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Text | Qu Guannan, Xi'an Jiaotong University
In order to make up for the shortcomings of the current Investor-State Dispute Settlement (ISDS), the United Nations Commission on International Trade Law Working Group III (UNCITRAL WGIII) (hereinafter) (referred to as the "Third Working Group") is promoting state-led reforms. At present, more than 30 countries have proposed possible ISDS reform plans, but the reform positions of various countries are quite different, and no consensus has yet been reached. For example, countries such as the United States, Japan, Chile, and Israel advocate procedural revisions and have relatively conservative stances; while countries such as Canada, Switzerland, and Mauritius, represented by the European Union, all support the establishment of investment courts and structural reforms to the international investment arbitration mechanism; China supports the EU's establishment of a permanent mechanism to resolve investment disputes, but it mainly focuses on establishing an appeal mechanism and still prefers to maintain the status quo at the first instance stage; other countries' positions are quite conservative. For example, Brazil hopes to return to the inter-state dispute settlement mechanism, while India and South Africa believe that it should After exhausting domestic remedies before resorting to the international investment arbitration mechanism, Russia has a negative attitude and opposes reforms by delaying the process.
Among the above-mentioned reform plans, the EU plan has made relatively rapid progress. It has completed the preparation of some draft documents and has won the support of more than 20 countries in Asia, Africa and Latin America. In January 2019, the EU and its member states submitted an application to Working Group III, proposing to establish a permanent mechanism for the settlement of international investment disputes, namely a multilateral investment court. The Multilateral Investment Court will adopt a two-tier system and appoint full-time judges. Therefore, the main features of the Multilateral Investment Court are twofold: first, the establishment of a permanent appeal mechanism to respond to criticisms of the current investment arbitration system’s lack of error correction mechanisms and inconsistent awards; second, the selection and appointment of full-time judges by the state to resolve current investment arbitration issues. Weaknesses in the system regarding the conduct and composition of arbitrators. This article will mainly discuss the selection of judges in the Multilateral Investment Court. It should be noted that in the context of traditional international investment arbitration, referees are often called “arbitrators”. However, the EU clearly stated in its multilateral investment court initiative that the referee should be a "judge" rather than a traditional arbitrator. To avoid confusion among readers, the word “judge” will be used primarily in what follows.
Judge issues to be changed in the reform
The work report of the 36th meeting of Working Group III of the United Nations Commission on International Trade Law pointed out that the current concerns of all parties about judges in international investment arbitration mainly focus on the following three aspects:
First , lacks or appears to lack independence and impartiality. Ensuring the independence and impartiality of judges is the key to ensuring due process, impartiality and the legitimacy of the investment dispute settlement system. Lack of independence and impartiality can be caused by numerous reasons, such as repeated appointments, conflict of interest situations and so-called conflicts of issues, as well as the practice of an individual switching roles as arbitrator, legal advisor and expert in different dispute resolution proceedings, i.e. moonlighting .
Second, the composition of the judges lacks diversity. It is generally believed that the current lack of diversity of judges in the field of investment dispute settlement has weakened the legitimacy of the dispute settlement system. Various statistics show that the composition of the judges does lack diversity, especially in terms of gender and geographical representation. The "2019 ICSID Annual Report" (International Center for Settlement of Investment Disputes, referred to as "ICSID") shows that in 2019, in terms of geographical distribution of judge appointments, Western Europe topped the list with 93 people. Among them, 77 were appointed by the parties and 16 by ICSID. Ranking second and third are North America (including the United States, Mexico and Canada) and South America, with 33 and 24 people respectively. In other regions of the world, such as Central America and the Caribbean, Central Asia and North Africa, sub-Saharan Africa, Eastern Europe and Central Asia, the number ranges from 1 to 5 people; in South Asia, East Asia and the Pacific, it is 10 people. The combined number of people in these regions is even smaller than that of South America, which ranks third. According to statistics on the number of cases released by ICSID in 2020, from 1996 to 2019, 47% of the arbitrators, mediators and ad hoc committee members appointed in ICSID cases were from Western Europe, and 21% were from North America, South America, South Asia, and East Asia and the Pacific region both accounted for 11%.Specifically, Western Europe still leads the list with 1,234 people. This number is more than ten times that of Central Asia and North Africa, reaching more than 20 times that of Central America and the Caribbean, sub-Saharan Africa, and Eastern Europe and Central Asia. times.
In the ranking according to the nationality of judges, only Mexico among the top 10 is a developing country, and the rest are developed countries. China ranks 30th with 14 people, which is only one-eighteenth of France, which ranks first. The country with the largest population in sub-Saharan Africa is Nigeria, ranking only 48th. Therefore, the Working Group 3 meeting emphasized that diversity should take into account more broadly age, ethnicity, language, legal background and country of origin, thus reflecting different stages of economic development. Promoting diversity will ensure that judges have a better understanding of national policy considerations, local law and practice and public international law.
Third, the qualifications of judges and the composition mechanism of the arbitral tribunal. The pursuit of diversity should not come at the expense of experience, ability and qualifications. Some critics believe that the composition mechanism of investment dispute tribunals stipulated in current investment treaties and arbitration rules is insufficient to ensure that judges have the appropriate qualifications to handle relevant cases. Therefore, the Working Group believes that it is up to UNCITRAL to formulate reform measures to deal with the mechanisms for constituting investment dispute tribunals in existing treaties and arbitration rules.
System design for the selection of judges
In view of the above-mentioned issues of judges that need to be solved urgently in the reform of international investment arbitration, and combined with the relevant guidance and suggestions in the report of the Third Working Group, the EU proposed to establish a permanent mechanism to systematically respond to issues of concern in the current reform of investment arbitration. respond. Among them, the EU proposed to consider the following five aspects: First, appoint full-time judges. The Multilateral Investment Court will appoint full-time judges who will not engage in any outside activities other than teaching, and the number will depend on the estimated workload of the permanent establishment. Second, moral requirements. The full-time working system for judges can partially ensure that they have a high level of professional ethics. At the same time, judges are also prohibited from engaging in other paid activities and political activities. On the premise of establishing a sound and transparent appointment process, the independence of judges from the government can also be ensured through a long-term non-renewable term system. Third, in terms of the qualification requirements for judges, the Multilateral Investment Court plans to adopt qualification requirements similar to those of other international courts. This means that judges should have the qualifications required to serve in the highest judicial bodies of their respective countries, or be legal advisors with recognized competence in international law (see Article 2 of the Statute of the International Court of Justice). Fourth, the selection mechanism for judges should ensure geographical and gender diversity. As Article 36(8) of the Rome Statute of the International Criminal Court stipulates, the election of judges of the International Criminal Court "must take into account the needs for representativeness of the world's major legal systems, fair geographical representation and fair representation of male and female judges." In order to meet these requirements, the International Criminal Court has established specific rules for the selection of judges, that is, the number of male and female judges should be at least six. Currently, 6 of the 18 judges of the International Criminal Court are women. In addition, the United Nations requires each regional group to have at least two judges. And if a regional group has more than sixteen state parties, then the region will have a minimum voting requirement of at least three judges. Fifth, when appointing judges to the permanent mechanism, the Multilateral Investment Court expects contracting parties to appoint objective judges, rather than judges who are considered too biased towards investors or countries. This is because when appointing judges, contracting parties should comprehensively consider the defensive interests of being a respondent in a potential investment dispute, as well as the offensive interests of providing adequate protection to domestic investors. Therefore, such dual considerations will prompt the country to make long-term plans.
When hearing each specific case, the Multilateral Investment Court will adopt a random approach to appoint judges from each department of the permanent body to ensure that the parties to the dispute cannot know in advance who will hear their case.
The Dilemma of Judge Selection
When an investor files a lawsuit, a portion of the judges of the Permanent Court will be randomly assigned to the court department that will hear the case. Neither the investor nor the respondent will participate in the selection of judges in a specific case.This policy consideration is that the EU does not believe that party autonomy need not be a key component of international investment arbitration, and that the current ad hoc mechanism for forming arbitral tribunals is likely to be a reason for the lack of diversity. Because parties usually attach great importance to the judge's expertise and experience when selecting a judge, duplicate appointments are often made, resulting in a very limited number of appointed individuals. Therefore, it is necessary to re-examine the party appointment mechanism in investment arbitration and limit the participation of disputing parties. In a standing mechanism, parties to a dispute have little influence over the selection and appointment of judges. This reform option can be compared to the selection and appointment mechanisms of existing international courts, such as the establishment mechanisms of the European Court of Human Rights and the International Court of Justice.
But this approach is contrary to the currently widely practiced arbitration model. In its reform submission to the Third Working Group, the Corporate Counsel International Arbitration Group expressed concerns that the Multilateral Investment Court has weakened the autonomy of the parties in selecting judges. Although the arbitration system has reasonable restrictions on the parties' independent selection of arbitrators. For example, some systems exclude arbitrators who lack minimum professional qualifications, but proposals to eliminate party autonomy entirely go against the interests of states and investors. Because this would prevent them from selecting the best person to resolve their investment dispute. At the first instance stage, since investment disputes often involve complex factual and legal issues, many factors need to be considered in determining the composition of the tribunal. For example, the judge's legal background, experience, nationality, energy commitment and special expertise that the case may require. Therefore, the parties need to consider whether the judge is suitable.
In terms of the selection and appointment of judges, China also supports the continued retention of party autonomy in the reform of international investment arbitration. China pointed out that judging from the traditional practice of international arbitration, the right of the parties to appoint arbitrators reflects the wishes of the parties and is the most attractive core feature of international arbitration. It was also mentioned at the meeting of the Third Working Group that the autonomy of the parties is a basic right of the parties to the dispute and is also one of the main reasons why the parties agree to submit their disputes to arbitration. In fact, parties rarely delegate their rights to participate in the formation process of investment dispute tribunals, and both countries and investors attach great importance to party autonomy. Therefore, retaining autonomy is of great help to enhance the confidence of the parties to the dispute, especially investors.
The selection conditions for judges
It can be seen that in the selection conditions set by the EU for the judges of the Multilateral Investment Court, the requirements for diversity or representativeness may conflict with the qualification requirements. Both are crucial to the Court's credibility and success, so it's worth thinking about how to strike a balance between them.
One view is that priority should be given to ensuring the qualifications of judges. Opponents believe that the Multilateral Investment Court’s many requirements for judge qualifications, such as a full-time working system and a “long-term non-renewable” term system, as well as restrictions on professional abilities and recognition will narrow the scope of qualified judges.
First, imposing these requirements will undoubtedly reduce the number of qualified investment arbitration judges available. Sufficient judges are the basis of the current investment dispute settlement system, because if there are insufficient judges, investors will not resort to international investment arbitration.
Second, if these requirements are adopted, the composition of judges will essentially be narrowed to three categories of personnel: 1. Senior academics; 2. Mature practitioners transitioning to full-time judges, most of whom are very senior but approaching retirement; 3. Retired judge. Critics believe that the common characteristics of these people are "old age, single structure and little practical experience." At the same time, this system design also sets up barriers for the entry of new judges and affects the composition of the judge team. The current direction of reform is to establish a dispute settlement system with age, gender and regional diversity. The proposed institutional design therefore runs counter to the ongoing efforts by international investment courts and the international arbitration community to expand the pool of judges and make arbitration more inclusive and representative.
Finally, based on different policy choices, different countries may place different emphasis on the qualification factors of judges, so a “one size fits all” approach may not be necessary or realistic. For example, many investment disputes occur between countries and investors in the same region. In this case, countries and investors may prefer judges with specific language skills and cultural knowledge, as well as familiarity with the region's legal system. The uniform selection conditions for judges of the International Investment Court cannot accommodate these different preferences.
Another view is that diversity and balanced representation are also important. It is undeniable that regions such as Western Europe and North America have innate and historical advantages in language and legal systems, and are indeed more likely to select qualified judges. However, this has also led to the concentration of judges who have formed international commercial arbitration tribunals in specific areas for a long time. within a small elite group. Working Group III noted that achieving geographical, gender and linguistic diversity and fair representation of different legal systems and cultures would enhance the quality of investment dispute settlement procedures. Because different perspectives, especially those from different cultures and levels of economic development, ensure more balanced decision-making, a lack of diversity undermines the legitimacy of the international investment arbitration system. Therefore, the composition of judges should strive to maintain balanced representation among developed countries, developing countries and least developed countries, as well as between capital-exporting countries and capital-importing countries, and be able to represent the world's major legal systems and traditions.
Structural Composition of the Court
When designing the composition of the Standing Dispute Settlement Mechanism, the first issue to be considered is the number of referees.
According to convention, international courts usually adopt a selective representation system, which generally requires that no two judges can be nationals of the same country. For example, the United Nations has 193 member states and the International Court of Justice has 15 judges. There are 168 parties to the United Nations Convention on the Law of the Sea, and the International Tribunal for the Law of the Sea has 21 judges. In the WTO, which has 164 member states, the Appellate Body has seven members. Another option is to establish a list of court members for the permanent body to select three judges to form a tribunal for a particular case. This approach would require the establishment of a larger pool of judges, using the same criteria and nomination procedures as traditional permanent courts to select judges on the list.
The second issue to consider is whether representation should be limited to the membership of the court. In the design of the EU Multilateral Investment Court, it is also possible to consider extending the authority of representation beyond the membership of the court, subject to the consent of the overwhelming majority of member states. However, there is also a counter-argument to this, namely that all available seats should be reserved for national judges of member states.
The future prospects of the Multilateral Investment Court
The Multilateral Investment Court advocated by the EU is still in its infancy stage, and any country can choose to join after expressing positive consent. In terms of power expansion, the Multilateral Investment Court is also relatively cautious. Only when two countries choose to use this mechanism and agree to apply it to their treaties, the Multilateral Investment Court system will begin to operate. At the same time, the EU also adopts an open attitude in the design of the court and retains a certain degree of flexibility on the basis of a permanent mechanism. For example, some countries want to use only the standing mechanism in inter-state dispute settlement, and some countries advocate using only the appeal mechanism in the standing mechanism of two-instance final appeal. On the contrary, some countries want to use only the first-instance mechanism. These issues can be discussed.
China believes that the investor-state investment dispute settlement mechanism is generally a mechanism worth maintaining. The formulation of multilateral rules requires the joint efforts of member states. The vitality of the multilateral mechanism also depends on the joint participation of member states. Although countries have different positions on investment arbitration reform, they face dilemmas in policy choices on specific issues. However, based on China’s submissions to the Third Working Group, generally speaking, China and the EU have a consensus on existing issues in the international investment arbitration system. In terms of reform opinions, the EU's proposal to establish a multilateral investment court is in line with China's desire to establish a permanent appeal mechanism and formulate rules related to arbitrators.Although the two sides still have differences on the methods and conditions for selecting judges, the EU's additional list of reform options based on the establishment of a multilateral investment court undoubtedly provides the possibility of reconciliation.
[Project information: National Social Science Fund Youth Project "Research on Multilateral Reform of International Investment Arbitration and China's Countermeasures in the Context of the "Belt and Road Initiative" (18CFX084)]
Cover and Table of Contents of this Issue
"China Trial" Magazine Issue 15, 2020
China Trial News Semi-monthly·No. 253
editor/Sun Min
