At the 2nd Annual Conference of the European Federation for Investment Law and Arbitration (EFILA) which was held in Paris on 5 February 2016, investment arbitration experts discussed current issues of investment arbitration and the way forward.
More than 100 investment arbitration experts, ranging from policy makers and academics, to counsel and arbitrators, discussed a whole array of topics, such as the current critical debate against investor-State arbitration (ISDS) in Europe, the role of third party funders, and the European Commission’s proposal for an “international investment court” (ICS). This blog post highlights key themes discussed at the conference.
Pros and cons of investment arbitration
The first panel explored the pros and cons of investment arbitration. While the benefits of investment arbitration were recognized, it was also acknowledged that the system faces important challenges, such as the higher number of stakeholders involved, new policies of states regarding investment arbitration and foreign investment, and a growing opposition against ISDS. Speakers analysed the issue of contradictory case law in investment arbitration and the differences in the basis and instruments upon which such decisions are made. There was agreement as to the importance of reforms regarding certain standards of protection, the controversial nature of the differentiated treatment between domestic and foreign investors, and the relevance of the wording of the related instruments and the role of states in shaping their content.
The panel also addressed the criticisms as to the lack of transparency and rising costs in investment arbitration, the alleged pro-investor bias and the role of the media, both from the arbitration practitioner’s and the state’s point of view.
Rule of law and investment arbitration: promoting or holding back its advancement?
The second panel engaged in a discussion arising from the need to examine investment arbitration as a dispute resolution mechanism from three different perspectives. The alleged difficult relationship between ISDS, the rule of law and public perception was discussed by the panel and transparency was given, once more, a central role in the debate. Speakers also provided a historical account of the “international minimum standard of treatment” (IMST) as the predecessor of the current standards in investment law and its protection mechanisms.
The difference between standards of protection for foreign and domestic investors brought forward the complex and potentially undemocratic nature of investment law as a limit for state action. By putting the relationship between investment law, the IMST, state regulatory powers and the rule of law under the spotlight, a lively debate ensued as the panel presented the argument that the inherent undemocratic nature of investment law does not diminish its contribution to the rule of law.
The panel also examined the tension between the alleged lack of legitimacy of investment arbitration and its position within a system of checks and balances governed by general and legitimate legal rules. Speakers recognized the contribution of investment arbitration in levelling the playing field and upholding the rule of law.
Third party funding, the role of secretaries and security of data in investment arbitration
The third panel looked at several specific issues in investment arbitration. On third party funding, the panel carefully pointed at the main challenges this issue poses regarding matters of confidentiality, conflict of interests, security for costs, and decision-making. Questions were raised by the speakers and participants as to the proper approach to be taken in relation to a party that is being funded on the merits, the presumptions that may arguably be placed on the funded party’s ability to pay, the difficulty in determining who is the “real party” in the arbitration, and the responsibilities to be placed on the parties to the proceedings. It was acknowledged that the unregulated nature of this issue and the difficulty in determining the content and the extent of disclosure obligations on the funded party are pressing matters in investment arbitration.
Regarding the issue of arbitral legal secretaries, it was recognized that the main debate revolves around the issue of tasks and duties that secretaries may fulfil without interfering with the nature of the obligations placed on the arbitrators by the parties. The panel underlined the importance of disclosure and strict supervision of the duties of the tribunal’s secretaries.
On the issue of data protection, the main issues raised related to transparency, data integrity protection and data manageability. Speakers stressed the importance of using proper data protection techniques within the setting of investment arbitration despite the technical challenges that this may entail. Attention was drawn to the potential conflict between data protection, confidentiality and the right of free access to information in investor-state disputes.
The proposal for an investment court system (ICS)
The final panel analysed one of the hot topics of investment arbitration in Europe right now, namely the ICS proposal. The starting point for the discussion was the EFILA Task Force report on the ICS proposal, which was published ahead of the conference. The panel critically discussed several shortcomings of the ICS proposal, such as the actual effectiveness of the proposed alternative in solving the perceived problems facing the ISDS system. The fact that states would be the only party that would select the judges may create a pro-state court. Also, the interplay between the proposed system, EU law and the Court of Justice of the European Union was critically discussed.
The way forward
The general takeaway from the discussions at the EFILA conference is that investment arbitration has reached a critical juncture. The external pressures for reforming the system are increasing and the ICS proposal points towards the possible way forward. Regardless of whether the proposal is implemented in the EU/US Transatlantic Trade and Investment Partnership (TTIP), the fact that it has been included in the EU-Vietnam FTA shows that the investment arbitration community must engage even more actively with the relevant policy makers, the public and the media in order to ensure that the eventual outcome offers a practical and efficient solution for the users of the investment arbitration system.