One of the key areas of discussion in UNCITRAL Working Group III (WG III) on Investor-State Dispute Settlement (ISDS) is the nature of the decisions produced by arbitration in ISDS disputes. States have long expressed concerns over the divergent interpretations of substantive legal standards in awards rendered in ISDS arbitrations. Arbitrators are not bound to any previous legal interpretations in their awards and may determine their own jurisdiction under the principle of competence-competence. Divergent interpretations relating to jurisdiction and admissibility are inevitable across disputes.

States have also raised concerns regarding procedural inconsistency. The procedure of a dispute can vary based on the rules, institution and arbitrators involved in the dispute. States have also noted the lack of a consistent framework in ISDS for addressing multiple concurrent proceedings involving similar claims or multiple claimants while the public has noted the lack of a framework for third parties affected by the claim to participate in disputes.

In addition, states often express concern over the notion of the ‘correctness’ of decisions. This is a view that arbitrators are often unable to interpret the applicable law of a dispute and incorrectly apply the law. Yet states that have raised this concern have not provided a clear idea of who is the proper authority to determine whether substantive law has been correctly interpreted in an investment dispute. Unlike commercial arbitration, ISDS awards are not subject to the consistent standards of review seen in the New York Convention and this is seen by many as a weakness of the system.

Apr-Jun 2019 issue