International Investment Law Symposium LLM Perspectives Online Publications

Can the E.U. Proposal to Establish an Investment Court Through TTIP Inform the Establishment of an Appeal Mechanism in ICSID?

1. Introduction

The negotiations between the E.U. and the U.S. on the Transatlantic Trade and Investment Partnership (TTIP) have sparked new public debates on the legitimacy of arbitration as an investor-state dispute settlement mechanism. Investor-state arbitration has been subject to increasing criticism in recent years.01Steven Finizio, The European Commission’s Draft TTIP and the Proposed Investment Court System, Lexis PSL Arb., Sept. 30, 2015. Practitioners are concerned with the lack of consistency among arbitral awards and the absence of a procedure to correct erroneous decisions. Critics also maintain that arbitrators are inherently biased against states.02John Beechy, Investment Arbitration, TTIP – Myths and Facts, in Austrian Y.B. Int’l Arb. 2016 217, 224 (Christian Klausegger et al. eds., 2016). To remedy these concerns, some authors have suggested that the International Center for Settlement of Investment Disputes (ICSID) should establish an appeals facility.03United Nations Conference on Trade and Development (“UNCTAD”), Reform of Investor-State Dispute Settlement: In Search of a Roadmap, 2 Int’l Investment Agreements Issues Note 8 (2013). The E.U. has proposed a different, more comprehensive solution to remedy the criticized deficiencies – a two-tiered investment court system. This permanent court of arbitration would be established through TTIP.04Finizio, supra note 1, at 1.

This article will analyze the proposal of the E.U. and then examine whether the two-tiered investment court could resolve the concerns regarding inconsistency of awards and lack of impartiality of arbitrators.05Stephan Schill, The TTIP Negotiations: US versus EU Leadership in Global Investment Governance, Kluwer Arb. Blog (Mar. 5, 2016), http://kluwerarbitrationblog.com/2016/03/05/the-ttip-negotiations-us-versus-eu-leadership-in-global-investment-governance/ (An official proposal of the U.S. for TTIP is not yet available. It can be assumed that their negotiation approach is based on the 2012 U.S. Model Bilateral Investment Treaty. The U.S. recently concluded the Trans Pacific Partnership, which contains a revised version of investor-State arbitration but not a standing investment court. The U.S. may prefer a similar approach in TTIP). Finally, it will address how the current debate on the E.U. proposal of TTIP can inform the debate on creating an appellate mechanism within ICSID.

2. The Current Investment Arbitration System and its Deficiencies

The primary objective of international investment law is the promotion and protection of foreign investments. To this end, most international investment agreements include dispute resolution provisions referring disputes to investor-state arbitration. Investment arbitration was celebrated as a powerful and dynamic method for investors to enforce substantive treaty protections against host-states.06Andrew Newcombe & Lluís Paradell, Law and Practice of Investment Treaties 1–2 (2009). It was seen as an efficient, independent and impartial dispute resolution mechanism.07Stephen W. Schill, Reforming Investor-State Dispute Settlement (ISDS): Conceptual Framework and Options for the Way Forward, Int’L Ctr. for Trade and Sustainable Dev. 1 (2015), http://e15initiative.org/wp-content/uploads/2015/07/E15-Investment-Schill-FINAL.pdf.

The International Centre for Settlement of Investment Disputes (ICSID) provides a legal and organizational framework for investment arbitration. It was praised as a forum for dispute resolution which “carefully balances the interests and requirements of all the parties involved,”08Ibrahim Shihata, Towards a Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA, 1ICSID Rev. 1, 4 (1986). and allows disputes to be decided without interference from domestic judicial or political organs.09Newcombe & Paradell, supra note 6, at 28.

The increase of investment treaty arbitrations in the past decade has prompted a public debate regarding the legitimacy of arbitrators deciding disputes involving state parties.10Schill, supra note 7, at 1. Investment arbitration has been criticized as favoring investors and not paying due regard to a states right to regulate.11Id.; Beechy, supra note 2, at 221–22, 225. Arbitrators appointed on an ad hoc basis by the disputing parties are perceived to lack independence and impartiality and thus not to be well suited to resolve investment disputes.12Alvarez et al., A Response to the Criticism against ISDS by EFILA, 33 J. Int’L Arb. 1, 13–14 (2016). It has been repeatedly decried that arbitrators are chosen from a small circle of practitioners and are frequently appointed by the same players.13Id. at 16–17.

Another point of criticism is the absence of a consistent body of case law. Similar provisions in international investment agreements are interpreted differently by arbitral tribunals.14Schill, supra note 7, at 1; Beechy, supra note 2, at 224; Alvarez et al., supra note 12, at 7. This inconsistency in arbitral awards is aggravated by the limited possibilities to correct erroneous awards.15Schill, supra note 7, at 1.

In reaction to the above described criticism, the E.U. proposes to establish a standing investment court. This article will first discuss the details of this proposal, and then evaluate whether the investment court as proposed can resolve concerns regarding the (1) lack of consistency of awards and (2) lack of impartiality of arbitrators.16Athina Papaefstratiou, The EU Proposal Regarding Investment Protection: The End of Investment Arbitration as We Know it?, Kluwer Arb. Blog (April 20, 2016), http://kluwerarbitrationblog.com/2015/12/29/the-eu-proposal-regarding-investment-protection-the-end-of-investment-arbitration-as-we-know-it/. Finally, the article will analyze how the debate of the E.U. proposal can inform discussions on a potential appeal mechanism under ICSID.

3. The E.U. Proposal

3.1 The Establishment of an Investment Court

The E.U.’s draft of TTIP as published on 12 November 2015 (“TTIP Draft”)17Eur. Comm’n, TTIP – Trade in Services, Investment and E-Commerce: Chapter II – Investment [hereinafter TTIP – E.U. Draft] (Nov. 12, 2015) http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf (disclosing the E.U.’s official proposal to the U.S. regarding Investment Protection and Resolution of Investment Disputes, to serve as basis for further discussions, as the treaty has not been ratified). differs significantly from the current investment arbitration regime. In reaction to the criticism discussed above, the E.U. suggests establishing a permanent two-tiered investment court.18Id. § 3, art. (9)(1). The E.U. Draft further requires disputes to be settled amicably through negotiations or mediations as far as possible. Id. § 3, art. (2)(1). Examining these provisions is not feasible within the limits of this article.

The TTIP Draft does not establish a complete set of new dispute settlement rules, but allows disputing parties to choose existing sets of rules. Claims can be submitted under the ICSID Convention, the ICSID Additional Facility, the 2010 United Nations Commission on International Trade Law’s Arbitration Rules, or any other rules agreed on by the disputing parties.19Id. § 3, art. 6(2). However, these rules only apply subject to the rules set out in the dispute resolution chapter of TTIP.20Id. § 3, art. 6(3). Hence, irrespective of the chosen rules, the dispute will be submitted to the permanent investment court. As a result, the rules chosen by the disputing parties may conflict with the rules in the TTIP Draft, which may cause difficulties in administering the process.21Finizio, supra note 1, at 2.

3.1.1 Tribunal of First Instance

The TTIP Draft establishes a permanent Tribunal of First Instance (Tribunal) with 15 “Judges”22The E.U. deviates from common terminology and refers to “Judges,” rather than the traditional “Arbitrators.” One can assume that this was a deliberate decision in reaction to the widespread criticism of arbitration and aims to distinguish the proposal from the current system. who are jointly appointed by the E.U. and the U.S.: five nationals of member states of the E.U., five of the U.S., and five of third countries.23TTIP – E.U. Draft, supra note 17, § 3, art. 9(1)–(2); European Commission Directorate-General of Trade, Reading Guide to the Draft text on Investment Protection and Investment Court System in the Transatlantic Trade and Investment Partnership (TTIP), Eur. Comm’n (April 20, 2016), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1365.

The qualification criteria for Judges are fairly strict.24Papaefstratiou, supra note 16. Judges are required to either be qualified in their respective countries for appointment to judicial office or be “jurists of recognised competence.”25TTIP – E.U. Draft, supra note 17, § 3, art. 9(4). They “shall have demonstrated expertise in public international law. It is desirable that they have expertise in particular, in international investment law, international trade law and the resolution of disputes arising under international investment or international trade agreements.”26Id. (emphasis added here and throughout the article).

These qualification criteria for Judges are vague and leave important questions unanswered. When does a jurist qualify as being “of recognised competence” and which threshold has to be met to “demonstrate expertise in public international law?”27Luise Woods, Fit for Purpose? The EU’s Investment Court System, Kluwer Arb. Blog (April 20, 2016), http://kluwerarbitrationblog.com/2016/03/23/to-be-decided/. Furthermore, the first option for qualification to the Tribunal, namely to qualify for the judicial office in their home country, restricts access of practitioners from countries where becoming a judge is a separate career track from becoming a lawyer. This system of separate career tracks is predominant in Europe and other civil law systems.28Nuno Garoupa & Tom Ginsburg, Judicial Reputation, A Comparative Theory 8 (2015). These practitioners can only be appointed to the Tribunal if they meet the more demanding standard of being a jurist of recognized competence. This differentiation appears unreasonable. Skills developed as a national state judge in state court proceedings do not necessarily translate to international arbitration proceedings. Arbitration practitioners who have practiced international investment arbitration, and potentially even have prior experience as arbitrators, may be better suited to decide disputes brought under TTIP.29Beechy, supra note 2, at 224.

The E.U. and the U.S. jointly appoint Judges for a six-year term, renewable once.30TTIP – E.U. Draft, supra note 17, § 3, art. 9(5). The President of the Tribunal31The President and Vice-President of the Tribunal are drawn from the Judges who are nationals of third countries and are appointed for a two-year term. Id. § 3, art. 9(8). appoints Judges to cases in panels of three – one from the E.U., one from the U.S., and a chairperson from a third country.32Id. § 3, art. 9(6). If the parties agree, the case can be heard by a sole Judge who is a national of a third country. Id. § 3, art. 9(6). Appointments are made on a rotational basis in a random and unpredictable order, giving equal opportunity to all Judges.33Id. § 3, art. 9(7). Since Judges are assigned randomly, the rules do not provide or allow for a process to evaluate which Judges on the Tribunal would be best suited to decide a specific case.34Id. Despite the fact that the appointment process does not require or allow any deliberations, the President of the Tribunal is granted 90 days to appoint Judges.35Id. In contrast, the UNCITRAL Arbitration Rules consider 30 days to be a reasonable time to appoint an arbitrator. If an authority chosen by the parties to appoint an arbitrator has not done so within 30 days, the parties can request that the arbitrator be appointed by the Secretary-General of the Permanent Court of Arbitration at The Hague.36United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules, art. 6(4).

One of the purposes of creating a permanent investment court was to move away from ad hoc creation of arbitral tribunals. To safeguard this functionality, the TTIP Draft provides that Judges shall be available at all times and on short notice.37TTIP – E.U. Draft, supra note 17, § 3, art. 9(11). Judges are paid a monthly retainer fee to ensure their availability. The E.U. suggests a retainer fee of approximately one-third of the retainer fee for the World Trade Organization Appellate Body members, i.e. 2,000 Euro.38Id. § 3 (3), art. 9 (6). (about $2,271.33, based on the June 19, 2016 exchange rate of 1 EUR = 1.1356 USD).

3.1.2 Appeal Tribunal

The second main difference from current investor-state dispute resolution systems is the creation of an appeal mechanism. The TTIP Draft establishes a permanent Appeal Tribunal, composed of six “Members,”39The E.U. Draft distinguishes between “Judges” of the Tribunal of First Instance and “Members” of the Appeals Tribunal. TTIP – E.U. Draft, supra note 17, § 3, arts. 9–10. The rational for this distinction is unclear. jointly appointed by the E.U. and the U.S. – two nationals from member sates of the E.U., two from the U.S., and two from third countries.40Id. § 3(3), art. 10 (1)–(2).

Like Judges of the Tribunal of First Instance, Members of the Appeal Tribunal are appointed for six years, renewable once.41TTIP – E.U. Draft, supra note 17, § 3, art. 10(5). The President and Vice-President of the Appeal Tribunal are selected from the Members who are nationals of third countries and serve a two-year term. The TTIP Draft further provides that they “shall serve on the basis of a rotation.”42Id. § 3, art. 10(6). However, since the Appeal Tribunal has only two Members from third countries, this rotation would simply result in the President and the Vice-President switching roles every two years.43This provision appears to be copied from the respective provision regarding the Tribunal of First Instance. It is unclear whether the rotation of President and Vice-President is a desired effect or the result of editorial oversight.

Qualification requirements for Members of the Appeal Tribunal are very similar to Judges of the Tribunal of First Instance, but not identical. Members “shall possess the qualifications required in their respective countries for appointment to the highest judicial offices, or be jurists of recognised competence.”44TTIP – E.U. Draft, supra note 17, § 3, art. 10(7). It is unclear whether the threshold for being a jurist of recognized competence is higher for an appointment to the Appeal Tribunal than for an appointment to the Tribunal of First Instance.45Woods, supra note 27.

Like the Tribunal of First Instance, the Appeal Tribunal decides in panels of three – one Member from the E.U., one from the U.S., and one from a third country.46TTIP – E.U. Draft, supra note 17, § 3, art. 10(8). Members will be appointed by the President of the Appeal Tribunal on a rotation basis, “ensuring that the composition of each division is random and unpredictable.”47Id. § 3, art. 10(9). However, considering that the Appeal Tribunal only consists of six members, two of each required nationality, there is not much room for random unpredictable selection.48Papaefstratiou, supra note 16. Furthermore, unlike the provision regarding the Tribunal of First Instance, there is no time limit for the appointment of Members of the Appeal Tribunal.49TTIP – E.U. Draft, supra note 17, § 3, art. 10.

Members of the Appeal Tribunal are required to be available at all times and on short notice, and will be compensated with a monthly retainer fee. The fee suggested by the E.U. is higher than the one for Judges of the Tribunal of First Instance. Members of the Appeal Tribunal would receive the same amount as WTO Appeal Tribunal members, i.e. around 7,000 Euro.50Id. § 3, art. 10(11)–(12). (about $7,996.43, based on the June 19, 2016 exchange rate of 1 EUR = 1.1356 USD).

The TTIP Draft specifies that appeals shall be decided within 180 days but in no case take longer than 270 days.51TTIP – E.U. Draft, supra note 17, § 3, art. 29(3). Since the Appeal Tribunal may have to re-evaluate the facts of a case, the 180 day-limit appears unrealistic.52Papaefstratiou, supra note 16.

3.2 Inconsistency of awards

The increase in conflicting and inconsistent arbitral awards has been strongly criticized. Arbitral tribunals have interpreted standard provisions on investment protection differently, at times even in cases brought under the same treaty.53Schill, Reforming ISDS, supra note 7, at 2. The appellate mechanism in the TTIP Draft aims to solve this issue.54Beechy, supra note 2, at 224. The following section will first elaborate on the grounds for appeal and then explain why the appeal mechanism will lead to greater consistency between arbitral awards.

3.2.1 Grounds for Appeal

The decision rendered by the Tribunal of First Instance is considered a “provisional award” which only becomes final after 90 days have elapsed from the day it was issued, with neither disputing party appealing to the Appeal Tribunal.55TTIP – E.U. Draft, supra note 17, § 3, art. 28(6). A party can appeal if (i) the Tribunal “erred in the interpretation or application of the applicable law,” (ii) the Tribunal “manifestly erred in the application of the facts, including the appreciation of relevant domestic law,” or (iii) on grounds provided for in Article 52 of the ICSID Convention.56Id. § 3, art. 29(1). Article 52 of the ICSID Convention provides for possible annulment of an award in case of an improper constitution of the tribunal, the tribunal manifestly exceeding its authority, corruption of a tribunal member, a serious divergence from fundamental procedural rules, or lack of reasons for the decision stated in the award.577 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, ICSID Convention, § 5 art. 52(1); Finizio, supra note 1, at 5.

Critics are worried that the grounds for appeal are too broad and thus enable parties to bring strategic appeals. They are particularly concerned about allowing for an appeal based on simple errors of interpretation of laws or manifest errors relating to the facts of the case. Parties can appeal if a tribunal manifestly errs on the national law applicable to the dispute because national law is considered as fact in international arbitrations.58Papaefstratiou, supra note 16. However, if an appeal is manifestly unfounded, the Appeal Tribunal can dismiss it on an expedited basis.59TTIP – E.U. Draft, supra note 17, § 3, art. 29(2).

The party filing the appeal must provide security not only for the cost of the appeal, but also for any amount awarded against it in the provisional award.60Id. § 3, art. 29(2). This provision presumably intends to deter unfounded appeals. However, it could also deter less affluent investors from filing meritorious appeals.61Woods, supra note 27.

3.2.2 The Appeal Tribunal Will Achieve Greater Consistency

The appellate mechanism will not eliminate the risk of inconsistency but will likely increase consistency between awards. Decisions of the Appeal Tribunal are not binding on future disputes and thus only have persuasive authority.62Beechy, supra note 2, at 224. However, since the TTIP Draft establishes a hierarchical structure, it can be expected that Judges of the Tribunal of First Instance will try to render awards which are not vulnerable to being appealed because they contradict previous awards of the Appeal Tribunal.

3.3 How Does TTIP Address the Perceived Lack of Impartiality?

Arbitrators are often accused of being biased against states. It is heavily criticized that arbitrators are not tenured judges but individuals chosen from a small group of lawyers who are perceived to have a vested interest in ruling in favor of investors.63Id. If such bias ever existed, the current proposal of the E.U. dramatically shifts the pendulum of partiality to favoring host states.64Woods, supra note 27.

All arbitrators65In this article, “Arbitrators” refers to both the Judges of the Tribunal of First Instance as well as the Members of the Appeal Tribunal. in the TTIP Investment Court are chosen by the E.U. and the U.S. Thus, investor claimants will have no influence on the composition of the tribunal deciding their case.66Woods, supra note 27. This eliminates one of the core features of the current arbitration system: namely, that both parties can choose a person whom they deem best qualified to decide their dispute.67Alvarez et al., supra note 12, at 17. There is a significant risk that the appointment will become largely a political decision. The E.U. and the U.S. may appoint primarily arbitrators who are biased towards states. However, proponents of the E.U. Draft argue that the E.U. and the U.S. are equally likely to appoint pro-investor arbitrators in order to further the interests of their investors.68Woods, supra note 27.

Even more striking than the one-sided process to appoint arbitrators to the Investment Court is the level of influence the states retain after their appointment. The arbitrators’ term is renewable and the E.U. and the U.S also reserve the right to remove arbitrators from the Investment Court.69TTIP – E.U. Draft, supra note 17, § 3, arts. 9(5), 10(5), 11(5). This creates strong pressure on arbitrators to please the E.U. and the U.S. in order to retain their positions. Arbitrators can be removed if they violate paragraph one of the provision on ethics or if their “behavior is incompatible with [their] continued membership of the Tribunal or Appeal Tribunal.”70Id. § 3, art. 11(5). Absent any clear criteria, this second reason for removal opens the door for arbitrary removal decisions. If an arbitrator routinely expresses opinions which are contrary to states’ belief, could this be deemed “incompatible with his continued membership”?

4. Appellate Mechanism in ICSID

Discussions regarding the feasibility of creating an ICSID appeals facility are not new. Already in 2004, ICSID published a discussion paper outlining possible features of an appellate body.71ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration, ¶ 20 (Oct. 22, 2004), http://pge.gob.ec/images/documentos/2016/Biblioteca/NOTA%20175/NOTA%20175%20INGLES.pdf [hereinafter “ICSID Secretariat, Discussion Paper”]. Similar to the discussions today, this initiative was driven by the desire to achieve greater coherence and consistency in arbitral awards.72Id. at ¶ 21. Offering an appeal mechanism to parties was seen as an opportunity to enhance international acceptance of investor-state arbitration.73Id. at ¶ 22. However, at the time, there was not sufficient state support to realize this idea.74UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 8. The article will now outline ICSID’s proposal and compare its features to the TTIP Draft.

The 2004 ICSID discussion paper envisaged a permanent Appeals Panel of 15 arbitrators, nominated by the Secretary-General of ICSID. Each arbitrator would be from a different country and of “recognized authority, with demonstrated expertise in law, international investment and investment treaties.”75ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 5. These qualification criteria for arbitrators are even more vague than the criteria suggested by the E.U. TTIP Draft.76See supra ch. 3.1.1.

Arbitrators of the ICSID Appeals Panel would be appointed to a case by the Secretary-General of ICSID, as far as possible after consultation with the parties.77ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 6. It is unclear when such consultation would be deemed impossible and how much influence disputing parties would be granted through consultation in the arbitrator selection process. In contrast to the TTIP Draft, this provision at least tries to preserve some level of influence by investors on arbitrator selection.78See supra ch. 3.3.

This ICSID discussion paper anticipates that awards could be challenged for a “clear error of law” or one of the grounds for annulment under Article 52 of the ICSID Convention. A potential further ground for appeal would be serious errors of facts, which would be narrowly defined in order to uphold the appropriate level of deference to the fact findings of the arbitral tribunal who decided the award under review.79Id. at ¶ 6.

Similar to the TTIP Draft, the ICSID discussion paper provides that the advance on fees and expenses would be borne by the party requesting the appeal – without prejudice to the ultimate allocation of costs in the decision on the appeal. Additionally, the party filing an appeal would be required to provide a bank guarantee for the amount of the award.80Id. ¶ at 10. See also supra ch. 3.2.2.

The ICSID Secretariat assumes that the submission of awards to the ICSID Appeals Panel would be based on treaty provisions. These treaty provisions could be interpreted as modifying the ICSID Convention as between the two respective state parties.81ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 2. This approach is necessary because Article 53 (1) of the ICSID Convention expressly excludes the possibility to appeal awards rendered pursuant to the ICSID Convention, except as provided for under the ICSID Convention.82Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 575 U.N.T.S. 159, art. 53(1)(b) (entered into force Oct. 14, 1966) (“ICSID Convention”). To incorporate the appeal facility into the ICSID Convention, however, would require a unanimous ratification by all contracting states, which does not appear to be a viable course of action.83ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 2.

Alternatively, it has been suggested that the appeals facility could be established through a resolution of the Administrative Counsel of ICSID, which is open to signature by all ICSID members. States can consent to the jurisdiction of the Appeal Panel by signing the protocol to this resolution.84Margie-Lys Jaime, An Appellate Body in Treaty-Based Investment Arbitration: Redefining the Investor-State Dispute Settlement Mechanism, 21 Spain Arb. Rev. 93, 101 (2014).

ICSID suggested the creation of an appeal facility in part to increase consistency between awards.85ICSID Secretariat, Discussion Paper, supra note 71, ¶ 21. However, it is significantly more challenging for an appeal facility under ICSID to achieve consistency than for the Appel Tribunal under the TTIP Draft. The TTIP Appeal Tribunal would exclusively decide cases arising out of TTIP – one multi-lateral treaty. The ICSID Appeal Panel would potentially decide cases arising out of numerous bilateral investment treaties. The respective underlying treaties may not only justify but require different interpretations and thus different outcomes.86UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 8.

The ICSID Secretariat recognizes that an appeal mechanism conflicts with the concept of finality of arbitral awards and enables parties to delay enforcement.87ICSID Secretariat, Discussion Paper, supra note 71, ¶ 21. In order to limit the additional time and cost spent on appeal proceedings, ICSID envisages a potential time limit of 120 days to decide an appeal.88ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 12. This time limit is similar to the targeted timeframe of 180 days in the TTIP Draft.89TTIP – E.U. Draft, supra note 17, § 3, art. 29(3).

5. Conclusion

There is no universal remedy for the deficiencies critics have identified in the current investor-state arbitration system.90Moreover, there is not even a common understanding as to the legitimacy of the concerns raised by critics. See, e.g., Alvarez et al., supra note 12. As discussed above, both the creation of a permanent investment court and the establishment of an appeal facility within ICSID present significant technical difficulties in their implementation.

Arbitration under the TTIP Draft and the proposed ICSID appeal mechanism has certain inherently different features. Creating a permanent investment court is a highly complex endeavor, but the chances of such endeavor ever being successful are the highest within the closed framework of one treaty.91UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 9. ICSID, unlike the investment court under TTIP, administers disputes arising out of a variety of different treaties and contracts. Consequently, the Appeal Tribunal under TTIP is likely to achieve greater consistency in arbitral awards than the Appellate Panel under ICSID. The Appeal Panel under ICSID has to adjust its treaty interpretations to diverging state party objectives and provisions in different treaties. Full consistency in ICSID arbitration would fail to pay due regard to the inherent differences of the treaties underlying the disputes.92Id.

There are, however, also several aspects of the discussed reform proposals which equally affect the E.U. Draft and a potential appeal mechanism under ICSID. Such common issues include the debate on appropriate grounds for appeal: should only questions of law or also questions of fact be open to review? Who should bear the costs of the appeal? How can the objectives of finality of awards and correctness be balanced?93Meg Kinnear, Appeal, Review, Annulment . . . What’s it all about?, ISDS Blog (Oct. 23, 2015), http://isdsblog.com/2015/10/23/icsid-guest-post-appeal-review-annulment-whats-it-all-about/. Can a treaty effectively limit the time to render decisions in appeal proceedings and what would a reasonable time limit be? Which qualification requirements should be established for arbitrators to be appointed to a permanent tribunal? With regard to these common issues, the academic debate prompted by the E.U. proposal for TTIP can equally inform future discussions on establishing an appeal mechanism within ICSID.

It remains to be seen which dispute resolution mechanism a final version of TTIP will establish. Will TTIP maintain the current system, establish a permanent investment court, or pursue yet a different approach? Whichever path they chose, if the E.U. and the U.S. can agree on a process, it will influence the future development of investor-state arbitration globally.94Schill, TTIP Negotiations, supra note 5.

References   [ + ]

01. Steven Finizio, The European Commission’s Draft TTIP and the Proposed Investment Court System, Lexis PSL Arb., Sept. 30, 2015.
02. John Beechy, Investment Arbitration, TTIP – Myths and Facts, in Austrian Y.B. Int’l Arb. 2016 217, 224 (Christian Klausegger et al. eds., 2016).
03. United Nations Conference on Trade and Development (“UNCTAD”), Reform of Investor-State Dispute Settlement: In Search of a Roadmap, 2 Int’l Investment Agreements Issues Note 8 (2013).
04. Finizio, supra note 1, at 1.
05. Stephan Schill, The TTIP Negotiations: US versus EU Leadership in Global Investment Governance, Kluwer Arb. Blog (Mar. 5, 2016), http://kluwerarbitrationblog.com/2016/03/05/the-ttip-negotiations-us-versus-eu-leadership-in-global-investment-governance/ (An official proposal of the U.S. for TTIP is not yet available. It can be assumed that their negotiation approach is based on the 2012 U.S. Model Bilateral Investment Treaty. The U.S. recently concluded the Trans Pacific Partnership, which contains a revised version of investor-State arbitration but not a standing investment court. The U.S. may prefer a similar approach in TTIP).
06. Andrew Newcombe & Lluís Paradell, Law and Practice of Investment Treaties 1–2 (2009).
07. Stephen W. Schill, Reforming Investor-State Dispute Settlement (ISDS): Conceptual Framework and Options for the Way Forward, Int’L Ctr. for Trade and Sustainable Dev. 1 (2015), http://e15initiative.org/wp-content/uploads/2015/07/E15-Investment-Schill-FINAL.pdf.
08. Ibrahim Shihata, Towards a Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA, 1ICSID Rev. 1, 4 (1986).
09. Newcombe & Paradell, supra note 6, at 28.
10. Schill, supra note 7, at 1.
11. Id.; Beechy, supra note 2, at 221–22, 225.
12. Alvarez et al., A Response to the Criticism against ISDS by EFILA, 33 J. Int’L Arb. 1, 13–14 (2016).
13. Id. at 16–17.
14. Schill, supra note 7, at 1; Beechy, supra note 2, at 224; Alvarez et al., supra note 12, at 7.
15. Schill, supra note 7, at 1.
16. Athina Papaefstratiou, The EU Proposal Regarding Investment Protection: The End of Investment Arbitration as We Know it?, Kluwer Arb. Blog (April 20, 2016), http://kluwerarbitrationblog.com/2015/12/29/the-eu-proposal-regarding-investment-protection-the-end-of-investment-arbitration-as-we-know-it/.
17. Eur. Comm’n, TTIP – Trade in Services, Investment and E-Commerce: Chapter II – Investment [hereinafter TTIP – E.U. Draft] (Nov. 12, 2015) http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf (disclosing the E.U.’s official proposal to the U.S. regarding Investment Protection and Resolution of Investment Disputes, to serve as basis for further discussions, as the treaty has not been ratified).
18. Id. § 3, art. (9)(1). The E.U. Draft further requires disputes to be settled amicably through negotiations or mediations as far as possible. Id. § 3, art. (2)(1). Examining these provisions is not feasible within the limits of this article.
19. Id. § 3, art. 6(2).
20. Id. § 3, art. 6(3).
21. Finizio, supra note 1, at 2.
22. The E.U. deviates from common terminology and refers to “Judges,” rather than the traditional “Arbitrators.” One can assume that this was a deliberate decision in reaction to the widespread criticism of arbitration and aims to distinguish the proposal from the current system.
23. TTIP – E.U. Draft, supra note 17, § 3, art. 9(1)–(2); European Commission Directorate-General of Trade, Reading Guide to the Draft text on Investment Protection and Investment Court System in the Transatlantic Trade and Investment Partnership (TTIP), Eur. Comm’n (April 20, 2016), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1365.
24. Papaefstratiou, supra note 16.
25. TTIP – E.U. Draft, supra note 17, § 3, art. 9(4).
26. Id. (emphasis added here and throughout the article).
27. Luise Woods, Fit for Purpose? The EU’s Investment Court System, Kluwer Arb. Blog (April 20, 2016), http://kluwerarbitrationblog.com/2016/03/23/to-be-decided/.
28. Nuno Garoupa & Tom Ginsburg, Judicial Reputation, A Comparative Theory 8 (2015).
29. Beechy, supra note 2, at 224.
30. TTIP – E.U. Draft, supra note 17, § 3, art. 9(5).
31. The President and Vice-President of the Tribunal are drawn from the Judges who are nationals of third countries and are appointed for a two-year term. Id. § 3, art. 9(8).
32. Id. § 3, art. 9(6). If the parties agree, the case can be heard by a sole Judge who is a national of a third country. Id. § 3, art. 9(6).
33. Id. § 3, art. 9(7).
34. Id.
35. Id.
36. United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules, art. 6(4).
37. TTIP – E.U. Draft, supra note 17, § 3, art. 9(11).
38. Id. § 3 (3), art. 9 (6). (about $2,271.33, based on the June 19, 2016 exchange rate of 1 EUR = 1.1356 USD).
39. The E.U. Draft distinguishes between “Judges” of the Tribunal of First Instance and “Members” of the Appeals Tribunal. TTIP – E.U. Draft, supra note 17, § 3, arts. 9–10. The rational for this distinction is unclear.
40. Id. § 3(3), art. 10 (1)–(2).
41. TTIP – E.U. Draft, supra note 17, § 3, art. 10(5).
42. Id. § 3, art. 10(6).
43. This provision appears to be copied from the respective provision regarding the Tribunal of First Instance. It is unclear whether the rotation of President and Vice-President is a desired effect or the result of editorial oversight.
44. TTIP – E.U. Draft, supra note 17, § 3, art. 10(7).
45. Woods, supra note 27.
46. TTIP – E.U. Draft, supra note 17, § 3, art. 10(8).
47. Id. § 3, art. 10(9).
48. Papaefstratiou, supra note 16.
49. TTIP – E.U. Draft, supra note 17, § 3, art. 10.
50. Id. § 3, art. 10(11)–(12). (about $7,996.43, based on the June 19, 2016 exchange rate of 1 EUR = 1.1356 USD).
51. TTIP – E.U. Draft, supra note 17, § 3, art. 29(3).
52. Papaefstratiou, supra note 16.
53. Schill, Reforming ISDS, supra note 7, at 2.
54. Beechy, supra note 2, at 224.
55. TTIP – E.U. Draft, supra note 17, § 3, art. 28(6).
56. Id. § 3, art. 29(1).
57. 7 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, ICSID Convention, § 5 art. 52(1); Finizio, supra note 1, at 5.
58. Papaefstratiou, supra note 16.
59. TTIP – E.U. Draft, supra note 17, § 3, art. 29(2).
60. Id. § 3, art. 29(2).
61. Woods, supra note 27.
62. Beechy, supra note 2, at 224.
63. Id.
64. Woods, supra note 27.
65. In this article, “Arbitrators” refers to both the Judges of the Tribunal of First Instance as well as the Members of the Appeal Tribunal.
66. Woods, supra note 27.
67. Alvarez et al., supra note 12, at 17.
68. Woods, supra note 27.
69. TTIP – E.U. Draft, supra note 17, § 3, arts. 9(5), 10(5), 11(5).
70. Id. § 3, art. 11(5).
71. ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration, ¶ 20 (Oct. 22, 2004), http://pge.gob.ec/images/documentos/2016/Biblioteca/NOTA%20175/NOTA%20175%20INGLES.pdf [hereinafter “ICSID Secretariat, Discussion Paper”].
72. Id. at ¶ 21.
73. Id. at ¶ 22.
74. UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 8.
75. ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 5.
76. See supra ch. 3.1.1.
77. ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 6.
78. See supra ch. 3.3.
79. Id. at ¶ 6.
80. Id. ¶ at 10. See also supra ch. 3.2.2.
81. ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 2.
82. Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 575 U.N.T.S. 159, art. 53(1)(b) (entered into force Oct. 14, 1966) (“ICSID Convention”).
83. ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 2.
84. Margie-Lys Jaime, An Appellate Body in Treaty-Based Investment Arbitration: Redefining the Investor-State Dispute Settlement Mechanism, 21 Spain Arb. Rev. 93, 101 (2014).
85. ICSID Secretariat, Discussion Paper, supra note 71, ¶ 21.
86. UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 8.
87. ICSID Secretariat, Discussion Paper, supra note 71, ¶ 21.
88. ICSID Secretariat, Discussion Paper, supra note 71, at annex ¶ 12.
89. TTIP – E.U. Draft, supra note 17, § 3, art. 29(3).
90. Moreover, there is not even a common understanding as to the legitimacy of the concerns raised by critics. See, e.g., Alvarez et al., supra note 12.
91. UNCTAD, Reform of Investor-State Dispute Settlement, supra note 3, at 9.
92. Id.
93. Meg Kinnear, Appeal, Review, Annulment . . . What’s it all about?, ISDS Blog (Oct. 23, 2015), http://isdsblog.com/2015/10/23/icsid-guest-post-appeal-review-annulment-whats-it-all-about/.
94. Schill, TTIP Negotiations, supra note 5.

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