The Multilateral Investment Court And The Public Interest

The international community has characterized the current international investment system as a “backlash against Investor-State Dispute Settlement (ISDS)”.[1] This is because multinational corporations are entitled to sue governments without persuading their governments to raise the issue through a diplomatic vehicle.[2] The International Centre for Settlement of Investment Disputes (ICSID) system was created for the protection of the investors. At the time of its creation, the host country was perceived as being the most powerful contracting party. In the absence of a Bilateral Investment Treaty (BIT), the host state would have been able to change its domestic law as soon as the investment became less favourable to its interests.[3] Nevertheless, it seems that investors have more power since the Government alone has legal obligations while the investor has none. Since the 2000s, ISDS has “trigger[ed] domestic frustration about the balance between foreign investor’s rights and national rights.”[4] Foreign investors can win big awards whilst the host countries are in a financial crisis.[5] As a result of the shift in balance of power between the host country and the investors, Bolivia, Ecuador, Venezuela have withdrawn from ICSID.[6] ISDS proceedings have been criticized by developing countries and academics as well as NGOs and the civil society leaders.[7] The current system lacks consistency and thus affects the predictability of case-law. Moreover, it lacks transparency.

In order to solve these issues, the European Commission proposed a Multilateral Investment Court (MIC) under the idea that procedural rules are the most suitable solution.[8] Through the eight-option Commission Staff Working Document on Multilateral reform of Investment dispute resolution aimed to fix the “backlashed” ISDS mechanism, option 5 was chosen. It seems that the MIC proposition is a sort of amended Investment Court System (ICS) (proposed in the Transatlantic Trade and Investment Partnership (TTIP)).[9] The nomenclature of the MIC instances is identical. Section 5.2.1 of the European Commission Working Document mirrors the Article 9(1) and 10 (1) of the Commission draft text Transatlantic Trade and Investment Partnership (TTIP).[10] In the same way, the MIC proposition tackles the rules of procedure relating to the adjudicators inasmuch as their appointments, terms, qualifications and the scope of appeal. According to the European Commission, this procedural reform will solve the above-mentioned weak points… But what about the human rights infringements? The environmental issues? The aboriginal rights?

It is true that the ISDS shortcomings can be solved through procedural changes. Since investment disputes often raise public interests, establishing Amicus Curiae participation procedures within the MIC scope would be fruitful for all economic actors such as NGOs, civil society, host countries and enterprises. Establishing the Amicus Curiae participation will indirectly strengthen the legitimacy of the MIC as well as bringing transparency and consistency.

Investment law aims have shifted over the years. Nowadays, investment disputes raise public interests because the issues impact the society. The Investor-State Dispute Settlement (ISDS) is becoming obsolete, because by its public interest nature, the ISDS system has less relevance to the needs of today. Furthermore, such Amicus Curiae participation is present in Free Trade Agreement (FTA) such as NAFTA and the NAFTA 3.0 (USMCA).[11] With these sets of rules of procedure the MIC will align with international law including the Mauritius Convention.

The Evolution Of The Legal Culture Of Investment Arbitration 

After World War II, modern international economic law development was focused on protection measures. State parties agreed to multilateral treaties for the purpose of protecting foreign trade and investment.[12] Similarly to commercial arbitration, the Investor-State Dispute Settlement (ISDS) mechanism was providing investors the right to arbitration if “they believe […] a party to agreement has breached one of its provisions”.[13] Therefore, the objective behind the ISDS mechanism was to implement an impartial dispute resolution mechanism between private and public parties.

Looking at its objective, there was no place for affected third parties under ISDS. Social issues such as labour laws, human rights and indigenous rights were to be solved through national court systems. At its creation, ISDS was aiming to protect investors against host-country abuse of their dominant position. Having the full authority to indirectly breach the treaty by changing the laws or the licensing processes establishing the ISDS was necessary. Not only the investors, but banks as well, were seeking these protections in order to ameliorate the problem of the “unfavorable investment climate”.[14]

In a short period of time, between 1959 and 1991, more than 400 bilateral investment treaties (BITs) were signed worldwide.[15] More than 3,000 BITs are known so far.[16] The Bretton Woods institutions have successfully advocated for the benefits of Foreign Direct Investments (FDIs), especially for Developing Countries.[17] Trade agreements were the most powerful route used to encourage more FDIs and were marketed as beneficial for the host countries.[18] FDIs promote competition in the domestic and international input market. They allow transfers of technology and knowledge. The recipient of an FDI will “gain employee training in the course of operating the new businesses”.[19] This transfer of knowledge contributes to human capital development in the host country as well. Furthermore, host states will make more income since governments will collect tax incomes from the foreign investors.[20] FDI thus stimulates employment, economic growth and development, contributing to the promotion of human rights.[21]

Investment Activities Have Expanded Economic Growth At The Cost Of The Environment And Human Rights

The World Bank implemented the legal vehicle of Investor-State Dispute Settlement (ISDS) in order to protect the investors’ rights. In this respect, the Investment-State arbitration system is a private mode of dispute resolution. Arbitration by its nature has a confidential character. Only the disputing parties have access to the proceedings. ISDS was not designed for third-party claims.

During the Consultative Meeting of Legal Experts, the Cameroon expert brought to the table the idea of the third-party claim. However, the chairman, Aaron Broches, responded that “it was not intended that the request for arbitration could be made by a third party”.[22] To the extent that domestic law is respected by investors, there is no need for third-party claims.

Regrettably, investors and host states have violated human rights. In the nineteenth century, many claims were lodged against foreign states. There are several cases where foreign states were accused of having abused the civil rights of foreigners, as well as numerous cases of police brutality.[23] In the second half of the nineteenth century, there were international claims alleging personal injury and death of undocumented migrants. Investors have also violated human rights by privatising the water and infrastructure.[24] FDIs therefore caused negative externalities such as the pollution of the environment (as through mining industries) and have severely infringed on the rights of foreigners.

From Private Investor-State Arbitration To Public Interests

Investment disputes have raised public interest matters. Even if there was no intention to have third-party participation in ISDS proceedings, the reality is no longer the same. Arbitrators’ decisions can have impacts on the public services of the host-state in the realms of  water, waste management and electricity.[25] Making matters worse, arbitrators’ decisions have touched on sensitive issues relating to socio-political subjects such as the extent of environmental protection.[26] The Metalclad Corporation case is one such example that demonstrated that the arbitrators are no longer ruling private Investor-State Disputes as they were in the late 19th  century. In fact, arbitrators’ decisions now have a direct effect on the communities at large and national policies, termed the “chilling effect”. Confidentiality no longer suits Investor-State Arbitration. These kinds of proceedings are public by their very nature and must be accessible to all communities.[27]

MIC Proposition Does Not Provide Adequate Answers on Public Interest Matters

According to the European Commission, the current ISDS system threatens the State’s rights to determine their own national policies and regulate their public interests. The Multilateral Investment Court (MIC) will be closer to the area of public law as opposed to commercial law which encompasses the protection of private interests.[28]

Surprisingly, the European Commission (EC) remained silent on what constitutes public interests. The 119-page proposition had no answer to the NGOs’ comments about the usefulness of third-party participation. According to the EC, the creation of the Appeal Tribunal and the appointment of permanent judges will solve these so-called public interest issues.

Many academics have written about the benefits of the participation of amicus curiae in investment treaty arbitration. Implementing a procedural vehicle for the third-party participation will bring more consistency and transparency. It would force the parties in dispute to publish the proceedings for the benefit of the public interests.

 The Fabric of the International Procedures on the Admission of the Amicus Curiae

According to the European Economic and Social Committee (EESC), it is imperative that the MIC does not impede the ability of the EU and its members to fulfil their obligations under international agreements such as environmental, human rights and labour standards.[29] Permitting amicus curiae submissions should be the first step in recognizing local residents, workers, unions, environmental groups and consumer interests.[30] The EESC’s stance should apply to all international communities.

The MIC proposition only challenges the consistency concerns within the appointed judges’ decisions. However, consistency should apply not only to the realm of investment law decisions, but should extend to other international agreements. Conventionally, a court decision must be in compliance with the national laws overall. Since the Investor-State Dispute Settlement is shifting to a Multilateral Investment Court, the latter shall rule in compliance with international agreements.[31] As mentioned in the previous sections, investment law is no longer a private matter. MIC implies public international law and therefore international investment law should follow the UN Agenda by promoting international legal obligations of multinationals and investors including the Ruggie’s principles on Business and Human Rights (protect, respect and remedies) and the OECD guidelines on responsible business conduct and human rights.[32]

Amicus Curiae Is Accepted In Several Fora

The concept of amicus curiae is accepted in various domestic legal systems such as Canada, the US and the UK. Both civil law and common law jurisdictions recognize the role of amici curiae participation in domestic courts.

On the international level, the International Criminal Court has granted leave to submit observations as amicus curiae as well as the Inter-American Court of Human Rights which “has broadened international legal procedure […by granting] admission of amicus curiae briefs in its proceedings”.[33] Furthermore, the European Court of Human Rights has included provisions for the admission of amicus curiae.[34] Lastly, the WTO Appellate Body (AB), in US-Shrimp,42 stated that under Article 17.9 of the Dispute Settlement Understanding (DSU), the Appellate Body has the authority to decline or consider any pertinent and useful information from amicus submissions.

The Commission Staff Working Document on Multilateral Reform of Investment Dispute Resolution indicates that the MIC proposition was inspired from the WTO as well as from the European Court of Human Rights system.[35] The implementation of a procedural vehicle for third-party participation is therefore even more significant.

Amicus Curiae Submissions Have Been Accepted In ICSID Forums

Major arbitration decisions on third-party participation requests have been accepted in ICSID Forums. One example is the tribunal of Aguas del Tunari SA v. The republic of Bolivia, which resulted in a unanimous decision that amicus requests were “beyond the power or the authority of the Tribunal to grant”.[36] In the case of Aguas Argentinas, S.A., Suez, Sociedad General De Aguas De Barcelona, S.A. And Vivendi Universal, S.A. V. The Argentine Republic, the amicus curiae request was rejected because of a lack of information from the petitioners.

Rule 37 Of ICSID Arbitration Rules: A Codification Of The Aguas Argentina Case

The Aguas Argentina decision is useful in establishing normative procedures and could serve as the foundation of the third-party brief submissions. This case has had such a large impact that in 2006, Rule 37(2) of ICSID Arbitration rules was created.[37] Therefore, amicus curiae has a place in international investment disputes. The EC can find legal grounds in favour of establishing a third-party participation channel within a Multilateral Investment Court.

Before ICSID, amicus curiae requests took the form of standing as a party, written submissions and access to case documents.[38] Initially, the arbitral tribunal denied requests due to the parties’ refusal to consent to their participation.[39] Subsequently, the Tribunal has started to accept amicus briefs. Commonly, NGOs are requested to participate as an amicus in arbitration proceedings in order to interpret investment treaties which will increase the harmonization and the consistency of the decision as well as to analyse the subject matters in the disputes.[40]

The future Multilateral Investment Court could mirror the ICSID Arbitration Rules. The reason why finding application to Rule 37 (2) of ICSID Arbitration Rules is difficult is that ISDS is not equipped to handle substantive legal rules. Under ISDS there are no permanent judges to administer the normalization of conditions, requirements or modalities. There is no appellate tribunal either, and thus no precedent can bind or persuade. Sometimes arbitrators decide in the international commercial arbitration field and other times the same arbitrators will judge in international investment law. Consequently, both regimes are sometimes commingled, and decisions can be contradictory even if the disputes are nearly identical.[41]

Although the assessment of Rule 37(2) ICSID Arbitration Rules was inconsistent,[42] the takeaways from these decisions are that (1) admissions of amicus curiae will increase transparency, (2) the human rights dimension is part of the public interest definition and (3) the tribunal has the power to grant amicus curiae submission on the grounds that the parties to dispute have consented to ICSID Arbitration rules or to ICSID Additional Facility (AF).[43]

Amicus Curiae submission under the MIC

 Amicus curiae submission is the starting point of the promotion of legitimacy, consistency and transparency. It cannot be said that admission of amici by itself will result in the achievement of the MIC goals. Not only, it is essential that judges —in the lens of the MIC body — admit such requests, but they should truly take them into consideration. Written submissions and oral submissions should be granted and judges should consider third-party arguments. Nevertheless, the international investment law community is not yet ready for such substantive rules. In order to reach this goal, a procedural method should be created.

Protection Of Public Interest, Thus Increasing Legitimacy

 Accepting amicus curiae will provide a forum for civil society. Over time, performing BITs obligations have depicted negative externalities. In relation to human rights, on March 28th, 2011, there was a group of 11 Guatemalan women that filed a lawsuit in the Superior Court in Ontario against Hudbay Minerals and HMI Nickel Inc. The woman alleged that these companies were complicit in the gang rape which occurred in 2007.[44] In 2017, the 11 Guatemalan women travelled to Canada in order to give their testimony during the ongoing discovery procedure.

In the meantime, the Government of Canada had legal impacts in the legal reforms abroad in the mining sector.[45] There were agents of Canadian companies that were hired as mining legislator experts to help with law drafting in Colombia.[46] The amended Mining Code, drafted with the help of these legal experts, weakened existing environmental and social safeguards as well as reduced mining tax rates and eliminated the national policy on the rights to the communities to receive economic benefits from mining activity.[47]

It is hardly surprising that international investment law and ISDS have lost legitimacy. The freedom of one group of individuals must end when it restricts the freedom of others. In this case, investors shall be deprived of their contractual rights when they restrict the freedoms of the host countries that protect its citizens and biodiversity. By admitting amicus curiae in the MIC system, international law agreements would be more respected due to the promotion of public interest safeguards.

Conclusion

In sum, ISDS no longer conforms to the needs of the investment law sector. Investors are also no longer the weaker contracting party. For these reasons, making a 180-degree turn on international investment law appears to be the solution. Many countries have withdrawn from ICSID as well as their BITs. The MIC proposition appears to be promising despite the absence of substantive changes. However, in order to attract contracting parties, it was a clever choice to propose a procedural multilateral agreement over a substantive multilateral treaty. The MIC should replace not only the ISDS but also the ICSID Additional Facility Rules in order to achieve consistency. There are many investment fora for dispute settlement that often collide instead of being in alignment. Therefore, disputing parties are going “forum shopping”.

The MIC proposition could set clear rules regarding the admission of the amicus curiae. Decisions from the ICSID Tribunal, ICSID Additional Rules, UNCITRAL Rules and NAFTA rules have positively accepted the importance and usefulness of the admission of third-party participation in investment disputes. During the public consultation for the establishment of multilateral reform of investment dispute resolution, EESC have raised public interest concerns. Amicus curiae submission is the first step in promoting legitimacy, consistency and transparency.

Carla Lessard graduated from civil law, common law and international development and globalization at the University of Ottawa. Her research interests include the international economic law regime (WTO, ICSID) related to human rights claims and the impacts of fair trade agreements on developing countries.

Banner image by Tingey Injury Law Firm, courtesy of Unsplash.

Works Cited