Ref. Ares(2018)5509951 - 26/10/2018
Ref. Ares(2019)3285988 - 20/05/2019
Argumentaire on a two-tier system for the settlement of investment disputes
The question has arisen as to whether it is better to create an appeal mechanism or
a two-tier court, with a first instance tribunal and an appeal mechanism. In general,
leaving the ad hoc arbitration system in place at the first instance will not address
satisfactorily the concerns that have been identified thus far whilst a two-tier
mechanism would do. There are a number of arguments in favour of a two-tier
system:
1.
Greater consistency and legal certainty. Not every case will go on appeal. A
single court will more effectively ensure consistency. In the same institution there will
be a greater degree of deference towards an appeal mechanism as compared to that
likely to be displayed by ad hoc tribunals. This will also ensure that the outcome of
cases is more predictable, which in turn will make the decision-making more
efficient, and hence more cost-effective, and possibly reduce the amount of cases
overall. Consistent jurisprudence both at the first and second instance will promote a
greater level of understanding and reduce "adventurous" claims by investors (which
are likely to be unsuccessful before the Court).
2.
Remand (i.e. sending a case back after an appeal where there are insufficient
facts to complete the case). This is probably impossible with ad hoc first instance
tribunals given they will already be disbanded when they have delivered their award
and the appeal will be rendered some time after that.
3.
Preventing parallel claims. The more treaties are subject to the court the more
cases can be more effectively handled. For example, this may happen through
joinder of cases, consolidation, stay of proceedings or even dismissal of cases. This
may also lead to a more satisfactory handling of some complicated legal issues (e.g.
corporate personality, shareholder claims etc.).
4.
Costs and expeditious handling of cases. A court will be better able to keep
costs down because it will be better able to control the length of hearings, pleadings
etc. With an appeal mechanism in place, States and investors will still have to bear
the significant costs of ad hoc arbitration at the first instance, whereas a two-tier
Court would reduce the economic burden overall – especially as membership widens
(the more countries join, the lower will be the cost for everybody). It would be
unnecessary to adopt procedural orders etc for each case. In addition time would not
be spent in the appointment of arbitrators and the associated costs would be
avoided.
5.
Independence and impartiality. Full time adjudicators at first instance will be
better able to ensure independence and impartiality. This will be through both
avoiding double-hatting (acting as counsel and arbitrator) but also through the
removal of incentives flowing from the desire to be reappointed linked, for example,
to the need to maintain good relations with counsel who are the gate-keepers to
appointment. An appeal mechanism only cannot provide such independence and
impartiality.
6.
Geographical and gender representativeness. A two-tier system provides more
opportunities for the appointment of adjudicators from underrepresented regions and
to seek gender balance. An appeal mechanism by itself will offer such possibility on
a more limited basis.