This is the first study on the subject of Investors’ Perception and views of Proposed Reforms to the Investor-State Dispute Settlement (ISDS) and it is conducted and released by the School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London (QMUL). It has been prepared with the generous support of the Corporate Counsel International Arbitration Group (CCIAG).
The background of the survey is the relatively long-standing debate about an alleged legitimacy crisis of ISDS, a debate largely initiated by civil society and NGOs as well as by a good number of academics. In response to this debate, and in late 2017, UNCITRAL has embarked on an ambitious project exploring the potential for reform of ISDS, focusing primarily on procedural reforms. Other international organisations have also embarked on similar efforts. It has emerged, however, that the typical claimants in ISDS processes, namely the investors, whether small or big, do not have any concrete representation or input in the reform process and have never expressed their views through an unbiased and academically rigorous empirical survey. This is undisputedly a shortcoming.
In an effort to fill this gap and fulfil the critical need for this important stakeholder’s representation, CCIAG has funded this research to be conducted by QMUL given our experience with more than 11 empirical surveys since 2006. It is noteworthy that while the survey was being conducted the reform discussions were ongoing and some important documents, such as Working Paper 185 (on the possible design of a Multilateral Investment Court) were not available to survey respondents.
The survey was conducted between 28 November 2019 and 31 December 2019 and comprised two phases: an online questionnaire completed by 86 respondents (quantitative phase) and, subsequently, 9 personal interviews (qualitative phase). All respondents represent investors and are either corporate counsel (79%) or management representatives or commercial managers (15%). Further information about the questionnaire respondents and interviewees can be found in the Methodology section in the appendices. Within a relatively short time frame, in November and December 2019, a survey was sent to a core group of investors, including members of the CCIAG, asking them to disseminate the survey. We have received more than 310 responses. However, we only used data coming from corporate counsel or representatives of corporations. All other responses (provided by outside counsel, arbitrators, academics or arbitral institutions) were disregarded. Our role was to remain independent, collect the data and present them in a useful format. We hope that the findings will generate further debate and will inform the reform process.
The key findings from the survey are:
The ‘State of play’
- Respondents express positive views about the existing arbitration system when comparing it to other dispute resolution mechanisms such as government negotiation, direct negotiation, mediation and litigation in the host state’s courts.
Potential for reform
- Almost four in five respondents indicate that there is scope for reforms to improve the consistency of ISDS, and three in four respondents believe that reforms could lead to a greater level of efficiency. While investors appear to be in favour of reforms that would improve the current system, it should also be noted that to a certain extent they are satisfied by the current system, as set out below.
Proposed areas for reform
- Respondents would welcome the establishment of a multilateral advisory centre open to both states and investors.
- Respondents believe the introduction of a code of conduct for arbitrators in ISDS would be a positive development.
- If the process for selecting and appointing ISDS arbitrators were to be changed, respondents have a higher level of confidence in appointments that would be made from mandatory arbitrator lists developed by an institution with equal State and investor representation or by independent institutions to ensure the impartiality and independence of ISDS arbitrators.
- While Respondents would welcome regulation in this area, they think third-party funding in ISDS should be permitted and be available to investors as a commercial decision.
- Respondents expressed mixed views on the introduction of an appeals mechanism in ISDS and nine in ten respondents would be opposed to a re-hearing of the tribunal’s factual and legal findings.
- On balance, Respondents do not favour the creation of a multilateral investment court.
- Respondents would welcome a mandatory requirement to go through mediation before arbitration proceedings can be commenced.
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