Introductory Remarks by Simon BatifortFootnote *

I remember attending early meetings of the UN Commission on International Trade Law (UNCITRAL) Working Group III (WGIII) in New York and being impressed. Dozens of state delegations, hundreds of representatives from all around the world, were gathered at the United Nations to voice their concerns about what they perceived to be the main problems with investor-state dispute settlement (ISDS). Many of those states had been “burned” by ISDS and clearly valued the opportunity to share their experience.

The process was run by an excellent Chair with experience as both an ISDS litigator and an investment treaty negotiator, a talented rapporteur, and it enjoyed the support of the competent staff at the UNCITRAL secretariat.

The UN and the state delegations had allocated significant resources to make sure that the meetings were well attended and that there was ample opportunity for discussion, with no state being rushed or denied the right to intervene on any topic.

After two decades of backlash against ISDS, had we finally found the right forum to fix the system?

The WGIII process has now been going on for eight years. There have been many, many, … many meetings. The main meetings take place at the UN in New York and Vienna, three times a year, usually for a full week. There have also been eight intersessional meetings held in the Dominican Republic, Singapore, Belgium, China, and other places, as well as informal meetings throughout the year. Thousands of pages of reports, papers, and draft instruments have been produced.

But so far only three projects have been completed—a code of conduct for adjudicators, model provisions and guidelines on mediation, and the statute of an advisory center. The more ambitious reform projects envisioned, such as the creation of a multilateral investment court, are still under discussion. It was clear from early on that the group would not touch substantive questions such as the meaning of “fair and equitable treatment” (FET). But there has also been pushback against discussing so-called cross-cutting issues such as damages, shareholder claims, and the right to regulate.

In this session, we take stock of where we are in the WGIII process. What are its main accomplishments? What are its main limitations? And given the direction taken so far, does WGIII remain a promising enterprise, or is it doomed to fail?

We have structured this session as a debate. We have two debaters and two commentators, all of whom are insiders of the system. In fact they were just in New York last week for the latest session of WGIII. Our first debater is Shane Spelliscy, Director General and Deputy Legal Advisor at Canada’s Trade Law Bureau, and the Chair of WGIII since the very beginning. Our second debater is Ladan Mehranvar, senior legal researcher at the Columbia Center on Sustainable Investment (CCSI), who represents CCSI at WGIII. Our first commentator, Mariana Pinto Schmidt, represents the government of Chile at WGIII.Footnote ¹ Professor Chiara Giorgetti of the University of Richmond School of Law, is a WGIII delegate for San Marino (having initially represented the Institute for Transnational Arbitration).

We will have four mini debates between Shane Spelliscy and Ladan Mehranvar, each of which will be enriched by the comments of Mariana and Chiara.

First debate: The mandate of WGIII has been interpreted from the outset to include only procedural issues and not substantive issues of international investment law. Does this limited mandate make WGIII fit for addressing the problems that justified the initiation of the reform process in the first place?

Remarks by Shane Spelliscy

The first thing I would say is to recall for everybody that in fact the mandate of WGIII from the Commission is actually a broad mandate. It is a broad mandate—in the actual wording of the text—“to address concerns related to investor state dispute settlement.” So, what does that mean? And what does the Working Group understand that to mean?

What it has understood is, as Simon said, it does not cover things like the FET standard. We are not trying to clarify what fair and equitable treatment means. We are not trying to write a new understanding of what indirect expropriation is. We are not drafting substantive exceptions to treaties. But this mandate does allow us to consider a broad range of concerns related to dispute settlement.

I do not see it as an overly limited or restrictive mandate. It is not purely a procedural mandate, as some have said. It is anything related to the dispute settlement process. In my view, and you will see this on the Working Group agenda, this does cover things that you would find in a dispute settlement chapter: standing, access to dispute settlement, limitations periods, and damages.

For those familiar with treaties, you usually have a Part B of a bilateral investment treaty. That is where we are operating. Is this sufficient to address the concerns identified with ISDS?

I would have three general points here. First, there is a practicality to a more limited mandate, particularly in a multilateral context. This is likely to be a ten-year project, already long. We may be able to move faster, but there is only so much that is really manageable in a task where you have not just dozens of delegations, but we typically have over one hundred states who come to the Working Group sessions to discuss these issues. In a multilateral process, if you try to add too much to it and try to take on too much, you doom yourself to actually producing nothing. There is a sense in which having a more limited mandate to start makes sense.

The second point is that treating substantive rules separately from mechanisms for dispute settlement also has a rationale to it. In any system of law, you have roughly two different parts. You have your substantive rules, the laws, and then you have your processes for dispute settlement. In order for it to be a well-functioning system, both have to work. If you have good, clear, well-written rules, but you do not have an effective mechanism for dispute settlement, the system will not function very well. Separating off and saying the procedural rules on dispute settlement need to be reformed is an important contribution itself.

But of course the opposite is true. If you do not have good rules, but you have good dispute settlement, you have not done enough. I have always said in the Working Group that the fact that we are focused on dispute settlement proceedings does not in any way diminish the importance for states to consider whether they have the right balance in their treaties in terms of substantive obligations. That is something that does have to be addressed. I would certainly accept that what we are doing at UNCITRAL is unlikely to be able to fully and completely address all of the concerns that have been identified with the investment treaty regime. I would say the same would hold true if you just focus on substantive standards.

But this is, from my perspective, a really important first step. Procedural reform of the dispute settlement system will yield important results and important contributions to reforming the system.

Remarks by Ladan Mehranvar

I do not have any pushback to that, so I am going to take it somewhere else because I tend to agree with Shane. But I do want to focus on this substance versus procedure dichotomy that has never really stopped being contentious in the room. It resurfaces every single session that the cross-cutting issues come up. These cross-cutting issues include matters that really go to the heart of the legitimacy and democratic crisis of the ISDS system. They are fundamental to the power dynamics of ISDS, and WGIII included them as part of the reform package early in 2018.

Even so, these issues include, as Simon has already mentioned, the state’s right to bring counterclaims, to limit shareholder claims, to regulate third-party funding, to require exhaustion of local remedies, and to prohibit speculative damages for non-operational projects. They are not peripheral issues; they are core to rebalancing a system that by design tilts heavily in favor of investors; and without these reforms, states really are exposed to billion dollar claims from possibly minority shareholders who never made a direct investment or bore any real risk in these host jurisdictions. That is a real asymmetry at the heart of ISDS. And let us be honest, most developing countries did not come to WGIII to refine the code of conduct or to build a multilateral court. They came to fix this imbalance.

But whenever proposals touch on these core power structures, we hear the same responses. That is too substantive. It is outside the mandate. Suddenly the procedural versus substantive line becomes a gatekeeping tool, flexible when reforms preserve the current system, but rigid when reforms threaten to transform it. That is not just frustrating, but also a form of agenda controlling.

Let us remember that developing countries in the room already gave up a lot by agreeing not to reopen the substantive rules and to review and reassess them in the treaties. Many of them could have followed the lead of developed countries and exited ISDS altogether. But instead, they chose to engage in this process, a very promising one, in good faith, expecting at least meaningful procedural reform. If now the most critical issues are declared off limits or derailed in some way, what are we really doing here?

WGIII was formed to address a crisis of legitimacy. But if the mandate is used to avoid rather than confront that crisis, then we need to ask: what exactly is being reformed?

Remarks by Mariana Pinto Schmidt

To begin with, I fully agree that WGIII is not dealing with substantive obligations. The Group’s mandate is clearly limited to investor-state dispute settlement, which is precisely what we have been working on. However, as Ladan rightly pointed out, whenever discussions touch on particularly relevant elements of the reform, especially cross-cutting issues, the question of whether these matters fall within the Working Group’s mandate tends to arise once again.

A clear example occurred during the most recent session in New York, when the draft provision on shareholder claims and reflective loss was discussed. Once again, it was argued that this issue exceeded our mandate. This was, frankly, disappointing. From the outset of these negotiations in 2017, concerns about reflective loss and the risk of double recovery were among the most frequently raised and they were explicitly recognized in the reports that established our reform agenda. It is therefore difficult to understand the position of some delegations and observers in resisting addressing precisely the issues that originally justified the creation of this Working Group.

Provisions of this nature are exactly the type of reforms we should be pursuing. Moreover, many of the same delegations raising objections within WGIII routinely negotiate such provisions in bilateral treaties. This raises a broader question: why is it considered acceptable to include these provisions bilaterally, yet there is resistance to addressing them multilaterally in a forum expressly mandated to tackle systemic ISDS concerns? I do not have an answer to that question, but I believe it is important to reflect on it.

Finally, and I offer this as a very personal view, it appears that, for some of the delegations opposing these discussions, their objections may be shaped by broader policy or political considerations. There does not seem to be a strong willingness to engage in a multilateral effort to modernize international investment agreements in a way that could contribute to greater consistency and coherence.

Second debate: WGIII has finalized only three projects to date, namely the Code of Conduct, Model Provisions and Guidelines on Mediation, and the Statute of the Advisory Center. Was it wise to accord so much negotiation time to those projects given their relatively limited impact compared to other projects on the agenda?

Ladan Mehranvar

This question really gets at a fundamental truth. The reform process has burned an enormous amount of time and resources. I am not going to say “many, many” as many times as you said, Simon. But a lot of energy and political capital have been spent on what are essentially the safest, most palatable issues for capital exporting countries and their business and legal industries, while sidelining the core concerns that brought most states that are at the receiving end of these ISDS claims to the table in the first place.

Take the Code of Conduct. In theory, it had the potential to be a very meaningful reform, especially around the problem of double-hatting. Everyone outside of the ISDS system recognizes that it is a glaring conflict of interest. How can someone advocate for a particular interpretation of an investment treaty provision in one capacity as counsel and then sit in judgment on that same standard in another case, even at different times?

That is not just a perception issue. It is structural bias. WGIII had the chance to take a clear principled stand to say this is unacceptable and we are serious about legitimacy and perception. But instead, the result was a watered-down text that essentially preserves the status quo, maybe adds the smallest tweaks to the edges instead of setting a new standard. The message was if states want real reform, they can pursue it bilaterally. It could have been the other way around, a high common standard and let states opt out if they wished.

But instead, the Group, or the most powerful voices in the Group, chose the lowest common denominator. That choice, I fear, has set the tone for everything that has followed.

The Advisory Center is another example. It remains a hypothetical project and even if it becomes operational, it is designed to offer limited and conditional support to a small subset of developing countries and potentially small and medium enterprises. It may help with capacity, but it does not really shift the power dynamics.

Meanwhile, critical reform areas like the ones that we have just discussed, cross-cutting provisions, have been delayed and with every subsequent proposal they have been watered down to almost nothing. These issues really go to the heart of ISDS and how it is seen as illegitimate and unbalanced by the public and by a lot of the states. It is not a question of priorities. There is a real cost component here.

For developing countries especially, participation in this process requires significant financial and human resources. Many delegations operate with skeleton staff and rely on donor funding to just attend these sessions. They have invested years into the process under the good faith belief that it would address the systemic imbalances in ISDS that have disproportionately affected them. Instead, what they have witnessed is a process that has prioritized form over substance and optics over outcomes. Outputs like the Code of Conduct offer political cover, not real change.

They create the appearance of progress without disrupting the architecture of investor privilege and the real harms caused by the current system. So yes, the projects finalized to date are marginal in impact and the time spent on them reflects more than inefficiency. It reflects a strategic choice to avoid the hard questions, to steer clear of anything that might actually rebalance the system. And that is the real story of the low hanging fruit. Not that it was easy to pick, but that it was chosen precisely because it would not rock the boat.

Shane Spelliscy

First, to clarify, we have brought three things to finalization, including mediation provisions and guidelines, and there is a fourth thing that is going to the Commission, dispute prevention. In terms of thinking about how time is accorded to these projects, WGIII very early on decided to move multiple reform projects forward at the same time. It is not right to say that we have “sidelined” procedural issues or cross-cutting issues. Work is ongoing and has been ongoing. For those who say, “well, my agenda item did not get put forward right away,” that is the nature of multilateral work. The idea that we decided on in WGIII is to move these forward at the same time because each state has a different experience in ISDS. Each state has different priorities based on what its lived experience is.

From my perspective, I would not denigrate any particular reform option as that is denigrating the lived experience of some states. I do not think that is the right thing to do. Every state is going to put a different priority on different projects—that is the result of multilateralism and you see that compromise in the work plan, devoting time to each project.

That is the nature of multilateral work. It entails compromise. It entails a respect for the experience of other states, even if you think that is not where your priorities would lie. I also would not accept the premise that things like the Code of Conduct or the Advisory Center are marginal.

The impact is, of course, yet to be seen. I do think that there are important innovations in the Code on things like independence and impartiality, on double hatting, on rules on disclosure. Some of it is codification. But even codification can be important in the international law context.

On the Advisory Center, I would say this was actually something that was prioritized by developing states. This was a project that they wanted to see pushed forward and they wanted to see come on the agenda. This is why it actually came early. It was a request of those least developed countries, and developing states, to move this forward. Perhaps I am more optimistic than Ladan, but I do believe it will become operational and I do believe it is going to make a significant difference.

When you think about some of the cross-cutting issues, one of the things you hear about, for example, is regulatory chill, and that developing countries do not have the expertise in house, they do not have the funds, they do not have the resources. When they get threatened with the billion dollar claim, they back down. Now if one accepts that as what happens, then in my mind, the Advisory Center is a key contributor to mitigating that. It is going to provide guidance to developing countries—expertise. It will in fact have the resources under the plan that we have to actually represent states in cases.

Now can it represent states in every single case? Probably not. What it can seek to do is build the capacity in developing states and least developed countries so that they have the capability of looking at those claims when they come in and knowing what is not meritorious and knowing when they can adopt regulation. I actually do think that ideas like this will lead to change.

The other thing to remember is the work is not done. We have had talks about the agenda and the mandate and I do not disagree that when a state hears something that they do not want to do, all of a sudden the mandate comes up. That is a trick in the book in a lot of negotiations, to try to go back to the original mandate. But these things that are being talked about are still on the agenda. There are still discussions on damages, there are still discussions on things like shareholder claims. We had the discussion: is it within mandate? I said last week, yes, it is within mandate. There are things like that that will need to be addressed. Will there need to be compromise in the end? Yes, there will need to be compromise in order to make this reform effective.

Remarks by Chiara Giorgetti

Thank you very much for the invitation to join you today. I would also like to thank the debaters, who highlighted several important and thought-provoking issues. I would like to offer some additional comments on how we might assess the work of WGIII so far—particularly regarding the concern that too much time has been dedicated to projects that are of “relatively limited impact.”

First, I do believe that concluding three projects is not insignificant. Indeed, I consider it a significant achievement. Take for example the Code of Conduct. Agreeing on an applicable Code of Conduct is—I think—a remarkable accomplishment. Though Codes of Conduct are becoming more common for international courts and tribunals, they are by no means the norm in international litigation yet. The International Court of Justice, for example, does not have a Code of Conduct for its judges and has only issued some general Practice Directions.

Codes of Conduct are somewhat more prevalent in international criminal courts—for example judges at the International Criminal Court adopted a Code of Judicial Ethics, which is advisory in nature.Footnote ² In international arbitration, Codes of Conduct are also becoming more common. Several arbitral institutions, such as the Singapore International Arbitration Centre and the Hong Kong International Arbitration Centre,Footnote ³ have adopted codes of conduct. In the same vein, some investment treaties and free trade agreements, such as the EU-Canada Comprehensive Economic and Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,Footnote ⁴ also include ethics provisions.

However, to my knowledge, this is the first time that a Code has been concluded in the context of a multilateral negotiation and agreed upon as a result of a sustained and inclusive process. This is, in and of itself, a remarkable achievement.

Similarly, the Advisory Center is also a significant achievement. The Advisory Center is clearly inspired by the Advisory Center on World Trade Organization law, but it has been carefully adapted to meet the specific context and needs of ISDS. This is only the second time such a multilateral advisory center has been created, and that is, again, noteworthy.

Second, the reforms adopted—and especially the Code of Conduct—have been responsive to some of the key criticisms of ISDS. Hence, I think it was appropriate to tackle them first. Indeed, one of the central reasons that led WGIII to engage in ISDS reform was to address the backlash on ISDS and the perceived lack of legitimacy in the selection and conduct of arbitrators: concerns about who appoints them, how and how often they are appointed, and arbitrators’ perceived conflicts of interests—especially in relation to double hatting, multiple appointments and issue conflict.

The negotiation of the Code allowed negotiators to address many of the criticisms and address these issues in the context of the larger ISDS reform agenda. For example, the fact that the Code required substantial disclosure is a significant and a noteworthy achievement of the Code. Similarly, the Advisory Center addresses the issue of access to justice and equality of arms—issues that are particularly important for small and developing respondent states. In this context, prioritizing these issues was logical and necessary.

That said—and this is my third point—I think it is fair to acknowledge that neither the Code nor the Advisory Center are completely satisfactory. Focusing again on the Code, which I know best: WGIII was originally tasked to address several specific issues, such as issue conflict, double-hatting and multiple appointments. Although the first draft of the Code included provisions for all of these matters, the final version does not. Issue conflict and multiple appointments are not included, and Article 4 on double hatting is widely seen as diluted. Indeed, the lack of consensus on Article 4 almost derailed the approval of the Code of Conduct on the last day of negotiations, until a compromise was found a few minutes before the conclusion of the negotiations.

Fourth and finally, it is worth reflecting on why we may view the outcome so far as both a success and as falling short. For this, I think it is important to note that the finalized projects are the result of an intense multilateral process. In each meeting, states came together to talk and listen to different perspectives. Some states advocated a certain approach, while other states wanted something completely different. It took five different drafts to reach an agreement on the Code, and the drafts were very, very different. Article 4 in particular saw intense debate, with deeply divergent views on how to regulate and address double-hatting. An intense process of negotiation was needed and a compromise, an equilibrium, had to be found. We had to make sure that the different positions were first aired, heard, discussed, and then a compromise was reached. As is often the case in diplomacy, no party is completely satisfied, and all parties are a little bit dissatisfied. But this is the nature of multilateral diplomatic negotiations; reform is also the result of negotiated compromise.

I would like to add one final observation. I believe the initial adoption of these instruments may also provide some additional lessons we can learn as we move forward with other—possibly more substantive—reform processes. One issue I observed during the negotiations of the Code of Conduct was that the engagement of states significantly grew over time. As the process of discussion and revisions continued, stakeholders became increasingly more involved. The negotiation and adoption of these initial instruments catalyzed interest from states, who are now more engaged—and equipped—for the next phase of reform. It will be important to seize this opportunity of renewed engagement to continue with the process of reform.

Third debate: Even if WGIII finalizes all the instruments it set out to prepare, including the statute of a multilateral investment court, is it likely that many states will opt into those instruments or will we see limited adoption?

Ladan Mehranvar

I think this really goes to the heart of the matter, and that is ratification. Yes, UNCITRAL can finalize as many texts as it wants, but without meaningful uptake by states, those instruments are just paper. There are really two key points to keep in mind here.

First, the reform process is opt-in by design, for now at least. Second, the reforms themselves are being shaped around the lowest common denominator, the minimum everyone can agree on, rather than what is needed or desired by the majority in the room. That is a problem. Locking in minimal reforms can actually weaken a respondent state’s position, not strengthen it. Because once you codify a lower standard, especially in a multilateral instrument, it can undercut what tribunals might otherwise interpret more progressively.

Instead of raising the floor, you are sealing the basement door. That is why some states that truly want reform may walk away not just from the negotiations, but from ultimately adopting these instruments, and not because they oppose reform, but because these texts just do not fix the problem for them. They are entrenching the status quo.

Meanwhile, powerful capital exporting states whose investors benefit most from ISDS, may not opt in at all, either due to a lack of political will or pressure from their investor and legal sectors. We get the worst of both worlds, watered down reforms and low participation.

The low participation may not matter at the end, since the low standards will still become reference points for best practices, even without states opting into those instruments.

My last point is that each issue that is discussed—whether it is the assessment of damages, appellate mechanism, or the standing mechanism—is being negotiated in a silo. That weakens reform-minded states and makes it harder to push for a core reform package where real tradeoffs and give and take are possible. Without that, what do we get?

The EU gets its court, capital exporters keep strong investor protections, and Global South states and their public are left with vague promises or soft standards that do not actually solve the problem.

All of this while many developing countries are still bound by old bilateral investment treaties (BITs) with no policy interest safeguards, no right to regulate, etc. The stakes are quite high for this group of countries. The countries that pushed for those treaties in the first place, like the United States, Canada, and many EU member states, have already moved on, breaking free from their ISDS treaties among each other. When those same states now push to water down key reforms or anchor their preferences in a multilateral court, we have to ask, what is really going on?

Because it is not reform. It is about locking in a global regime that still overwhelmingly serves the interests of transnational capital. Yes, ratification will be limited. Some states should not even opt in or ratify these reforms unless what is on the table actually addresses the core injustices of this system, or there is some give and take.

What we need is not a new court with old rules. We need a new social contract for international economic governance and cooperation—one that prioritizes public interest over private power and treats legitimacy as a political imperative, not just a branding exercise.

Shane Spelliscy

Why are we trying to find consensus? What are we trying to do here? We are trying to establish, ultimately, reforms that will take the form of a protocol to a multilateral treaty. That multilateral treaty will allow states, with a single signature, to amend their existing BITs or plurilateral treaties, but only insofar as the other party or parties to that treaty agrees.

So, why find consensus? You find consensus out of a desire to make reform actually effective. One can have certain standards in treaties where everybody sees the options they want. They have their own clause that they sign onto, and it looks exactly like they want. But if their treaty partner does not agree, that does not bring change. It does not work.

That is the point of this. I do not want to say that this is going to be easy. I fundamentally disagree with Ladan’s view that what we have are “watered down” provisions. I do not see that as the case. If you review what some of those provisions are, you will see fundamental changes in what has been the system coming in. If we look beyond the rhetoric, and at the actual provisions, there are real changes here. But consensus is hard. I have been trying to forge it in WGIII for the last seven years. It is not easy.

It is not easy when states come with their own perspectives. You have 110 states coming with their own perspective on ISDS, and they have to find a way forward together. There is no guarantee that our work will be accepted by states in the end. We will not really know that until we open the treaty for signature and for ratification. Each state is then going to have to make a sovereign decision for itself as to whether or not this treaty will address, at least in part, some of the changes that it wishes to see and whether it will sign on.

That is the fundamental nature of the opt-in that Ladan is talking about. I am optimistic that there will be broad acceptance. Why?

Certainly the project is taking a long time. That is to be expected because of its breadth and how much we are trying to accomplish in the reform of an entire system, but also because we have made the decision to move as efficiently as we can, but also methodically and deliberately to make sure that what we are doing in these reforms is fully understood, to debate it and to try to find consensus rather than pushing through a particular agenda. All with the goal of ensuring, as I said in WGIII, that no state is left behind; that the states who want to participate in this, can do so; that they can keep up with the work; that they can understand. This involves not just the WGIII sessions. It involves enormous amounts of outreach and separate meetings, some of which were mentioned by Simon. There have been many meetings, but many meetings are what is needed to actually move a multilateral process forward in a way that does not just jettison to the side those who cannot keep up.

I remain optimistic because of what I see at the meetings. Ladan said that some states may walk away; possibly, but we still have attendance of over 100 states. They are not just there, they are not just listening, they are actively participating. Flags go up, debate is had. Every state that raises its flag gets the chance to speak. We do not cut states off.

Yes, we have to find consensus, but there is still engagement after seven years, engagement after many, many, many, many meetings. States have not given up. I think that testifies both to the fact that they see value in what we are doing, and they continue to hope. They see that what will come out of this will at least seek to address some of their concerns. Now, as I said at the beginning, within our mandate, we are not trying to fix every problem—but we are taking a chunk out of this, one bite at a time.

Mariana Pinto Schmidt

I would like to share the perspective of why a country such as Chile, which I represent, is actively participating in this process. As you know, around 100 states are involved here. In our case, our motivation is to update our old BITs. Doing this bilaterally is an extremely challenging task.

To put this into perspective, Chile currently has over thirty old BITs, and other countries have more than a hundred. I have spoken with many delegates from other states, including those who oppose certain elements of the reform, and they, too, recognize how difficult it is to renegotiate these treaties one by one. That is why there is a strong interest in pursuing a multilateral instrument, as it offers a valuable opportunity to save significant time and resources. It is important to note that negotiations are costly and consume a significant part of our budgets. Many delegations, including my own, operate with very small teams, and there are also differences in technical expertise among states.

Our older BITs contain very few rules, and Chile, with extensive experience negotiating modern treaties, would welcome the opportunity to apply these modern provisions to our existing agreements. That would be a very positive outcome for us. At the same time, we recognize that other countries may find this process more challenging, particularly those that have never negotiated modern investment treaties.

My second point concerns the divergent interests among the participating states. It is important to acknowledge that not all states agree on the need for reform. Among those who do, there are further differences. For instance, there is a smaller group very interested in a multilateral investment court. I would say that not all states share that priority, but some clearly do. There is another group that favors an appellate mechanism, but not necessarily within a permanent mechanism. In my view, that group is larger. Moreover, there is an even larger group interested in the procedural rules and cross-cutting issues, as these lie at the heart of the challenges associated with our old BITs and address the difficulties many states have encountered in ISDS proceedings.

However, not all states are necessarily focused on reforming ISDS under treaties. Some are more interested in investment contracts or domestic investment legislation providing for ISDS. This variety of interests makes it more difficult to reach consensus.

This brings me to my final point: for this reform to succeed, we must be flexible enough to accommodate these diverse interests. As Ladan noted, for the time being, these elements are opt-in. My personal view is that there should be a set of core elements in this reform to ensure that states truly committed to the process can apply common rules and avoid more fragmentation. Beyond these core elements, other provisions could remain optional.

It is also critical, as Shane highlighted, to ensure that our trading partners are willing to join these reforms. A consensus-based outcome is essential because otherwise, the reform will not be attractive or acceptable to other contracting partners. We need to strike a balance between flexibility and core provisions.

Finally, even if we design the best possible reform, it will have little impact if states are unwilling to opt in, which would render our efforts meaningless. Overall, however, I remain optimistic about the process so far. I believe some states will join this reform, although others may not, and we will only know the full picture once the process is complete.

Fourth debate: WGIII has been extraordinarily successful in gathering states and other observers to deeply engage in discussions on ISDS. Is it fair to say that, whatever the outcome, the WGIII negotiations will have a long-lasting impact on ISDS and on international lawmaking in general?

Shane Spelliscy

Over the past seven years, WGIII has served as a forum for more than just multilateral negotiations of this instrument that I was talking about. It has been a forum for states to meet, to engage on issues of shared concern, to educate each other on their practices, on how they handle things.

At another event I was at not so long ago, one of the questions, and it was from a state representative, was how would this engagement continue among states once WGIII is finished? And there are mechanisms that we have developed that might work for that: the Advisory Center, some sort of multilateral instrument, a conference of the parties. But what I would suggest is that the question really is as telling as the answer, because what the question shows is the significant value that states have placed in the very process of being able to attend WGIII and to discuss things.

It has shed significant light on a number of the concerns that states have and I would say it has already produced important consensus in the area. As Mariana said, when we started our work back in 2017, there was not even international consensus that ISDS created concerns that actually required reform. There were divergent views expressed on that, even about whether or not UNCITRAL should take on this topic. Within a couple of years, we had come to consensus on that issue. The consensus was that this was an area where reform was needed. That is a significant consensus and a significant outcome in and of itself.

It is a recognition that has spawned conversations in academia, in law firms, and, as importantly, since states are in control of these sort of mechanisms, in government buildings across the world. I would say that those conversations, that desire to engage, that form of interacting outside of the negotiating context, is something that will have a lasting impact. It is also having the effect of encouraging other projects. If you look across the sphere of international investment law now, you see other reform projects.

Obviously, states have been looking at this and organizations have been looking at this area for quite a while. But at least from my experience in this field, since UNCITRAL began its work, we have entered into probably the most significant phase of ISDS reform consideration that the world has seen.

If nothing else, my view is that WGIII has contributed to positive momentum on reform by creating a consistent space where states can come and engage with each other on these issues and a space where states actually have an equal voice. You have to find consensus, so whether you are large or small, whether you are capital importing, capital exporting, you have to find consensus. Having a space where all have an equal voice, I think that has paid off and has value in and of itself.

Ladan Mehranvar

This is definitely a valuable forum to be having these discussions, because as everyone on the panel has pointed out, it is incredibly difficult to renegotiate investment treaties on a bilateral basis. UNCITRAL has offered something rare, a multilateral space where reform might actually feel possible.

But I want to push us to think a little deeper. Broad participation or broad attendance should not be mistaken for genuine influence or meaningful progress. We need to be asking what do we actually mean by progress? Who gets to define it and in whose interest? For some, codifying the status quo is seen as success. For others, that is exactly the problem. Just because many voices are present does not mean they carry equal weight. Participation alone does not guarantee influence. Yes, the discussions are extensive, but they are often structured to keep more transformative or politically sensitive ideas, especially the cross-cutting issues, off the table.

At the same time there is a real informational gap in the room, and I appreciate what Shane just said on this topic—that outside of these formal sessions there are other informal sessions and I know Shane has been to many, and us too as an institution, together with other institutions, we try to fill that technical gap before these sessions.

There is also high turnover, and the cost of participation means that many developing countries cannot send consistent, well-resourced delegations session after session. These factors make it very difficult to influence the reform process and we should not underestimate what it takes just to be in that room.

Many developing countries show up because the system has failed them, and they really do want change. But again and again, they are met with procedural roadblocks and calls for them, not powerful states, to “compromise.” Why are they always asked to compromise? Since I take detailed notes, I tend to go back to those and look at how many times developing countries are asked to compromise. It is eye-opening.

Why must reformers water down their proposals in order to compromise while defenders of the status quo can hold firm what they want? We are told compromise is needed for consensus. But if the price of that compromise is lowering the bar, then what are we really reforming?

We saw this play out with the Code of Conduct. Everyone agreed in the room that double hatting was a problem. Everyone minus a couple of observers. But instead of banning it outright, the final text merely introduced weak cooling off periods. Now, and I have heard this anecdotally and perhaps some of you know, arbitrators cite this text even before official opt-ins have taken place to justify questionable behavior, treating what is not banned as implicitly being allowed. That is a problem.

By aiming for minimal safe outcomes, the official record often erases the real debates in the room. Many wanted to ban double hatting completely, but the concerns of those countries often get watered down in the official summaries and their calls for strong enforceable safeguards quietly vanish from the final texts.

While these instruments may be presented as products of consensus, that does not tell the full story. I appreciate that there is a diverse number of interests in the room. It is very difficult to reach true consensus, but we just have to be careful, I think. Yes, WGIII may leave a legacy, but it will not necessarily be a positive one.

I think there is still time to correct course. I am not going to be totally negative. That means raising the bar, not just clearing the lowest one. It starts by asking whose voices are shaping the process? Whose interests are being protected? Who is being asked to compromise repeatedly? And should industry lobbyists really be given the floor to speak before state delegations even get a chance to weigh in?

Chiara Giorgetti

Yes, I think it is indeed fair to say that WGIII will have a long-lasting impact on ISDS and on international lawmaking in general. Let me explain why in a few short points.

First, participation in WGIII is very broad, and increasingly so. Many states send delegations to WGIII negotiations. Notably, this is not only for the members of the UNCITRAL Commission, but also for all UN members as well as numerous observers representing very diverse stakeholders—from ISDS critics to investors’ representatives. During the process, all delegations can engage and are given the floor equally. The process is very open and inclusive. I represent San Marino, who is not a member of the UNCITRAL Commission, yet San Marino can participate fully with other states that are members of the Commission and is given a completely equal opportunity for engagement. International organizations and learned societies—like the Permanent Court of Arbitration and the American Society of International Law—are also present in the negotiations and provide important expertise and viewpoint diversity.

The presence of so many delegations results in a very open and inclusive process. It creates an interesting and engaged community of people who work in the same space. Moreover, as the negotiations have been lasting for several years and many of the delegates are the same, negotiators know each other—this creates comity and facilitates negotiations.

Second, however, it is also important to acknowledge that the large number of meetings, informal consultations and side events can place considerable demands on participants’ time and financial resources. This burden is particularly pronounced for developing countries or for those countries that are located far from New York or Vienna, where the negotiations take place. There are some available funds to facilitate their participation, but I think it is important to recognize that this issue exists.

Third, the process also demonstrates that UNCITRAL and WGIII have become a viable forum for the codification of international law. Indeed, alongside the International Law Commission (ILC), WGIII has become a central institution for negotiating and drafting international instruments—though WGIII of course focuses on the specific mandate of ISDS reform. At a time when the ILC has faced challenges in presenting new treaty texts for adoption—with the notable recent exception of a draft Treaty on the Crimes against Humanity—it is important that alternative viable forums exist to provide support for the development of international lawmaking in general.

Fourth and finally, it is also essential to ensure that as we continue with the WGIII process and negotiate new—and possibly transformative—international instruments, there is space for innovation and reform and that all voices are heard and taken into consideration.