Wednesday, February 10, 2021

An appeal in investor-state disputes at last?

The lack of an appellate mechanism in the international investment arbitration regime, unlike the WTO (albeit dysfunctional now) has been a major source of criticism as well as a challenge to the legitimacy of the ISDS system. The EU has attempted to correct this notion by proposing an investment court system as well as an appellate mechanism. It has incorporated this idea in the Canada-EU Comprehensive Economic and Trade Agreement. The idea of the arbitral tribunal and the appellate mechanism was also subject to challenge as violating EU law. The European Court of Justice in this decision seems to have laid that to rest.

The rules and finer print of the mechanism have been worked out now and are publicly available (page 62 of this larger large multilingual document) here. The Appellate Tribunal is what the appellate mechansm will be now called. It would be a six member tribunal. The term of office would be for 9 years. A division to hear a particular appeal will consist of 3 members - similar to the WTo Appellate Body. In terms of the Secretariat servicing the Appellate Tribunal, the ICSID Secretariat would be performing that role.

I was trying to compare the ambit and timelines of the Appellate Tribunal with that of the WTO's Appellate Body - 2 significant departures ( I am sure there may be more)

1. Power to remand the matter back to the original tribunal 

Under the DSU, the Appellate Body has no power to remand the matter to the panel that had originall decided the case. As per Article 17, paragraph 13 the "Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel." There is no scope for remand.

The Appellate Tribunal under the Canada-EU CETA has the power to remand the matter. Article 3(3) of the decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal states as follows:

"If the facts established by the Tribunal so permit, the Appellate Tribunal shall apply its own legal findings and conclusions to such factsand render a final award. If that is not possible, it shall issue a decision referring the matter back to the Tribunal to render an award in accordance with the findings and conclusions of the Appellate Tribunal..."

2. Duration

The WTO Appellate Body has a 90 day rule for completing its reports - 

"As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. In fixing its timetable the Appellate Body shall take into account the provisions of paragraph 9 of Article 4, if relevant. When the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days."

The period and the inability of the Appellate Body to complete the proceedings and submit its report within 90 days has been a cause of considerable tension at the WTO.

The Appellate Tribunal under the Canada-EU CETA seems to have been given more time! In fact, there is an opportunity to extend the period through a specified process.Article 3, paragraph 5 of the decision states:

"As a general rule, the appeal proceedings shall not exceed 180 days from the date a disputing party formally notifies its decision to appeal to the date the Appellate Tribunal issues its decision or award..."

Further, the Appellate Tribunal can inform the parties if it requires more time than the 180 days with the reasons for the delay. Further, every effort (a best endeavour again?) to complete the proceedings by 270 days must be done. Has the EU-Canada CETA provisions formalised what used to happen in Appellate Body practice in reality at the WTO?

I am sure there are more nuances that the two processes can be compared with. One needs to see how the Appellate Tribunal will function under the CETA, would it face similar challenges as the Appellate Body of the WTO and would it prove to be a model for investment norm setting multilaterally?

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