*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"China Moves the G20 toward an International Investment Framework and
Investment Facilitation", "China Moves the G20 on Investment", "The Rise of
Self-judging Essential Security Interest Clauses in IIAs", "Can Host
Countries have Legitimate Expectations?", "The Next Step in Governance: The
Need for Global Micro-regulatory Frameworks", "How International Investment
Agreements can Protect Free Media", "The Evolving International Investment
Law and Policy Regime: Ways Forward", "China's Outward FDI and
International Investment Law", and  "Policy Options for Promoting FDI in
the LDCs" *are* available at and

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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 201  June 5, 2017
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*Challenges on the road toward a multilateral investment court*
* <#m_3709013044542036001__edn1>
Gabrielle Kaufmann-Kohler and Michele Potestà**

Growing criticism over investor-state arbitration has triggered demands for
reforms of the existing framework from countries, international
organizations and civil society groups. In the recently concluded EU-Canada
Comprehensive Economic and Trade Agreement and EU-Vietnam Free Trade
Agreement, the contracting parties replaced the *ad hoc* system of
investment arbitration with standing bilateral bodies composed of
first-instance and appellate tribunals. In a further move, in December
2016, the European Commission launched a public consultation on a
“multilateral reform of investment dispute resolution.”[1]
<#m_3709013044542036001__edn3> In addition, discussions are taking place on
a global scale at the UN Commission on International Trade Law (UNCITRAL),
where the reform of investor-state dispute settlement may be tabled as
future work.[2] <#m_3709013044542036001__edn4> This *Perspective* addresses
one reform option, the creation of a multilateral investment court, and
reviews the main challenges that the establishment of such a court would
have to master to be successful.

A crucial challenge lies in the composition of the new court. The
appointment process must ensure the selection of impartial and independent
decision-makers with expertise and experience in the field, through a
transparent process unaffected by political considerations. How to achieve
this? Some think that appointments made only by states entail the risk that
“pro-state” individuals be selected; others consider that at least some
states will view themselves as both potential respondents and home
countries of prospective claimants and thus choose balanced personalities.
Here one may ask whether investors also should be involved in the
selection, for instance through consultations or in the context of
establishing a panel from a roster of decision-makers. Whoever makes the
initial selection, an advisory panel could screen candidates to ensure the
quality of the persons and the transparency of the process, following the
trend in modern international courts. Other issues are the term of office
and its renewability, which are key to judicial independence. A longer term
without renewal likely better protects judges from interference. Whatever
the modalities, what ultimately matters is that the composition of the new
body be perceived as legitimate by all stakeholders.

What law will govern the proceedings? Certainly, the treaty creating the
court. Beyond, it will depend whether the proceedings remain
arbitration-like or are exclusively court-like. If the former, proceedings
could either be subject to a domestic *lex arbitri* or be completely
delocalized, similarly to proceedings under the ICSID Convention. Whatever
the choice, it will need to be articulated clearly to avoid uncertainties
when it comes to national court interference, post-award remedies and
enforcement. By contrast, if the new dispute-resolution body is deemed an
international court subject only to public international law, the issue of
the law governing the proceedings will be resolved insofar as national law
will, by definition, play no role.

A further question is what controls there would be over the decisions of
the court: Limited annulment to guarantee finality like for arbitral
awards? Or a full-fledged appeal on law (and possibly facts) to ensure
consistency of the jurisprudence (as the current system is criticized for
its lack of consistency)? Or lighter alternative control mechanisms to
reconcile finality and consistency?

Another challenge is ensuring the new system’s ultimate effectiveness, that
is, the enforceability of its decisions. Presently, parties can rely on the
enforcement rules contained in the ICSID and New York Conventions. Will the
New York Convention be available for the enforcement of the court’s
decisions? The answer depends again on the nature of the new
dispute-resolution process. If it is considered arbitration, it will
benefit from the New York Convention system. If not, the treaty creating
the court will have to provide for an enforcement regime binding
contracting states. Enforcement in non-contracting states will by contrast
be uncertain; it will depend on national law as no international rules
exist ensuring the enforcement of judgments of international courts.

Finally, how will disputes become subject to the jurisdiction of the new
court? For disputes arising from *new* investment treaties, states will be
able to refer to the court in that *new* treaty. But what about the 3,300+
*existing* investment treaties? Here, two options are available.
Governments could renegotiate existing treaties. Alternatively, a
multilateral convention, modelled on the Mauritius Convention on
Transparency, could allow states to opt into the court regime for their
existing treaties (or some of them). An opt-in convention would allow
states to effect the envisaged modifications at once, releasing them from
the potentially burdensome and long treaty-by-treaty renegotiations. An
opt-in convention would also have the advantage of following the approach
successfully tested in respect of transparency, although the treaty law
challenges involved in a broader reform of the investor-state arbitration
regime will be substantially more complex than the introduction of a
transparency standard in investment treaties.

To master these challenges, a reform would be elaborated best in a forum
such as UNCITRAL that is global; inclusive; state-run, yet open to other
stakeholders; and has procedures in place for writing international

* <#m_3709013044542036001__ednref1> *The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
** <#m_3709013044542036001__ednref2> Gabrielle Kaufmann-Kohler (
[log in to unmask]) is a Professor at the University of
Geneva and Co-Director of the Center for International Dispute Settlement,
Geneva, Switzerland; Michele Potestà ([log in to unmask]) is a Senior
Researcher with the Center for International Dispute Settlement, Geneva,
Switzerland, and a Senior Associate at Lévy Kaufmann-Kohler, Geneva,
Switzerland. This *Perspective* is based on “Can the Mauritius Convention
serve as a model for the reform of investor-state arbitration in connection
with the introduction of a permanent investment tribunal or an appeal
mechanism? Analysis and roadmap,” June 3, 2016, prepared by the authors on
behalf of the Geneva Center for International Dispute Settlement (CIDS) for
UNCITRAL (available at
english/CIDS_Research_Paper_Mauritius.pdf). The purpose of the report was
to review reform options, analyze their strengths and weaknesses and
provide a roadmap for reform for policy-makers. The authors are grateful to
Mark Feldman, Michael Nolan and Cristoph Schreuer for their helpful peer
reviews. *Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
[1] <#m_3709013044542036001__ednref3> *See* European Commission, “European
Commission launches public consultation on a multilateral reform of
investment dispute resolution,” December 21, 2016,
[2] <#m_3709013044542036001__ednref4> *See* UNCITRAL, “Report of the
Commission session on the work of its forty-ninth session (A/71/17),”
paras. 187-195,

*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Gabrielle Kaufmann-Kohler and Michele Potestà**,
‘Challenges on the road toward a multilateral investment court,’* *Columbia
FDI Perspectives, No. 201, June 5, 2017. Reprinted with permission from the
Columbia Center on Sustainable Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*.*
For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

   - No. 200, Saurabh Garg, “The next phase of IIA reforms,” May 22, 2017.
   - No. 199, Miguel Pérez Ludeña, “United States corporate tax reform and
   global FDI flows,” May 8, 2017.
   - No. 198, Terutomo Ozawa, “How to handle the job-offshoring backlash?”,
   April 24, 2017.

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - *On June 13, 2017*, CCSI, the World Bank and the Sustainable
   Development Solutions Network are hosting a brown bag lunch discussion at
   Columbia Law School about the changes, opportunities and challenges we are
   most likely to be facing over the coming years with respect to the
   governance of extractive industries. Join four leading practitioners (*Kevin
   Ramnarine*, Strategic Adviser/Former Minister of Energy, Trinidad and
   Tobago, *Sonia Balcazar*, Consultant Associate at Synergos Consulting
   Services; former Regional Development Planning Manager, Rio Tinto,
Peru, *Peter
   Cameron*, Director of the Energy, Petroleum and Mineral Law and Policy
   Centre, University of Dundee, Scotland, UK, and *Michael Stanley*,
   Sector Lead, Oil, Gas & Mining, World Bank) in discussion about how they
   see the challenges and opportunities shape up, and in particular, how the
   World Bank’s EI SourceBook can serve as a tool to strengthen governance in
   the sector. *For more information, and to register, please visit our
   website here
   - *On May 16, 2017*, *The New Frontiers of Sovereign Investment
*was published
   by Columbia University Press. Edited by CCSI Fellow Malan Rietveld and CCSI
   Head of Extractive Industries Perrine Toledano, the volume combines the
   insights and experience of academic economists and practitioners from
   several sovereign wealth funds (SWF) to survey a diverse financial
   landscape and to establish the challenging topical questions facing a broad
   range of SWFs today: Should they serve both economic development and
   financial returns—and how? Will responsible investment will enhance
   long-term returns? How can fiscal rules for SWFs be improved to meet
   emerging economic challenges? The book considers these questions as they
   apply to both long-established and newer SWFs. Featuring contributions from
   sovereign wealth practitioners from Alberta’s AIMCo, the Nigerian Sovereign
   Investment Authority and the New Zealand Superannuation Fund, as well as
   analysis by scholars at the forefront of sovereign investment, this volume
   provides timely and much-needed information on these rapidly evolving
   - *In April 2017*, CCSI launched a series of short videos from the
   authors of Rethinking Investment Incentives: Trends and Policy Options
   (published by Columbia University Press in July 2016), summarizing the
   important messages from each chapter. New videos are posted weekly
   use of incentives to attract investment is connected to and impacts the
   most pressing challenges facing us today, including climate change,
   corruption, conditions/availability of employment, harmful competition, and
   inefficient public spending. How, when, where, and why governments use
   incentives to attract, keep and influence investment is therefore
   critically important to whether and how society benefits from investments
   and to other public policy decisions and trade-offs. It is increasingly
   apparent, however, that the use of incentives is not well
   understood—including by the policy makers who use them—which necessitates a
   closer look and, in many cases, a policy response.

Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Columbia University
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