The ICLRC took part in the 46th session of the UNCITRAL Working Group III

On October 9-13, 2023, the International and Comparative Law Research Center (ICLRC) took part as an observer in the 46th session of the UNCITRAL Working Group III. The Center’s expert on public international law Ekaterina Petrenko and external expert Anna Kozyakova represented the ICLRC. Among other things, the experts utilized some ideas of the Investment Law and Arbitration Lab researchers. The Lab was recently established by the ICLRC as an expert platform to study the issues discussed in the Working Group.

At the session the Working Group considered Draft provisions on the establishment of an advisory centre on international investment law (A/CN.9/WG.III/WP.230) and Draft provisions on procedural and cross-cutting issues (A/CN.9/WG.III/WP.231).

Since 2017, the Working Group III has been working on the reform of investor-State dispute settlement (ISDS). As an element of such reform, it was proposed to establish an Advisory Centre, which could, inter alia, provide technical assistance, capacity building in international investment law and investor-State dispute settlement, and legal representation services.

The draft provisions for the establishment of the Advisory Center are well advanced. At the October session, an understanding has been reached that it would be appropriate to establish the Advisory Centre as an intergovernmental body. However, there is still no consensus among the member States of the Working Group on a number of fundamental issues, namely membership, beneficiaries, and funding.

The question of how the activities of the Advisory Centre would relate to the activities of other organizations in the field of investment law and arbitration aroused a lively discussion. For this purpose, the Center’s experts proposed to establish a mechanism, which in the future would allow the Advisory Centre to become a center for consolidation of different bodies and organizations’ efforts in the field of support and systematization of practice, as well as exchange of experience and best practices. This could raise awareness of the tribunals’ practices, gaps, and inconsistencies among States and other participants of the ISDS system, and contribute to greater consistency and predictability in the practice of the tribunals. The members of the Working Group agreed on the need to emphasize the importance of cooperation with and coordination among international and regional organizations and requested the Secretariat to modify the respective draft provision 3.

During the session, the Center’s experts also commented on the importance of ensuring the proper quality of legal services to be provided by the lawyers of the Advisory Centre. Will the Advisory Centre be able to provide representation services of comparable quality to those provided by professional law firms with extensive practice? In addition, how to deal with potential criticism of States that representatives from the Advisory Centre have not performed their representative function to the best of their ability, especially if the outcome of the case is unfavorable to the represented State? The current version of the draft provisions does not answer these questions yet. Regarding the proposed function of facilitating the engagement of external counsel, no decision was reached on how the selection of law firms will be carried out and whether the beneficiaries of the Advisory Centre will be able to influence this selection. The Chairperson and several members of the Working Group agreed that this point deserved attention. 

Following the discussion, the Secretariat was requested to revise the draft provisions on the establishment of the Advisory Centre and submit them to the Working Group for consideration at its next session in January 2024.

The draft provisions on procedural and cross-cutting issues also generated a lively discussion. The draft consists of 25 provisions on conditions and limitations to submission of a claim, conduct of proceedings, certain issues related to the tribunal decision-making (assessment of damages and compensation, allocation of costs, etc.), which were proposed to be used as model provisions for inclusion in existing or future investment agreements.

Initially, much attention was given to the sequence in which to proceed with the draft and how to prioritize the discussions. In the end, the Working Group decided to start with draft provision 23 on the assessment of damages and compensation, followed by draft provisions on conditions and limitations to submission of a claim. It was also agreed that the provisions on the conduct of the proceedings could then be considered, as well as articles 24 (time limit for final decision by the tribunal) and 25 (allocation of costs).

Draft provision 23 generated a lively discussion among States because of the particular relevance of the methodologies for assessing damages and compensation to their interests. Following the discussion, the Secretariat was requested to revise this provision in order to address gaps in existing international investment agreements and to prepare recommendations to the tribunals on the assessment of damages and compensation.

With respect to the provisions on conditions and limitations to submission of a claim, the Working Group decided not to continue work on the provision on settlement of disputes between States, as well as on draft provisions 2 and 3. The States disagreed on whether claimants should be required to pursue domestic remedies through a local court or competent authority before bringing an investment arbitration claim. After consultation and taking into account the differences, the Working Group asked the Secretariat to suggest ways in which, in addition to obliging claimants to pursue domestic remedies, their use could be encouraged, and to do the same for other requirements to submission of a claim.

The Working Group plans to discuss these issues further. Work to address the ISDS issues initially identified as concerns by the Working Group is scheduled to be completed in a phased approach in 2026. Thus, draft provisions on the establishment of an advisory centre on international investment law, as well as draft guidelines on dispute prevention and mitigation, are scheduled to be presented to the Commission in late June/early July 2024.

The ICLRC will continue to actively follow the work of Working Group III and participate in the discussions as an observer.