These remarks approach the panel topic of investor-state dispute settlement (ISDS) at the crossroads, by reflecting on the ongoing discussions on ISDS reform that are taking place at the United Nations Commission on International Trade Law (UNCITRAL). There are three sets of factors likely to inform how ISDS is being transformed.

First, real or imagined issues.

It had to be acknowledged that ISDS is facing a legitimacy crisis. That said, opinions have diverged over whether the crisis was one of perception, or one grounded in fact. This divergence in views was apparent at the 50th UNCITRAL Commission session in July 2017, when UNCITRAL’s mandate for future work on ISDS was decided on. It was also discernible at the first session of UNCITRAL Working Group II (ISDS reform) in November 2017.

Under a three-pronged mandate, UNCITRAL Working Group II (at the time of the panel) was at the phase of identifying and considering concerns. It would then move on to consider (1) whether reforms are desirable; and (2) if so, whether to develop any reforms.

The current phase of identifying concerns was important. In the same way that the diagnosis of a malaise would determine the need and form of remedy to be prescribed, the current phase of UNCITRAL’s work focused on defining the problem, which definition would impact the solution.

One aspect of discussion during the first session of UNCITRAL Working Group II in November 2017 that showcased the difference in views on whether an issue was real or imaged was the exchange over coherence or consistency of arbitral decisions. Is there a problem of incoherence if what we are dealing with are different treaties with different negotiating intents? Or is there a problem with inconsistencies because we are dealing with treaties with a high degree of similarity in core obligations, sometimes identical language?

Ultimately, what the Working Group will need to work toward is ways of dealing with what are actually problems with ISDS, while taking into account issues of perception.

Second, old or new generation investment treaties.

In more recent years, states have sought to conclude investment treaties that respond to developments in the ISDS universe. For example, in order to aid in the interpretation of treaties, states have drafted more perspective clauses to clarify the substantive obligations, and provided for mechanisms for draft interpretation, as well as for non-disputing third party submissions in the event of a dispute before an arbitral tribunal. In reaction to issues of the costs of investment arbitration, states have provided for cooling off periods to promote amicable resolution of disputes, early dismissal procedures for frivolous or unmeritorious claims, and forum selection clauses as well as provisions for the consolidation of claims. So as to improve transparency in ISDS, states have introduced provisions on the publication of awards, public hearings, and submissions by third parties with a significant interest in the proceedings.

A number of these tools were shared about at the Working Group II meeting in November 2017, as examples of efforts that have been undertaken to address some of the concerns that have arisen vis-à-vis ISDS.

UNCITRAL’s work would need to take into account the transformation of ISDS that is already underway. It would do well not to halt this progress, undermine it, or undo it. Instead, UNCITRAL should seek to complement, even extend, current efforts.

Third, institutional or rules-based reform.

In discussions over ISDS reform, commentators have often introduced bifurcations such as (1) multilateral or bilateral reform; or (2) systemic or procedural reform.

Another way to think about the discussions over ISDS reform is in terms of institutional or rules-based reform. This bifurcation is not intended to suggest that one necessarily precludes the other, but is to clarify the suite of options that could be considered.

At the time of the panel, the work of UNCITRAL was not yet at the stage of considering whether and what reforms would be doable. However, at the Working Group meeting in November 2017, there was a noticeably consistent call from the member states of the European Union in particular, for systemic, holistic reform.

It is too early to predict what form such reform could eventually take. For example, would a new institution be established so that ISDS does not engage an ad hoc mechanism, and perhaps could be subject to appellate review? Or, would reform be in the form of amendments to or drafting of provisions of rules and procedures of ISDS that would tackle issues with the current mechanism in its various iterations and permutations and combinations?

The former, institutional reform, has been described as the multilateral, systemic option for reform. That said, it is worthwhile noting that the latter, rules-based reform could also be the subject of multilateral reform introducing systemic solutions. For example, the Mauritius Convention on Transparency sets out means by which transparency could be introduced into the ISDS mechanisms of existing treaties. A similar treaty vehicle could be drafted to introduce new rules-based reforms of ISDS procedures in investment treaties.

Both institutional and rules-based reform at UNCITRAL are likely to have to coexist alongside other reform efforts, such as by states parties and arbitral institutions, as part of a suite of options or as a transitional arrangement.

Having run through the real or imagined issues, old or new generation treaties, and institutional or rules-based reform, as three factors likely to inform how ISDS is being transformed, this note wraps with some comments on the UNCITRAL process. The UNCITRAL process would be a key factor in shaping the robustness of the output.

First, UNCITRAL is composed of sixty member states elected by the United Nations General Assembly (GA). Its mandate is from the GA, and its work is reported to, considered, and adopted by the GA through its Sixth Committee on legal matters. UNCITRAL is a truly multilateral process. Membership of UNCITRAL is such that it is representative of the various geographic regions of the world, and its principal economic and legal systems. These are prime ingredients for a truly inclusive, international dialogue—an opportunity not to be lightly passed up on.

Second, at the UNCITRAL Working Group meetings, observer delegations representing intergovernmental organizations, arbitral institutions, and civil society organizations are present. These add additional dimensions to the inclusiveness of the dialogue. Although government-led, the discussion benefits from statistics, trend analysis, and useful suggestions on commercial practice, which derive from the breadth of expertise and experience represented in the room.

Third, UNCITRAL has consistently adhered to a practice of consensus-based decision making, as a matter of convention. This practice echoes that of the Sixth Committee and the GA on legal issues. Building consensus is a tricky and laborious art. Consensus is not unanimity. But it ensures that all available options are fully explored. A consensus outcome would provide a solid foundation for a greater take up rate of the output. Further, with decision making by consensus, all of the delegations present at the Working Group would have the opportunity to be involved in the decision making. This would stand in contrast to the situation of a vote at the Working Group or at the UNCITRAL Commission, which would take place only amongst the sixty elected member states of UNCITRAL.

It is hoped for all our sakes that the outcome of UNCITRAL’s deliberations is a good one. Inclusiveness and the consensus-based process of UNCITRAL would be key to ensuring that.