For the 52nd meeting, WG III had the same items on its agenda as those that had been on the agenda of the previous sessions. These are the Draft statute of a standing mechanism for the resolution of international investment disputes and annotations, and the Draft provisions on procedural and cross-cutting issues and annotations. The session also included on its agenda several additional items, such as the Draft guidelines on the calculation of damages and compensation in investor-State dispute settlement and a document on the Structure and design 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.
Draft provisions on procedural and cross-cutting issues
The first item on the agenda was the continuation of the discussion of the Draft provisions on procedural and cross-cutting issues.
Draft provisions 5 relates to security for costs, which is modelled on the revised ICSID Arbitration Rules in 2022, was discussed in the first days.
The draft provides for the possibility for arbitral tribunals to order any party who makes a claim to provide security for costs. Paragraph 4 provides for the various circumstances which the tribunal may take into account when ordering security for costs. These circumstances include:
“(a) That party’s ability to comply with an adverse decision on costs;
(b) That party’s willingness to comply with an adverse decision on costs;
(c) The effect that providing security for costs may have on that party’s ability to pursue its claim;
(d) The conduct of the parties; and
(e) In relation to subparagraphs (a) to (d), the existence of third-party funding.”
Much of the discussion in the first two days was centred around these circumstances, in particular in relation to a situation where a state makes a counterclaim and would be subject to a request for security for costs. Moreover, the very question arose whether a claimant should have the right to request a security for costs, and hence whether a tribunal should be authorized to order security for costs against the state, which was opposed by several delegations. It was in the end agreed to include that awarding security for costs against a state is not possible unless in exceptional circumstances.
It was also proposed to include a separate paragraph in relation to third-party funding, which would be a circumstance to be considered. In this respect, it had also been proposed that the existence of third-party funding should automatically or mandatorily result in a security for costs if the agreement between a party and the third-party funder would not cover adverse costs, or, at the least, that a Tribunal should take into account the fact that the agreement between a party and the third-party funder would not cover adverse costs. The latter proposal however did not achieve consensus, and hence no decision was made on this point. It was however decided to include the following sentence ““For greater certainty, the Tribunal retains the discretion to order a funded party to provide security for costs, even when the third-party funding agreement includes a commitment to cover an adverse decision on costs.”
Paragraph 6 of this provision provides for both the mandatory suspension of the proceedings in case a disputing party fails to comply with the order to provide security for costs, and, after consulting the disputing parties, the possibility for the Tribunal to order the termination of the proceedings with respect to that claim. Delegations disagreed on the question whether the suspension of the proceedings in case a disputing party fails to comply with the order to provide security for costs should be mandatory or whether it would be at the tribunal’s discretion. In the end, it was decided to keep the paragraph largely as it is. The phrase “with respect to that claim” in the last sentence, which provides for the possibility for the Tribunal to order the termination of the proceeding, was however deleted.
Draft provisions 6, 7 and 8 attracted less debate and were adopted with some minor modifications.
Draft Statute of a Standing Mechanism
Certain provisions of the Draft statute of a standing mechanism for the resolution of international investment disputes and annotations was also discussed. As a reminder, aside from the Draft Statute, the Government of Switzerland had made a submission before the previous session in New York (A/CN.9/WG.III/WP.241) containing some suggestions for alternative language of certain provisions, in particular those relating to the decisions subject to appeal and the grounds for appeal.
The discussion however was mostly limited to article 34 which covers the effect of the decision, notably in relation to appeal. The provision was accepted with little modifications. It was for instance agreed to add the following sentence to paragraph 4, which provides that, after the lapse of the time provided for rectification, the decision shall be final and binding on the parties : “the remaining part of the award or decision which was not reversed shall be binding on the disputing parties.”
Structure and design of a standing mechanism for the resolution of international investment disputes
WG III also discussed a document relating to the Structure and design of a standing mechanism for the resolution of international investment disputes (A/CN.9/WG.III/WP.256). This document contains important questions and proposals relating to, amongst others, whether a standing mechanism would be a two-tier body or two separate bodies, the nature of jurisdiction, the means of consent to the jurisdiction of a standing mechanism, and the interaction between the standing mechanisms and investment agreement(s) and any other applicable rules, and the relation with the ICSID Convention.
The document contemplates several models, such as a single standing first-tier mechanism with no appeal procedure (model 1), a two-tier system with both a disputes tribunal and an appeals tribunal which would hear claims only from the disputes tribunal (model 2), a single standing appeals mechanism which would hear appeals against decisions rendered by arbitral tribunals (operating under the ICSID Convention, the UNCITRAL Arbitration Rules or other arbitration rules) (model 3), and then finally two distinct standing mechanisms whereby a one-tier mechanism and an appellate mechanism would be established as two separate bodies (model 4). The proposals also include certain hybrid models: a standing one-tier mechanism functioning also as an appellate mechanism for awards rendered outside the standing mechanism, a standing appeals mechanism functioning also as a first-tier mechanism for certain types of disputes, or a standing two -tier mechanism, in which the Appeals Tribunal would hear appeals not only of decisions rendered by the Dispute Tribunal but also awards by arbitral tribunals.
The choice of course is significant, not the least because it raises the question whether one or two statutes need to be envisaged and drafted, and because it influences the jurisdiction of the first-tier tribunal and the appeals tribunal and the way in which consent will or can be expressed for either or both. Finally, creating an appeals tribunal which would hear appeals against decisions rendered under the ICSID Convention would also require an inter se modification of the ICSID Convention, which was the subject of a document published by ICSID prior to the previous session, which discusses the various options for an inter se modification of the ICSID Convention.
The various pros and cons of each models were discussed by several delegations, and there was no consensus on the preferred model at this stage. Delegations noted the importance of ensuring consistency and predictability, the cost-effectiveness of establishing one or two tribunals, and the need to provide states with the possibility to either opt-in or opt-out of one or the other mechanism.
It was decided, whatever choice is made in the end, to develop two separate statutes: one for a first-tier standing body and another for an appellate standing body, as it was felt that the two bodies should be independent of each other.
The jurisdiction of the mechanisms, and in particular the exclusivity of the jurisdiction of the first-tier mechanism was discussed in detail. Several options were explored and discussed, and it was finally decided that the secretariat should explore further the different options on how the states parties to the statutes of each tribunal could consent to the exclusive jurisdiction of a standing mechanism. This could be through the inclusion of exclusivity in the statutes themselves, through an opt-in via the listing of the investment treaties by the states (which would provide for the competence of the established tribunal provided that the other state party to the listed treaty would also list the same treaty), or through an opt-out in respect of listed treaties.
The fifty-third session will take place in New York in January 2026, and will be devoted to the further consideration of both the standing mechanism and the draft provisions on procedural and cross-cutting issues. The secretariat was requested to prepare the draft statutes of both a first-tier standing mechanism and an appellate standing mechanism.