An Empirical Study on the Effectiveness of Non-Disputing State Party Submissions in Investor-State Disputes

Executive Summary

(Full report can be read here)

 

This Memorandum analyses from an empirical perspective the prevalence of submissions made by Non-Disputing State Parties (“NDSPs”) and their influence on arbitral awards in Investor-State arbitration under investment treaties. The submissions studied for the purposes of this Memorandum are limited to those made by NDSPs, and not by other third parties. A summary of our key findings is set out below. 

 

Part I – NDSP Submission Provisions: Treaty provisions providing for NDSPs to make submissions (“NDSP submission provisions”) to an arbitral tribunal can be found in 78 International Investment Agreements (“IIAs”), out of a total of 2577 IIAs surveyed. Such provisions are also found in four sets of arbitration rules (i.e. the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration 2014, the SIAC Investment Arbitration Rules 2017, the SCC Arbitration Rules 2017, and the CIETAC International Investment Arbitration Rules 2017). Notably, whilst NDSP submission provisions in IIAs and arbitration rules both allow for submissions on questions of treaty interpretation, the arbitration rules provide the tribunal with discretion to allow submissions on other issues related to the dispute.

 

Part II – NDSP Submissions in Investor-State Arbitration: As of the time of writing (i.e. 22 April 2020), and based on publicly available information, there have been 141 NDSP submissions made pursuant to 9 NDSP submission provisions, all of which have been under IIAs. The United States made the most NDSP submissions, followed by Mexico and then Canada. No State outside the Americas has made an NDSP submission. In this connection, NDSP submissions are most prevalent in NAFTA Chapter Eleven arbitrations, followed by CAFTA-DR Chapter Ten arbitrations, and then other Investor-State arbitrations commenced under various BITs to which either the United States or Canada is a party.

 

In addition, we observe that the content of most NDSP submissions directly corresponds to the stage of arbitration proceedings at which these submissions are made. What is more, States have generally been consistent in the positions they adopt both as NDSPs and as litigants in Investor-State disputes. Furthermore, consistency in the positions taken among treaty parties in their submissions appears to have resulted in the emergence of agreed interpretations of particular treaty provisions.

 

Part III – Weight accorded to NDSP submissions by arbitral tribunals: NDSP submissions are a means which treaty parties may use to demonstrate “subsequent agreement” or “subsequent practice”, which must be “taken into account” by arbitral tribunals in interpreting the relevant IIA pursuant to Article 31(3)(a) and Article 31(3)(b) of the Vienna Convention on the Law of Treaties (“VCLT”) respectively. (Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331, 8 ILM 679). While arbitral tribunals are not always explicit in how they decide the weight they accord to the various interpretive tools that they consider, our survey reveals that they generally consider and accept the interpretations advanced in NDSP submissions, especially where all treaty parties espoused similar positions.

 

In this regard, we have also identified three factors that may affect the weight accorded to interpretations advanced in NDSP submissions, namely: (i) the consistency among treaty parties’ positions in a particular Investor-State dispute; (ii) whether the positions advanced by treaty parties are consistent over time; and (iii) whether the tribunal has specifically invited NDSPs to make submissions on certain issues. (See Part III.C). The first two factors demonstrate a common view that amounts to a subsequent agreement or practice, thus increasing the likelihood that tribunals will place greater weight on the NDSP submissions. As for the third factor, we note that tribunals tend to be more explicit in their considerations of submissions from NDSPs that they have invited, thus hinting that tribunals may place greater weight on it as well.

 

Part IV– Recommendations for improving the effectiveness of NDSP submissions: Finally, we offer four recommendations on how NDSP submission provisions may be improved, either in existing or future treaties, to enhance the mechanisms for making NDSP submissions. There are four key recommendations in this regard: (i) first, express the NDSPs’ right to make submissions in unambiguous terms; (ii) second, include procedural guidelines for NDSPs to make submissions; (iii) third, clarify the weight to be accorded to NDSP submissions and include a requirement for tribunals to give reasons where they fail to consider NDSP submissions; and (iv) fourth, explain the significance, if any, to be attributed to NDSPs’ silence in a dispute in the treaty.

 

In addition, we offer three suggestions that NDSPs may consider in order to improve and enhance increase the effectiveness of their submissions in influencing tribunals’ interpretation of the their treaties, namely: (i) first, clearly express a common position amongst treaty parties; (ii) second, clearly express a long-standing, consistent position; and (iii) third, be targeted in drafting NDSP submissions.

 

Full report can be read here.

 

 

 

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