Partner, DMDB Law
UNCITRAL’s Working Group III (“WG III”) on Investor-State Dispute Settlement (ISDS) Reform met in Vienna from 20 to 24 January 2025. WG III had two main items on its agenda, which were the same as those on the agenda of the previous session : the “Draft provisions on procedural and cross-cutting issues” (with some “Additional provisions on procedural and cross-cutting issues”), and the “Draft statute of a standing mechanism for the resolution of international investment disputes”.
Since 2004, CEPANI is represented in UNCITRAL Working Group II on Dispute Settlement, and since 2023, CEPANI is represented in UNCITRAL Working Group III.
Procedural and cross-cutting issues
The first item on the agenda was the discussion of provisions 1 to 9, 11 and 12 (paragraphs 1 to 5 and 7) of the Draft provisions on procedural and cross-cutting issues. As a reminder, 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). Two “Additional provisions on procedural and cross-cutting issues” were added to the discussion, covering “joint interpretations” by States parties to an investment agreement, and “Submission by a non-disputing Treaty Party”. These additional provisions were not discussed during this session.
It was decided to first discuss the provisions in Section A, and that these could be considered as a supplement to the UNCITRAL Arbitration Rules. At a later stage, WG III would discuss how these provisions could possibly be transformed into treaty provisions or how to make these applicable to already existing international investment agreements (IIAs).
WG III spent the first days on discussing the first series of the Draft provisions on procedural and cross-cutting issues, notably provisions 1, 2 and 3. On the first day, most attention was devoted to provision 1 relating to evidence. The discussion related, amongst others, to the specific position of the State when it comes to document production, and to whether it was at all necessary to deviate from the corresponding provision in the UNCITRAL Arbitration Rules. After the discussion, most of the provision remained unchanged with some adjustments. However, in relation to paragraph 7 of provision 1, WG III discussed the need to specify the ‘documents, exhibits or other evidence’ which the Tribunal would have the obligation to exclude. A new draft was circulated which included the following documents, exhibits or other evidence which the Tribunal shall exclude :
“7. The Tribunal shall, at the request of a disputing party or on its own initiative, exclude documents, exhibits or other evidence:
(a) Which were obtained contrary to the law of the State where they were collected;
(b) Which were falsified or fabricated or are found to be fraudulent;
(c) The use of which as evidence is prohibited under the applicable law or privileges; or
(d) The use of which as evidence is contrary to the respondent’s essential security interests.”
It was in the end decided to delete (d), as it was considered that such documents would either have been obtained in violation of (a)-(c), or would, because of their character, not be subject to a document production order.
On draft provision 2, relating to bifurcation, it was decided to add the bifurcation (or trifurcation) of the proceedings between the merits and damages stages ; the initial draft only covered bifurcation of jurisdictional objections and the merits of the dispute. It was also agreed to make clear in draft provision 2 that a request for bifurcation does not prejudice the right of a party to raise any other objections on the jurisdiction of the Tribunal pursuant to article 23 of the UNCITRAL Arbitration Rules.
Draft provision 3 on “Interim/provisional measures” was discussed during the morning session of the third day. The draft provision presented was relatively minimalistically drafted, providing only that “The Tribunal may, at the request of a disputing party, grant interim/provisional measures”, with further specifications left open for discussion. Several delegations proposed that the draft provision should reflect the ICSID Arbitrations Rules on this question (ie ICSID Arbitration Rule 47). At the same time, it was observed that Article 26 of the UNICTRAL Arbitration Rules already regulates provisional measures, and that it would be necessary only to amend or supplement that provision to reflect the specific nature of investor-state dispute settlement. It was agreed that a Tribunal should not be allowed to order a provisional measure “which attaches or enjoins the application of the measure alleged to constitute a breach referred to in the claim”. A further suggestion was made to also not allow a Tribunal to order a provisional measure which could impede a state’s ability to regulate in the public interest to protect life, health and the environment. The latter was left for further consideration at a later stage.
In relation to draft provision 4, entitled “Manifest lack of legal merit/early dismissal”, some delegations proposed that a Tribunal could also, upon request of a party, dismiss a claim if a party has adduced fraudulent evidence. Most delegations objected to this, and it was decided to not include this addition. Other than that, WG III supported the provision. It was however decided to raise the time period for the objection that a claim is manifestly without legal merit from 45 to 60 days after the constitution of the Tribunal.
Draft statute of a standing mechanism
The second 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. WG III had started the discussion on the Draft statute during the 48th Session of WG III in New York in April 2024, during which a first reading of articles 2 to 6 and 14 to 17 of the draft statute had been completed ; during the 49th session in September 2024 in Vienna, WGIII had completed a first reading of articles 7 to 10(4).
The discussion hence continued on the role and mandate of the ‘Selection committee’ (article 10). Paragraph 5 of that article provides that “upon the review of the initial list of candidates, the Selection Committee may recommend to the Conference that an open call be made for additional candidates.” It was decided to add that the recommendation should be accompanied by reasons. It was also decided to further explore the possibility for a State, whose nominated candidate was disqualified by the Selection Committee, to nominate another candidate. Paragraph 6, which provides that “upon final review, the Selection Committee shall present the list of suitable candidates to the Conference for its consideration”, and that “the list shall be made public unless determined otherwise by the Conference” was maintained, with the omission of the part “unless determined otherwise by the Conference”.
Article 11 regulates the appointment of the Tribunal members by the Conference of the Contracting Parties. The discussion centred around the number of votes states would have, the required quorum or majority for a candidate to be appointed, and the possibility for states to vote for candidates from other regional groups.
In respect of the term of office (article 12), WG III supported a non-renewable term, to ensure judicial independence and avoid the politicization of the Tribunals. Terms ranging from five to nine years were suggested, and in the end, it was decided to have a term of nine years. The staggered appointment process provided for in paragraph 2 was also supported, whereby half of the members would serve a full term, and the other half serving a shorter term of six years to ensure continuity. It was also decided that no member would be eligible for reappointment, even those members who were appointed for the initial shorter term of six years. In respect of the salary, it was decided that most of these questions were to be taken up by the Conference of the Parties.
Finally, in respect of the removal, resignation, vacancies and replacement of members (article 13), WG III agreed to the fact that the process to remove a member of the Tribunal should be initiated by the President of the Tribunal in case of a serious breach of the Protocol, including the Code of Conduct and other professional ethical obligations, or a failure to perform the duties. The decision on removal should then be made by a three-fourths majority of the members of the respective Tribunal.
The discussion then moved to the Appeals Tribunal (articles 18 ff). Article 18 on the jurisdiction of the Appeal Tribunals will be discussed at a later stage. Article 19 covers the request for an appeal, and it was agreed that the time frame for requesting an appeal would be 120 days as of when the award or decision was rendered. It was proposed that, pursuant to Article 20, the Appeal would be assigned to a Chamber constituted after the request was registered.
The next fifty-first session will take place in February 2025 in New York, and will be devoted to the operationalization of the Advisory Centre on International Investment Dispute Resolution, the draft multilateral instrument on ISDS reform (MIIR), and the further consideration of the draft provisions on procedural and cross-cutting issues and the draft statute of a standing mechanism.