“Evolution not Revolution”: CIArb sets out its approach to the question of ISDS reform

On 13 February 2019, the Chartered Institute of Arbitrators held “Evolution, Not Revolution: CIArb’s Work on Investor State Dispute Settlement (ISDS) Reform at UNCITRAL Working Group III”, a panel discussion generously hosted by Pinsent Masons LLP. The event was convened to launch CIArb’s ISDS discussion papers ahead of the UNCITRAL WG III 37th Session in New York in April 2019 and brought together a broad spectrum of viewpoints with representatives from academia, investors, practitioners and policymakers.

Our approach to reform: Evolution not Revolution

The question of ISDS reform is one of the most high-profile issues in the field of arbitration today, with certain stakeholders calling for the entire system to be replaced with a Multilateral Investment Court (MIC). As a leading centre of excellence for ADR, the Chartered Institute is committed to serve the public interest, and we have a clear interest in an ISDS framework that operates effectively. We recognise the need for reforms to improve the consistency, clarity and predictability – however, ISDS mechanisms are crucial in underpinning international trade and investment. As such, it is vital that risk is minimised when considering alternative models and reform should be undertaken in an iterative, targeted and incremental way. We must not throw the baby out with the bathwater.

Our discussion papers have been prepared to set out the parameters of the ISDS reform debate and are intended to provoke a conversation on how reform should proceed.

Starting the conversation

At the beginning of the event,  Mercy McBrayer MCIArb delivered a brief summary of CIArb’s ISDS discussion papers and introduced a Panel Chair, Dr Paul Tichauer FCIArb (CIArb’s representative at UNCITRAL WG III) who kicked-off the conversation, which explored the issues raised by the papers in depth.

The discussion was divided into three parts concerning decisions, decision-makers and efficiency in the arbitration proceedings respectively.

Jean-François Le Gal FCIArb (Partner in International Arbitration at Pinsent Masons LLP) opened the first part about awards in investment arbitration. He identified the lack of consistency of the decisions as one of the concerns creating unpredictability of the results. As a potential solution, he suggested standardization which would involve developing a uniform interpretation of the key concepts in international arbitration. Dr Crina Baltag (Senior Professor in Law at the University of Bedfordshire) explained her approach to ISDS Reform from the academic’s perspective and underlined the systematic nature of the discussed concerns. V.V Veeder QC added his remarks from the perspective of his experiences in the ISDS disputes and emphasised that the need for the reform is dictated by the fact that many states have lost their confidence in the current dispute resolution system. Philp Bliss Aliker FCIArb as a representative for the nation of Uganda to UNCITRAL Working Group III presented his concerns towards the reform from the viewpoint of developing countries. This part of the panel discussion was followed by many questions from the audience concerning among others China's and EU's approaches to the ISDS reform.

The second part of the discussion, concerning decision makers was started by Philp Bliss Aliker FCIArb who shared his war stories about the state's preferences to the appointed arbitrators. V.V Veeder QC  identified problematic issues as for instance conflict of interests arising out of links between an arbitrator and a party, party's counsel or third-party funder. He also raised a problem of ethics in international investment arbitration and indicated that the potential code of conduct will not be effective without a sanction. Subsequently, Wolf von Kumberg FCIArb gave his views from the investor’s perspective as in-house general counsel with experience in dealing with ISDS disputes.  He reminded that the fact that parties are able to appoint the tribunal increases credibility of the whole system. The discussion about arbitrators initiated many questions from the audience concerning for instance use of artificial intelligence in international arbitration and means of evaluating arbitrators.

In the third and final part of the event, Wolf von Kumberg FCIArb considered problems regarding lack of efficiency in arbitration proceedings. There is a common consensus that arbitration has become far too costly and time-consuming. As potential solutions, he pointed out to IBA Guidelines and wider use of mediation in the investment disputes. Dr Crina Baltag added her remarks and appealed to put the imperfections of the ISDS system into a broader perspective. As potential ways in which efficiency can be improved she listed expedited procedures and consolidation of the proceedings. The panel discussion was followed by a lively Q&A session, before a drinks reception which was generously sponsored by the Pinsent Masons LLP.

The fantastic turnout at this event illustrates the salience of the ISDS reform question. In provoking such a vibrant and stimulating conversation, we set out to involve CIArb members and the wider stakeholder community as we develop our positions, and we welcome contributions from anybody who’d like to comment on the discussion papers.

For further information please contact Lewis Johnston (CIArb head of Policy and Research): ljohnston@ciarb.org.

CIArb Discussion Papers can be downloaded here.

View more images from the event here.