Professor Nikos Lavranos, Secretary General of EFILA, attended the 50th session of the United Nations Commission on International Trade Law (UNCITRAL) as part of the CIArb delegation. This is his report.
On the instigation of the EU, the UNCITRAL Commission adopted a broad mandate for a Working Group to:
- identify and consider concerns regarding ISDS;
- consider whether reforms are desirable in light of the identified concerns;
- if the Working Group were to conclude that reform is desirable, to develop and recommend any relevant solutions;
This mandate was adopted after a heated debate in which the USA and Japan were the strongest opponents to such a mandate, while the EU, Canada, Mauritius, South Africa and several Latin American countries vigorously pushed for such a mandate.
The debate reflected the different views as to whether, and if so, to what extent the ISDS system needs to be reformed or even preferably replaced by a permanent multilateral investment court (MIC).
Eventually, all present states accepted to give UNCITRAL such a broad mandate.
Although, the proponents of this mandate repeatedly reassured each other that the outcome of the work of the UNCITRAL Working Group should not be prejudged and that all options should be on the table, it was obvious for everybody in the room that the only outcome will be the creation of the MIC.
Indeed, the template for the negotiation process and draft text for the MIC will replicate the ‘Mauritius Convention approach’, which was successfully adopted for the UNCITRAL Transparency Rules for investment treaty arbitrations adopted in 2014 and which will enter into force in October 2017.
A detailed report by Gabrielle Kaufman-Kohler and Michele Potestà in which they describe how the Mauritius Convention approach could serve as a model for creating the MIC provided the basis for the discussion and the eventual adoption of the mandate.
The ‘Mauritius Convention approach’ allowed for an extraordinarily fast negotiation process and contains a flexible opt-in menu for the contracting parties. Accordingly, states are free to select whether or not the UNCITRAL Transparency Rules will also apply for disputes initiated under pre-existing BITs or only for BITs which entered into force after the Transparency Rules become applicable.
In addition, the unusual low requirement of only 3 ratifications for the entering into force of the Mauritius Convention is another feature, which allows for turning a negotiated text into a formally applicable legal instrument.
Considering the fact that work on the MIC is slated to start already next November and assuming that the ‘Mauritius Convention approach is’ followed, a draft text for the MIC could be on the table by the end of 2018, so that the first signatures could be put under such a text in 2019, making the MIC a reality by 2020.
In sum, the EU has successfully managed to instrumentalize UNCITRAL for its MIC idea. Only time will tell how much traction there actually will be among states for creating the MIC.
The debate on the mandate showed that there is not yet consensus for the MIC throughout the world. While the EU, most EU Member States, Canada, some Latin American countries and South Africa seem very eager to create the MIC, in the Asian and Pacific region there seemed to be considerably less appetite.
In particular, Japan, China, Singapore, South Korea, NZ and Australia were much more cautious and less convinced about the urgent need to replace the current ISDS system with something completely new, which may very well create new legal and policy problems.
CIArb continues to work with partners across the arbitration and business community to monitor these developments and ensure that policymakers appreciate the distinction between different modes of arbitration, particularly investment and commercial arbitration.
The Institute’s guidelines and standards continue to be referenced as exemplars of best practice and we look forward to working towards creating a system that works for everyone.