Beijing Arbitration Commission

Symposium on “Reform of the Investor-State Dispute Settlement System – Uniformity and Diversity” Successfully Hosted

Publish time: 2019-5-18

On the afternoon of May 17 2019, the symposium themed “Reform of the Investor-State Dispute Resolution System – Uniformity and Diversity” jointly organized by the International Council of Commercial Arbitration (the “ICCA”) and the Beijing Arbitration Commission / Beijing International Arbitration Center (the “BAC”) was successfully hosted at the BAC international conference hall. The symposium has attracted over one hundred professionals from governmental authorities, social organizations, enterprises, colleges and law firms.

The symposium

Madame Wang Hongsong

At the beginning of the symposium, Madame Wang Hongsong, Vice Chairperson of the BAC, delivered a welcome address. Madame Wang said that the BAC has a long-standing relationship with the ICCA, and that the BAC has paid constant attention to, and provided lasting support to, the ICCA Congresses. For this symposium, the BAC is honored to have the three presidents of the ICCA to have in-depth discussions on the reform of the investor-state dispute settlement (the “ISDS”) system with experts from academic and practice circles, both domestic and abroad. Moreover, Madame Wang shared the BAC’s exploration in the reform of the ISDS system, introduced the background of the making of the BAC Investment Arbitration Rules, and stressed that those bold innovations in the BAC Investment Arbitration Rules draft for comments require unremitting efforts for an effective implementation in a broader scope. Therefore, this symposium is expected to promote the discussion and exchange of different thoughts and views. Meanwhile, she also hoped that the BAC’s research results could contribute to the reform of the ISDS system.

Prof. Gabrielle Kaufmann-Kohler

Prof. Gabrielle Kaufmann-Kohler, President of the ICCA, reviewed the long-term cooperation between the ICCA and the BAC in her opening speech. As the BAC has provided lasting support to the ICCA Congresses and other events, and the ICCA has also provided support to the BAC’s events such as the Summit on Commercial Dispute Resolution in China, she said that the ICCA looks forward to the continuation of its partnership with the BAC. Prof. Gabrielle Kaufmann-Kohler then presented details of the ICCA’s recent development and latest research achievements. When talking about this symposium, she said that the ISDS reform has just become a spotlight recently, and the BAC has already obtained some research findings, so she expected that all the speakers and attendees could enjoy this event.

Mr. Jiang Chenghua

Thereafter, Mr. Jiang Chenghua, Deputy Director General of the Department of Treaty and Law of the PRC Ministry and Commerce, delivered a welcome speech. Mr. Jiang said that the reform of the ISDS has captured high attentions from governments, multinational corporations and arbitration practice circles. During the practice of the past few decades, the legal process within the international investment law area has made great progress, but also exposed a number of problems, especially the lack of uniformity. For the purpose of meeting challenges, the UNCITRAL initiated the reform of the ISDS, and the ICSID is now working on the amendment to its investment arbitration rules, but state governments hold different opinions on this reform. China proposes to make balanced investment dispute settlement rules, and the key of this reform is whether it will be in favor of the legal process of the international investment area. Three points will be crucial during this process, namely, impartiality, independence and uniformity. The reform of the ISDS will only succeed if it meets the aforesaid requirements. Meanwhile, long-term joint efforts within the international community will be required to realize the goal of the reform.

Mr. Tao Jingzhou

Dr. Chen Fuyong

The symposium was moderated by Mr. Tao Jingzhou, Managing Partner in Charge of Business Development in Asia of Dechert LLP. In session I, Dr. Chen Fuyong, Deputy Secretary General of the BAC, delivered a keynote speech on “The Upcoming BAC/BIAC Rules for International Investment Arbitration: A Chinese Approach to the Concerns over Investment Arbitration Regime”, and Associate Professor Jane Willems from the Law School of Tsinghua University, acted as the commentator. Dr. Chen firstly introduced the background and process of the making of the BAC International Investment Arbitration Rules draft for comments (the “BAC Investment Arbitration Rules”). He said that with the expansion of international investments, there has been an ever growing demand for investment arbitration globally. However, the problems of the existing investment arbitration system has aroused some concerns, such as the lack of transparency of the arbitral process, the excessively long time duration, the high costs, and the lack of arbitrators’ independence and impartiality. It was under this background that the BAC realized the significance of the reform of investment arbitration, and expected to contribute a Chinese approach to the reform of the ISDS through its research and making of the BAC Investment Arbitration Rules. Then Dr. Chen interpreted in details the highlights of the BAC Investment Arbitration Rules, including the adoption of appeal mechanism aiming to ensure the fairness and uniformity of the awards, the proper improvement of transparency in order to balance the transparency and confidentiality of investment arbitration, efficiency enhancement and cost reduction, higher requirements on arbitrators’ qualifications and behaviors, and the application of the rules in both institutional arbitrations and ad hoc arbitrations.

Associate Prof. Jane Willems

When providing her comments, Associate Prof. Jane Willems thought highly of the making of the BAC Investment Arbitration Rules, and believed that the rules will enlarge China’s influence over the international community and further influence the making of international law. Meanwhile, Associate Prof. Jane Willems reviewed the innovative approaches reflected in the BAC Investment Arbitration Rules one by one, and made suggestions on the practical implementation and the refinement of substantive standards. At last, she looked forward to seeing the first international investment arbitration filed with the BAC as soon as possible.

Prof. Albert Jan van den Berg

Prof. Albert Jan van den Berg, Honorary President of the ICCA, delivered a keynote speech on “Uniformity of Arbitral Awards? A Calling for Appeal Mechanism”. Professor Chi Manjiao from the Law School of the University of International Business and Economics made comments. Prof. Albert Jan van den Berg said that the discussion about appeal mechanism of investment arbitration has lasted for years, and it was shown in the discussion of the UNCITRAL Working Group III that representatives of various states have extensive concerns about the uniformity, consistency, predictability and correctness of investment arbitration awards. Prof. Albert Jan van den Berg thought that the comparison of two cases only makes sense under the same substantive standards of the treaty. Different interpretations of the investment arbitration treaty do exist, but not so wide-ranging as complained by the UNCITRAL, and the UNCITRAL’s resolution of this problem is not to unify the substantive standards of investment protection in all investment agreements, but to set up appeal mechanism or multi-levelled court system in the procedural reform. Next, Prof. Albert Jan van den Berg specifically introduced the practice of the appeal mechanism. Under the existing over 3000 international investment agreements, the appeal mechanism is not legally binding, and roughly 25 international investment agreements have provisions trying to discuss the possibility of adopting appeal mechanism in the future. He further introduced the appeal mechanism the EU and the UNCITRAL are exploring to adopt, as well as the specific form of the institution of appeal. At last, Prof. Albert Jan van den Berg said that the appeal mechanism could not determine how the substantive standards of treaties are to be interpreted, and in this respect a template of international investment agreement could be considered to resolve the problem of non-uniformity of the substantive standards. Apart from that, the primary consideration for adopting of the appeal mechanism is the issue of legality. The main cause of legality lies in the independence and impartiality of arbitrators and the appointment thereof, and many new institutional developments are already capable of resolving the ISDS system’s problems in this regard.

Prof. Chi Manjiao

Prof. Chi Manjiao in his comments made a further introduction of the problems and challenges met by the ISDS in its recent development, and then a detailed interpretation of the background of the reform of the ISDS. Prof. Chi Manjiao was of the opinion that as per the scheme of the UNCITRAL Working Group III, the reform of the ISDS could be carried out progressively or systematically, and the establishment of an appeal mechanism obviously belongs to a systemic or structural reform. Whether the appeal mechanism will work cannot be generalized, and whether or not to adopt the appeal mechanism could be determined based on consideration of the following factors: the host states’ valuation of the ISDS system, the host states’ interest demand and familiarity with the ISDS, and the advantages and disadvantages of the appeal mechanism.

Prof. Gabrielle Kaufmann-Kohler

Prof. Gabrielle Kaufmann-Kohler then delivered a speech themed “The UNCITRAL Working Group Contribution to Addressing Concerns and Developing Reform Options”. Dr. Wang Xuehua, Partner of Beijing Huanzhong & Partners, provided comments. Prof. Gabrielle Kaufmann-Kohler firstly presented an introduction of the working range, working process and the current status of the UNCITRAL Working Group III. The main task of the UNCITRAL Working Group III is to discuss and identify the problems of the ISDS system, to deliberate whether a reform is needed, and if yes, how relevant schemes are to be made. Nevertheless, the UNCITRAL Working Group III only works on the procedural reform scheme, excluding the reform of investment treaties’ substantive standards. After that, Prof. Gabrielle Kaufmann-Kohler elaborated on the existing ISDS system’s problems found in the respects of costs, time duration, uniformity of awards, diversity, and independence and impartiality of arbitrators by reference to a series of statistics. Prof. Gabrielle Kaufmann-Kohler specifically stressed the issue of lack of diversity in gender, region and age. According to the statistics, among the 25 arbitrators mostly appointed to handle ISDS cases, only two are females, and none is of Asian or African nationality. Concerning the reform options, Prof. Gabrielle Kaufmann-Kohler pointed out that if under a progressive reform scheme, the existing ISDS system’s problems could be resolved by changing the means of arbitrator appointment, restricting repeated appointments of the same arbitrator and appointment of arbitrators wearing two hats. And if under a structural reform scheme, measures for consideration include the establishment of an appeal mechanism and multilateral investment courts. Both reform schemes will be discussed at the same time in the future by the UNCITRAL Working Group III.

Dr. Wang Xuehua

In his comments, Dr. Wang Xuehua referred to the BAC Investment Arbitration Rules’ innovative approaches, reviewed and analyzed the reform schemes raised by Prof. Gabrielle Kaufmann-Kohler and the value consideration thereof. As to the reform of the ISDS, Dr. Wang Xuehua thought that the reform of the ISDS and the making of reform schemes need to discuss and resolve various issues, such as how the reformed system could be ensured to be efficient, flexible and capable of meeting the requirements of both host states and investors, how the reform could be well coordinated with the existing ISDS system, and how the enforcement of arbitral awards could be guaranteed. Apart from that, the reform of ISDS should not be limited to procedural issues, but also should establish clearer and more accurate substantive standards and guidelines of the rules.

Mr. Donald Donovan

Mr. Donald Donovan, Honorary President of the ICCA, delivered a keynote speech on “Balancing between the Protection of Investor and Integrity of Sovereign State”. Mr. Ren Qing, Partner of Global Law Office, acted as the commentator. From the perspective of host states, Mr. Donald Donovan shared the main problems of the existing ISDS system in the eyes of host states, namely, the incorrect application of treaties by the arbitral tribunals. Taking the three investment agreements of CPTPP, USMCA and CETA as examples, he elaborated on how host states made responses to the aforementioned problem during the making of the investment treaties. Mr. Donald Donovan said that with regard to the scope of application of the treaties, host states further clarified the definition of investment and investor in their newly made treaties, and inserted denial of benefits clauses, for the purpose of preventing investors from non-signatory states from obtaining the protection of the treaty by having their companies incorporated in signatory states. And thus all the aforementioned three treaties provide that investors controlled or owned by non-signatory states shall prove they have substantive business operations in signatory states. Concerning the scope of protection under the treaties, the treaties have clearly reduced the arbitral tribunal’s discretion, refined the standard of fair and equitable treatment, and redefined the standard of indirect expropriation, so as to promote the uniformity of arbitral awards. At last, Mr. Donald Donovan summarized that the aforementioned new treaties represent host states’ efforts in promoting the reform of the ISDS at the level of rulemaking, which was a re-adjustment of the balancing and coordination of the relationship between the investors’ interests and the host states’ administrative autonomy.

Mr. Ren Qing

Mr. Ren Qing in his comments stressed once again the importance of investors and host states’ benefits balance to China with reference to statistics of China’s direct investment, international construction contracting projects and investment disputes that involve China. Mr. Ren Qing then referred to treaties such as the China-Japan-ROK Investment Agreement and the China-Canada Investment Promotion and Protection Accord, and provided comparative interpretation of the definition of investment, the denial of benefits clause, the most-favored-nation clause, the standard of fair and equitable treatment, and the standard of indirect expropriation. Thereafter, he shared China’s specific practice concerning the scope of application of treaties, the scope of protection under the treaties, and relief measures.

Prof. Zhang Yuejiao

At the end of the symposium, Prof. Zhang Yuejiao, Former Judge of the WTO Appellate Body, delivered the closing remarks. Firstly of all, Prof. Zhang Yuejiao affirmed the selection of topics and the profundity of discussions of the symposium, and also appreciated the BAC and the ICCA’s well organization of this event as well as the speakers’ insightful speeches. Prof. Zhang Yuejiao believed that as to whether the reform of the ISDS is needed, the answer is obvious. Currently, the ISDS system’s problems as shown in the costs, the time duration, the uniformity of arbitral awards, the transparency, the diversity, the arbitrators’ independence and impartiality, the appointment of arbitrators, and the interpretation of treaties’ substantive provisions are actually pushing the reform of the ISDS. When talking about how the reform should be carried out, Prof. Zhang Yuejiao thought that whether it is a structural reform or a progressive reform, we will need a comprehensive follow-up, but cost issue is also an important factor to be assessed in the selection of reform mode. Prof. Zhang Yuejiao suggested to establish a specific working group to handle the code of arbitrators’ behaviors, and to provide guidelines on substantive standards and definitions under the treaties. At last, Prof. Zhang Yuejiao said that the discussion and debate on the reform of the ISDS will continue, and therefore lasting attentions and joint efforts from everyone are strongly expected. She also looked forward to seeing the BAC Investment Arbitration Rules officially released in the near future, which will play an important role within the area of investment arbitration.

Panel discussion

Group photo of speakers

Group photo of speakers

In recent years, there has been increasing demand for investor-state dispute settlement, especially international investment arbitration, and the reform of investor-state dispute settlement system has become a spotlight. The BAC as a leading Chinese arbitration institution with certain influence internationally, published the BAC International Investment Arbitration Rules draft for comments in February 2019, so as to meet the needs of the changing situation, trying to provide a Chinese approach for the reform of the investor-state dispute settlement system, and to further promote the development of international investment law. The BAC will pay continuous attention to the reform of investor-state dispute settlement system, and also welcome professionals and experts within the industry, domestic and abroad, to provide valuable comments and suggestions, and continue to pay attention to and participate in various events organized by the BAC.

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All disputes arising from or in connection with this contract shall be submitted to Beijing Arbitration Commission / Beijing International Arbitration Center for arbitration in accordance with its rules of arbitration. The arbitral award is final and binding upon both parties.
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