INTRODUCTION Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP
and provisional measures, amongst others. In 2023, UNCITRAL approved, inter alia, a Code of Conduct for Arbitrators and Judges, and Model Provisions on Mediation. Ongoing discussions in UNCITRAL’s Work- ing Group III (which consists of representatives of the state members of UNCITRAL) are focusing on reforms in procedural arbitration rules, the establishment of a specialised investment court, and the creation of a centre for advising sovereign states involved in treaty disputes. ISDS is still ascendant, but for how long? Despite – or perhaps partly because of – the criticisms and legal and regulatory initiatives intended to limit ISDS, the number of ISDS cases continues to rise. Over the past ten years, during which time the back- lash against ISDS has been strongest, the number of such cases has reportedly more than doubled. This increase can be attributed to several factors. First, as foreign direct investment continues to grow globally, so does the potential for disputes and the recourse to ISDS. The proliferation of BITs over the past few decades has created an environment where investors can rely on ISDS mechanisms to settle dis- putes with host states. There are still around 2,000 BITs in effect around the world, with the majority containing ISDS provisions. It is trite to observe that investors can derive substantial value from the availability of ISDS remedies, especially when the relevant domestic court system lacks the resources or the expertise to handle disputes of great size and complexity. Second, in recent years the political climate has reverted to regionalism and resource nationalism, which in turn has led to disputes over compensation for investments adversely affected by state actions, including outright expropriations. Several high-profile cases have brought attention to the ISDS system, most recently involving energy and national resourc- es, with several states settling investment treaty dis- putes arising from expansive regulatory programmes or nationalisations in those areas. At the same time, the geopolitical uncertainty created by armed conflict, most prominently in Ukraine and in the Middle East, gives rise to new circumstances in which investment treaties can be deployed to protect valuable assets
from state interference or direct taking, such as in the occupied territories of Crimea or Eastern Ukraine. The future: a return to domestic courts? It is reasonable to expect that the current politi- cal trend against multilateralism, combined with the ongoing efforts to limit the reach of ISDS, will have a profound impact on how international disputes are resolved in future. As noted, one possibility is an agreement on a stand- ing investment court. The ostensible goal of this per- manent investment court is to improve the legitimacy, transparency and accountability of the ISDS system by creating a more “standardised” judicial process – one of the main criticisms against ISDS being that it takes place in various fora under ad hoc tribunals and varying procedural rules. The court is intended to consist of permanent judges selected through a presumably transparent and meritocratic process. The timing (or indeed the ultimate political feasibility) of the establishment of such a court is currently unknown. Notably, in recent years mediation has been promoted as an alternative to arbitration in ISDS cases. Media- tion could foster a more collaborative approach to resolving disputes, but so far it has not been widely adopted by either investors or states. The prospects of mediation-related initiatives in the ISDS space therefore remain uncertain. The abolition of ISDS mechanisms in several jurisdic- tions could also imply a greater role for the local judi- ciary in resolving investor–state disputes, in addition to its current role of enforcing any resulting awards. In anticipation of this development, which inevitably means presenting local courts with complex, often politically significant matters with substantial stakes, states should be taking steps to ensure that local judicial systems are adequately funded and staffed, and to promote prompt access to, and administration of, justice. Improvement in domestic court systems would also motivate foreign investors and states alike to agree to the preservation of foreign investor protec- tions in contractual agreements governed by domes- tic law – an approach that was also favoured before investment treaties became widely available.
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