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Speakers: Valerie Hughes (Queens University), Luke Sobota (Three Crowns LLP), Ricardo Ramirez Hernandez (WTO Appellate Body) and Andrea Bjorklund (McGill University)
Valerie Hughes – WTO
She gave three reasons why WTO adjudicators are independent:
1) The way the dispute settlement system is designed.
The WTO Appellate Body is a standing body, which adds to the independence factor. The appellate body members shall be unaffiliated with any government and they shall be broadly representative of the WTO membership.
In any given case a division of three members is formed by random selection, out of the seven members that hear appeals. Another factor is collegiality, meaning that the three members in a Division that hear an appeal may meet with the other four, and this exchange of views provides coherence. Additionally, the opinions or dissents are anonymous, which adds to the independence.
2) Rules of conduct that are imposed.
The rules of conduct specify that each member shall be independent and impartial, and they have an obligation to disclose any relationship likely to give rise to “justifiable doubt” as to their independence. She stated that this concept is quite broad and includes, among others, statements of personal opinion for example through publications.
3) Unique features of the WTO dispute settlement system
The Appellate Body report is adopted by the Dispute Settlement Body (DSB). The entire membership will have a say on the DSB monthly meeting, and interestingly, in the history of the WTO there has never been a decision not to adopt the report.
WTO members have exclusive authority to adopt interpretations of multilateral trade agreements, which also avoids the possibility of having a biased appellate member. In her opinion, the system is almost perfect.
Regarding the appointment of the Appellate Body members, it is also done by consensus of the WTO membership. A member may apply for a second 4-year term; however there is no explanation on how this should be done. There is not a lot of satisfaction in how this process works, particularly because there is a view that members wishing to be reappointed for a second term will be “watching their backs” during the first term, which has led some to suggest that there should be only one term. Interestingly, nobody has ever suggested that there has been a biased or non-independent appellate body member.
Luke Sobota – ISDS
He addressed three questions of investor-state tribunals:
i) What are the prevailing criticisms to ISDS?
He started his presentation by citing some of the criticisms to ISDS published in the New York Times and on Buzzfeed: secret nature of meetings, lack of full disclosure of decisions, the fact that it has led to national laws being revoked and environmental regulations being challenged, and all in the name of defending the interests of investors.
He divided them into procedural criticisms: pervasive confidentiality, lack of transparency into the decision-making process, reliance on conflicting arbitrators who wear two hats and have a financial interest, and a system marked by excessive costs; and substantive criticisms: inconsistent results, erroneous application of international law, insufficient deference to sovereign prerogatives which has led to a chilling effect on policy-making on issues such as health and environment.
In this context, he noted that Bolivia, Ecuador and Venezuela have withdrawn from ICSID, both France and Germany have strongly criticized ISDS, and last month India terminated a large number of its BITs.
ii) Are the criticisms substantiated by correct data?
He highlighted some of the following data on ISDS: 60% of disputes are against developing countries; the latest ICSID statistics indicate that 45% of the time claimants are successful, while states win 55% of the time; all ISDS cases over time show that claimants are successful in 27% of cases, respondents in 47%, and the rest of the cases are settled; the average claimed amount is $600 million, while the average amount awarded is $16 million.
iii) Is this data correctly identifying the problems facing ISDS?
Regarding the issue of independence, he said it is surprising to note that states are winning a majority of cases and sustaining a low amount of damages in the cases that they lose. Many investors argue they are only receiving pennies on the dollar for their assets being appropriated by states.
Regarding the argument that sovereign actions are being reviewed outside of national courts, he considered that people making such statements seem uncomfortable with the idea of International law performing a check over domestic actions.
In his opinion, ISDS is certainly in need of improvement; however it is important to remind ourselves of where we are today and how, prior to this system, international dispute resolution was marked by uncertain diplomatic protection actions. ISDS is quite vibrant, there are more than 3000 BITs, and those treaties and the awards give far more clarity and coherency to the field than has ever existed before. The fact that we have created this system in a relatively short time attests to the fact that both states and investors perceive a fundamental value in ISDS even if it can be improved.
He highlighted that arbitration is consensual, and the fact that states agree to have their decisions reviewed at the international level in itself is empowering and contributes to improving the rule of law. He noted that, as John Veeder said, if ISDS loses its attractiveness to investors, we will see a rise in private ad hoc arbitrations which will further non-transparency.
Andrea Bjorklund – Comprehensive Economic Trade Agreement (CETA)
She gave a brief overview of the new proposal contained in CETA. She highlighted that the biggest innovation is the establishment of a roster of 15 individuals, instead of the traditional party-appointed arbitrators. Of these individuals, 5 will be Canadian, 5 EU nationals and 5 neutrals, and on any given case there will be one person from each group with the neutral member chairing the tribunal. In her opinion, one of the concerns is that it shifts all the power of appointment to states.
There is an institutional safeguard however, which is that the CETA Joint Committee will have to agree on the appointment. In her opinion however, this is a lost opportunity to make the process less politicized, and the tripartite structure probably will not satisfy investors. The representation issue is also particularly difficult in the EU, where one state might not feel that the arbitrator from another EU state represents their interests.
Ricardo Ramirez Hernandez summarized some of the points mentioned regarding both investor-state and the WTO. He highlighted the issue of qualifications, and how the broader the base to select arbitrators is, the less likely it is that you will have an issue of independence. Another issue is the rules on challenges to arbitrators, and how when they provide for a stay of the proceedings, it is often used as a tactic to delay the arbitration. In his opinion, party-appointment goes to the core of independence.
Isabel San Martin is a Research Assistant at the London Court of International Arbitration.