16 Nov 2023
The latest session of UNCITRAL Working Group III (WG III) focused on draft provisions for establishing an advisory centre in international law and so-called cross-cutting issues (i.e. issues which may have substantive reform implications that raise the question of whether they exceed WG III’s mandate of procedural reform only).
Establishing an advisory centre in international law
The key discussions revolved around the proposed centre's service scope; the eligibility of non-member states and non-state non-members (particularly micro, small and medium enterprises, or MSMEs) to access those services; funding structures; and the criteria for classification of developing, developed, and least developed states. The Ciarb delegation intervened to emphasize the direct link between MSMEs' access to the advisory centre's services and Sustainable Development Goal 16 (SDG16) supporting the rule of law and access to justice. Ciarb highlighted the need for clear criteria for vetting and suggested contracting states could sponsor MSMEs' participation in capacity building processes, underlining the mutual benefits this approach would yield. These benefits include extending access to justice, enhancing the centre's legitimacy, promoting understanding of dispute resolution mechanisms, reducing unfounded claims, and encouraging the use of early dispute resolution mechanisms, which aligned with the interests of all parties involved.
Other concerns raised included the role of the secretariat, the governing board and the executive director, and about how they would operate and be selected. Additional issues included payments for services, staff diversity, budget decisions, and the need for incentives to boost membership. It seems clear that the most significant hurdle yet to be cleared is who would fund the centre, since the states with the most access to funds would need the services of the centre least and vice versa.
The WG III moved on to discuss possible ISDS reforms that implicated so called cross-cutting issues. These issues are those that have been put forward by the states but are not prima facie procedural reforms. Since the mandate of the Working Group is that its focus is to be on procedural reforms, these suggestions, however well supported, may be outside the scope of its authority. But as the Chair noted, the group could have the option to pursue them anyway, especially if it determines that reforms perceived to be substantive are procedural enough in nature to fall within the broadly stated scope of work.
These discussions included concerns over economic impacts, proposed draft provisions, overlaps with International Centre for Settlement of Investment Disputes (ICSID) Rules, and the potential inclusion of procedural rules in treaties. Topics emphasized included amicable settlements, damages, third-party funding, and human rights protection. Some states, particularly states with emerging economies in both Africa and South Asia, repeatedly raised the issue of damages due to the potential negative impacts on the national economies of both the emerging and least developed states. Delegates also discussed the application of compound interest and issues related to dispute settlement mechanisms.
There was considerable debate as to whether these issues were procedural or substantive, and therefore within the remit of the working group. Opinions varied widely on whether to make any draft provisions on these issues mandatory by way of a multilateral instrument or in the form of guidelines. In general, states seemed in favour of incorporating a multilateral instrument into the existing UNCITRAL Rules while investor observers favoured creating a stand-alone set of guidelines, similar in operation to the Code of Conduct previously created by the group. During these sessions, Ciarb made an intervention in which it clarified that any option pursued should not require amending the UNCITRAL Rules themselves and that this should be made clear for the benefit of commercial users. The concern being that changes to the UNCITRAL Rules used in thousands of commercial arbitrations globally, would have a direct impact on practitioners and the market. Ciarb accepted that a discrete set of ISDS provisions could be created and could support these provisions if they were carefully crafted through consultation with all stakeholders and were widely accepted . It also echoed concerns about potential duplication and fragmentation in the ISDS procedural options, highlighting the recent successful ICSID Rules process and the need to prevent negative consequences for all UNCITRAL Rules users.
About WG III
UNCITRAL Working Group III (WG III) convened its 46th session in Vienna from October 9 to 13 2023, focusing on Investor-State Dispute Settlement (ISDS) reform. Ciarb is an observer organisation and was represented at the session by Dr Isabel Phillips MCIArb, Director of Policy and ADR Development, and Mercy McBrayer FCIArb, Head of Arbitration Professional Practice, supported by Lara Oranli, Professional Practice and Policy Intern.
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