Global asset management quarterly: A global briefing on developments and market trends
Welcome to the thirteenth edition of Global asset management quarterly.
We speak with Meg Kinnear, Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID) about the evolution of her role with ICSID as well as investor-state dispute settlement (ISDS) itself; the changes she has seen over the last eight years and challenges during her new term. We also discuss common misconceptions about ISDS and how the arbitration community should be responding to criticisms of ISDS.
I was fortunate to be the first stand-alone Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID), and so I had a lot of scope to define how to fulfil my role. My first months were spent learning how things were done within the ICSID Secretariat and talking to internal and external stakeholders to get their views on what our priorities ought to be. The next step was to ensure the Centre was properly organized, resourced and staffed to deliver the best service possible. This included a lot of work that likely was not visible from outside the Centre but which has had an immense impact on our operation. We did a significant amount of staffing, adding expert lawyers, paralegals, administrative legal assistants, dedicated hearings organizers, and financial administrators: indeed, we have doubled our staff from 34 people in 2009 to 70 staff today. We accompanied this increase in staff with internal training and development of best practices for every step in an ICSID case. We also adopted automated internal case tracking, financial and case management systems, and have upgraded the technology and rooms used for cases. These continue to have an enormous effect on our practice.
The next step was to ensure stakeholders knew the changes that had been made and understood what ICSID could do. For example, many counsel did not realize that we administer UNCITRAL cases as well as ICSID Convention and ICSID Additional Facility cases, or that we host hearings for cases under non-investment rules and between states under trade treaties such as the Canada-US Softwood Lumber Treaty. We also developed a number of knowledge projects, notably the new website which is now trilingual, the statistics report, a revamped ICSID Review, and a quarterly newsletter. Another example is the “ICSID 101” training program that we have now given across the world. Today I often hear back from arbitrators and counsel who see the positive impact of all these steps and are really impressed with the quality and variety of services ICSID can provide and the top caliber of our staff. That has been very rewarding – to see that our efforts are noticed and have a positive effect on the cases.
The priority is always to provide the highest level of service in the most cost and time effective manner, so we continue to focus on that. However, there are several ongoing projects that contribute to investment arbitration on a more systemic level. The most important of these is the project to amend the ICSID rules. I do not know how far-reaching these will be, but we have sought state, private sector and public comment, so I am certain this will be a useful process. Second, we are participating in the discussion led by the EU and Canada about the potential for a multilateral standing court on investment. This is a decision to be taken by sovereigns, but if states want such a system, it seems obvious that ICSID could best provide it in the most expert and cost effective manner, so we will see how that discussion evolves. Third, we have been named as the Secretariat for the investment chapter of the Canada-EU FTA, and we are ready to offer these services when the relevant provisions go in force. We have also advised other treaty negotiation partners that we are glad to provide a similar service for their agreements.
There are a number of fundamental misconceptions. For example, there is a prevailing belief that investors always win their cases, when in fact the empirical evidence consistently shows that states win slightly more than half of the cases. Another misconception is that ISDS is only for the Fortune 500 Company. In fact, many small and medium sized companies and individuals use ISDS, and it is a very valuable remedy for them.
There is a real need to explain what the ISDS system is and isn’t, and to make accurate and balanced information available as a basis for the public dialogue on the topic. This was one of the reasons we started publishing our statistics – to provide an empirical basis for the on-going discussion. It is also one of the reasons we favour transparency, and have made a point of getting information about ISDS into the public domain. Perhaps the best example of this effort is web-casting hearings, which are available for every case. Many of these webcasts are on our ICSID website and I always encourage those who critique the system to have a look at these videos before they come to a conclusion about the system. What they will see is a professional adjudication addressing complicated factual and legal matters in an impartial manner.
In addition, we should be open to continuously improving the ISDS system as we get practical experience. I think that the current system is a very impressive and effective one, and is unique in international dispute settlement. One of the most notable features is how rapidly ISDS has evolved in a short period. So, for example, we have seen increasing acceptance of open hearings, third party submissions, summary process to dismiss cases for lack of legal merit and the like. On the substantive side, we have seen states drafting increasingly clear and detailed treaties to better express their purpose and object. This is exactly as it should be. ICSID has been a leader in the evolution of the ISDS system, for example with the transparency initiatives and summary dismissal provisions in the 2006 rules. Another opportunity for evolution is currently available in our amendment process and I am excited to see this unfold.
The key development in international investment arbitration has been the increased availability of treaty-based arbitration. Interestingly, the drafters of the ICSID Convention anticipated that contractual disputes would be the mainstay of its services. However, over 75 per cent of ICSID cases today are based on consent in an investment treaty and the promises undertaken in those agreements. This has created a very specialized international investment law and has grown public international law at an unprecedented rate.
My sense is that ISDS will become increasingly tailored to its context, with specialized provisions that recognize the particular needs of investors and states involved in a case. We have already seen this with draft texts in the current generation of investment treaties which allow for notes of interpretation, encourage mediation, especially for small and medium sized enterprises, or build in mechanisms for the dismissal of cases without legal merit.
The discussion about a multilateral investment court has arisen at various times since the early 2000s. Indeed, in 2004 ICSID proposed the creation of an international appellate facility to hear appeals from investment tribunals but there was insufficient support for the idea at the time. Generally these proposals vary from the current annulment system in two ways. First, they allow review on broader grounds. These proposals generally suggest review on the grounds of error of law, fact and procedure, whereas ICSID annulment is limited to the grounds in Article 52 of the Convention and was designed to be a limited remedy for serious error, usually of a procedural nature. The second difference is in the adjudicator. Most of these proposals suggest a standing appellate tribunal composed of nationals from the Contracting States plus a national of a third State. The ICSID annulment committees are selected by the Chairman of the ICSID Administrative Counsel from the Panel of Arbitrators and cannot be a national of either disputing party or of the state of any of the tribunal members whose decision is at issue.
The main factor for taking a look at the ICSID rules is simply to keep them modern and effective. The last rule amendment process was in 2004-6, and so we thought it was time to have another look. We have asked states, the private sector and the public to identify any issues they believe should be addressed, and the Centre has some housekeeping items that we will propose to members as well. Whatever is done, we have stressed that the ICSID Rules will maintain their balanced approach and will continue to be the most effective tool for disputing parties.
Welcome to the thirteenth edition of Global asset management quarterly.
If COP25, 2019 were to be summarized in a word, it would be ‘pathways’ – shorthand for the social, economic and technological choices that must be made in the near term in order to avoid catastrophic climate change.
Jargon at international climate talks often acts as a barrier to quick understanding of the nature and status of key issues – Article 6, ITMOs, ‘corresponding adjustments’ and (my personal favourite) A6,4ERs are just a few of the phrases used.