Investment Court System – Three Ways to Avoid State-Partiality by Judges - international litigation blog
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Investment Court System – Three Ways to Avoid State-Partiality by Judges

Investment Court System – Three Ways to Avoid State-Partiality by Judges

Since September 2015, the European Commission has been pushing forward a proposal for a new investment court system (ICS) aimed at addressing the numerous criticisms expressed about the existing investor-State dispute resolution (ISDS) mechanisms (see here, here and here for previous posts on this topic).

ISDS is a very sensitive topic since such disputes always place States in the position of respondents. Furthermore, they are seen by many as placing restrictions on a State’s right to sovereignty and right to regulate. In addition, the outcome of these disputes may profoundly impact the financial situation of a State. On top of those concerns, investor-State disputes are generally solved by recourse to international arbitration, a mechanism which is seen by many as lacking consistency, transparency and legitimacy.

In order to address those concerns, the key aspects of the proposal brought forward by the European Union are the following:

– The creation of a permanent investment court which would have exclusive jurisdiction to rule on investment claims and would therefore render forum-shopping and multiple parallel proceedings impossible;

– This permanent court would be composed of a First Instance Tribunal and an Appeal Tribunal;

– Judgements would be made by publicly appointed judges;

– Proceedings would be transparent and a right to intervene for all interested countries would be provided.

While I personally think that the ICS presents a step in the right direction, as it offers possible solutions to the main concerns raised about classical ISDS mechanisms, I do not think, nor pretend, that this proposal is free from any potential flaws.

Indeed, one of the main doubts expressed by many commentators against the ICS relates to the methodology for appointing judges to the First Instance Tribunal and to the Appeal Tribunal. For instance, in respect of the EU-Canada free trade agreement (CETA), it is currently contemplated that judges of the new investment court will be appointed by States and they should only serve a limited term of 5 years renewable once (Article 8.27 of the CETA).

If this appointment procedure is ever adopted, it will certainly not take long before the credibility, legitimacy, independence and neutrality of the whole system starts to be contested by the perception that the judges are biased in favour of States. It is indeed very likely that such a suspicion will quickly arise since those judges will be appointed (even if indirectly) by the States and because their term in office will be subject to re-appointment by those same States (meaning that the judges might be tempted to render decisions more favourable to States in order to be re-appointed).

While it remains to be seen whether the ICS will ever see the light of day, and if so under which form, I hereby suggest three possible alternatives/solutions in order to address the risk of State-partiality by judges.

The first possible solution would be to involve the world community at large in the creation of the ICS and in the appointment process of the judges (in this vein, the fact that the United Nations Commission on International Trade Law (UNCITRAL) has recently agreed to consider a possible reform of the existing ISDS mechanisms is already a clear sign of this tendency).

In my opinion, the best way to involve the world community would be to establish the ICS within the framework of the United Nations and to draw inspiration from the way judges are appointed at the International Court of Justice (i.e. appointment by the United Nations General Assembly and the Security Council).

While it is true that having the judges appointed by the UN General Assembly or the Security Council would not solve the problem of State-appointed judges (as States are members of the UN General Assembly and of the UN Security Council), we could, nevertheless, have another independent organ of the United Nations (for example the Secretary-General) appointing the judges to the new investment court in a totally independent manner.

A second possible solution to the issue of State-partiality would be to appoint judges for a longer term but without the possibility of re-appointment. In such a way the judges would be standing long enough in office to gain valuable experience, but any suspicion regarding their independence would be mitigated, as they are in any event prevented from seeking reappointment.

A third and last possible solution would be to enhance transparency and peer-review by requiring judges, who do not agree with the majority, to draft dissenting opinions. Such a requirement, and the risk of having a dissenting opinion shedding light on clear and obvious discrepancies in a court judgment, should indeed force a majority to reinforce their opinion with strong reasoning thereby reducing the risk of State-partiality.

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Those three approaches were hereby made with a view to open a debate. Feel free to react if you have any other suggestions or comments.

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