The Bahrain Chamber for Dispute Resolution (BCDR-AAA) has been entrusted with drafting the Kingdom of Bahrain's official submissions to Working Group III on Investor-State Dispute Settlement (ISDS) Reform of the United Nations Commission on International Trade Law (UNCITRAL). As leader of the Bahraini delegation to Working Group III, BCDR-AAA acts as a bridge between the regional and the international arbitration communities.
UNCITRAL Working Group III, whose 38th session will be held in Vienna from 14 to 18 October 2019, has been mandated to (1) identify and consider procedural concerns regarding ISDS, (2) consider whether reform would be desirable in the light of any identified concerns, and (3) develop solutions to identified problems and recommend them to UNCITRAL.
In Bahrain's submission, BDCR-AAA highlights some of the positive aspects of ISDS for both States and investors and stresses that any reform of the ISDS system must maintain these advantages and improve on them. They include the neutrality of ISDS towards politics and business interests, the finality and enforceability of ISDS awards, and the fact that ISDS is more manageable than adjudicatory bodies like the World Trade Organization that require large resources.
While conceding that the current ISDS system raises concerns relating to conflicts of interest, diversity, costs and duration, and the inconsistency of arbitral awards and decisions, the submission urges that any move to a system of one or more permanent investment courts should be regarded with caution. Not only would such a system fail to address the main flaws of the current ISDS system with respect to conflicts of interests, the cost and duration of proceedings, and inconsistency of findings, but it could also give rise to new problems such as politicization of the appointment of judges.
The submission puts forward five alternative proposals for reform: (1) binding codes of conduct to be developed by arbitral institutions to address all aspects of conflicts of interest, including the selection of arbitrators, arbitrators' ethical duties, arbitrator challenges, and the ethical conduct of counsel and institutional staff; (2) a wider pool of arbitrators, including from developing countries, so that all legal systems of the world are fairly and inclusively represented on the arbitration tribunals that shape ISDS jurisprudence; (3) joint interpretative committees to harmonize the interpretation of treaty provisions, rather than an appeal mechanism; (4) arbitrators dedicated to annulment proceedings to ensure consistency in the application of the ICSID Convention and Rules by annulment committees; and (5) new grounds for annulment in international investment agreements to extend the circumstances in which annulment is permitted in the ICSID system.
Finally, the submission regrets that the opportunity has not been taken to consider substantive as well as procedural reform of the ISDS system. It would be immensely valuable to the international community if Working Group III were to consider the reform of substantive treaty protections, too.
Click here to read the Kingdom of Bahrain's submission in full.