Introductory remarks

Should Investment Disputes Be Submitted to International Arbitration or to a Permanent Investment Court? Presentation by Nassib G. Ziadé BCDR-AAA/SCC Joint Conference on Salient Issues in Investment Arbitration Sunday 18 November 2018 Manama, Bahrain 1

Introductory remarks • Investment arbitration system is severely flawed • Reform, and not replacement, is the solution 2

Introductory remarks • Flaws in investment arbitration system • Reservations over permanent investment court • Alternative solutions 3

I. Flaws in investment arbitration system • Main concern: conflicts of interest • Greater diversity still a pressing need • Cost and duration of proceedings • Awards and decisions lacking in consistency 4

II. Reservations over permanent investment court • The European Commission is the main proponent of a permanent investment court • The proposal fails to address the principal flaws and creates new problems • Fear of pro-State bias in the appointment of judges 5

II. Reservations over permanent investment court • Unintended effects of court on investment • Contracting States appoint judges unilaterally • Problematic if judges’ mandates are renewable 6

II. Reservations over permanent investment court • Recourse to experts or consultations with stakeholders cannot allay concerns • Reason to doubt that appointees will have required level of expertise • Appointment process may not be insulated from politics 7

II. Reservations over permanent investment court • Permanent investment court will not solve the issue of cost • Problem of transposing the WTO dispute settlement mechanism into international investment law 8

II. Reservations over permanent investment court “I would also point out that, notwithstanding that the European Commission papers and proposals are quite detailed, it is far from clear how they would work in practice. They seem to be inspired to some degree by the WTO system. But inter-State trade disputes concerning the interpretation and application of multilateral WTO treaties are hardly comparable to investor-State investment disputes under more than 3,000 bilateral investment treaties, each with its different wording and negotiating history.” Sir Michael Wood 9

III. Alternative solutions If not a permanent investment court, then what? 10

III. Alternative solutions • First proposal: creation of an appellate mechanism within existing institutions • Shortcomings of appeal mechanism: • an additional layer that adds time and cost • appellate mechanism unlikely to aid consistent decision making 11

III. Alternative solutions • Second proposal: • establishment of joint interpretative bodies • dedicated pool to handle ICSID annulment proceedings • possibility for States to insert additional grounds for annulment in their BITs 12

III. Alternative solutions • Proposed solution for conflicts of interest: Promulgation of internal and external codes of conduct by specialized arbitration institutions 13

III. Alternative solutions The establishment of a permanent investment court, which would be a true leap in the dark, is not the way to remedy the imperfections of investment arbitration. The choice is not between (1) unconstrained, self-regulating investment arbitration, exposed to the vagaries of arbitration practitioners, and (2) a permanent investment court with ill-defined boundaries and a hastily adopted statute. The way ahead is to carefully circumscribe investment arbitration and prevent specialized arbitration institutions from delegating their regulatory role to arbitration practitioners. 14

Final thoughts • A permanent investment court will not allay legitimacy concerns • Reform has not been given a proper chance • The creation of a permanent investment court is unlikely to be in the best interests of developing countries 15

Introductory remarks