Page 29 - CLT032221

ALTERNATIVE DISPUTE RESOLUTION MARCH 22, 2021 ¦ S-29

Awards can range from a few million to over $50 claimants to disclose the identity of third-party
billion, as in the case of Yukos v. Russia. Investor- funders, and to permit awards and the proceed-
state arbitration is often administered by the World ings to be made public absent objection by a party.
Bank’s arbitration arm, the International Centre The EU’s new free trade agreements with Canada,
for Dispute Resolution (ICSID), or the Permanent Vietnam and Singapore provide for the countries to
Court of Arbitration at The Hague. Typically, like constitute standing bodies to hear disputes brought
in commercial arbitration, each party picks a co- by investors against the host states. Such standing
arbitrator. The two co-arbitrators in turn propose bodies would eliminate any role of investors in con-
a chair. If the parties cannot agree on the presiding stituting the tribunal.
arbitrator, the international institution will select While there is merit to these and other arbitra-
the chair. tion reforms, they are unlikely to neutralize the
Elected officials have chaffed against the idea of criticisms heaped onto investor-state arbitration.
tribunals comprised of private international ar- The nationalist, or even tribal, impulse against for-
bitrators making decisions about public policies eign adjudicators sitting in judgement of domestic
of governments when foreign investors find that policies cannot be fully addressed no matter how
those policies have hurt their profits. For example, transparent the arbitral process, how wise the arbi-
Sen. Elizabeth Warren is on record objecting to the trators, and how correct the awards.
investor-state arbitration aspect of the United States- In order for investor state arbitration to survive as
Mexico-Canada Agreement (USMCA): “I have an effective global system of dispute resolution, the
serious concerns about ISDS—a policy in the new deeper normative concerns of the political move-
TPP trade agreement that would let foreign compa- ments against investor state arbitration must be
nies challenge American laws outside of American addressed. Domestic constituents will continue to
courts. And I’m not the only one—former Secretary exert pressure on elected officials to reject investor
of State Hilary Clinton did too in her book [.]” state arbitration, unless the foreign investment that
Over in Europe, in 2020, 23 member states of the this system is designed to promote creates wealth and
European Union signed a treaty to terminate intra- protects well-being across all segments of society. In
EU bilateral investment treaties. Once the states a conversation with economist Joseph Stieglitz, Al-
ratify their agreement, over 120 bilateral investment exandra Ocasio-Ortiz explained her objection to the
treaties will terminate. The stated policy reason for North American Free Trade Agreement (NAFTA),
terminating these treaties is that they are incompat- the precursor to the USMCA. She faulted NAFTA
ible with EU law. In other words, the EU deemed for creating environmental imbalances and exacer-
that foreign investors within the EU should not be bating economic inequality. “Gains of trade should
entitled to protection greater than what is afforded be enjoyed by all workers who helped create those
under its own system of laws, and private tribunals gains,” she insisted. It seems likely that elected
should not get to decide if EU laws do not apply to officials will feel less pressure to chafe against inter-
those investors. national tribunals if the investment rules they are
In response to the political criticisms of inves- called upon to enforce receive broad support from
tor-state arbitration, the international arbitration domestic constituents.
community—senior executives in arbitral insti- The BITs that are currently in force are the prod-
tutions, lawyers, and scholars—have proposed uct of an economic system that constrained the
changes to arbitral rules designed to increase ef- policy space for governments to enact laws and reg-
ficiency and transparency, sought to increase the ulations promoting human rights, labor standards,
diversity of arbitrators, and considered standing or environmental protections, because they require
transnational courts with government-appointed government to compensate foreign investors for di-
adjudicators, among other reforms. For example, minished profits arising from such regulations. BITs,
ICSID has proposed to amend its rules to require
¦ Continued on PAGE S-30

CONNECTICUT
Law Tribune