations. The Report of UNCITRAL, Fiftieth Session states that the main aims of the Working Group III are to (i) identify and consider concerns regarding ISDS (ii) consider whether reforms were desirable in the light of any identified concerns and (iii) develop any relevant solutions.

 

EU Submission

In its submission, the EU expressed some fundamental concerns on ISDS in particular (i) lack of consistency, coherence, predictability and correctness of arbitral decisions (ii) no mechanism under the current system to address inconsistent and incorrectness of decisions (iii) lack of diversity, independence and impartiality of decision makers in ISDS.  It is interesting to note that the Submission reminds the Working Group III that the nature of concerns are ‘intertwined and are systemic [and] addressing one specific concern would leave other concerns unaddressed’. Therefore the EU urged the Working Group III to find a systemic response to these problems. Although, the submission does reflect the EU response to the concern, it seems that the EU has adopted the World Trade Organization (WTO) Dispute Settlement as a benchmark while suggesting a possible solution to the concern. This is understandable because the overarching aim of the EU is to create a Multilateral Investment Court, offering an alternative to ISDS. However, it is worth noting that the submission does not refer to a ‘multilateral investment court’ but rather to a ‘standing mechanism’ throughout the text of the submission. Later, the Commission clarifies that the proposal aimed at establishing a permanent multilateral investment court. There are some noticeable suggestions, including the following: (1) the creation of two-tier adjudication, i.e., a first instance tribunal and appellate tribunal, (2) a provision in a bilateral agreement that ‘would be necessary to ensure that parties to a bilateral agreement would retain control over the interpretation of their agreement by being able to adopt binding interpretations,’ (3) the participation of the non-disputing party to the treaty in the dispute, (4) the standing mechanism could also be used for state to state dispute resolution, (5) the creation of a mechanism to ensure that all disputing parties can operate effectively in the investment dispute settlement regime. Such a mechanism could aid least developed and developing countries in litigation in international investment disputes and possibly in other aspects of the application of international investment law.

 

The way forward

The ongoing ISDS reforms are at the preliminary stage. The recently held 37th Session (1-5 April 2019, New York) of the Working Group III agreed that a distinction between incremental and systemic reforms was not useful. Further, the Working Group allocated time and structured the reform project in three steps. First, solutions to the problem are required and a project schedule will be submitted to the Secretariat by 15 July 2019. Second, in the next session, there will be discussion on the proposals and the project will be scheduled. Third, after the creation of the project schedule, there will be further deliberation on potential solutions before recommendations are made to the Commission. It seems that the ISDS reforms are taking a turtle walk, but we can hope that a slow and steady process will bring the best out of the Working Group.