An ISDS appellate body:
real world or quixotic ideal?
Stephen Bouwhuis*
* Assistant Secretary, Attorney-General’s Department Commonwealth of Australia
([email protected]). Any views expressed are those of the author and do not necessarily reflect
those of present or past employers.
1
ABSTRACT
The proposal for an appellate body for investor-State disputes is not new. However, the
proposal has recently been given fresh momentum by decisions by the United States
Congress and the European Parliament to include such a mechanism as an objective in the
legislation underpinning their negotiating positions. This paper explores some of the
practical difficulties with the concept and how they might be overcome.
I INTRODUCTION
The difficulties with the current system of investor-State dispute settlement are well
known. These include concerns about: arbitrator quality; inconsistent awards; 1 and the
perceived inclination of arbitrators to decide in a way favourable to their appointing
party. 2
Various proposals exist to address these difficulties. One of the most commonly cited is
for an appellate body for investor-State disputes. Such a mechanism would be available
to the Parties to the various panels appointed to decide investor-State disputes.
The proposal for such a body is one that has been around a long time. 3 The theory
underpinning the proposal is that such a level of review, staffed by a body of select
arbitrators, would better ensure the impartiality of those arbitrators as well as both the
quality and consistency of their decisions. 4
The proposal had been somewhat boosted by decisions by the United States Congress and
the European Parliament to include such a body as an objective in the legislation
underpinning their negotiating positions.
In the United States, the Trade Act of 2002 - commonly known as the Trade Promotion
Authority, enshrined ‘providing for an appellate body or similar mechanism to provide
coherence to the interpretations of investment provisions in trade agreements’ as one of
the principal negotiating objectives of the United States in negotiating Free Trade
Agreements. 5
1
See in particular Gabriel Bottini, ‘Reform of the Investor-State Arbitration Regime: The Appeal Proposal’ in
Jean E. Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-State Dispute Settlement System: Journeys
for the 21st Century (BRILL Nijhoff, 2015) 455-473, 466 (noting in particular that it is not just inconsistency
‘but also that flatly inconsistent decisions on important issues continue to be rendered years after the first
disagreement erupts, with no solution in sight’). See also UNCTAD, Reform of Investor-State Dispute
Settlement: In Search of a Roadmap, pages 3-4, available at <
http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d4_en.pdf>, last accessed 20 February 2016.
2
UNCTAD, Reform of Investor-State Dispute Settlement: In Search of a Roadmap, page 4, available at
<http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d4_en.pdf>, last accessed 20 February 2016; Menon,
Sundaresh, International Arbitration: The Coming of a New Age for Asia (and Elsewhere) (2002), available at
http://www.arbitration-icca.org/media/0/13398435632250/ags_opening_speech_icca_congress_2012.pdf, pages
15-16, last accessed 20 February 2016; Roberts, Anthea, ‘Power and Persuasion in Investment Treaty
Interpretation: The Dual Role of States’ 104 The American Journal of International Law, 179-225, 179.
3
Diaz, Hugo Perezcano, ‘Enhancing the Dispute Settlement System of Much Ado About Nothing’ (2013) 6
Investment Treaty Arbitration and International Law, 1-10 at 1.
4
See for example, World Economic Forum, the Evolving International Investment law and Policy Regime:
Ways Forward, at page 7, available at < http://e15initiative.org/wpcontent/uploads/2015/09/E15_no14_Investment_final_REV_x1.pdf >, last accessed 20 February 2016.
5
Trade Act of 2002, P.L. No. 107-210, 116 Stat. 933 (2002), sec. 2101(a) (codified at 19 U.S.C. § 3801(a))
2
In the European Union, the European Parliament has also called for changes to the dispute
settlement regime for investment agreements including ‘the opportunity for the parties to
appeal’. 6 This itself has been reflected in the negotiating mandates for trade and
investment agreements to be negotiated by the European Commission. In particular, this
position is reflected in the Directives for the negotiation of the Transatlantic Trade and
Investment Partnership between the European Union and the United States issued by the
Council of the European Union. 7
Indeed, the European Commission has gone so far as to try to set out a vision for an
‘Investment Court System’. This ‘Court System’ would be composed of a tribunal of first
instance and a tribunal to hear appeals. 8 15 judges would hear matters of law and fact at
first instance and a further 6 judges would hear questions on appeal. Such an avenue of
appeal would be confined to questions of law, manifest error in the appreciation of facts
and the other limited grounds for appeal provided under the ICSID Convention. 9
A number of trade and investment agreements also require the Parties to those agreements
to consider joining an appellate body should one be created. 10 These provisions typically
provide that:
‘If a separate multilateral agreement enters into force as between the Parties that
establishes an appellate body for purposes of reviewing awards rendered by tribunals
constituted pursuant to international trade or investment agreements to hear
investment disputes, the Parties shall strive to reach an agreement that would have
such appellate body review awards rendered under Article … in arbitrations
commenced after the appellate body’s establishment.’ 11
6
European Parliament Resolution of 6 April on the Future European International Investment Policy
(2010/2203(INI)), paragraph 31 (European Parliament Document. P7_TA(2011)0141 )
7
Directives for the Negotiation of the Transatlantic Trade and Investment Partnership between the European
Union and the United States, page 9 (Council of the European Union Document ST 11103/13, 17 June 2013).
8
European Commission, Concept Paper: Investment in TTIP and beyond – the path for reform: Enhancing the
right to regulate and moving from current ad hoc arbitration towards an Investment Court (2015); European
Commission, Transatlantic Trade and Investment Partnership: Trade in Services, Investment and E-Commerce:
Chapter II – Investment, draft of 16 September 2015, available at
http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf., last accessed 7 May 2016.
9
European Commission, draft text, Transatlantic Trade and Investment Partnership: Trade in Services,
Investment and E-Commerce, Article 29(1). The grounds of appeal provided for under Article 52(1) of the
ICSID Convention are: (a) that the Tribunal was not properly constituted; (b) that the Tribunal has manifestly
exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has
been a serious departure from a fundamental
rule of procedure; or (e) that the award has failed to state the reasons on which it is based (Convention on the
Settlement of Investment Disputes Between States and Nationals of Other States 575 UNTS 159).
10
Canada-European Union: Comprehensive Economic and Trade Agreement, Article 8.28, available at
http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng
last accessed 18 June 2016; European Union-Singapore Free Trade Agreement, Article 9.30.1(c), available at
http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152844.pdf, last accessed 18 June 2016 ; United
States-Chile Free Trade Agreement, signed 6 June 2004 (entered into force on 01 January 2004), Article
10.19.10, available at http://www.sice.oas.org/Trade/chiusa_e/Text_e.asp#10.19, last accessed 18 June 2016;
Dominican Republic-Central American-United States Free Trade Agreement, Annex 10-F, available at
http://www.sice.oas.org/trade/cafta/caftadr_e/caftadrin_e.asp, last accessed 18 June 2016.
11
US-Chile Free Trade Agreement, signed 6 June 2004 (entered into force on 01 January 2004), Article
10.19.10, available at http://www.sice.oas.org/Trade/chiusa_e/Text_e.asp#10.19, last accessed 18 June 2016.
3
These provisions in a range of trade and investment agreements commit a range of States
to considering an appellate body should one be created. This could create quite a
momentum for countries to join an appellate body should one be established.
II CHALLENGES FACING THE PROPOSAL
This paper examines five challenges faced by the proposal to establish an appellate body:
(a)
the different texts of the different agreements
(b)
the concern that an appellate body would make the investor-State dispute
settlement even longer and more expensive
(c)
legal difficulties arising from the texts of the various agreements
(d) the challenge in getting anything agreed in the current international system,
and
(e)
public opinion.
A The Different Texts of the Different Agreements
One of the most commonly cited difficulties facing the proposal for an appellate body is
the different provisions of the different trade and investment agreements. Indeed, there
are over 2,500 investment agreements currently in force around the World. 12 Whilst there
are some commonalities in the drafting of some of the provisions in some of these
agreements there are also significant differences. These differences arguably would make
it difficult to develop a consistent jurisprudence that would apply to agreements other than
those actually being litigated.
For example, if the text relating to the minimum standard of treatment refers to police
powers in one agreement and not in another then an interpretation by an arbitral tribunal
of the meaning of police powers in the first agreement is unlikely to be of much relevance
in the second.
Whilst this is a significant challenge, an appellate body could at least develop and follow a
set of general principles, which themselves could be used in considering the differences
between agreements. Moreover, even similar decisions based on the same text would
seem an improvement on the current case law.
B Quicker and Cheaper
The second problem concerns the additional costs and time that such a new arbitral body
would entail.
12
This figure is comprised of 2278 bilateral investment agreements and 282 other international investment
agreements currently in force (UNCTAD, Investment Policy Hub – available at
<http://investmentpolicyhub.unctad.org/IIA>, last accessed 14 February 2016).
4
A key advantage of international arbitration is that it is supposed to be quicker and
cheaper than a standard proceeding brought under the domestic laws of a country.
However, given the way that international arbitration has evolved, nowadays there is a
real question of whether it is actually is either quicker or cheaper. Hence, one of the
arguments against an appellate body is that it will just exacerbate the costs and length of
proceedings of investor-State disputes. Particularly as - if the precedent from WTO is
anything to go by - most decisions from the primary level are likely to be appealed
anyhow. 13
To some degree how much additional cost and time might be entailed depends on how the
appellate body is structured. For example, if the appellate body is to consider issues of
law and fact it would certainly seem likely that the result will be a process that costs more
and takes more time. Hence, most proposals seem to envisage a ‘WTO style’ process,
whereby the appeal is confined to questions of law (acknowledging that sometimes this
can be a fine line to draw).
However, even if the appellate body was confined to questions of law that would still
entail some delay and expense. Time and resources would still be involved in considering
questions of law arising out of the decisions of tribunals constituted to consider investorState Disputes.
Arguably though some of that additional time and expense would be offset by some of the
benefits of the new system. A consistent and developed jurisprudence would reduce the
time taken in deliberations. Presently, the outcomes of investor-State disputes vary
considerably, seemingly dependent in large part on the members constituting each panel.
Hence, investors know that even if the vast body of the jurisprudence is against them there
is still a reasonable chance that they may prevail in any decision and States similarly have
little incentive to settle a dispute even if the jurisprudence is against them. However, if
there was an appellate body that followed general principles and employed a consistent
jurisprudence then the investor would know that they were unlikely to prevail and hence
would be less likely to litigate. Similarly a State facing a consistent jurisprudence against
them would have more incentive to settle.
The appellate body could also be supported by a permanent Secretariat, which would
build up expertise 14 upon which the arbitral tribunal could draw. Although little has been
written about the interaction between the Secretariat and the various WTO panels and the
Appellate Body, the collective knowledge housed in the WTO Secretariat has certainly
added to the strength of the WTO dispute settlement system.
If such an option of an appellate body still seems too expensive and time consuming a
more modest option would be to professionalising the primary level of dispute settlement.
That is, rather than create a new layer of appellate review the system for investor-State
arbitration could be reformed though the creation of a standing panel composed of a
limited number of highly professionalised arbitrators who would hear investor-State
13
World Trade Organization, Percentage of Panel Reports Appeled by Year of Adoption: 1995-2014, available
at <https://www.wto.org/english/tratop_e/dispu_e/stats_e.htm> (indicating that 68 per cent of panel reports had
been appealed between 1995 and 2014).
14
See generally Eduardo Zuleta, ‘The Challenges of Creating a Standing International Investment Court’
Proposal’ in Jean E. Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-State Dispute Settlement
System: Journeys for the 21st Century (BRILL Nijhoff, 2015) 403-423, 417-418.
5
disputes. This could be a standing body selected through a considered process designed
not just to select those with particular skills and expertise but also with a view to other
criteria like geographic representation and gender.
Such a more limited proposal would still face similar legal difficulties as with an appellate
body. However, unlike an appellate body, it would not allow for a more specialised
division of labour, whereby more capable jurists are focused primarily on more difficult
issues of law and the overall jurisprudence, rather than being tied up on both questions of
fact as well as questions of law at the first instance. Moreover, given the volume of
investor-State litigation, such a division between primary decision making and appellate
review, seems warranted. However, if an appellate body is too radical a reform, perhaps a
more professionalized first level of review might be a more modest, incremental reform.
C Legal Difficulties Arising from the Texts of the Various Agreements
These are also difficulties arising from the existing texts of agreements. More specifically
the proposal faces two key legal difficulties:
Firstly, the text of numerous bilateral investment agreements often specify a closed
list of dispute settlement options, and
Secondly, the texts of these agreements most often rely on existing mechanisms,
such as the International Centre for Settlement of Investment Disputes (ICSID) or
the Permanent Court of Arbitration, yet the statutes of those mechanisms do not
provide for such a procedure.
As to the first difficulty, there is a question of whether the Parties to the agreement could
not just agree a modification between themselves. This could arguably be through a
subsequent agreement between the Parties on the meaning of the agreements that apply
between them, 15 or by formal amendment of the agreements between them.
As to the second difficulty, these same options would arguably apply, although the
position is more complicated due to the multilateral nature of the Convention establishing
ICSID and the Conventions establishing the Permanent Court of Arbitration as well as the
nature of their provisions. Each is worth briefly examining in turn.
1 The Difficulties under the ICSID Convention
In starting with the difficulties associated with the Convention establishing ICSID, it is
notable that Articles 53(1) and 66 of the ICSID Convention exclude any appeal against
ICSID awards and require unanimity for an amendment to the Convention. Given the
difficulty in achieving such unanimity in the current international system (as outlined
above) proposals have focused on two Parties to the ICSID Convention modifying the
agreement as it applies between themselves. Indeed, this was the very proposal developed
by the Secretariat of ICSID in 2004 in order to create such an appellate body. 16 The idea
15
Vienna Convention on the Law of Treaties, opened for signature on 23 May 1969, 1155 UNTS 331 (entered
into force 27 January 1980), Article 31(3)(a).
16
ICSID Secretariat, Discussion Paper: Possible Improvements of the Framework for ICSID Arbitration (2014),
Annex, paragraph 2, available at
6
being that two Parties to a trade or investment agreement agree to bilaterally modify the
ICSID Convention as it applies between themselves.
Even assuming away the legal questions regarding such a modification, there are also
practical difficulties. In particular, any such amendment would need to ensure that the
other Parties to the ICSID Convention are not then effectively subsidising the costs of the
new mechanism as a result of the mechanism drawing unduly upon the existing resources
of ICSID. Moreover, each of the two Parties would need to ensure that this agreement
between themselves was reflected in their own domestic laws. Otherwise an investor,
might still try to enforce a decision of first instance through the domestic laws of the Party
against which it had brought the proceedings.
Whilst these practicalities can be overcome, the legal difficulties remain contested. For
example, De Figueieredo, notes the difficulties associated with the modification of a
multilateral treaty between two Parties. Specifically, he argues that:
‘Not only does the submission of a dispute to the jurisdiction of the Centre create
multilateral obligations, the Centre, as an international organization, may exercise
its functions only within the limits of the mandate conferred on it by its members
under its constitutive treaty. Accordingly, the modification of a provision of the
ICSID Convention that has the effect of expanding the jurisdiction of the Centre
also has the effect of expanding the mandate conferred on the Centre. In this
sense, modification of the jurisdiction of the Centre between certain of the
Contracting States does not seem possible, to the extent that modification of the
mandate of an international organization requires the consent of all of member
States.’ 17
2 The Difficulties under the Conventions Establishing the Permanent Court of
Arbitration
Similar problems arise under the Conventions establishing the Permanent Court of
Arbitration, which provide for a list of arbitrators nominated by States, from which States
are meant to choose for any arbitration. 18 That is, the Parties to the Permanent Court of
Arbitration are meant to draw from the list of arbitrators established under the auspices of
that court, not select their own.
However the Conventions establishing the Permanent Court of Arbitration also provide
for the establishment of what is known as ‘a special Tribunal’, which would arguably sit
outside this requirement. 19 Hence, this might be a way around these difficulties, again
though this position is not entirely uncontested.
<https://icsid.worldbank.org/apps/ICSIDWEB/resources/Documents/Possible%20Improvements%20of%20the%
20Framework%20of%20ICSID%20Arbitration.pdf>, last accessed 20 February 2016.
17
De Figueiredo, Roberto Castro, ‘Fragmentation and Harmonization in the ICSID Decision-Making Process in
Jean E. Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-State Dispute Settlement System: Journeys
for the 21st Century (BRILL Nijhoff, 2015) 506-530, 522.
18
1899 Convention for the Pacific Settlement of International Disputes 1 AJIL 103 (1907), Article 24; 1907
Convention for the Pacific Settlement of International Disputes, Article 45.
19
1899 Convention for the Pacific Settlement of International Disputes 1 AJIL 103 (1907), Article 21; 1907
Convention for the Pacific Settlement of International Disputes, Article 42.
7
D The Challenge Getting Anything Agreed in the Current International System
A broader structural challenge facing the proposal is the inherent difficulty in getting
anything agreed in the current international system made up of 193 States. The recent
agreement in Paris on climate change is a rare exception, although it is worth bearing in
mind that that itself took years of preparation and was driven by the process of climate
change, which if left unchecked will imperil the planet; and yet agreement was still
painstaking difficult.
Hence it seems likely that anything requiring an actual treaty or an amendment to an
existing treaty, such as amending the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States, 20 or amending the Conventions
under which the Permanent Court of Arbitration is established, 21 is not about to happen
anytime soon.
Then there are the difficult domestic processes. In particular, it is nowadays rare for the
United States Congress to ratify more than a handful a treaties in any session. 22 Nor is the
United States a Party to the compulsory dispute settlement procedures of the International
Court of Justice, nor a Party to the Statute of the International Criminal Court, nor indeed
a Party to the United Nations Convention on the Law of the Sea, let alone its regime for
dispute settlement. Hence, even if is an international agreement to create an appellate
body was negotiated, there must remain real doubt as to whether the United States would
ever participate in it.
Accordingly, given these difficulties, proposals for such a mechanism have tended to
focus on ways through which such a mechanism might be established short of a formal
multilateral treaty. In particular, proposals tend to focus on an agreement reached by a
limited set of States into which other States can opt-in as circumstance fit.
E Public Opinion
Whatever proposal is adopted it will need to take account of general public opinion. That
notably includes significant numbers of people skeptical of the benefits of trade
agreements and suspicious of any reforms. Any who doubt the potential impact of public
opinion need only refresh their views by looking back at what happened to the much
vaunted Multilateral Agreement on Investment.
Moreover, the proposal for an appellate body does not currently have the support even of
the majority of arbitration practitioners, let alone the general public. In a recent survey,
some 61 percent of current arbitration practitioners indicated that they did not support
20
Convention of the Settlement of Investment Disputes Between States and Nationals of Other States 575 UNTS
159.
21
1899 and 1907 Convention for the Pacific Settlement of International Disputes, 1 AJIL 103 (1907) & 2 AJIL
Supp. 43 (1908).
22
The most that it seems to have ratified in recent years appears to be 4 treaties in 2014.
8
such a mechanism. 23 Albeit, that figure is at least improved over what it was in 2006,
when 91 per cent of arbitration practitioners were reported as being opposed. 24
If such a mechanism is not just to go the same way as the Multilateral Agreement on
Investment, there will be a need to explain the benefits of an appellate body, and explain
them well. There is an old adage of public policy – ‘never mind the reality – feel the
myth’. Which essentially means that whatever the merits of your public policy proposal it
will not survive if the public do not understand its benefits.
There are, however, advantages to such a new mechanism which should engender a level
of public support. In particular, it could be designed in a manner to address a range of
public concerns expressed about the current system for investor-State arbitration. For
example, the new mechanism could incorporate more recent developments designed to
improve the transparency of international dispute resolution, such as the formal ability to
receive amicus submissions and the publication of judgments. The new mechanism could
also incorporate formally appointed arbitrators, as opposed to ad hoc arbitrators, who are
largely unknown to the public. Such arbitrators could be drawn - in part - from a public
policy background, thus providing some assurance that public policy considerations
would at least be taken into account.
III HOW MIGHT SUCH A PROPOSAL WORK?
Key questions remain as to how such an appellate body might work. In particular, as to
how the arbitral panel is composed. Given the concerns about the impartiality of
arbitrators it would seem important to have a system whereby the arbitrators are not just
appointed ad hoc by each side at the start of an arbitration.
Such ad hoc processes are problematic as there is a temptation to pick an arbitrator not
necessarily because they are the strongest but often as they are viewed as likely to be
sympathetic to the appointing party. These arbitrators then choose chair on which they
can both agree, which again may not be a decision based entirely on their quality. The
result is an ad hoc arbitral panel - perhaps not of the highest quality - with no particular
reason to be interested in how their decision fits within the general body of investment
arbitration and indeed the overall guiding principles underlying investment arbitration.
Hence proposals, such as that by the European Commission, tend to focus more on the
creation of a standing body of arbitrators to decide investor-State disputes. The
arbitrators, who would be selected for the appellate body, could be chosen by lot from a
pool of arbitrators selected by States or selected by seasoned arbitrators in conjunction
with States. If the arbitrators are chosen by States quality may be traded in favour of other
diplomatic objectives. For example, States could trade support for arbitrators to be
selected for reasons that may have nothing to do with the quality of the arbitrator in
question. 25 For example, a State might offer to vote for a candidate of lesser quality for
the appellate body in order to secure a reciprocal vote from another country in a process
Queen Mary University of London, International Arbitration Survey: Improvements and Innovations in
International Arbitration, at page 8, available at <http://www.arbitration.qmul.ac.uk/docs/164761.pdf>,
last accessed 20 February 2016.
24
Ibid.
25
Brandeis Institute for International Judges, Towards an International Rule of Law (2010), at page 37.
23
9
that its government cares more about. That could mean a selection that is not about
quality.
If the arbitrators are decided upon by a body of seasoned arbitrators then there are
questions about the transparency of the process and whether the arbitrators selected will
be suitably sympathetic to public policy concerns. This in turn raises further questions as
to who selects the seasoned arbitrators who then in turn select the arbitrators for the
appellate body.
Alternatively, arbitrators for the appellate body could be selected by the head of an
existing arbitral authority, such as the International Centre for Settlement of Investment
Disputes or the Permanent Court of Arbitration. However, that similarly gets you to
considerations of the transparency in their decision making process. Whether, for
example, these people have been the subject of lobbying by arbitrators. It also seems
quite a high responsibility to give to a person who themselves is not democratically
appointed in any way.
A hybrid might be where a group of seasoned practitioners nominate a list of arbitrators
for consideration by States, who would then decide on the arbitrators for the appellate
body on the basis of that list. The practitioners could be given a mandate to select highly
capable arbitrators but also to take into broad account other factors like gender or
geographic distribution.
The selection by the group of seasoned arbitrators and practitioners would then go to
States, perhaps sitting as the board of that entity. For example, the Administrative
Council of the International Centre for Settlement of Investment Disputes or the
Permanent Administrative Council of the Permanent Court of Arbitration. The States can
then either veto in-toto the nominations or veto some small percentage – say 2 from a list
of 17 - so that you end up with a final list of 15. However, if States want to veto more
than 2 arbitrators then they would have to veto the entire list in which case they would
have to select from a new list resubmitted by the list of seasoned practitioners that would
then not contain any of the original names.
Whichever way selected, the arbitrators would have to meet certain minimum criteria
related to knowledge of international investment law as well as ethics and professional
responsibility. They would also not be permitted to be advocates in other investment
litigation. This would reduce risks of conflicts of interest arising. 26 The arbitrators for
any particular arbitration could then be drawn by ballot from the list, with those of the
nationality of the particular parties to the arbitration automatically excluded. Judges could
be paid a retainer and then a daily rate for when they are actually conducting the
arbitration.
The new system would increase the scrutiny on those appointed 27 and the pressure by
member States to get it right 28 and ensure that arbitrators have an interest in the
jurisprudence underpinning the system as a whole. 29 The new system would also create a
division of labour between a tribunal that would consider questions of fact and an
appellate body that would be concerned primarily with questions of law. This would
26
Bottini, above n 1, 469.
Ibid., 462.
28
Ibid., 469.
29
See generally Zuleta, above n 14, 408-413.
27
10
address many of the problems identified with the current system for investor-State
litigation and the enhancements might win over a skeptical public.
IV CONCLUSION
Given the difficulties in getting anything agreed in the current international system
outlined above, how then might such a system emerge? Most likely incrementally; as a
result of an-opt in by States. Provided that that structure was set up in a way that might be
open to other States joining, the establishment of an appellate mechanism even between a
limited number of States would then trigger an obligation under a range of existing trade
and investment agreements for other States to consider joining the appellate body. From
there it is not hard to see other States joining in.
This would be even more likely if the appellate mechanism emerged from one of the
larger international trade deals, such as the Transatlantic Trade and Investment
Partnership. That possibility is further enhanced by both the United States and the
European Union being publically committed to such a mechanism.
Indeed, the Comprehensive Economic and Trade Agreement recently completed between
Canada and the European Union provides for a 15 member Tribunal of first instance, with
members of the Tribunal appointed for five years and paid a retainer. 30 The agreement
also provides for an Appellate Tribunal, although much of the detail of how such a
mechanism would work is left to be determined by the Agreement. 31 This text, in the
Comprehensive Economic and Trade Agreement between Canada and the European
Union, is not dissimilar to that in the Dominican Republic-Central America-US Free
Trade Agreement. 32 This suggests further that both the United States and the European
Union might be comfortable with such a mechanism.
Closer to home the question of whether to join such a mechanism remains an open one for
the Australian Government. However, it is notable that the Trans-Pacific Partnership is
one of the many agreements which commits parties to consider whether awards rendered
in investor-State litigation should be subject to any ‘appellate mechanism for reviewing
awards ... developed in the future under other institutional arrangements’. 33
30
Canada-European Union: Comprehensive Economic and Trade Agreement, Article 8.27, available at
<http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/cetaaecg/index.aspx?lang=eng> last accessed 18 June 2016.
31
Canada-European Union: Comprehensive Economic and Trade Agreement, Article 8.28, available at
<http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/cetaaecg/index.aspx?lang=eng> last accessed 18 June 2016.
32 Dominican Republic-Central American-United States Free Trade Agreement, Annex 10-F, available at
<http://www.sice.oas.org/trade/cafta/caftadr_e/caftadrin_e.asp>, last accessed 18 June 2016.
33
Trans-Pacific Partnership Agreement, Article 9.23.11, available at
<http://dfat.gov.au/trade/agreements/tpp/official-documents/Pages/official-documents.aspx>, last accessed 18
June 2016.
11