Partner, DMDB Law
UNCITRAL’s Working Group III (“WG III”) on Investor-State Dispute Settlement (ISDS) Reform met in Vienna from 23 to 27 September 2024. WG III had three main items on its agenda : the “Draft statute of a standing mechanism for the resolution of international investment disputes”, the “Draft provisions on procedural and cross-cutting issues”, and the “Draft multilateral instrument on ISDS reform”.
Since 2004, CEPANI is represented in UNCITRAL Working Group II on Dispute Settlement, and since 2023, CEPANI is represented in UNCITRAL Working Group III.
Draft statute of a standing mechanism
The first item on the agenda of WG III was the “Draft statute of a standing mechanism for the resolution of international investment disputes”, complemented by the Annotations to the draft statute. The Draft statute constitutes one of the more important items on the agenda of WG III. WG III had started the discussion on the Draft statute during the previous session of WG III in New York in April 2024.
During the 49th meeting, much attention was given to the question of the selection and qualification of the members of the Tribunal(s), both in terms of expertise and of nationality (Draft Article 7). The composition of the Tribunals (Draft Article 8) also gave rise to some debate. Draft Article 8 proposes to take account of an equitable geographical distribution, the representation of the principal legal systems, and an equal gender representation. The practical implementation of this was discussed, as one of the questions raised was how this could be achieved as not all states will likely not join the newly established tribunal at the same time. In the end, it was agreed to keep these requirements, and delegations were asked to reflect on whether other criteria should be included. It was also agreed, in light of the second paragraph of Draft Article 8 which provides that no two members of the Tribunal will be nationals of the same State, that the ‘predominant nationality’ test will be applied in case of dual nationality.
In respect of nomination (Draft Article 9), it was agreed to keep both nominations from States, and an open call following a procedure to be developed by the Conference of the Parties. However, there was much discussion on the two parallel nomination procedures, and on the relation between both. More specifically, the sequence of both procedures was discussed, in addition to questions such the situation where a State would support one of its nationals, and a national of the same State would participate in the open call, as no two members of each Tribunal may be nationals of the same State. There was also some discussion on the ‘best efforts’ obligation of States to consult with various bodies, such as bar and business associations, when States nominate individuals, and on the question more generally whether at all an open call should be included. The role and mandate of the ‘Selection committee’ (Draft Article 10), established to review and verify the nominated candidates was also debated. It was reminded that these procedures relate to the nomination of candidates, and that the appointment of the members of the Tribunals is done by the Conference of the Contracting Parties (Draft Article 11).
Procedural and cross-cutting issues
The second item on the agenda of WG III was the document on “Draft provisions on procedural and cross-cutting issues”, and the Annotations to the draft provisions. This too constitutes an important item on the agenda of WG III, which had already started the discussion of these draft provisions in a previous session.
The draft provisions are divided into three sections: provisions to supplement the applicable procedural rules (A), provisions building on existing procedural rules and investment agreements including on the submission of a claim (B), and provisions on cross-cutting issues (C). Initially, the discussion centred on the (re-)categorization of the provisions in these sections, as the various categories might be used differently. Some States proposed that the provisions in Section A, for example, be used to harmonize the procedural rules in ISDS generally. Those contained in Section B on the other hand, would be more suitable as treaty provisions. Section C, in turn, contains only two provisions which are “cross-cutting” (Right to regulate and Assessment of damages and compensation). It was suggested in relation to these latter provisions, that further work and consideration was required. In the end, delegations were invited to submit written comments on the draft provisions in Section A. It was also decided that the provisions in Sections B and C should be considered together as treaty provisions for use by the parties.
The discussion also focused on certain provisions in particular such as Draft Provision 10 on counterclaims, Draft Provision 12 on third-party funding, and Draft Provision 20 on damages and compensation. The latter provision in particular triggered much debate, and clearly was the subject of divergent views on the various elements contained in that provision, such as the award of interest, the method of calculating the compensation, and the factors which Tribunals should take into account when awarding compensation.
Draft multilateral instrument on ISDS reform
The final item on the agenda was the “Draft multilateral instrument on ISDS reform” (MIIR). The MIIR, it is recalled, is intended to be a treaty which would implement the various elements of ISDS reform in a single instrument. In practice, the MIIR would be a sort of framework convention, with several protocols, which the parties can decide to adhere to and ratify. These protocols each would cover, amongst others, the “UNCITRAL Code of Conduct for Arbitrators in International Investment Dispute Resolution”, the “Draft provisions on procedural and cross-cutting issues”, the “Statute of an advisory centre on international investment dispute resolution”, the “Draft statute of a standing mechanism for the resolution of international investment disputes”, and the “Draft statute of an appeal mechanism for the resolution of international investment disputes”. Then, States can submit a list of investment treaties to which the Protocols they have adhered to will apply, the result being that States in doing so show their intent to modify the listed investment treaties (Articles 6 and 7).