The outcome of the UNCITRAL 50th session: The first steps towards a Multilateral Investment Court (MIC)

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Dr.Lic.Herfried Wöss
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Lic.Adriana San Román R.
M.A.Finance & Investment (Exeter)
Dante Figueroa,Esq.
LL.M.(AmU),LL.M.(Chile)
Christian Carbajal Valenzuela
LL.M.(Warwick)
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The outcome of the UNCITRAL July
2017 meeting: The first steps
towards a Multilateral Investment
Court (MIC)
Prof. Dr. Nikos Lavranos, LL.M.
Of Counsel
August 7, 2017
Background
The 50th session of the United Nations
Commission on International Trade Law held on
10 July 2017 in Vienna endorsed a mandate to
work on the EU’s proposal to transform
international investment arbitration (ISDS)
into a court-based system.
Dr. Herfried Wöss and Prof. Dr. Nikos Lavranos,
partner and of counsel of Wöss & Partners,
participated in the 50th
session of UNCITRAL on
behalf of the American Society of International
Law (ASIL) and the Chartered Institute of
Arbitrators, respectively
As it is well-known, the EU has been actively
selling its proposal for a so-called investment
court system (ICS) that would replace the now
widely hated investor-state dispute settlement
(ISDS) system. Indeed, Canada and Vietnam have
already accepted the ICS in their respective
FTAs with the EU. For obvious practical
reasons, the EU is aiming at establishing a

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single permanent multilateral investment court
(MIC) rather than creating multiple bilateral
ICSs. Therefore, the EU has been seeking the
collaboration of other international
organisations to provide a forum for
negotiating and eventually establishing the
MIC.
The Mauritius Convention approach
The EU found in the UNCITRAL the perfect
partner. UNCITRAL is the core legal body of the
United Nations system in the field of
international trade law with a universal
membership specialising in commercial law
reform worldwide. It has been active for over
50 years. UNCITRAL focuses in particular on the
modernisation and harmonisation of rules on
international business. It seeks to increase
business opportunities worldwide by formulating
modern, fair, and harmonised rules on
commercial transactions. UNCITRAL has provided
a forum for the formulation and adoption of
several international conventions, model laws
and rules for the harmonisation of commercial
law. More recently, UNCITRAL has also entered
the realm of ISDS, in particular by the
adoption in 2014 of the UNCITRAL Transparency
Rules, which provide for extensive transparency
in arbitration proceedings and participation of
non-disputing parties in such proceedings.
The UNCITRAL Transparency Rules (turned into
the Mauritius Convention) were in particular
pushed by the EU in order to address criticism
against the perceived lack of transparency in

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the ISDS system. One of the special features of
the Convention is that it provides each
signatory with maximum flexibility to decide to
which investment treaties (only new ones or
also existing ones) the Transparency Rules
should apply. Moreover, only three
ratifications were required for letting the
Mauritius Convention enter into force: that
will be the case in October 2017. In other
words, in the short time span of only three
years, the Mauritius Convention became a
reality.
In short, the process leading towards the
UNCITRAL Transparency Rules was extraordinarily
short and efficient.
This is exactly the reason why the EU has opted
again for UNCITRAL in order to replicate the
process for a similar quick creation of the
MIC. An extensive report prepared by Gabrielle
Kaufman-Kohler and Michele Potestà, which
formed the basis for discussion in UNCITRAL,
provides a detailed roadmap on how the
‘Mauritius Convention approach’ could serve as
a model for creating the MIC.
The report confirms that the Mauritius
Convention is a suitable model for creating the
MIC, while giving states maximum choice to
decide whether, and if so, when to opt in. In
other words, it allows those states, which
consider the MIC to be a better solution than
the current ISDS system, to move forward
without having to wait for consensus by a large

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number of states.
The UNCITRAL mandate
Ultimately, all UNCITRAL members agreed to give
the Commission the following broadly formulated
mandate:
• identify and consider concerns regarding
ISDS;
• consider whether reforms are desirable in
light of the identified concerns;
• if the Working Group were to conclude that
reform is desirable, to develop and recommend
any relevant solutions.
Despite the unanimous adoption of the mandate,
the debate leading up to its adoption displayed
considerably diverse views by the various
participating parties.
The pro-MIC camp
The leaders of the pro-MIC camp are the EU, the
EU Member States (Spain, Slovakia, Germany,
Romania, Czech Rep, Belgium, Austria, France,
Italy, Estonia, Sweden, Bulgaria, Croatia,
Poland and the Netherlands took the floor),
Canada, South Africa and several Latin American
countries such as Argentina, Ecuador, Colombia
and Peru.
Canada, the EU and its member states emphasised
that there is a need to overcome the spaghetti
bowl of 3,000 BIT and thus the discussion must
take place in a multilateral forum and that
multilateral solution such as the MIC is

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essentially the only solution. Mauritius,
aiming to give another treaty its name, also
vigorously supports the EU arguing that by now
it is clear that ISDS needs to be urgently and
radically reformed and that the ‘Mauritius
Convention approach’ is the best way forward.
The anti-MIC camp
In contrast, the USA, and in particular Japan,
strongly questioned the need for such urgent
work on reforming the ISDS in such a radical
manner.
Instead, the focus should be on the current
work on certain aspects regarding commercial
arbitration, conciliation and new topics,
including ethics and concurrent proceedings,
Tokyo and Washington argue. The US questioned
the underlying notion that a single ISDS regime
would be possible in light of the very
different 3,000 BITs. Also, the US questioned
the notion that the ISDS system is not
reformable, saying reforms have been
implemented for more than a decade. Moreover,
the US argued that diversity in the
jurisprudence is a good thing, which indeed
reflects the choices of states made in their
BITs. The US also rejected the claim that ‘ISDS
is dead’.
Similarly, Japan vigorously questioned the
underlying reason of the whole discussion on
investment protection, claiming that it is
based on wrong and misinformed perceptions by
the public and politicians rather than facts
and evidence. Japan called for facts and

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6

evidence which would support the need for any
reforms. Instead of reforms, governments are
obliged to inform their own public and
parliaments about ISDS and BITs.
That is what Japan did with regard to TPP and
it worked well. Moreover, the proposed MIC
would essentially become a ‘world legislator’
being in a position to decide highly sensitive
and important issues without any
accountability. Japan believed other issues
related to investor state disputes, such as
ethics and concurrent proceedings, should be
given priority.
The wavering camp
There was a significant number of states that,
while not openly opposing the mandate, were
lukewarm – at least at this point in time –
about the idea of moving towards a MIC. For
example, China, Russia, Singapore, South Korea,
Thailand, Vietnam, New Zealand and Australia
all stress that the outcome of the efforts of
the UNICTRAL Working Group should not be
prejudged towards the MIC and that all options
should be considered.
They also called for more analytical work on
the pros and cons of the current ISDS system
and possible reforms. In particular, Russia and
South Korea cautioned not to through away 50
years of ISDS experience and replace it by
something which may create new problems.

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Other states such as Thailand and Chile also
questioned the focus on the procedural and
institutional reforms, arguing that instead the
focus should be first on the reform of
substantive protection standards. Of note is
also the position of the United Kingdom, which,
while not strongly opposing the new UNCITRAL
mandate, was considerably more cautious towards
moving forward the reform efforts compared to
the other EU member states.
The next steps
The work of the UNCITRAL Working Group will
commence in November this year.
In my view, a draft text for the MIC could be
on the table by the end of 2018 or early 2019,
with the first ratifications in 2020.

The outcome of the UNCITRAL 50th session: The first steps towards a Multilateral Investment Court (MIC)

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The outcome of the UNCITRAL 50th session: The first steps towards a Multilateral Investment Court (MIC)