19. investment tribunals and the commercial arbitration ... - SSRN papers

19. INVESTMENT TRIBUNALS AND THE COMMERCIAL ARBITRATION MODEL: MIXED PROCEDURES AND CREEPING INSTITUTIONALISATION Prof. Fabien Gélinas*

International investment law has evolved dramatically in the course of the 1990s, with increasing numbers of investment claims brought by investors directly against states.4 Today, international investment protection instruments, the most ubiquitous of which is the bilateral investment treaty (BIT),5 systematically provide for the right of a foreign investor to claim directly against a host state for violations of treaty protections. Investors have been granted the right to bring claims to an arbitral tribunal constituted under one of various sets of international arbitration rules that are strongly inspired by commercial arbitration rules, such as the International Centre for the Settlement of Investment Disputes (ICSID) Rules and the ICSID Additional Facility Rules. Other sets of rules mentioned in investment protection instruments were designed for commercial arbitration and were simply enrolled, without much ado, in the resolution of

* D.Phil. (Oxon.), LL.B., LL.M. (Montréal), McGill University Faculty of Law; Director, Institute of Comparative Law, McGill University; formerly General Counsel of the ICC International Court of Arbitration. See UNCTAD, “International Investment Disputes”, Occasional Note, 29 November 2004: UNCTAD/WEB/ITE/2004/2. 4

The total number of bilateral investment treaties in force likely reached the 2000 figure in the year 2000. See M. Hallward-Driemer, “Do Bilateral Investment Treaties Attract FDI? Only a bit … and they could bite”, online: World Bank . 5

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investment disputes. This chapter looks at some of the issues raised by the import of the commercial arbitration model into the realm of treaty-based investment disputes.

A. Mixed Procedures and Instrument Choice The investment protection regimes that create a direct right of action for the investor establish a mixed system which sits uneasily between public international law jurisdictions and domestic judicial systems. The first question one might ask is whether such a mixed system accomplishes something which neither domestic courts nor public international law tribunals could accomplish. The primary justification for this protection regime lies in the need to avoid domestic courts in order to guarantee a dispute resolution process between host-state and investor that is both neutral and effective. Neutrality of the forum and effectiveness of the remedy are widely believed to constitute major factors in investment decisions as they are in other business decisions. In the early 20th century, when the international commercial arbitration model was being developed, commercial actors were clearly attempting to steer clear of domestic courts and procedures.6 This was in part for reasons pertaining to time efficiency and procedural flexibility, but by all accounts the movement was driven mainly by concerns related to neutrality. It is neutrality, too, which drives investment dispute resolution away from domestic courts, or which at least justifies the existence of an additional recourse for investors. The domestic courts at issue here are of course those of the state party to the dispute, a situation which makes the goal of a perfectly neutral procedure difficult to achieve, if not in deed, at least in appearance. And in matters related to neutrality, every one knows that appearances are just as important as reality.7 Turning now to the justification of the mixed system in relation to public international law tribunals and courts, it should be sufficient to point to the inadequacy of a state-to-state configuration given the liberalisation of investment flows and the consequent increase in the volume of foreign investment. The means of recourse traditionally contemplated by public in-

See “Report and Preliminary Draft Convention adopted by the Committee on International Commercial Arbitration at its meeting of 13 March 1953”, reproduced in (1998) 9/Vol. 1 ICC International Court of Arbitration Bulletin 32. 6

The dictum of Lord Hewart in R. v. Sussex Justices [1924] 1 Law Reports (King’s Bench Division) 256 at 260) is the most often cited formulation of what appears to be an old principle: “it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done”. 7

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ternational law, if not satisfactory, might have been tolerable at a time when cross-border investments were large and few. The state might be expected to take care of the few significant investments made abroad by its nationals. But this approach is clearly not adapted to a system which successfully fosters such investments in the name of economic development, creating a situation where the state cannot realistically be expected to extend its protection to an investor unless a strategic industry is at stake. Where the matter is simply one of defending the “rights” of the investors (understood in the way a legal right is understood within a municipal legal system) as opposed to the rights of the state under international law and its interests in the broader context of international relations, the procedure is now for the investor to pursue. From the public international law standpoint, the significant development in this respect is the extension of the grammar of rights beyond the area of human rights and into the area of investment protection, i.e. in favour of limited liability corporations in most cases. Also of note in this respect is the enforceability of the resulting award under the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington or ICSID Convention)�� or �� the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention)�� . It is not entirely clear whether the increased rights of investors actually make a difference in terms of global volumes in foreign investment, but it appears that investment flows do tend to follow the geographical lines of investment protection instruments.8 The question remains, then, whether a specialised international tribunal would not have achieved all of the objectives being pursued while delivering more consistent and predictable results. The short answer is that the fragmentation of investment protection instruments makes this impossible. The long answer takes the experience of the failed Multilateral �� Agreement on Investment�� negotiations into account, recalling that the creation of a specialised tribunal was not seriously considered despite the prospect of an end being put to fragmentation. This long answer then points to considerations of instrument choice that seek avoidance of institutionalisation at all costs. The actual convergence of the rules found in bilateral and regional investment protection treaties – given its likely impact on investment riskassessment costs – is all very well, provided that state sovereignty and the attendant dynamics of treaty-making are fully preserved. This implies a

M. Hallward-Driemer, supra, note 2; E. Neumayer and L. Spess, “Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?”, SSRN Electronic Paper Collection: . 8

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categorical rejection by states of any institutionalisation of the protection regimes that could make a unilateral exit overly difficult. When thinking of institutionalisation, one naturally evokes a decisionmaking organ of the executive or legislative type. But the importance of international rule-making and standard-setting by courts and other tribunals should not be overlooked. The American model of judicial involvement in high-level law-making is spreading fast and so is the sense of acceptability of judicial or similar organs effectively reviewing legislative action. The fear of institutionalisation is as justified in respect of the “judicial” function as it is in regard of the executive and legislative functions. It should be clear that this fear of institutionalisation in the context of treaty-making is a fear of giving rise to alternative sources of legitimacy. Alternative sources of legitimacy are challenges to the claims of sovereignty maintained by states. This is perhaps one of the reasons why the International Court of Justice does not enjoy universal, automatic jurisdiction. In my view, it is also one of the reasons why the arbitration model was found to be attractive in the context of investment protection. The commercial arbitration template had the added advantage of increasing confidence even further on the part of investors, who felt that it would enable them to litigate on their own terms, those of the international business community.

B. Ad Hoc Tribunals and Precedent From the traditional perspective of public international law, the spread of the arbitration model clearly works to exacerbate the often-discussed multiplication of international courts and tribunals. Arbitration is truly the ultimate in multiplication, since it normally contemplates a separate tribunal for each dispute. The notion of a tribunal for each dispute is only mildly tempered by the constitution of a significant number of arbitral tribunals under the aegis of permanent arbitration institutions. The Permanent Court of Arbitration (PCA) and the International Court of Arbitration of the International Chamber of Commerce (ICC), like many other arbitration centres, offer a reassuring framework which facilitates the organisation of procedures and provides a third-party authority when necessary. ICSID, the World Bank’s Centre especially created for the resolution of investment disputes between investors and host states, also offers a reassuring supporting framework for arbitration.9 But it remains the case that the majority of arbitral tribunals are constituted outside any

9

The Centre was created by the Washington Convention.


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such frameworks. This makes the study of arbitration extremely difficult, since the phenomenon largely escapes the scrutiny of empirical research. More importantly, in the context of investment protection, this ensures a degree of fragmentation and a resistance to organising forces which serve as safeguards against institutionalisation. But is it really so? What is the impact of this ad hoc justice mechanism on the development of the law? The role of arbitrators in shaping the rules they apply has attracted much attention in scholarly circles. Because a cogent theory of sources has not emerged which could fill the gap between municipal systems and the traditional conception of public international law, international arbitrators are standing uneasily between systems they cannot fully embrace. The absence of a cogent theory of transnational sources that could fill the gap surely serves to blur the distinction between public international law and transnational commercial law. The inevitable blending of sources for governing rules of law is strongly felt in many situations. Article 42 of the Washington Convention provides us with the most telling example. It essentially enshrines the possibility for an arbitral tribunal to apply, to a single dispute, principles of international law as well as rules of municipal law and transnational law. The provision is symptomatic of a broader phenomenon. Even in private matters, when parties to an arbitration procedure have not agreed upon the law governing their international contract, arbitral tribunals regularly apply “rules of law” that are detached from municipal sources, including conflict of law provisions.10 They thus find themselves caught up in the process of redefining the normative space in which they move. In the commercial arbitration arena, much has been written about a sui generis legal system for international commerce, a so-called lex mercatoria. Over the past three decades, the latter went from academic theory to empirical reality.11 This reality, to the limited but incontrovertible extent it can be perceived and documented, evidences a considerable number of points of resemblance with the methods of public international law. One notices a particularly frequent resort, albeit poorly conceptualised, to customs and usages, the binding practices of the relevant actors. One also discovers a comparative approach to the notion of general principles of law, whereby arbitrators often perform a comparative analysis of several

See generally Y. Derains: “State Courts and Arbitrators”, in Arbitration in the Next Decade, Special Supplement to ICC International Court of Arbitration Bulletin (Paris: ICC Publishing, 1999) at 27. 10

See F. Gélinas, “Le jurisprudence arbitrale de la Chambre de Commerce internationale” (2000) 1 Cahiers de l’arbitrage (Gazette du Palais), 19. 11

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municipal legal systems with a view to extracting a general principle they can then individuate by application to the particular case before them. Reference is thus obviously made to principles that also have currency in public international law, such as pacta sunt servanda, or the principle of good faith.12 International commercial arbitrators, acting in a setting understood as purely private, have even developed a notion of imperative law detached from municipal legal systems.13 This notion of transnational public policy finds its closest parallel in the public international law notion of jus cogens. The methods are therefore similar to those of public international law and, not surprisingly, the substantive results inevitably tend to converge. This similarity of methods and an attendant convergence of substance go a long way to explaining how an arbitral tribunal acting under the aegis of ICSID can seamlessly and effortlessly move from the principles of transnational commercial law to those of public international law and back, especially, but not exclusively, in the presence of an investment contract. What is more significant, however, is that arbitrators in most investment contexts are recognised as having a particularly important role in shaping the norms they apply, while the impact of each of their decisions on future deliberations in other cases is seen as limited. The impact of an ad hoc arbitral decision on the deliberations of future tribunals is seen as limited because the constitutive elements of a system relying on judge-made law appear not to be present. Such elements would include an organisational hierarchy of tribunals horizontally allowing for a range of opinions to develop and vertically imposing order and coherence from above through adequate reporting. It is as well to recall, however, that these conditions did not obtain in the English system – the epitome, for many, of precedent-based systems – before the the late 19th century.14 It was simply not possible for a strict rule of stare decisis really to take hold before then.15 And yet the common law tradition had managed to evolve

This principle remains controversial in the practice of international business contracts. Its relative impact on contractual obligations and adjudication has been the subject of intense debate in the context of the Convention on the International Sale of Goods (the Vienna Convention, or CISG) and the Unidroit Principles of International Commercial Contracts. 12

See K. Karsten and A. Berkeley, Arbitration – Money Laundering, Corruption and Fraud (Paris: ICC Publishing, 2003). 13

A reasonably systematic reporting of cases started with the initiative of the Council on Law Reporting in 1865, and an organised court structure was introduced by the Supreme Court of Judicature Acts 1873-1875. Note that these conditions may have obtained earlier in many of the states of the United States of America. 14

The reasons of Parke J. in Mirehouse v. Rennell (1833) 1 Cl. & Fin. 527, at 546, are occasionally cited as establishing a stricter rule of precedent. Although reference is made to the need to follow 15


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over centuries, relying on a softer understanding of precedent.16 The idea of treating a decision as strictly “binding” could even be said to be foreign to the common law tradition envisaged in a broader historical context. In contrast to the rule of stare decisis, the much older doctrine of precedent simply expresses the rule of law desideratum that like cases should be treated alike. It expresses concern for formal justice, for predictability and coherence, but says nothing of binding authority. Arbitral decisions, in the words of a famous arbitral award, “progressively create a jurisprudence which it behoves us to take into account, for it is derived from economic realities and conforms to the requirements of international commerce, to which the incrementally developed rules specific to international arbitration must respond”.17 This is essentially a reference to persuasive authority. A system based on persuasive authority as opposed to binding authority fosters a degree of competition between tribunals. As long as it is contained within the bounds of legal rationality writ large, i.e. one that is shared by a broadly defined and diffuse community of jurists imposing a justificatory framework more constraining than open-ended moral reasoning, this phenomenon can only be welcome. As long as the relevant epistemic community can regulate itself and renew its knowledge through broad-based input,18 competition for sway in legal interpretation and approaches can only foster our chances of making the right decisions, of getting closer to the elusive right answer. The lack of a hierarchy of tribunals creates a situation in which a decision becomes a leading case not because of some power formally granted to the arbitrators or status conferred on their awards, but by virtue of the authority, now laid bare, wielded by their reasoning. Decisions made in such context, in other words, make law not ratione imperii, but imperio rationis.

rules derived from precedents for the sake of certainty and consistency, even where they are “not as convenient and reasonable as we ourselves could have devised”, the case only says that precedents are to be followed “when they are not plainly unreasonable and inconvenient”, a formulation closer to the general desideratum that like cases should be treated alike, one that has no implication of strict bindingness. See generally J. H. Baker, An Introduction to English Legal History, 2nd edn (London: Butterworth, 1979) at 133 ff. 16

17 Interim Award in ICC Case No. 4131, 1982 (my translation) in Collection of ICC Arbitral Awards 1974-1985, Paris, ICC Publishing, 1989, 465 at 470.

The many representations of law as a partially open self-referential system generally reflect both of these requirements. See, for example: F. Ost and M. van de Kerchove, Legal Systems between Order and Disorder (trans. I. Stewart, Oxford: Clarendon Press, 1994); G. Teubner, ed., Autopoietic Law : A New Approach to Law and Society (New York: Berlin, 1988). 18

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This logic, with its market-of-ideas undertones, has its price, which is a somewhat less orderly arrangement of international law.19 What the ad hoc nature of the investment arbitration system has achieved, therefore, is the impossibility of a case-law system based on a strict rule of stare decisis. It has not excluded the general principle that like cases should be treated alike (the soft doctrine of precedent); it could not have prevented persuasive authority from doing its justificatory work, and from fostering a balance between the right answer in terms of substantive justice on one side, and predictability and coherence of the system on the other. I would suggest that the soft doctrine of precedent is so central to the idea of law and the process of legal reasoning that no act of legislative authority could ever displace it entirely. A handy example of such attempt in the context of treaty-making can be found in the rules governing the Dispute Settlement Body (DSB) of the World Trade Organisation (WTO). The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) lays down the substantive law to be applied by a panel, or by the Appellate Body, referring to the “covered agreements”.20 It then goes on to state that the recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.21 Yet in its very first report, the Appellate Body decided that the trade rules found in the covered agreements were not to be read in clinical isolation from public international law, an acknowledgement that context matters in defining rights and obligations, including the context provided by panel rulings and other decisions expounding international law.22 Likewise, the instrument choice made in the context of investment protection – the choice in favour of ad hoc arbitral tribunals whose awards cannot be appealed and might not be published – cannot fully contain the urge of the homo ratio juris to rely on previous decisions and to seek coherence. That is, it cannot prevent the tendency of legal processes to foster, at least to an extent, their own institutionalisation.23

See R. B. Ahdieh, “Between Dialogue and Decree: International Review of National Courts” Emory University School of Law Public Law & Legal Theory Research Paper Series, Paper No. 04-10, available through SSRN Electronic Paper Collection: , at 151, note 224. 19

20

Annex 2 to the Agreement Establishing the World Trade Organisation, 1994, Article 3(1).

21

Ibid., Article 3(2).

Case AB-1996-1, US – Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body, 29 April 1996, at 18 (WTO Doc. WT/DS2/9). 22

The proposal by a World Trade Organisation (WTO) commentator that dispute settlement panels should act strategically provides a glimpse of the process of adjudicative institutionalisation: “[I]nternational Tribunals should move cautiously in their early years, striking a delicate 23


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C. Creeping Institutionalisation, Public Debate and Legitimacy Institutionalisation, even if not entirely self-conscious, serves clear purposes of efficiency on the one hand and legal certainty on the other. But most would agree that institutionalisation without legitimation and accountability is best avoided. For the creeping institutionalisation of legal processes also has a dark side: it entrenches the economic and social value of the specialised knowledge created and possessed by a community of experts whose interests clearly lie in further entrenchment. In the context of investment arbitration, the fear is one of contemplating the worst kind of “dictatorship of the experts”: a bureaucracy run by independent contractors accountable only to each other. Serious issues of information and communication arise from the use of the commercial arbitration model in investment arbitration. These issues are obviously central to the question of legitimacy. The only conceivable way of preventing a body of case-law from developing in investment arbitration would have involved a total ban on publication.24 Despite the fears prompted by the use of the commercial arbitration model, with its much-touted rules of confidentiality, a total ban on award publication, or reporting, did not materialise in investment arbitration. The way in which the publicity of the award is dealt with follows rules that vary from one investment protection instrument to another. In the case of regional agreements, it may vary according to the state party involved in the dispute.25 Within each instrument, the governing rule may depend on the applicable set of arbitration rules, which normally depends on the investor’s choice. Some sets of arbitration rules may in fact be silent on some of the issues related to confidentiality, including the publication of the award. As a result, the ultimate answer may not be clearly apparent

balance between independence and deference that permits states to develop a level of comfort with international review and to become habituated to complying with unfavorable outcomes in specific cases. Only later will a more assertive approach be feasible […]”. L. R. Helfer “Adjudicating Copyright Claims under the TRIPs Agreement: the Case for a European Human Rights Analogy” (1998) 39 Harv. Int’l L.J. 357 at 410. Note that the process of institutionalisation need not be deliberate or even self-conscious. It is arguable that a ban on publication would not be sufficient to prevent institutionalisation entirely, since the lawyers and arbitrators involved in arbitration have always informally shared a certain amount of information otherwise deemed confidential. 24

In the case of NAFTA, for instance, if Canada or the United States are involved, either the state or a disputing investor that is a party to the arbitration may make an award public; if Mexico is the disputing state, the applicable arbitration rules apply to the publication of an award: Annex 1137.4 NAFTA. 25

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in some cases. In terms of award publication, a distinction may be made between the publication of the full text of an award and the publication of anonymous and redacted excerpts. The practice of the ICC in this respect has been to assume the right to publish anonymous, redacted excerpts unless one of the parties requests that this should not be done. The UNCITRAL Rules of Arbitration provide for private hearings but are otherwise silent on the issue of confidentiality.26 This has understandably prompted many to turn to “general principle”, a strategy that has yielded limited results in terms of certainty.27 The ICSID Rules require the consent of both parties for publication of the award.28 The Additional Facility Rules, however, allow for “excerpts of the legal rules applied by the tribunal” to be published without such consent.29 These numerous possible configurations have in practice generated a fairly high rate of award publication in the area of investment protection. In fact, the proportion of awards that get published, at least in excerpts, is quite likely higher than that which any system of court reporting had ever allowed before the age of electronic reporting.30 The particular issue of award publication, therefore, has not been central to the debates over legitimacy. The area where concerns as to legitimacy have been voiced most convincingly lies upstream of the award, where well-informed, civil-society input could influence outcomes in pending cases and ultimately help shape case law. This is where the public interest argument hits home, and where rules imported from the commercial arbitration model really need revisiting. Investment disputes submitted to arbitration very often concern important issues that have a public dimension. Some cases have a direct impact on public schemes and programmes adopted in the public interest by legislatures. Interpretations of treaty standards by arbitral tribunals can have a “chilling effect” upon democratically elected governments and legislatures, who might refrain from adopting certain programmes for fear of having to pay compensation following international review by an

Arbitration Rules of the United Nations Commission on International Trade Law, GA Res. 31/98, UN GAOR, 3rd Sess., VIII Yearbook 7 (1976), art. 25.4. 26

See generally H. Bagner, “Confidentiality – A Fundamental Principle of International Commercial Arbitration?” (2001) 18 J. of Int’l Arb. 243; L. Y. Fortier, “The Occasionally Unwarranted Assumption of Confidentiality” (1999) 15 Arb. Int. 131. 27

ICSID Rules of Arbitration, art. 48(5); ICSID Additional Facility Rules of Arbitration, art. 53(3). 28

29

ICSID Additional Facility Rules of Arbitration, art. 53(3).

One should bear in mind, however, that traditional court reporting involves a selection of cases based on the value to lawyers and judges of each decision, whereas awards get published based on reasons that might have nothing to do with their interest to the legal community. 30


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arbitral tribunal. Other cases might involve review of a judicial process under international law standards pertaining to denial of justice. That public interests are at issue in many of the investment arbitration cases is not in doubt. What is controversial is how this should influence the rules regulating information flows in that context. The questions revolve around the information that needs to be made public and the possibility for third parties to provide input to investment tribunals. North American Free Trade Agreement (NAFTA) tribunals had many opportunities to reflect upon the application of the rules and principles of international commercial arbitration in the mixed context of investment arbitration. They were systematically sympathetic to the public interest argument when defining the contours of the duty of confidentiality. The tribunal in the Loewen case, for example, was not prepared to recognise a general obligation of confidentiality that might deprive civil society of information that should be public: “In an arbitration under NAFTA, it is not to be supposed that, in the absence of express provision, the Convention or the Rules and Regulations impose a general obligation on the parties, the effect of which would be to preclude a Government (or the other party) from discussing the case in public, thereby depriving the public of knowledge and information concerning government and public affairs.”31 The decision echoed the negative findings in Metalclad 32 about the existence of a general duty of confidentiality, as well as those in Methanex, which decided there was no general duty of confidentiality to be found in NAFTA, the ICSID Additional Facility Rules, or in the UNCITRAL Rules.33 The conclusion that there is no general duty of confidentiality is more controversial with respect to the UNCITRAL Rules, which were designed and are generally being used for the resolution of commercial cases, than it might be with respect to the ICSID Rules of Procedure, which were designed for investment arbitration. The S.D. Myers tribunal’s decision was justified in introducing a distinction between the case of investment

The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, Decision on Respondent’s Objection to Competence and Jurisdiction, 5 January 2001, ICSID Case No. ARB(AF)/98/3 [Loewen], available online at at p. 26. 31

Metalclad Corporation v. the United Mexican States [Metalclad], Award, 30 August 2000, NAFTA/ICSID (AF), 40 (2001) ILM 55. Also available online at at p. 13. 32

33 Methanex Corporation v. United States of America [Methanex] (Decision of the Tribunal on Petitions from Third Persons to Intervene as “Amici Curiae”), (2001), (UNCITRAL), online at .

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arbitration and the situation that generally prevails in purely private commercial arbitration: “[…] whatever may be the position in private consensual arbitration between commercial parties, it has not been established that any general principle of confidentiality exists in an arbitration such as [this …]. The main argument in favour of confidentiality is founded on a supposed implied term in the arbitration agreement. The present arbitration is taking place pursuant to a provision in an international treaty, not pursuant to an arbitration agreement between the disputing parties.”34 But a purposive and functional approach might have been preferable. Reliance on the non-existence of an arbitration agreement is arbitrary to the extent that investment arbitration sometimes does involve a contract, and because in any event the consent of a state given by treaty and taken up through the filing of a claim by an investor can very well be taken to constitute an arbitration agreement. A purposive and functional approach would have taken the whole context into account in deciding the issue of confidentiality, including the question of whether public interests are at stake. Be that as it may, the Free Trade Commission issued a joint note in 2001 which confirmed that NAFTA does not impose a general duty of confidentiality.35 The three NAFTA countries also agreed to make available to the public all documents submitted to, or issued by, a Chapter 11 tribunal, subject to redaction of information that is privileged under the state party’s domestic law, confidential business information, and information which the parties must withhold pursuant to the governing arbitration rules.36 Again, a purposive and functional approach to the interpretation of the governing arbitration rules would take account of whether public interests are at stake.37 Availability of information is, in and of itself, important in piecing together the elements of legitimacy. It is certainly crucial in terms of traditional political legitimacy: civil society must have access to information that

In the matter of a NAFTA Arbitration Under the UNCITRAL Arbitration Rules between S.D. Myers, Inc. and Canada, Procedural Order No. 16, 13 May 2000 at 8. 34

Note of Interpretation of Certain Chapter Eleven Provisions, NAFTA Free Trade Commission, 31 July 2001; available online: Canadian Department for Foreign Affairs and International Trade . 35

36

Idem., section A 2 b).

Contextual interpretation is all the more important given that the rules are mostly silent on this issue. 37


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institutionally informs and shapes public policy – and investment arbitral decisions do just that. But the instrumental value of the information is even more important when considering the legitimacy of the process itself. The information has instrumental value in that it enables civil society to participate in the decision-making process; it enables civil society to provide valid, well-informed input to the process. The information, in other words, can only realise its full value potential if non-disputing parties are allowed, somehow, into the arbitral procedure. Again, NAFTA Chapter 11 tribunals had many occasions and were put under some pressure to consider the question of amicus curiae submissions. Two tribunals constituted under the UNCITRAL Rules considered that they had discretion to accept written submissions by amici.38 These decisions were based on Article 15(1) of the UNCITRAL Arbitration Rules, which, like similar provisions in most international arbitration rules, empowers the tribunal to conduct the procedure in such a manner as it considers appropriate, subject to overriding considerations of procedural justice.39 What is interesting in the approach is that the issue is analysed in terms of procedural discretion. The tribunal in UPS, quoting the decision in Methanex, concluded that permitting amicus submissions was “a matter of its power rather than of third party right.”40 It was a question of facilitating the tribunal’s “process of inquiry into, understanding of, and resolving, that very dispute which has been submitted to it in accordance with the consent of the disputing parties.”41 On 7 October 2003, the NAFTA Free Trade Commission issued a statement along the same lines, supporting the power of Chapter 11 tribunals to grant applications for written amicus submissions and setting out a process for tribunals to follow in dealing with such applications.42 The position under NAFTA is thus aligned with that under the WTO dispute settlement mechanism, which, indirectly, also allows tribunals to receive amicus curiae submissions.43

The cases are Methanex, supra note 33, and United Parcel Service of America Inc. v. Government of Canada [UPS] (Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae), (17 October 2001), available online at . 38

The relevant provisions in the ICSID Rules would be Article 44 for the ICSID Rules and Article 35 for the Additional Facility Rules. 39

40

UPS, supra note 38, at 61.

41

Ibid. at 60.

Statement of the Free Trade Commission on non-disputing party participation, 7 October 2003; available online: Canadian Department for Foreign Affairs and International Trade . 42

United States – Import Prohibition of Certain Shrimp and Shrimp Products, (1998) WTO Doc. WT/DS58/AB/R (Appellate Body Report) 103-07. 43

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The overall result is one of greater transparency and broader-based deliberations informed by a larger constituency, a sense of public debate within the narrow meaning of public interest adjudication.44 What are the consequences of this development on the phenomenon of institutionalisation? As already pointed out, the fear of institutionalisation in treaty-making is a fear of new, diffuse sources of legitimacy being created. Adjudicative institutionalisation today is just as important as the legislative and executive aspects of institutionalisation which are so carefully avoided in treaty-making. Adjudicative institutionalisation creeps in even where adjudicative power rests in ad hoc tribunals using rules that preserve a certain amount of secrecy. For civil society to gain access to information produced in investment arbitration proceedings is a net improvement in terms of traditional political legitimacy. Again, civil society must have access to information that institutionally informs and shapes public policy in a particular country. But for civil society to provide input to investment tribunals is another matter altogether. It is a matter of public participation in the decisionmaking process, justified because the decisions involve public interests. It is a matter not only of providing valuable input – a perspective which the disputing parties might not bring – but also of generating direct and independent legitimacy for the tribunal, the process, and ultimately the institution. This legitimacy is independent of that generated by the institutions of the countries involved. It is not channelled through the state that signed the investment protection treaty. It is self-standing. And it entrenches the creeping institutionalisation of investment arbitration. The tribunal in Methanex put it clearly: “the Chapter 11 arbitration process could benefit from being perceived as more open or transparent; or conversely be harmed if seen as unduly

I leave aside the issue of open hearing, which in my view has great symbolic significance but is of limited practical interest. The issue turns on the governing rules and the agreement of the parties. Of note in this context is the “Statement of Canada on Open Hearings in NAFTA Chapter Eleven Arbitrations”: “Having reviewed the operation of arbitration proceedings conducted under Chapter Eleven of the North American Free Trade Agreement, Canada affirms that it will consent, and will request the consent of disputing investors and, as applicable, tribunals, that hearings in Chapter Eleven disputes to which it is a party be open to the public, except to ensure the protection of confidential information, including business confidential information. Canada recommends that tribunals determine the appropriate logistical arrangements for open hearings in consultation with disputing parties. These arrangements may include, for example, use of closed-circuit television systems, Internet webcasting, or other forms of access.” Available online: Canadian Department for Foreign Affairs and International Trade �. 44


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secretive. In this regard, the Tribunal’s willingness to receive amicus submissions might support the process […] whereas a blanket refusal could possibly do harm.”45 A debate is currently raging concerning the need for appeal mechanisms in investment arbitration. In reflecting upon the need for more coherence and more certainty in the decisions of investment tribunals, it is well to bear in mind that the establishment of an appeal mechanism, ad hoc or otherwise, would be another step toward the institutionalisation of investment arbitration.46

45

Methanex, supra note 33, at 49.

See generally “ICSID Discussion Paper on Possible Improvements to the Investment Arbitration Framework”, available online: World Bank ; “Enforcement, Review and Appeal Mechanisms in Investor-State Dispute Settlement: Background Note by the OECD Secretariat”, OECD Directorate for Financial and Enterprise Affairs, Fall 2004. 46