#icsid arbitration

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Investor’s Consent to ICSID Arbitration Under Côte d’Ivoire’s Investment Code

A request for acceptance of the investment constitutes valid evidence of the investor’s consent to ICSID arbitration under Côte d’Ivoire’s Investment Code. This is the finding of the arbitral tribunal in an ICSID arbitration initiated by an Ivoirian company, Société Resort Company Invest Abidjan, and two French nationals, Stanislas Citerici and Gérard Bot, against the Republic of Côte d’Ivoire. The arbitration was initiated on the bases of the 2012 Investment Code of Côte d’Ivoire.

According to Article 20 of the Investment Code the investor’s consent to ICSID arbitration must be expressed at the time when the investment is made.

“Le consentement des parties à la compétence du CIRDI ou du mécanisme supplémentaire, selon le cas, requis par les instruments les régissant est constitué, pour la République de Côte d’Ivoire par le présent article, et exprimé expressément dans la demande d’agrément pour la personne concernée.”

The parties agreed that the investor’s consent to ICSID arbitration under Côte d’Ivoire’s Investment Code could not be expressed simply by filing a request for arbitration as is often the case under bilateral investment treaties (“BIT’s”.

The investors argued that a foreign national’s filing of a request for acceptance of the investment (“demande d’agrément”) was sufficient to manifest their consent to ICSID arbitration; whereas Côte d’Ivoire argued that the foreign investor must expressly record its consent to ICSID arbitration in the request for acceptance itself. Both parties agreed that no express mention of ICSID arbitration is to be found in the actual request for acceptance filed by the investors and that there was no express reference to the possibility of ICSID arbitration in the model request for acceptance published by the responsible national authority of the hosting State.

The arbitral tribunal composed of Zachary Douglas, Yves Fortier and Kaj Hobér found that the investor expressed its consent to ICSID arbitration under Côte d’Ivoire’s Investment Code in its request for acceptance which was accepted by the State authorities.

“154. … a valid and binding arbitration agreement for the purpose of Article 25 of the ICSID Convention came into force when the ‘Centre de Promotion des Investissements de Côte d’Ivoire’ approved the ‘demande d’agrément’ filed by the Claimants. Article 20 of the Code records the Respondent’s prospective consent to ICSID arbitration but a valid and binding ICSID arbitration agreement comes into force only if two conditions are satisfied: first, the putative investor must file a ‘demande d’agrément’ and, second, that ‘demande d’agrément’ must be approved by the Centre de Promotion des Investissements.”

The arbitral tribunal also noted that the lack of clarity of Article 20 regarding the investor’s consent to ICSID Arbitration under Côte d’Ivoire’s Investment Code can be corrected by Côte d’Ivoire so that prospective investors will be in no doubt as to manner in which they are to convey their consent to ICSID arbitration. Differently from a BIT, the investment code is a unilateral act that can be easily modified by the host State alone.

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Transparency in Investment Arbitration

Transparency in Investment Arbitration: Entry into Force of the Mauritius Convention

On 18 April 2017 Switzerland became the third UN Member State to ratify the 2015 United Nations Convention on Transparency in Treaty-Based Investor-State Arbitration (“The Mauritius Convention”). The Mauritius Convention reaffirmed the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (UNCITRAL Rules), and extended their applicability across all new investment arbitrations (ICSID, SCC, UNCITRAL etc.).

According to Article 9, the Convention would enter into force six months after the third UN Member State ratification. Therefore, following Switzerland’s ratification the UNCITRAL Rules will apply on all treaty-based investment arbitrations registered after 18 October 2017.

The initiative for transparency in investment arbitration initially came as an answer to the backlash against investment arbitration, namely the argument that important State interests, cannot be adjudicated in private. The UNCITRAL Rules incorporated procedural provisions, which try to make investment arbitrations more easily accessible to the public (publication of arbitration documents, access to hearings, amicus curiae submissions etc.). [see our previous reporting on the rules] Taken as a whole, they could drastically alter a traditional feature of investment arbitration, confidentiality.

However, whether the UNCITRAL Rules can actually introduce transparency in investment arbitration and address the proclaimed problem, is uncertain. Indeed, a number of features hint that this might have been a flamboyant, but rather hollow, political move. First, the UNCITRAL Rules apply only to treaty-based investment arbitrations, excluding those under national laws or contracts. Second, several broadly drafted provisions ensure that parties may still exclude “confidential or protected” information from the public.

In addition, while initially enthusiastic, States seem unwilling to participate in the Mauritius Convention. Following Switzerland’s ratification, only three States are now full parties (Mauritius, Switzerland and Canada), while eighteen remain mere signatories.

According to Article 2(2) of the Mauritius Convention, which relates to the unilateral offer of application of the UNCITRAL Rules (“[in investment arbitrations] where the respondent is a Party that has not made a reservation relevant to that investor-State arbitration under article 3(1), and the claimant agrees to the application of the UNCITRAL Rules on Transparency”). In light of this, it will be interesting to observe if and to what extent parties will be willing to apply the Mauritius Convention and introduce transparency in investment arbitration.

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International Arbitration at the Kuala Lumpur Regional Centre for Arbitration

The Kuala Lumpur Regional Centre for Arbitration (KLRCA) was launched in 1978 by the Asian African Legal Consultative Organization.

While the Hong Kong International Arbitration Center, the China International Economic and Trade Arbitration Commission and the Singapore International Arbitration Centre constitute the main arbitral institutions in the region, institutions such as the Kuala Lumpur Regional Centre for Arbitration in Malaysia are increasingly active.

Since its first arbitration, the number of cases administered at the KLRCA has constantly increased. According to the KLCRA 2016 Annual Report, the Centre for Arbitration registered 62 new arbitration cases, mostly domestic. Most of the claims concerned construction, engineer, infrastructure, architecture and design-related matters. The average duration of international arbitration proceedings was of 10.84 months. Average total costs were USD 53,059.96 with an average of USD 42,708.94 per arbitrator and an average of 10,351.42 for administrative fees.

The KLCRA is also an alternative hearing venue for the International Centre for the Settlement of Investment Dispute. The two Centres signed a Memoradum of Understanding in 2014. Moreover, pursuant to the provisions of the ASEAN Comprehensive Investment Agreement, parties can refer their disputes under this Agreement to the KLRCA.

The KLCRA Arbitration Rules

The KLCRA Rules consist of the KLCRA Arbitration Rules, the UNCITRAL Rules as amended in 2013, and the Schedules. The KLCRA Rules were amended earlier this year to improve the efficiency and quality of the arbitration proceedings administered by the Centre. The 2017 version of the Rules applies to arbitration commenced on 1 June 2017 unless otherwise decided by the parties.

1. The Request for Arbitration

Pursuant to the KLCRA Arbitration rules, the arbitration agreement must be in writing. The 2017 version of KCLRA rules includes a model clause and submission agreement.

The arbitration commences once the party initiating the arbitration files its request in writing along with required documentation in KLCRA Arbitration Rule 2 and the USD 795.00 registration fee for international arbitration proceedings. A different fee applies for domestic proceedings.

2. The Joinder of Third Parties

Since the amendments of 2017, third parties may also join arbitration proceedings. The third party will have to submit a response within 15 days to the arbitration tribunal or, if not constituted, to the Director of the Centre.

3. Constitution of the Arbitral Tribunal

The parties are free to determine the number of arbitrators. However, for international arbitration, if the parties fail to decide, the default number is three arbitrators. In that case, each party will pick an arbitrator and the two arbitrators will choose the presiding arbitrator. If they fail to do so within 30 days, the Director will appoint him or her. In the event the parties agreed on a sole arbitrator and if they fail to do so within 30 days, the Director will proceed to his or her appointment.

5. Challenge of Arbitrators

Under the KLRCA arbitration rules a party may challenge an arbitrator when there are justifiable doubts as to their impartiality and independence or when the arbitrator “does not possess any requisite qualification on which the parties agreed.” In international arbitration proceedings, the challenging party must also pay a fee of USD 5,300.00.

6. Interim measures

The arbitral tribunal has the power to grant interim measures if a party so requests. The KLRCA rules also allows a party to request urgent interim measures prior to the constitution of the tribunal. In that case, the party must submit a request to appoint an emergency arbitrator as provided in the Schedule 3 of the KLRCA rules.

7. The Award

The arbitrator(s) must submit the final draft of the award for “technical review” to the Director of the Center within 3 months of the closing of the proceedings. If the Director finds an irregularity, the arbitral tribunal must correct it within ten days.

It is worth noting that the KLCRA also offers fast track arbitration proceedings for parties seeking fast (with a maximum of 160 days) and cost-effective proceedings. For international arbitration, commercial disputes with an amount in dispute of less than USD 75,000 will be subject to document-only arbitration unless otherwise decided.

Finally, the Centre also provides arbitration rules for commercial disputes based on Islamic principles. Thus, the proceedings and the award will in principle comply with the specificity of the Shariah.

Céline Pommier, Aceris International Arbitration Law Firm

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Provisional Measures in ICSID Investment Arbitration

The International Centre for the Settlement of Investment Disputes (ICSID) Convention allows parties to an ICSID arbitration to request provisional measures from arbitral tribunals. Provisional measures are frequently requested in the course of arbitrations, and the ICSID has compiled a comprehensive table with past requests for provisional measures, showing when requests for provisional measures in ICSID investment arbitration were granted and when they were rejected.

According to Article 47 of the ICSID Convention, arbitral tribunals are vested with the power to grant “any” provisional measures which they deem necessary.

“Except as the parties otherwise agree, the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken to preserve the respective rights of either party.”

Any such order that a tribunal makes is considered binding, despite the use of the word “recommend” in the text of the Convention.[1]

In addition, Rule 39 of the ICSID Arbitration Rules lays out the procedure for granting provisional measures in ICSID investment arbitration. An application to a tribunal must include the rights the party is seeking to preserve, the types of measures requested and the circumstances that make them necessary.

“(1) At any time after the institution of the proceeding, a party may request that provisional measures for the preservation of its rights be recommended by the Tribunal. The request shall specify the rights to be preserved, the measures the recommendation of which is requested, and the circumstances that require such measures.

(2) The Tribunal shall give priority to the consideration of a request made pursuant to paragraph (1).

(3) The Tribunal may also recommend provisional measures on its own initiative or recommend measures other than those specified in a request. It may at any time modify or revoke its recommendations.

(4) The Tribunal shall only recommend provisional measures, or modify or revoke its recommendations, after giving each party an opportunity of presenting its observations.

(5) If a party makes a request pursuant to paragraph (1) before the constitution of the Tribunal, the Secretary-General shall, on the application of either party, fix time limits for the parties to present observations on the request, so that the request and observations may be considered by the Tribunal promptly upon its constitution.

(6) Nothing in this Rule shall prevent the parties, provided that they have so stipulated in the agreement recording their consent, from requesting any judicial or other authority to order provisional measures, prior to or after the institution of the proceeding, for the preservation of their respective rights and interests.”

ICSID tribunals have accepted that, in order to be able to grant provisional measures pursuant to Article 47 and Rule 39, they must be satisfied that they have prima facie jurisdiction to hear the case. This assessment will not, however, prejudice their findings on jurisdiction in later stages of the dispute.

Furthermore, the threshold for granting provisional measures of any kind is usually high and tribunals are guided by the principles of urgency and necessity in their assessment of whether the circumstances warrant the requested protection to prevent irreparable harm to the rights of the party.

Provisional measures may take any form that the parties request or the tribunals consider appropriate. Among others, these may be measures that ensure the preservation of evidence, or provide for security for costs.

A controversial category of provisional measures includes measures ordering States to halt judicial proceedings against the investors in their jurisdiction. Such orders not only limit a State’s legitimate exercise of sovereignty, but at the same time arguably constitute an affront to the separation of powers, since they may involve an interference by the executive into judicial matters. In fact, a recent ICSID tribunal, when requested to order the cessation of criminal investigations in the Respondent State, declared that it lacked the ability to make such an order, considering that no convincing evidence of bad faith on the part of the Respondent State had been presented.[2] This decision is reproduced below.

Despite the high threshold required, provisional measures in ICSID investment arbitrations are an important tool for both investors and Respondent States, as they can guarantee both parties’ cooperation during the arbitration, safeguard the parties’ interests and help to ensure compliance with an eventual award.

Anastasia Choromidou, Aceris Law

Download the PDF file .

[1] Emilio Agustin Maffezini v The Kingdom of Spain, Procedural Order No 2, 28 October 1999, para. 9, available at https://www.italaw.com/sites/default/files/case-documents/ita0477.pdf.

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Enforcement of an ICSID Arbitration Award in the United Kingdom and EU Law

The enforcement of an ICSID investment arbitration award in the United Kingdom can be a complex matter, especially when doing so would arguably violate EU law.

In January 2017, the UK High Court delivered a judgement to stay enforcement proceedings of the final ICSID award in the case of Ioan Micula and others v Romania, following a request by Romania and the EU Commission to do so.

Among the many interesting EU and investment law questions that the Court considered, it notably had to strike a balance between two sets of international obligations that were incumbent on the UK: the UK’s obligations under the ICSID Convention and the UK’s obligations under EU law.

By way of background, under EU law, State aid to commercial entities is prohibited, which is why Romania was required to cancel a series of tax incentives, in preparation for its accession as a member State of the EU in 2007. This cancellation gave rise to the investment dispute in question, which was brought under the Sweden-Romania BIT and resulted in an ICSID arbitration tribunal finding that Romania had failed to respect the investors’ legitimate expectations and to safeguard their fair and equitable treatment. Because of the EU law issues that arose (including those concerning infra-EU BITs), the EU Commission participated in the arbitration as amicus curiae, where it raised, among others, issues concerning the enforceability and compatibility of an eventual award with EU law. The problem with enforcement lay in the fact that, should Romania be required to compensate the investors, as the award ultimately found, it was alleged that this would in itself constitute illegal State aid in breach of EU obligations.

After the award was rendered against Romania, it unsuccessfully sought its annulment. In the meantime, the European Commission also issued a Final Decision and an Injunctive Order, which prohibited Romania from paying the award. The investors are seeking to annul the Commission’s decision at the Court of Justice of the EU (CJEU).

Following the Injunctive Order, the investors sought enforcement of their arbitration award in the UK, where they registered the final award at the High Court pursuant to Section 1(2) of the Arbitration (Investment Disputes) Act of 1966, which implements the obligations contained in Article 54 of the ICSID Convention. In response, Romania and the European Commission requested that the Court either set aside the Registration Order or, in the alternative, stay enforcement proceedings pending the CJEU’s decision.

The High Court thus had to decide upon two potentially conflicting obligations. First, the obligation under Article 54 of the ICSID Convention, which requires that the UK recognize and enforce an award as if it were a final judgement of its own courts. Second, the UK’s obligation under EU law, under which the Court has discretion to stay proceedings, so as to reduce the risk of arriving at conflicting outcomes with EU institutions, when there are ongoing domestic proceedings.

The High Court refused to set aside the Registration Order, on the basis that there was no risk of conflicting outcomes with EU institutions in allowing the registration of the award. This was for two reasons. First, the Injunctive Order was addressed to Romania and prohibited it from payment of the award only. A contrario, there was no prohibition to the investor’s actions to enforce the award. Second, it drew a distinction between the registration of an award with the High Court and its enforcement. As the Court indicated “[r]egistration is not necessarily a precursor to execution, though it may lead to it”.[1] Since only the latter would be illegal State aid, it ruled, there was no need to set aside the registration.

In order to decide whether it could and should stay proceedings, the Court then looked into the legal status of a registered award. The 1966 Act itself contains no grounds for refusing or staying enforcement. Instead, a registered award “is equated to a final domestic judgment for these purposes, but is not in a better (or worse) position” and its enforcement is subject to the same law applicable to enforcing a judgement of the High Court, including EU law.[2] Therefore, because of the Commission’s dictum about illegal State aid, the High Court found that it could not, at this point, allow enforcement. Additionally, it found that because of the pending CJEU decision on annulment, there was a “material risk of conflict” with that decision.

Under its reading of the law there would be no conflict or breach of the UK’s international obligations by allowing Registration but staying the proceedings.[3] Since Article 54 of the ICSID Convention does not entail the ‘automatic’ enforcement of an award, but simply requires States to subject final awards to the same conditions of enforcement as national judgements, this obligation was implemented by the mere fact of the award’s registration at the High Court. In staying proceedings, the Court did not violate the ICSID Convention, but complied with the additional conditions of EU law, as it would have done for any other national judgement.

Interestingly, the High Court did not exclude the possibility of making the stay of enforcement provisional upon the granting of security by Romania. Instead, it withheld its decision on this issue until an additional hearing on the matter took place.

With this position, the High Court managed to navigate around the issue of conflict between EU and investment law, by finding a way to facially comply with both sets of obligations.

The distinction the High Court drew between registration and enforcement of an ICSID investment arbitration award highlights that investors seeking enforcement in the UK should be wary of the legal regime of enforcing national judgements, which may be impacted by other international obligations incumbent on the enforcing forum.

Anastasia Choromidou, Aceris Law

[1] Micula & Ors v Romania & Anor [2017] EWHC 31 (Comm) (20 January 2017), para. 125, available at: http://www.bailii.org/ew/cases/EWHC/Comm/2017/31.html.

[2] Ibid, at para. 129.

[3] Ibid, at para. 132.

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ALAPLI ELEKTRIK B.V. V. REPUBLIC OF TURKEY (ICSID CASE NO: ARB/08/13) - DECISION ON ANNULMENT OF 10 JULY 2014

The ICSID case Alapli Elektrik B.V. v. Republic of Turkey concerned a concession to develop, finance, own and operate a power plant in Turkey.

The dispute was governed by the ICSID Convention, the Energy Charter Treaty (the “ECT”) and the Agreement of Reciprocal Encouragement and Protection of Investments between the Kingdom of the Netherlands and the Republic of Turkey of March 27, 1986 (the “BIT”).

During the bidding process, the Claimant had allegedly relied on a national law that experienced significant changes resulting in a loss of its investment and a violation of the ECT and BIT.

The Tribunal ruled that it lacked jurisdiction under both the ECT and the BIT, however, without examining the merits of the case.

As a result, the Claimant filed for annulment of the award on the grounds of a serious departure from a fundamental rule of procedure (Article 52 (1) (d) of the ICSID Convention), a failure to state reasons (Article 52 (1) (e) of the ICSID Convention) and a manifest excess of powers (Article 52 (1) (b) of the ICSID Convention). An ad hoc Committee was then constituted to consider the award’s annulment.

First, regarding the alleged serious departure from a fundamental rule of procedure, the committee ruled in the negative. In order for a challenge to be upheld, there must be (i) a deprivation of a party’s benefit or protection and (ii) it must have a material effect on the outcome of the dispute. The Committee ruled that the arbitral tribunal’s award did not violate Article 48(1) of the ICSID Convention, which only requires the majority of the votes of the members of the arbitral tribunal, as was the case (paras. 157-185).

Second, relying on both MINE v. Guinea and Vivendi I, the Committee ruled that there was no violation of Article 52(1)(e) of the ICSID Convention because the award allows readers to comprehend and follow its reasoning (paras. 197-199) and, even if the arbitrators’ reasoning were different, which is allowed by the ICSID Convention, the reasoning was in any event complementary (paras. 212-214).

Third, in order for a violation of Article 52(1)(b) of the ICSID Convention to be upheld, there must be a manifest excess of powers that is obvious, plain or evident. Here, the Committee found that the arbitral tribunal applied the correct law to the dispute and thus dismissed the challenge (paras. 234-257).

Therefore, the Committee dismissed the claim for annulment of the award under

Articles 52(1)(b), 52(1)(d) and 52(1)(e) of the ICSID Convention (paras. 258‐265).

Such an outcome is unsurprising from a statistical perspective: between 1971 and 2000, 13% of awards were annulled, which fell to 8% of awards being annulled between 2001 and 2010, which has fallen even further since this date.

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OPIC KARIMUM CORPORATION V. THE BOLIVARIAN REPUBLIC OF VENEZUELA (ICSID CASE No. ARB/10/14) - DECISION ON THE PROPOSAL TO DISQUALIFY PROFESSOR PHILIPPE SANDS, ARBITRATOR, MAY 5, 2011

This decision concerns the rejection of a challenge to the arbitrator Professor Phillipe Sands, who had been appointed by Respondent, the Bolivarian Republic of Venezuela.

The challenge was made by Claimant on the basis that Phillipe Sands had been appointed previously by Respondent, and also previously by Respondent’s counsel, as arbitrator in ICSID and non-ICSID cases, and that these previous appointments created not only a potential for undue influence and unfair advantage, but also suggested an ongoing professional and business relationship between Phillipe Sands and Respondent and Respondent’s counsel, so as to create a manifest lack of independence and impartiality.

The two other members of the Arbitral Tribunal denied the Claimant’s request for disqualification. They held that there is a “relatively high burden” in challenging an ICSID arbitrator, that only a small number of cases had been based upon multiple appointments and that a manifest lack of independence must be established clearly and objectively in order for a challenge to succeed.

The Arbitral Tribunal disagreed with the ruling in Tidewater v. Bolivarian Republic of Venezuela that multiple appointments as arbitrator by the same party in unrelated cases was a neutral factor in considerations relevant to a challenge, however. To the contrary, the Arbitral Tribunal stated that in this context, multiple appointments by counsel or a party of an arbitrator was not a neutral factor but constituted a consideration that must be carefully considered in the context of a challenge, and that this consideration must be considered objectively as multiple appointments may lead to the conclusion that the arbitrator cannot be relied upon to exercise independent judgment (Decision, p. 18, para. 50).

In the case at hand, the Arbitral Tribunal noted that there were two previous appointments of Philippe Sands by Respondent. These were in two cases involving similar facts, in one of which the Tribunal was not constituted and in another that was rejected on jurisdictional grounds. There were also two appointments by Respondent’s counsel, Curtis, Mallet-Prevost, Colt & Mosle LLP, in “unrelated cases involving Turkmenistan” (where Philippe Sands was also unsuccessfully challenged).

The Arbitral Tribunal found that neither of these multiple appointments established the required “manifest” lack of independence by Professor Sands.

The Arbitral Tribunal also rejected Claimant’s arguments on the Suez criteria, and concluded that the proposal for disqualification submitted by Claimant must be dismissed.

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From International Investment Arbitration to an Investment Court System

Will an Investment Court System be better than the current arrangements for International Investment Arbitration? The EU and Canada appear to think so.

In the recently-approved and signed Comprehensive Economic and Trade Agreement between the European Union (EU) and Canada, a different approach to International Investment Arbitration is being put forward by the EU and its Member States for the resolution of Investment Disputes. This is the controversial proposal to establish a Permanent Multilateral Investment Court System.

The word ‘Court’ does not appear in CETA, which, instead, envisages dispute resolution first by a Bilateral ‘Tribunal’, until the parties establish a Multilateral ‘Tribunal’. CETA copies the wording of the proposal for an Investment Court System which first appeared elsewhere, notably in the still-negotiated Transatlantic Trade and Investment Partnership between the EU and the US. It has also been incorporated in the EU-Vietnam Free Trade Agreement.

Even though CETA has been signed (and ratifications are pending), this part of the Investment Chapter is still debated. This evidences the highly controversial nature of the proposal. In fact, Canada and the EU have just concluded talks with about 40 other countries in Geneva regarding a permanent Investment Court System.

The proposal contains “guarantees” such as a centralised appeals mechanism, transparency provisions, permanent judges, etc., that will supposedly ensure that the sensitive subject matter, often dealt with in Investment Arbitration, is properly handled by a more “legitimate” body than ad-hoc arbitral tribunals.

Additionally, the Investment Court System will aim to ensure that issues like abuse of process and conflicts of interests of arbitrators, allegations of which are frequently made in investment arbitrations, will be resolved through provisions on ethics (e.g., a prohibition of ‘double hatting’), qualifications and the random assignment of judges. It also has some interesting provisions such as disclosure as the disclosure of third-party funding by investors.

On the other hand, this proposal generates a number of practical and legal problems, which the investment arbitration community is cautious about. The Investment Court System would lessen certain attractive features of arbitration such as confidentiality (already somewhat diminished for UNCITRAL arbitrations) and party autonomy in appointing adjudicators, while raising questions about costs, the duration of procedures and financing a new institution. The key question of “who decides who decides” has been resolved in a manner that may also be inconsistent with the interests of both Parties. The average ICSID arbitration already costs in excess of USD 8 million, and with an Appellate Tribunal that can review both the laws and facts de novo, this seems certain to increase.

Second, the pool of potential permanent judges with the necessary qualifications and lack of conflict of interests to man the Court is rather small. It will likely be composed of the same arbitrators who are already serving as investment treaty arbitrators.

Another significant issue is the enforcement of Investment Court System decisions, which CETA attempts to sidestep by an express reference to enforcement under the 1958 NY Convention. It is highly unclear that these decisions will satisfy the definition of an arbitral award, which is the necessary precondition to the Convention’s applicability. It will be argued that the awards are being made by “permanent arbitral bodies to which the parties have submitted” under Article I(2) of the New York Convention, but the strength of this argument depends on the form the Investment Court System ultimately takes.

Last, in the context of CETA and the EU, the establishment of a Permanent Investment Court System has raised questions of compatibility with EU Treaties, which is why in the coming months the issue is likely to be referred to the European Court of Justice for an Opinion.

The Investment Court System is the latest proposed measure in the context of multilateralization and institutionalization of the decentralized regime of International Investment Law. The success of the proposal will signal a new era for International Investment Law globally.

It is impossible to say whether the Investment Court System will be better or worse, although it is quite clear that institutionalization and an appellate mechanism are going to make resolving investment disputes even more expensive.

Relevant provisions from the CETA treaty on the Investment Court System are shown below.

Article 8.27

Constitution of the Tribunal

The Tribunal established under this Section shall decide claims submitted pursuant to Article 8.23.

The CETA Joint Committee shall, upon the entry into force of this Agreement, appoint fifteen Members of the Tribunal. Five of the Members of the Tribunal shall be nationals of a Member State of the European Union, five shall be nationals of Canada[1] and five shall be nationals of third countries.

The CETA Joint Committee may decide to increase or to decrease the number of the Members of the Tribunal by multiples of three. Additional appointments shall be made on the same basis as provided for in paragraph 2.

The Members of the Tribunal shall possess the qualifications required in their respective countries for appointment to judicial office, or be jurists of recognised competence. They shall have demonstrated expertise in public international law. It is desirable that they have expertise in particular, in international investment law, in international trade law and the resolution of disputes arising under international investment or international trade agreements.

The Members of the Tribunal appointed pursuant to this Section shall be appointed for a five-year term, renewable once. However, the terms of seven of the 15 persons appointed immediately after the entry into force of the Agreement, to be determined by lot, shall extend to six years. Vacancies shall be filled as they arise. A person appointed to replace a Member of the Tribunal whose term of office has not expired shall hold office for the remainder of the predecessor’s term. In principle, a Member of the Tribunal serving on a division of the Tribunal when his or her term expires may continue to serve on the division until a final award is issued.

The Tribunal shall hear cases in divisions consisting of three Members of the Tribunal, of whom one shall be a national of a Member State of the European Union, one a national of Canada and one a national of a third country. The division shall be chaired by the Member of the Tribunal who is a national of a third country.

Within 90 days of the submission of a claim pursuant to Article 8.23, the President of the Tribunal shall appoint the Members of the Tribunal composing the division of the Tribunal hearing the case on a rotation basis, ensuring that the composition of the divisions is random and unpredictable, while giving equal opportunity to all Members of the Tribunal to serve.

The President and Vice-President of the Tribunal shall be responsible for organisational issues and will be appointed for a two-year term and shall be drawn by lot from among the Members of the Tribunal who are nationals of third countries. They shall serve on the basis of a rotation drawn by lot by the Chair of the CETA Joint Committee. The Vice-President shall replace the President when the President is unavailable.

Notwithstanding paragraph 6, the disputing parties may agree that a case be heard by a sole Member of the Tribunal to be appointed at random from the third country nationals. The respondent shall give sympathetic consideration to a request from the claimant to have the case heard by a sole Member of the Tribunal, in particular where the claimant is a small or medium-sized enterprise or the compensation or damages claimed are relatively low. Such a request shall be made before the constitution of the division of the Tribunal.

The Tribunal may draw up its own working procedures.

The Members of the Tribunal shall ensure that they are available and able to perform the functions set out under this Section.

In order to ensure their availability, the Members of the Tribunal shall be paid a monthly retainer fee to be determined by the CETA Joint Committee.

The fees referred to in paragraph 12 shall be paid equally by both Parties into an account managed by the ICSID Secretariat. In the event that one Party fails to pay the retainer fee the other Party may elect to pay. Any such arrears by a Party will remain payable, with appropriate interest.

Unless the CETA Joint Committee adopts a decision pursuant to paragraph 15, the amount of the fees and expenses of the Members of the Tribunal on a division constituted to hear a claim, other than the fees referred to in paragraph 12, shall be those determined pursuant to Regulation 14(1) of the Administrative and Financial Regulations of the ICSID Convention in force on the date of the submission of the claim and allocated by the Tribunal among the disputing parties in accordance with Article 8.39.5.

The CETA Joint Committee may, by decision, transform the retainer fee and other fees and expenses into a regular salary, and decide applicable modalities and conditions.

The ICSID Secretariat shall act as Secretariat for the Tribunal and provide it with appropriate support.

If the CETA Joint Committee has not made the appointments pursuant to paragraph 2 within 90 days from the date that a claim is submitted for dispute settlement, the Secretary General of ICSID shall, at the request of either disputing party appoint a division consisting of three Members of the Tribunal, unless the disputing parties have agreed that the case is to be heard by a sole Member of the Tribunal. The Secretary General of ICSID shall make the appointment by random selection from the existing nominations. The Secretary-General of ICSID may not appoint as chair a national of either Canada or a Member State of the European Union unless the disputing parties agree otherwise.

Article 8.28

Appellate Tribunal

An Appellate Tribunal is hereby established to review awards rendered under this Section.

The Appellate Tribunal may uphold, modify or reverse a Tribunal’s award based on:

(a) errors in the application or interpretation of applicable law;

(b) manifest errors in the appreciation of the facts, including the appreciation of relevant domestic law;

(c) the grounds set out in Article 52(1) (a) through (e) of the ICSID Convention, in so far as they are not covered by paragraphs (a) and (b).

The Members of the Appellate Tribunal shall be appointed by a decision of the CETA Joint Committee at the same time as the decision referred to in paragraph 7.

The Members of  the  Appellate  Tribunal  shall  meet  the  requirements  of Articles 8.27.4 and comply with Article 8.30.

The division of the Appellate Tribunal constituted to hear the appeal shall consist of three randomly appointed Members of the Appellate Tribunal.

Articles 8.36 and 8.38 shall apply to the proceedings before the Appellate Tribunal.

The CETA Joint Committee shall promptly adopt a decision setting out the following administrative and organisational matters regarding the functioning of the Appellate Tribunal:

(a) administrative support;

(b) procedures for the initiation and the conduct of appeals, and procedures for referring issues back to the Tribunal for adjustment of the award, as appropriate;

(c) procedures for filling a vacancy on the Appellate Tribunal and on a division of the Appellate Tribunal constituted to hear a case;

(d) remuneration of the Members of the Appellate Tribunal;

(e) provisions related to the costs of appeals;

(f) the number of Members of the Appellate Tribunal; and

(g) any other elements it determines to be necessary for the effective functioning of the Appellate Tribunal

The Committee on Services and Investment shall periodically review the functioning of the Appellate Tribunal and may make recommendations to the CETA Joint Committee. The CETA Joint Committee may revise the decision referred to in paragraph 7, if necessary.

Upon adoption of the decision referred to in paragraph 7:

(a) a disputing party may appeal an award rendered pursuant to this Section to the Appellate Tribunal within 90 days after its issuance;

(b) a disputing party shall not seek to review, set aside, annul, revise or initiate any other similar procedure as regards an award under this Section;

(c) an award rendered pursuant to Article 8.39 shall not be considered final and  no action for enforcement of an award may be brought until either:

(i) 90 days from the issuance of the award by the Tribunal has elapsed and no appeal has been initiated

(ii) an initiated appeal has been rejected or withdrawn; or

(iii) 90 days have elapsed from an award by the Appellate Tribunal and the Appellate Tribunal has not referred the matter back to the Tribunal;

(d) a final award by the Appellate Tribunal shall be considered as a final award for the purposes of Article 8.41; and

(e) Article 8.41.3 shall not apply.

Article 8.29

Establishment of a multilateral investment tribunal and appellate mechanism

The Parties shall pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes. Upon establishment of such a multilateral mechanism, the CETA Joint Committee shall adopt a decision providing that investment disputes under this Section will be decided pursuant to the multilateral mechanism and make appropriate transitional arrangements.

Article 8.30

Ethics

 The Members of the Tribunal shall be independent. They shall not be affiliated with any government.10 They shall not take instructions from any organisation, or government with regard to matters related to the dispute. They shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest. They shall comply with the International Bar Association Guidelines on Conflicts of Interest in International Arbitration or any supplemental rules adopted pursuant to Article 8.44.2. In addition, upon appointment, they shall refrain from acting as counsel or as party-appointed expert or witness in any pending or new investment dispute under this or any other international agreement.

If a disputing party considers that a Member of the Tribunal has a conflict of interest, it shall send to the President of the International Court of Justice a notice of  challenge to the appointment. The notice of challenge shall be sent within 15 days of the date on which the composition of the division of the Tribunal has been communicated to the disputing party, or within 15 days of the date on which the relevant facts came to its knowledge, if they could not have reasonably been known at the time of composition of the division. The notice of challenge shall state the grounds for the challenge.

If, within 15 days from the date of the notice of challenge, the challenged Member of the Tribunal has elected not to resign from the division, the President of the International Court of Justice shall, after hearing the disputing parties and after providing the Member of the Tribunal an opportunity to submit any observations, issue a decision within 45 days of receipt of the notice of challenge and notify the disputing parties and the other Members of the division. A vacancy resulting from  the disqualification or resignation of a Member of the Tribunal shall be filled promptly.

Upon a reasoned recommendation from the President of the Tribunal, or on their joint initiative, the Parties, by decision of the CETA Joint Committee, may remove a Member from the Tribunal where his or her behavior is inconsistent with the obligations set out in paragraph 1 and incompatible with his or her continued membership of the Tribunal.

Anastasia Choromidou, Aceris Law SARL