Everlasting Discussion of Reform on ISDS’s Ad Hoc Arbitration Mechanism: Problems and Suggestions

Ahmet Dulger

Law Department - Law School - Ibn Haldun University - Istanbul - Turkey

Abstract

It is possible for a search on global effort to unify the rules governing international investment law and to have more systematic dispute settlement system. I am relatively optimistic about a comprehensive global approach in order to improve the current Investor-State Dispute Settlement (“ISDS”) mechanism. However, this global approach would not be the multinational investment agreement. Considering the current political atmosphere, neither of the globally active actors are able to lead a successful initiation for a global investment treaty. On the other hand, regional agreements for establishing a permanent investment court system would be possible. A permanent investment court mechanism is necessary for building an effective, legitimate, and transparent judicial system in the ISDS. Further, an Appeal Tribunal will help correcting the legal errors and securing the consistency between arbitral awards for the similar issues of investment law. It is also argued that, opposed to the European Union (“EU”) Transatlantic Trade and Investment Partnership (“TTIP”) Proposal, the investment law must keep its ad hoc arbitration system in order to respond the unique needs of each dispute. Preserving the flexibility of ad hoc tribunals has its own constructive results, while a permanent court will definitely be a cornerstone to achieve the goal of harmonizing international investment law. This Paper aims to analyze the discussions on ISDS reform initiatives through the motivation behind and the efforts to create a multilateral investment court (“MIC”). Problems of ICSID and ad hoc arbitration will be presented in the first section. Current ISDS mechanism suffers mostly from the problems of contradictory arbitral decisions, the double hat dilemma, apparent bias of arbitrators, and lack of stare decisis. In addition to these, investor’s access to arbitration and the concerns for transparency of proceedings and accountability of arbitrators will be the main issues to be presented through jurisprudence. Second section discusses the efforts for the establishment of a permanent investment court by the examples of the EU TTIP Proposal, the Organisation of Islamic Cooperation (“OIC”) Investment Agreement, and the CETA investment court system. As the TTIP negotiations were ended without conclusion at the end of 2016 and abolished by a Council decision in 2019 which reveal that the protocol is obsolete, EU should look for new negotiations. On 30 April 2019 Court of Justice of the EU approved CETA investment court system which means that the Court gave the European Commission a green light for creating a permanent MIC. The negotiations of UNCITRAL working group III which enhances the discussions and preparation for understanding of establishing such system will also be examined. Another subsection will be reserved for the text of a draft investment protocol for the OIC Investment Dispute Settlement Organ. The protocol which is anticipated to be adopted in March 2020 will provide a long awaited institution for ISDS among the OIC Members. Therefore, this Paper will demonstrate that MIC system is at the core of discussions regarding a reform on ISDS and these instruments represent significant contribution to the institutional development phases of ISDS.

Keywords

Investment arbitration, multilateral investment court, ICSID, EU, Transatlantic Trade and Investment Partnership, Organisation of Islamic Cooperation, Investor-State Dispute Settlement