Should the system of investor-state dispute settlement (ISDS) be reformed?

Should the system of investor-state dispute settlement (ISDS) be reformed? That is the question being considered by the United Nations Commission on Trade Law (UNCITRAL).

ISDS provisions are contained in about 3,000 investment treaties and investment chapters of free trade agreements. The provisions permit a foreign investor in the form of a company or individual to bring a claim directly against a State where the investor believes that its investment is being threatened by an action of the State.Foreign-Direct-Investment

FDI and ISDS

FDI can be a valuable tool to exploit resources and build production facilities while creating jobs and infrastructure, particularly in developing countries. Investment agreements aim to create an enabling environment for foreign investors. Among other things, the provisions protect them against expropriation without adequate compensation and guarantee their ability to freely move assets in and out of the country. Sovereign States, on the other hand, need to govern with a multiplicity of interests in mind and their actions can, inadvertently or deliberately, deprive the foreign investor of an intended benefit. ISDS procedures provide the mechanism by which such disputes are resolved.

The most common procedures are drawn from the world of commercial arbitration, used to determine disputes between two commercial parties. They involve the use of an arbitral tribunal which gives equal standing to the investor and the State and whose decisions are binding.

The majority of developing countries rely on foreign direct investment to foster economic growth and development. The overwhelming majority of defendants in arbitral proceedings are the governments of developing and emerging economies. The outcome of ISDS arbitral tribunals can and do impact the ability of governments to develop and implement policy.

Concerns Regarding ISDS

A note by the UNCITRAL Secretariat – “Possible reform of investor-State dispute settlement” and the Report of its Working Group on ISDS summarize expressed concerns regarding ISDS. They include:

  • Inconsistency of arbitral decisions – instances where the host State is sued by different investors on the same issue but with different outcomes from different tribunals;
  • Lengthy duration and extensive cost of ISDS – States that have been sued may not have the resources to adequately defend its policies and actions or to pay arbitral awards;
  • Lack of transparency – States are using public funds and tribunal decisions may be sealed;
  • Lack of an early dismissal mechanism to address unfounded claims;
  • Lack of a mechanism to address counterclaims by respondent States;
  • Heavy reliance on arbitrators from the investor States and who may not understand policy.

Questions at the heart of these concerns address the overall legitimacy of the process. Should a system created to address disputes between two commercial parties be used to resolve policy issues that may impact millions of people? Is it acceptable to exclude domestic investors from the same recourse available to foreign investors?

Proponents of ISDS acknowledge the validity of some of these concerns and say they can be addressed by reforming the current system of ISDS. They also point to the underlying concerns that led to the use of ISDS in the first place – politicization from the use of diplomacy to address dispute and the slow judicial processes in some countries’ domestic legal system.

Concerns are not limited to those expressed by emerging economies. The EU’s submission to the UNCITRAL Working Group highlights systemic issues it believes warrants establishment of a multilateral investment court that would replace the use of arbitral tribunals. A March 2018 ruling of the European Court of Justice concluded that the ISDS clauses in an intra-EU investment treaty were incompatible with EU law.

The Trump Administration has also inserted its perspective on ISDS in the context of the NAFTA re-negotiations. The U.S. Government has consistently expressed its displeasure at being required to abide by the decisions of international panel decisions it finds not to its liking. In August 2017, the Trump Administration floated the idea of opting out of NAFTA ISDS provisions (Chapter 11). Should the US remove itself from the NAFTA ISDS provisions this would be a major departure in US policy and a disappointment for US corporations but a shot in the arm for opponents of ISDS.

Investment Facilitation

UNCITRAL will continue its deliberations. A growing consensus appears to be that while ISDS serves a role the system needs to be reformed. Meanwhile, in December 2017, 70 WTO members agreed to begin discussions to develop the framework for a Multilateral Investment Facilitation Agreement. Discussions will not address ISDS reform, but the purpose will be to minimize the likelihood of disputes by creating a more transparent, efficient, and predictable environment for facilitating cross-border investment.

To the extent that disputes arise because of tension between development-oriented policies of host States and investor goals, conflicts can best be minimized by incorporating a true development dimension into whatever frameworks are used to manage the FDI inflows into developing countries.

(Cross-posted from DevelopTradeLaw blog.)

Go on! Women in Arbitration Panel in D.C.

trunks.jpgGo On! makes note of interesting conferences, lectures, and similar events.

► The Women in International Law Interest Group of ASIL along with Georgetown International Arbitration Society and DC Women in International Arbitration will host a breakfast panel on “Women in Arbitration” which will be held on Wednesday January 10, 2018 from 8:30 to 10:30am at ASIL Headquarters, Tillar House in Washington, D.C. 

To RSVP click here.

Nuevo libro para abogados hispano- y angloparlantes/New Book for Lawyers Who Speak Both Spanish and English

(English version follows)

Tres mujeres y profesoras de derecho: S.I. Strong de la Universidad de Missouri (Estados Unidos), Katia Fach Gómez de la Universidad de Zaragoza (España) y Laura Carballo Piñeiro de la Universidad de Santiago de Compostela (España) tenemos el honor de presentar el libro Derecho comparado para abogados anglo- e hispanoparlantes: Culturas jurídicas, términos jurídicos y prácticas jurídicas/ Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices  (Edward Elgar Publishing Ltd., 2016). Este trabajo supone una plasmación por escrito de algunas de las características más relevantes de nuestras carreras profesionales: trayectorias académicas y de práctica de la abogacía internacional desarrolladas en español e inglés, y en estrecho contacto con las comunidades jurídicas latinoamericana, europea y estadounidense. En consonancia con ello, la obra que hemos elaborado permite que abogados y estudiantes de derecho que hablan inglés y español adquieran fluidez jurídica en un segundo idioma. Realizar dicho esfuerzo es extremadamente importante no sólo para abogados especializados en derecho internacional, sino también para abogados dedicados al derecho nacional pero que tratan con clientes cuya lengua materna es un idioma extranjero.

La forma en que “Derecho comparado para abogados anglo- e hispanoparlantes” involucra a abogados y estudiantes de derecho en la práctica jurídica bilingüe es única por diversos motivos. En primer lugar, y dado que la mayoría de los abogados bilingües trabajan con otros abogados y con clientes que cuentan con unos orígenes legales y culturales muy variados, el libro no se limita a analizar unas jurisdicciones concretas. Por el contrario, el libro ofrece información sobre diversos países hispanoparlantes (fundamentalmente, España y México) y angloparlantes (fundamentalmente, Estados Unidos y Reino Unido). En segundo lugar, la monografía contextualiza la información, no sólo ubicando el nuevo vocabulario y los principios legales en el contexto lingüístico apropiado –el libro es completamente bilingüe-, sino también ofreciendo abundantes comparaciones con la legislación y la práctica de otras jurisdicciones. En tercer lugar, este tipo de análisis permite que los abogados y estudiantes de derecho aprecien las diferencias existentes en las culturas jurídicas, empresariales y sociales relevantes. Ello ayuda a los lectores a no incurrir en ofensas que puedan derivarse de problemas de comunicación involuntarios. El libro también explica por qué existen dichas diferencias y cuál es su fundamento en un contexto jurídico determinado.

Profundizar en la comprensión a través de barreras nacionales, sociales y culturales es un objetivo esencial de un mundo cada vez más pluralizado. Derecho comparado para abogados anglo- e hispanoparlantes es una herramienta muy útil para aquellos que trabajan cruzando fronteras lingüísticas. Como este libro de 700 páginas demuestra, no hay que temer a las diferencias, sino que hemos de alegrarnos de que la diversidad jurídica y lingüística exista.

***

unnamedThree law professors – S.I. Strong of the University of Missouri, Katia Fach Gómez of the University of Zaragoza and Laura Carballo Piñeiro of the University of Santiago de Compostela – have the honor of presenting their new book, Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices / Derecho comparado para abogados anglo- e hispanoparlantes: Culturas jurídicas, términos jurídicos y prácticas jurídicas (Edward Elgar Publishing Ltd., 2016).  This work reflects some of the characteristics that are most relevant to our professional careers as academics and practitioners working in both English and Spanish, and involving jurisdictions in Latin America, Europe and the United States.  Consistent with that, the book that we have written helps lawyers and law students who speak Spanish and English become legally fluent in their second language.  This effort is extremely important not only for specialists in international law, but also for domestic lawyers whose clients speak different languages.

 

Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices / Derecho comparado para abogados anglo- e hispanoparlantes” introduces lawyers and law students to bilingual legal practice in several ways.  First, the book does not focus solely on single jurisdictions, since most bilingual lawyers work with clients and co-counsel from a variety of legal and cultural backgrounds.  Instead, the book offers information on several English-speaking nations (primarily the U.S. and the U.K.) and Spanish-speaking countries (primarily Spain, Mexico and Argentina).  Second, the text seeks to contextualize the information, not only by placing the new vocabulary and legal principles in the appropriate linguistic setting (the book is entirely bilingual) but by providing extensive comparisons to the law and practice of other jurisdictions.  Third, the discussion helps lawyers and law students appreciate differences in the relevant legal, business and social cultures, thereby helping them avoid giving offense through any inadvertent miscommunications, and explains why those differences arose and why they make sense in that particular legal environment.

 

Increasing understanding across national, social and cultural lines is an important goal in our increasingly pluralistic world, and Comparative Law for Spanish-English Speaking Lawyers provides a useful tool for those who work across linguistic lines.  As this 700+ page text shows, legal and linguistic differences need not be feared but can instead be celebrated.

 

Interview with Georges Abi-Saab

In the latest edition of our series titled “Conversations with Leading Judges”, it was my great pleasure to interview Georges Abi-Saab, Honorary Professor of International Law at the Graduate Institute of International and Development Studies in Geneva.  He was Member (and former Chairman) of the Appellate Body of the World Trade Organization (since 2000). He was also Member of the Administrative Tribunal of the International Monetary Fund and of various international arbitral tribunals (ICSID, ICC, etc.)  Abi-Saab served as Judge ad hoc of the International Court of Justice and Sometime Judge on the Appeals Chamber of the International Criminal Tribunals for the Former Yugoslavia and for Rwanda and Commissioner on the United Nations Compensation Commission (UNCC). He has published widely on international law in both English and French, including his General Course on Public International Law at the Hague Academy.

The interview touches upon a wide array of topics including pluralism within International Law, the New International Economic Order, politicization of the WTO Appellate Body, diversity within international adjudication, and other topics.  The  video interview is available at:http://www.jus.uio.no/english/services/knowledge/podcast/guest-lectures/2016/interview-with-his-honour-judge-georges-abi-saab.html

The full set of interviews is available at:  http://www.jus.uio.no/english/research/areas/intrel/interviews/

On the Job! Assistant Professor of International Law at Graduate Institute Geneva (deadline 15 Feb.)

The Graduate Institute of International and Development Studies in Geneva, Switzerland, invites applications for a full-time position at the rank of Assistant Professor in International Law (pdf) with a specialization in one of the following areas :

  • International Economic Law – trade law, investment law, intellectual property and/or financial regulation
  • Protection of Human Dignity – human rights, humanitarian law, international criminal law and/or transitional justice
  • International Environmental Law – climate change, energy law, and/or natural resources management
  • Transnational Law – transnational business transactions, commercial arbitration, alternative dispute settlement, transnational litigation

starting on 1 September 2015 or on a mutually agreed-upon date.

Candidates are expected to have an excellent background in international law and be prone to interdisciplinary dialogue.

Applicants should have a doctoral degree prior to the start of their contract.

All candidates must be able to supervise master’s and doctoral theses and to teach graduate students in both disciplinary and interdisciplinary programs, including general courses in International Law and in their own area of specialization.

The teaching language is either English or French. Prior knowledge of French is not required, but the successful candidate is expected to acquire at least a passive knowledge of it within two years of being hired.

Applications, including a motivation letter, a detailed curriculum vitae and a list of publications –  but excluding letters of recommendation and publication samples – must reach the Director, preferably by email (director@graduateinstitute.ch, ref. LAW) or by post (Graduate Institute of International and Development Studies, P.O. Box 136, 1211 Geneva 21, Switzerland), by  15 February 2015.

Information on employment conditions can be obtained using the same contact details.

The Institute reserves the right to fill the post by invitation at any time.

For more information, candidates are encouraged to consult the Institute’s website: http://graduateinstitute.ch/open_positions

On the Job! Attorney Advisor position at U.S. Foreign Claims Settlement Commission

The United States Foreign Claims Settlement Commission, an independent quasi-judicial agency in the U.S. government that determines the validity and monetary value of claims of U.S. nationals for losses caused by foreign governments, is searching for an attorney advisor. For more information on the position, visit  http://www.justice.gov/legal-careers/job/attorney-advisor-international.

Read On!: International Commercial Contracts: Applicable Sources and Enforceability

Professor Giuditta Cordero-Moss has published the book “that she would have liked to have read when she started her career as an in-house lawyer in an Italian multinational Company about thirty years ago”; it is titled International Commercial Contracts and is available here.

Any practising lawyer and student working with international commercial contracts faces standardised contracts and international arbitration as mechanisms for dispute settlement. Transnational rules may be applicable, but national law is still important. Based on extensive practical experience, this book analyses international contract practice and its interaction with the various applicable sources: which role is played by the contractual regulation, which by national law, which by transnational sources, what is the interaction among these factors, and how does this all apply to contracts that refer disputes to international arbitration?

Giuditta was kind enough to respond to my request for an interview for IntlLawGrrls:

Q: You studied law in Rome and then pursued Phds in both Russia and Norway, what impelled you towards academic research and what did you write about?

A: I have always been interested in pursuing a deep and systematic understanding of the law. For the first decade and a half of my career I was a corporate lawyer, and I was very busy with drafting contracts , negotiating them and advising on their operation. Whenever interesting legal issues arose, they had to be addressed as efficiently as possible. There was no possibility to engage in extensive research, as the next contract and negotiation was waiting; the interesting legal issues were often avoided by commercial solutions. This gave me a long mental list of possible research topics. Many of these topics related to Russian law, as I was following my company’s (the Norwegian multinational Norsk Hydro’s) legal affairs in Russia. It was the beginning of the 90s, the Soviet Union had collapsed, the Russian legal system was undergoing important reforms, and it was very difficult to obtain reliable legal advise. To ensure that Norsk Hydro’s activity in Russia was relying on a certain competence of Russian law, the head of the Legal Department of Norsk Hydro agreed to sponsoring my studies of Russian law. That’s the background for my Russian PhD. The topic was the intersection between freedom of contract, the applicable law and arbitration. Back in Norway, I decided to continue working on the mental list of possible research topics that I had been compiling during all my years in practice.

 

Q: You have practiced as an international commercial lawyer in Italy, Norway and Russia. This must provide you with broad insight as the importance of context and culture on the interpretation and application of international commercial law- What is the most memorable (amusing, confusing, etc.) example from practice?

A: There is one red thread that has characterized my practice – be it the years as financial lawyer in Italy (at Fiat) or the years as international commercial lawyer in Norway and Russia: when contracts are being drafted and negotiated, all attention goes to the wording of the terms, and very little to the applicable law. You can be in a room filled with lawyers for all involved parties, both in-house and external, and they will negotiate for days, nights and weekends the amount of the penalty to be paid in case of delays in the production, or whether the termination clause should contain the word “reasonable”. At the very last minute before the signing, then, the applicable law may be decided, and nobody will pay attention to the circumstance that choice of English law will make all the negotiations of the penalty useless (because contractual penalties are illegal under English law), or that choice of German law will imply that the termination clause is based on reasonableness even if it does not say so.

 

Q: Your new book, International Commercial Contracts, seeks to explain how international contract law interacts with national law and how this affects international arbitration decision making and enforcement by national courts. Whereas one school of scholars view international commercial law as autonomous system, you seem to emphasize the importance of recognizing the field as transnational- where national rules and international norms interface. Can you explain the background for your vision?

A: The background is very practical, and appears from my answers to your first two questions: my research is based on the desire to clarify some of the questions that arose when I was drafting, negotiating and applying international contracts. It is certainly very empowering to draft the terms of a contract without taking into consideration the applicable law, as if the contract was part of an autonomous system. However, when differences arise between the parties, contracts need to be interpreted and enforced. It is in this phase, that the applicable law becomes important. Even when the contract contains an arbitration clause, the relevance of the applicable law may not be completely excluded. My interest in the interaction with national law is based on the desire to write contract terms that are enforceable in practice. To be able to do so, it is necessary to understand to what extent the contract terms are capable of being enforced simply on their own basis, and to what extent they depend on the applicable law.

 

Q: At present some international courts, such as the ICC, are experiencing legitimacy challenges. What are the key legitimacy challenges confronting international arbitration tribunals?

A: International commercial arbitration is very well established as a mechanism to solve disputes, not the least thanks to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Nowadays, arbitration is being increasingly criticized for having become too well established, that is too regulated, too formalized, too time consuming, too expensive. There is a growing interest in alternative dispute resolution mechanisms, that are less rigid: conciliation, mediation, structured negotiations. These mechanisms cannot really compete with arbitration as long as their result in not enforceable, but they can be appropriate in situations where enforceability is not crucial.

 

Q: Your book presents many practical insights from practice on proper contract drafting. It seems that it will be a good textbook for students and reference for practitioners. Do you think we need to change legal education to focus more on the provision of practical skills – like contract drafting, oral argumentation (moot arbitrations), etc.?

A: Law is an applied science, and it can be very useful if the educational system may convey both aspects, the practical and the theoretical. In my opinion, for the theoretical part it is very important that students are taught the method to apply the law: if they understand the main principles, how to apply the principles to factual situations, which sources are relevant, how to interpret sources, etc., then they are given the possibility to orientate themselves in the legal landscape. I think it’s less important that we teach the specific content of every single provision – whether the term to present a certain request is 20 or 30 days, for example. This is something that they may look up when they need it. The practical side of teaching is also very important: it permits the students to apply in practice the method they have learnt in theory, which ensures a better pedagogical result. The systems of legal eduction vary considerably, in some countries there is very little emphasis on practical skills, in others there is more. It is certainly desirable to reach a balance between theory and practice, although it can take a lot of effort and time to introduce new elements in educational traditions.

Q: You are one the few women within international commercial arbitration. How can we recruit more women into this Field?

A: There are many more women of the younger generation within arbitration than there used to be a couple of decades ago.

 

Thank you for joining us on Intl Law Grrls!