Evolution or Revolution?

From 29th October – 2nd November, CIArb were present at the 36th session of UNCITRAL Working Group III in Vienna with official Observer’ status. Our delegates Paul Tichauer and Mercy McBrayer made a direct plea for measured, targeted and gradual reform to improve the consistency and predictability of the system.

Investor-State Dispute Settlement is one of the most politically high-profile – and misunderstood – areas of arbitration. In the current climate of global turbulence where the future of the international commercial system is in question, the ISDS system has come under increasing criticism. Some critics have gone as far as to call for the entire system to be thrown out and replaced with a permanent Multilateral Investment Court (MIC). This debate formed the backdrop to the recent session of UNCITRAL Working Group III, which was tasked with identifying whether ISDS reform is appropriate.

CIArb’s position on this question is clear. Whilst there is scope to improve the consistency, clarity and predictability of ISDS, it is imperative that any reforms don’t undermine the credibility of the international trade and investment. Our preference is therefore for a gradual evolution of the system, rather than the highly risky revolution that the establishment of an MIC would involve.

During his two addresses to the conference floor, our delegate Dr Paul Tichauer FCIArb emphasised our support for reforms to strengthen ISDS and the need for “incremental, iterative, progressive and prioritised reforms”. Paul also drew attention to the fact that many of the tools needed to improve the performance of the system already exist. For instance, CIArb offers very clear practice guidelines that set out mechanisms used by a range of arbitral bodies to deal with multi-party, multi-transaction contracts (an issue raised during the deliberations). Closer adherence to the highest professional standards in ISDS could go a long way towards improving trust in the system.

Overall, there was a clear consensus in favour of ISDS reform on the grounds of three main concerns. Firstly, the consistency, coherence, predictability and correctness of arbitral decisions by ISDS tribunals; secondly, concerns pertaining to arbitrators and decision-makers; and finally, concerns with the cost and duration (i.e. efficiency) of ISDS cases. These are all important challenges and CIArb concurs that they need to be addressed.

The next session of the working group will be held in New York in April 2019 and is likely to move on to the question of the precise shape any reforms to ISDS should take. Our delegation will once again be in attendance to argue for evolutionary change. As Paul put it in Vienna, decision makers should bear in mind the adage: how do you eat an elephant? One bite at a time…