Draft SIAC Investment Arbitration Rules – Key Recommendations

siac

I. INTRODUCTION

  1. The following are my comments on the Draft Investment Arbitration Rules of the SIAC. In doing so, I have considered the draft SIAC Investment Arbitration Rules along with the Trans-Pacific Partnership (TPP) Investment Chapter, and the Stockholm Chamber of Commerce (SCC), International Centre for Settlement of Investment Disputes (ICSID), and International Chamber of Commerce (ICC) Rules.
  2. My comments are broadly classified into the following:
    • Suggestions regarding potential inclusions; and
    • Recommendations relating to specific provisions.

II. SUGGESTIONS REGARDING POTENTIAL ADDITIONS

A. APPEAL MECHANISM

  1. While the finality of an award in an investment arbitration proceeding is an attractive proposition for a foreign investor, the inclusion of a provision for an appeals mechanism may enhance the confidence of states in the investment arbitration process. Indeed, several states are currently looking to renegotiate their consent to investment arbitration because of perceived pro-investor bias. India, for example, plans to renegotiate its investment agreements based on its revised Model BIT that requires investors to exhaust local remedies before resorting to arbitration. By providing an appeal mechanism, the anti-ISDS (Investor-State Dispute Settlement) measures that states are considering may be wholly avoided.
  2. An appeal mechanism would further facilitate better consistency and reliability of ISDS decisions and help prevent further fragmentation of the law.
  3. The inclusion of an appeal mechanism could also be of strategic advantage to SIAC. There are several countries in the Asia-Pacific region looking to renegotiate their investment treaties and the provision of an appeals feature may make it very attractive for those states to adopt SIAC Investment Arbitration rules in their new or renegotiated treaties.
  4. To this end, I propose a clause along the lines of the draft below be considered for inclusion:

Rule 31A – Appellate Authority

  1. The President shall constitute a standing Appellate Authority consisting of 12 members.
  2. Each member of the Appellate Authority shall be appointed for a term of 4 years. Each appointed member shall be eligible for a maximum of another term of 4 years.
  3. The President and the Committee of the Court shall formulate rules regarding the qualification (including nationality requirements), fees and allowances, and terms of service of members to be appointed.
  4. Any member may resign his office provided his resignation is given in writing to the Court. On acceptance of the resignation by the Court, the President may appoint a replacement in accordance with these rules.

Rule 31B – Appeals

  1. Either party may make an application to the Court for the appeal of the award within a period of 30 days from the date of issuance of an award.
  2. On receipt of application, the Court shall issue a ‘notice to respond’ to the other party along with a copy of the application. The recipient shall file a response to the application within 30 days of receipt of the notice to respond.
  3. On receipt of the response to the application, the Court shall constitute a three member Appellate Tribunal from the members of the Appellate Authority for the consideration of an appeal.
  4. The Appellate Tribunal shall consider the appeal of the award on the following grounds:
    1. material and prejudicial error in law
    2. determinations of fact that are clearly erroneous
    3. insufficient reasoning
  5. Unless otherwise directed by the Appellate Tribunal, all appeals will be determined upon written documents submitted by the parties. Oral hearings may be scheduled at the discretion of the Appellate Tribunal when the parties request for one or if the Appellate Tribunal deem it necessary.
  6. The request for an oral hearing must be made no later than with the application of appeal to the Court.
  7. The Appellate Tribunal shall decide whether and to what extent the appeal shall proceed. It shall within 30 days of its Constitution:
    1. Reject the appeal and confirm the original award or
    2. Allow the appeal to proceed and provide directions regarding further steps
  8. Upon considering all the submissions of the parties, the Appellate Tribunal shall render an award as soon as practicable. The award rendered shall either reject the appeal and uphold the original award or amend the original award to the extent necessary.
  9. The award issued by the Appellate Tribunal shall be final and binding on the parties and no further appeal may be permitted in any judicial or other proceeding.

B. MASS CLAIMS

  1. There are instances where a state’s regulatory action can give rise to several investment disputes of similar nature involving different foreign investors. A provision to enable the grouping together of such multiple claims of different investors, filed against the same respondent State, would make dispute resolution by ISDS more cost efficient. It would also provide for greater consistency in decision making.
  2. For example, there are 26 pending arbitrations against the Spanish Government for its alleged unfair revision of Renewable Energy Tariffs to the detriment of several investors in the sector.[1] A provision for the joining together such claims into one consolidated arbitration where there is a joint agreement on the appointment of arbitrators will provide a more efficient redressal of such disputes and avoid any inconsistent or fragmented decisions.
  3. Another example are the CME vs. Czech Republic[2] and Lauder vs. Czech Republic[3] cases, where two conflicting awards were issued on disputes arising out of the same State action. This could have been wholly avoided had there been a mechanism to allow grouping of such claims. Moreover, the provision for appeals suggested earlier will provide parties who choose to group their claims an opportunity to have it reviewed for any error on law or material fact.
  4. To safeguard the principle of party autonomy, the provision on mass claims should be subject to the consent of the parties. If the parties so consent, then the provision could require the appointment of arbitrators to be made jointly by the various claimants and in the absence/failure of such an agreement, the Court shall make an appointment in consultation with the parties.

C. CONSOLIDATION

  1. The provisions regarding consolidation of multiple claims involving the same parties could ideally be extended to the investment arbitration rules. As an example, the TPP Investment Chapter includes an elaborate provision on consolidation of multiple claims pertaining to investment disputes.[4]

D. EMERGENCY ARBITRATORS

  1. In the context of investment arbitrations, enforceability issues relating to decisions of emergency arbitrators may be more pronounced given that states are typically the respondents. Moreover, strict cooling-off periods, generally provided within a treaty containing the consent to arbitration, apply. Perhaps it is for these reasons that the ICC Arbitration Rules exclude the application of its Emergency Arbitrator provision to investment arbitration proceedings. Therefore a thorough consideration of the advantages and disadvantages of applying this provision to investment arbitrations must be evaluated prior to taking a final position on the matter.

III. RECOMMENDATIONS RELATING TO SPECIFIC PROVISIONS

E. DRAFT RULE 16.5 – Power of Presiding arbitrator to make procedural Rulings

  1. It is understandable that this provision has been made to account for instances where co-arbitrators are travelling or are unavailable for a considerable length of time. However to ensure that the provision is used only in such circumstances, it may be amended as follows:

Draft Clause:

A presiding arbitrator may make procedural rulings alone, subject to revision by the Tribunal.

Proposed Revision:

A presiding arbitrator shall consult other arbitrators to make procedural rulings or where necessary make such rulings alone, subject to revision by the tribunal.

F. DRAFT RULE 35.1 – Exclusion of Liability

  1. Certain jurisdictions may not allow for wholesale exclusion of liability. In such a scenario, the effect of the draft provision may entirely be negated. To avoid such a situation, the Exclusion of Liability clause could be modified to either of the options below:

Draft Clause:

SIAC, including the President, members of its Court, directors, officers, employees or any arbitrator, shall not be liable to any person for any negligence, act or omission in connection with any arbitration governed by these Rules.

Proposed Revision 1:

SIAC, including the President, members of its Court, directors, officers, employees or any arbitrator, shall not be liable to any person for any act or omission in connection with any arbitration governed by these Rules unless such act or omission constitutes wilful misconduct or gross negligence.

Proposed Revision 2:

SIAC, including the President, members of its Court, directors, officers, employees or any arbitrator, shall not be liable to any person for any act or omission in connection with any arbitration governed by these Rules except to the extent such exclusion of liability constitutes a violation of a mandatory provision under the applicable law.

G. DRAFT RULE 37.3 – Transparency vs. Confidentiality

  1. In the interest of promoting harmonious growth of international investment law, SIAC should take the lead in endeavouring to improve disclosure of information regarding investment arbitration proceedings, subject to some confidentiality safeguards. In line with this objective, the clause may be rephrased as follows:

Draft Clause:

SIAC may publish any orders, directions and/or awards under these Rules with the express consent of all parties.

Proposed Revision:

SIAC shall endeavour to obtain the consent of all parties and make available to the general public the following:

a. submissions by “non-disputing contracting parties” and “non-disputing parties” or amicus briefs

b. orders, awards and decisions of the tribunal

Where information of confidential nature is involved, SIAC shall endeavour to provide redacted versions of the above listed documents.

[1]           http://www.jus.uio.no/pluricourts/english/blog/daniel-friedrich-behn/2016-01-26-arbitration-spain.html       (Accessed on 07 Jun 2016)

[2]           CME. vs. Czech Republic, Partial Award, 13 Sep 2001

[3]           Ronald S Lauder vs. Czech Republic, Final Award, 03 Sep 2001

[4]           Trans-Pacific Partnership, Chapter 9, Investment, Art. 9.28

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