Global Arbitration Review published a summary of an interview with Gary Born about international arbitration. Here's an excerpt, focusing on the investment arbitration part:
Interviewed as part of a New York International Arbitration Centre event in memory of its late founding chair, Judith Kaye, Born addressed a range of topics from the continuing importance of the seat of arbitration to the Lord Chief Justice of England and Wales's recent comments proposing more judicial review of cases and the criticisms that face investor-state dispute settlement.
Born was adamant that the arbitral system works and works well. He said that in the past 30 years it has "flourished" with caseloads soaring at every institution, including regional ones, and been used to resolve sports, tax, IP and financial disputes when historically it wouldn't have been.
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What also works is investor-state arbitration, Born argued after his interviewers raised the litany of criticisms the process has received in recent times.
"It's not perfect" – no process can be that involves disputing parties whose primary objective is "to make life as horrible as possible for the other party" –but the portrayal of it by critics is "wildly distorted", Born said. We should embrace not slander a system that ensures the rule of international law prevails in contemporary affairs.
Born said he finds it "odd" even to have to respond to some of the criticisms of investment arbitration. For example, he said you "really have to scratch your head" over claims it isn't transparent, in light of amendments to NAFTA and ICSID, the Mauritius Convention, the UNCITRAL Transparency Rules, the availability of awards on the web and the practice of cases being broadcasted live online.
If one wants cases to be more transparent, one should make them so not attack the system as fundamentally flawed, he said.
In answer to the criticism that investment arbitration is tilted against host states, Born noted empirical research on outcomes by Washington & Lee Law School professor Susan Franck which shows that "about a third" of all disputes result in the investor's claim being rejected entirely.
Some claims are upheld – but often only in small part – and some are resolved consensually. There's no "stacked deck", he argued.
States furthermore have found "a very able set of arbitrators" who they are comfortable appointing, including experienced practitioners and academics such as Brigitte Stern, J Christopher Thomas and Toby Landau QC.
As to the alleged inconsistency of awards, Born acknowledged there are divergences of opinion on whether, say, cooling-off periods affect jurisdiction and the meaning of fair and equitable treatment. But he said "parties don't cite investment arbitration awards for no purpose or to no end. It's because investment tribunals pay a lot of attention to what prior awards have decided."
Where states want clarity rather than organic development of precedent, they amend their investment treaties – "that's exactly how the law ought to resolve".
The criticisms of investment arbitration are not just wrong but "wildly wrong" and those who attack the system "would do well to take a step back and think about what a world would look like without neutral and independent application of legal rules because that is the direction that their criticisms take us," Born said.
He acknowleged that work is needed to reduce the cost of the process. But he noted that, despite the general criticism of the expense of arbitrating, "when you get to an individual investment arbitration, or, frankly, other arbitrations, the individual parties [...] never seem particularly concerned".
"States never fail to take every jurisdictional objection, no matter how unlikely it is that it will prevail; claimants never don't seek to go after every possible request for document disclosure, no matter how unlikely it is it will be granted".
He added that he regards ethical rules or guidance to govern the conduct of arbitration counsel as unnecessary. "Questions of ethics are complicated. I think our current system of regulation basically by the counsel's home jurisdiction, though certainly one can find cases where things go awry, largely works."
I have a couple reactions to this.
First, I think it's true that some of the transparency complaints about investment arbitration are a bit dated. Most recent agreements have some pretty good provisions ensuring transparency in the litigation process. On the other hand, older agreements without such provisions still exist, and when complaints arise under those agreements, transparency is still lacking. In addition, with regard to cases being broadcast "live online," sometimes that means you have to travel to the city where the arbitration is being held, and watch "live online" in a designated room. So, there is still room for improvement here.
As to the data on outcomes of investment disputes, e.g., a third of cases rejected entirely, I've never understood how this is a rebuttal to a criticism that investment arbitration is biased against host states. Investors can sue states; states can't sue investors. That's the structural bias in the system. Is there additional bias due to outcomes favoring investors or governments? That's harder to measure. But regardless, the structural bias is there. Investment arbitration is sometimes presented as a neutral way for foreign investors and states to resolve disputes. But that's not really what it is under investment treaties/FTA investment chapters, is it? The ability to invoke arbitration does not go both ways. Rather, investment arbitration is a way for investors to sue states when the investors object to the states' behavior and actions.
(Actually, this is only part of the bias. The other part is that, with a couple exceptions, only foreign investors, as opposed to ordinary citizens, have an effective means to sue states under international law.)
He also makes reference to "the meaning of fair and equitable treatment," and notes that where states want clarity, they amend their investment treaties. I agree that there is an issue of clarity with regard to FET, but I think a larger issue than clarity is the inherent scope of this obligation. Some governments have tried to clarify it, and perhaps narrow it, but it remains extremely broad. As long as you have words such as "fair" and "equitable" and "arbitrary" -- even with manifestly in front of it -- in there, this obligation is broad enough to support credible claims against a very wide range of government actions (including tobacco regulation). Thus, as long as FET is in there in some form, controversial cases will come along, and the system will face the same criticism it does now. No clarifying of the obligation will help with this.
Finally, the possibility of abandoning the system makes him worry about "what a world would look like without neutral and independent application of legal rules." It seems to me that a basic assumption of many investment arbitration supporters is that domestic political and legal systems cannot offer a neutral and independent application of legal rules (maybe to foreign investors, maybe in general, I'm not sure what they have in mind exactly). On this point, I'd want to see some empirical data on domestic systems, to see which of them do and which of them do not offer this already. I suspect the problem is not nearly as widespread as investment arbitration supporters would have us believe, and that more narrow and targeted solutions are probably available in those circumstances where a problem does exist. But I think the domestic problem needs to be defined first, and with regard to investment obligations such as FET, it never has been.
