In advance of the next meeting of UNCITRAL Working Group III (WG III) in April 2019, the European Union and its Member States have made a submission on “Establishing a standing mechanism for the settlement of international investment disputes” (the Submission), as well as a possible work plan for achieving this aim. As described in our blog post here, WG III has identified a number of concerns in relation to the resolution of investor-state disputes by ad hoc tribunals. In the Report of the 36th Session, WG III encouraged governments to submit proposals as to how the concerns about ISDS identified in the 36th Session should be addressed by way of reform.

The Submission advocates systemic structural change, proposing a two tier “standing mechanism” as “the only available option that effectively responds to all the concerns identified in the working Group” and “the only option that captures the intertwined nature of those concerns“. The features of the “standing mechanism” proposed in the Submission are unsurprising given the previously published views of the EU’s institutions, in particular the European Commission (the Commission). The rhetoric in the Submission differs from the previous articulations coming out of the EU institutions which refer overtly to an “investment court system“. However, the Commission’s news page makes clear that the “standing mechanism” described in the Submission is a “multilateral investment court“. In addition, whilst the Submission makes reference to “adjudicators” rather than judges, the characteristics of the “adjudicators” are those described in the EU’s previous papers on this topic (see here).

The Commission has historically been the flag-bearer for the EU’s reform of ISDS. In the Submission however, it is emphasised that the proposal represents the views of the EU “and its Member States“. This proposition may be tested if the proposed standing mechanism ultimately finds support: further to CJEU Opinion 2/15 on the European Union–Singapore Free Trade Agreement (FTA) on May 16, 2017, the instrument establishing a standing mechanism will need to be ratified by each of the Member States.

The EU’s Proposed “Standing Mechanism”

1. Two tier adjudication by “adjudicators”

The Submission proposes two-tier adjudication with a first instance tribunal and appellate tribunal, both composed of full-time “adjudicators”, who will be “prohibited from having other activities” and appointed for a “long, non-renewable term”. The number of adjudicators would be based on projections as to the court’s workload. The adjudicators would be subject to “strict ethical requirements“, and would be required to have comparable qualification requirements as for other national courts. This is noted to “imply that adjudicators have the qualifications required in their respective countries for appointment to the highest judicial offices or are jurisconsults of recognised competence in international law“. Mechanisms (to be determined) will be used to ensure geographical and gender diversity and the appointment process should be “robust and transparent to ensure the independence and impartiality of adjudicators“, with independent persons to be involved in screening appointments.

2. Appellate review

The Submission proposes that the appellate tribunal would hear appeals from the tribunal of first instance on “errors of law (including serious procedural shortcomings) or manifest errors in the appreciation of the facts” but that it should not conduct a de novo review of the facts. The Submission notes that mechanisms, including possibly security for costs, should prevent abuse of the appeal process. The appellate tribunal would be able to remand cases to the first tier tribunal – the Submission indicates that remand is “problematic” with ad hoc tribunals as they will have been disbanded before the decision on appeal is rendered.

Notably, some domestic legal systems do allow for a court to remand an award to an ad hoc tribunal. It appears that this possibility may be necessary if a State uses the appellate architecture but not the first tier tribunal (see “Open Architecture” below).

3. Enforcement

The Submission proposes two enforcement mechanisms: an internal enforcement regime (i.e. State signatories agree to enforce “awards” issued by the first tier tribunal or the appellate tribunal subject to the conditions laid down in the instrument establishing the standing mechanism), and enforcement under the New York Convention 1958 (the NYC). Enforcement under the NYC would be necessary in order that awards can be enforced in the jurisdiction of States which did not accede to the instrument setting up the standing mechanism. The view expressed in the Submission is that the standing mechanism would fall within the NYC’s definition of a “permanent arbitral body” and therefore an award of the first tier or appellate tribunal would be enforceable under the NYC.

The Submission makes clear that, under the internal enforcement regime, there would be no review of awards at domestic level (for example, under the set aside or annulment grounds laid down in national law) or through ad hoc mechanisms such as the ICSID annulment process. The review (if any) would take place by appeal to the appellate tribunal. In relation to enforcement under the NYC, the Submission notes that “[i]t may be necessary to include mechanisms to prevent the disputing parties activating set-aside procedures at a later stage“.

4. Application to existing treaties, opt in mechanism and jurisdiction

The Submission acknowledges that “[i]t is vital that a standing mechanism be able to rule on disputes under the large stock of existing and future agreements“. Signatory States will adopt the Convention by accession and then serve notifications “opting in” to the jurisdiction of the standing mechanism in respect of particular existing or future treaties.

5. “Open architecture” and State to State adjudication

The instrument setting up the standing mechanism would permit States to use the appeal mechanism only – this would enable States to continue to resolve investor-State disputes through ad hoc arbitration with the possibility of awards being appealed.

The Submission also speculates that the standing mechanism could be used for state to state dispute resolution under investment treaties (even if there was no investor-State dispute resolution mechanism provided in the treaty in question).

6. Expansion of binding interpretations

Given that there would be a multilateral mechanism covering multiple bilateral agreements, the Submission argues that it “would be necessary to ensure that the parties to a bilateral agreement would retain control over the interpretation of their agreement by being able to adopt binding interpretations” and therefore the possibility of binding interpretations should be “maintained and indeed expanded to cover treaties that do not explicitly provide for it” (emphasis added).

This is a particularly interesting aspect of the proposal. States have been comfortable to agree to investment treaties which do not include a right to issue binding interpretations, confident that ad hoc tribunals will interpret the treaty consistent with their intentions. However, the implication is that the predictability and consistency which the EU anticipates will be brought about by introducing a standing mechanism to determine disputes under multiple treaties may risk interpretations of individual treaties contrary to the intentions of the states which are party to them.


The Submission provides a further illustration of the commitment of the EU to a fundamental change to the method of resolution of investor-state disputes. It further explains why the EU and its member states consider that the establishment of a standing mechanism will: tackle issues of consistency and correctness (including by gradually developing “a more coherent approach to the relationship between investment law and other domains, in particular domestic law and other fields of international law“); address ethics concerns and ensure independence and impartiality; ensure the public international law pedigree of decision-makers; encourage geographical and gender diversity; and reduce costs and duration (directly, by removing the time and cost of arbitrator appointment and challenge proceedings and allowing for management of multiple claims, as well as indirectly, by improving predictability and reducing re-litigation of a particular issue).

However, questions remain about the feasibility of establishing a standing full-time court for the resolution of investor-state disputes, the level of remuneration which would be required to attract the calibre of independent adjudicators which the proposal requires, and whether the costs of maintaining a standing body would be acceptable to those well-developed countries which have not been involved in many (if any) investor-state claims. At a more general level, the discussions at the forthcoming 37th Session in New York will reveal how influential the Submission is in persuading the other members of WGIII that systemic reform is the only way in which the concerns noted at the 36th Session must be addressed.