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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 262  October 7, 2019
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Alexa Busser ([log in to unmask])
*Guaranteeing the independence of the judges of a Multilateral Investment
Court: *
*A must for building the Court’s credibility*
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*** <#m_-6678473840608668200__edn1>
by
Rishi Gulati and Nikos Lavranos ** <#m_-6678473840608668200__edn2>

A main reason for the backlash against investor-state dispute settlement
(ISDS) is that ISDS does not adequately guarantee the independence and
impartiality of arbitrators. In particular, the fact that many arbitrators
also act as legal counsel and represent both investors and states is
perceived as problematic.

To fix this (perceived) inadequacy, reforms must be pursued and enacted
speedily. Various options exist. One extreme option would be to completely
abolish ISDS and simply rely on domestic courts to resolve claims between
foreign investors and states. This would be an undesirable option because,
in many countries, the rule of law and the independence of the judiciary
are compromised. Thus, a robust international legal infrastructure for ISDS
remains necessary, though it should be simultaneously complemented by the
strengthening of domestic legal systems.

Recently, the EU Commission submitted to UNCITRAL’s Working Group III the
basic outline of what a future Multilateral Investment Court (MIC) may look
like.[1] <#m_-6678473840608668200__edn3> The MIC would be a standing
two-tier dispute-settlement mechanism with full-time adjudicators. One of
the most dramatic changes to the current ISDS system is that only states
would select and appoint MIC judges, thus eliminating any participation of
claimants which, so far, appoint one of the three arbitrators. Admittedly,
states would not make the selection for specific disputes. However, states
are invariably respondents in investor-state disputes, so the proposed
system may raise concerns about the MIC’s independence and impartiality,
including by affecting the principle of equality between the parties.

It is therefore absolutely crucial that the MIC’s institutional design is
very carefully considered and crafted. In particular, if a future MIC does
not live up to the standards of independence and impartiality expected of a
modern international court or tribunal, there is little point in even
contemplating such a reform, as it is unlikely to fare any better than the
current regime.

How to guarantee independence and impartiality?

Independence and impartiality are the cornerstone of a judicial system’s
credibility. While judicial “independence” demands that judges make their
decisions purely based on the law and the facts of a case, free from any
external pressures, “impartiality” requires that judges are not objectively
or subjectively biased in their decision-making in a particular case. Given
the significance of judicial independence and impartiality to the success
of any future MIC, this issue needs to be subjected to detailed discussion
and deliberation in UNCITRAL’s Working Group III.

To guarantee the MIC's institutional independence, the Court must possess
operational (administrative and financial) independence, as well as
decisional independence (decisions should be enforceable). To ensure the
individual independence of MIC judges, judicial selection should be based
on merit and undertaken transparently, and security of tenure should be
ensured (non-renewable terms that are relatively lengthy promote individual
independence). To implement a robust impartiality regime, a judicial code
of conduct ought to be enacted, rules for recusal should be properly
enshrined in law and a judicial complaints mechanism should be established.
For any future MIC to be considered independent and impartial, it should
thus possess at least the following features:[2]
<#m_-6678473840608668200__edn4>

   - An independent registry controlled by the court, administrative
   freedom on staffing matters and appropriate funding to ensure financial
   independence.
   - A scheme ensuring the enforceability of court decisions.
   - Implementation of non-renewable terms of judicial appointments that
   are approximately 7-9 years long, and other aspects guaranteeing financial
   security of judges.
   - Establishment of an independent panel or body of experts playing a
   substantive role in the judicial selection process that operates in a
   transparent way.
   - Implementation of a robust regime enhancing judicial impartiality.

Clearly, creating a MIC is resource intensive, time consuming and a
significant shift away from the current regime. If reform efforts are to be
effective, guaranteeing judicial independence and impartiality should
constitute key features of the proposed MIC. Ultimately, to address the
legitimacy and credibility deficit of the current regime, the rule of law
and the domestic judiciary in most countries must be strengthened.
Otherwise, the reform will just amount to changing the label as opposed to
bringing about real and meaningful reform.

------------------------------
* <#m_-6678473840608668200__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
supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
series.*
** <#m_-6678473840608668200__ednref2> Rishi Gulati (
[log in to unmask]) is the LSE Fellow in Law at the London School
of Economics and Barrister, Victorian Bar, Australia; Nikos Lavranos (
[log in to unmask]) is Secretary General of EFILA and Guest Professor,
International Investment Law at the Brussels Diplomacy Academy of the Free
University Brussels. The views expressed do not necessarily represent those
of the institutions with which the authors are affiliated.  The authors
wish to thank Nathalie Bernasconi, Federico Ortino, and an anonymous
reviewer for their helpful peer reviews.
[1] <#m_-6678473840608668200__ednref3> See submission of the EU and its
member states to UNCITRAL’s Working Group III, 24 January 2019,
https://undocs.org/en/A/CN.9/WG.III/WP.159/Add.1
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.
[2] <#m_-6678473840608668200__ednref4> Some of these features have already
been incorporated into the EU proposal; see ibid., footnote 1, para. 19
(security of tenure); para. 20 (qualifications); para. 22 (transparent
appointment process); paras 30-32 (creating a self-standing enforcement
mechanism); and paras 16-18 (ensuring provisions avoiding conflict of
interest).
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Rishi Gulati and Nikos Lavranos, ‘Guaranteeing
the independence of the judges of a Multilateral Investment Court: A must
for building the Court’s credibility,’ Columbia FDI Perspectives, No. 262,
October 7, 2019. Reprinted with permission from the Columbia Center on
Sustainable Investment (**www.ccsi.columbia.edu*
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=0899fcf991&e=dd153d6a25>*).”
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,
Alexa Busser, [log in to unmask]

*Most recent Columbia FDI Perspectives*
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   - No. 261, Zbigniew Zimny, ‘FDI has benefitted the EU members from
   Central and Eastern Europe and can continue to do so,’ September 23, 2019
   - No. 260, Karl P. Sauvant, ‘Do not neglect establishment trade: the
   China-US example,’ September 9, 2019
   - No. 259, Howard Mann and Martin Dietrich Brauch, ‘Investment
   facilitation for sustainable development: Getting it right for developing
   countries,’ August 26, 2019

*All previous FDI Perspectives are available at *
*http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/*
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*. *

*Other relevant CCSI news and announcements*

   - CCSI released its 2018-2019 Annual Report
   <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c3f148cbdc&e=dd153d6a25>
   .
   - *On October 24, 2019*, our Fall 2019 International Investment Law and
   Policy Speaker Series, co-sponsored by Baker McKenzie and Arnold &
   Porter, continues with a talk by *Grant Hanessian*, Partner, Baker
   McKenzie, on "Legitimacy, Efficiency and ICSID’s Proposed Rule
Changes." *Please
   see our website
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for
   more information and the full schedule*.
   - *On November 18, 2019*, CCSI, the Center for Chinese Legal Studies,
   and the Society for Chinese Law (SCL) will co-host a talk by *Angela
   Zhang*, Associate Professor of Law and Director of the Centre for
   Chinese Law, University of Hong Kong, on “The US-China Trade Negotiation: A
   Contract Theory Perspective.” *Please see our website
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   for more information.*

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2019 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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*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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"An Advisory Centre on International Investment Law: key features", "Do not
neglect establishment trade: the China-US example", "Incentivizing
sustainable FDI: The Authorized Sustainable Investor", "The potential
value-added of a multilateral framework on investment facilitation for
development", "Promoting sustainable FDI through international investment
agreements", "Determining Quality FDI", "The State of the International
Investment Law and Policy Regime", "Towards G20 Guiding Principles on
Investment Facilitation for Sustainable Development", "Five Key
Considerations for the WTO Investment-facilitation Discussions, Going
Forward", "International Investment Facilitation: By Whom and for What?",
"Moving the G20's Investment Agenda Forward", "Sustainable FDI for
Sustainable Development", "Towards an Investment Facilitation Framework:
Why? What? When?", "Beware of FDI Statistics!", "Towards an Indicative List
of FDI Sustainability Characteristics", and "The Evolving International
Investment Law and Policy Regime: Ways Forward" *are* available at
https://ssrn.com/author=2461782 and
http://www.works.bepress.com/karl_sauvant/.

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