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ASA at UNCITRAL Working Group III: September 2024 and January 2025 Meetings
by Prof. Christine Kaddous and Dr. Dolores Bentolila
The Swiss Arbitration Association (ASA) is actively participating in the UNCITRAL Working Group III (WG III) discussions on investor-state dispute settlement (ISDS) reform. This report marks the first of a series covering ASA’s engagement in these meetings.
Christine Kaddous and Dolores Bentolila represented ASA at the WG III sessions held in September 2024 and January 2025. During both meetings, States continued their discussions on two key areas of reform: (i) the Draft Statute on a Standing Mechanism and (ii) the Draft Procedural and Cross-Cutting Issues Provisions.
Standing Mechanism for the resolution of international investment disputes
In September 2024, the WG III considered the selection and appointment of the members of the Tribunals. The discussions were intense with very detailed information that have political impacts. Briefly, the outcome was the following:
- Qualifications and requirements : emphasis was given on professional expertise, high level of competence for the members; experience in different areas and functions (for example as arbitrator, judge, mediator or counsel) should be considered holistically to ensure diversity in the composition of the Tribunals; experience to handling international disputes was also mentioned; experience working or dealing with governments, including as part of the judiciary or the foreign or civil service. Candidates and members would be subject to the Code of conduct for judges in international investment dispute Resolution, which required their independence and impartiality. After (long) discussions, it was agreed that paragraph 1 of Article 7 of the Draft Statute will read: “The members of the Tribunals shall be independent and impartial and shall be persons of high moral character, enjoying the highest reputation for fairness and integrity with recognised competence in public international law or international investment law as well as in the resolution of international disputes. They shall also meet the criteria that may be set forth in the regulations adopted by the Conference of the Contracting Parties”. The issue of the nationality of the members was also debated. It has been stressed that it would need to be taken into account to ensure balanced geographical representation and to prevent the member from being assigned a dispute involving the State of which it has nationality or nationals of that State. This issue was however left open at this stage.
- Composition of the Tribunals: one main outcome: the principles of equitable geographical distribution based on the UN regional groupings, the representation of the principal legal systems and equal gender representation have to be applied for the composition of the Tribunals.
- Nomination of candidates: the nomination of candidates is made by the Contracting Parties. A contracting Party may nominate up to four individuals as candidates for appointment as members of the Tribunal. The candidate need not be a national of a Contracting Party. However, equitable geographical representation and the representation of the principal legal systems and equal gender representation should be considered by a Contracting Party in its nomination process. The issue of an open call for nominations was raised. The Conference of the Contracting Parties may carry out an open call. However, despite intense discussions, no consensus was reached, leaving the issue open to further deliberations.
- Selection Committee: the WG first considered whether it would be necessary to establish a selection committee. Very diverse views were expressed in the room about the role of such a committee, its decision-making power, its composition, the criteria to be applied to choose the members of that committee… the reference was also made rather to a screening committee. After intense discussions, it was agreed that the committee should be composed of seven members reflecting the principles of equitable geographical distribution, the representation of the principal legal systems and equal gender representation. The members of the Committee should be subject to independence and impartiality as well as disclosure requirements.
In January 2025, the discussions went on regarding the Selection Committee, the appointment by the Conference of the Contracting Parties, the terms of office and the removal, resignation and replacement of members. The WG also started the examination of the Appeals Tribunal.
- Selection Committee: the discussions focused on the potential competence of the Selection Committee to recommend to the Conference of the Contracting Parties that an open call be made for additional candidates. The issue was very sensitive. It was suggested that if a candidate nominated by a Contracting Party was disqualified by the Selection Committee, that Contracting Party should be given an opportunity to nominate another individual as a substitute for consideration by the Selection Committee. The WG agreed to consider this approach further. It also agreed that “the Selection Committee shall present the final list of suitable candidates to the Conference for its consideration. The list shall be made public.” This same list shall classify the candidates by gender and by regional groups based on their nationality. In the case that the candidate was nominated by a Contracting Party of which he or she is not a national, the regional group to which the nominating Contracting Party belongs shall also be indicated.”
- Appointment by the Conference of the Contracting parties: after densediscussions, it was stressed that each Contracting Party should only have one vote if members of the Dispute Tribunal and the Appellate Tribunal were appointed from a single list of candidates. On whether members of the Dispute Tribunal and the Appellate Tribunal should be appointed from a single list of candidates or separate lists, it was suggested that the elections should be conducted separately with separate screening processes, especially if the qualifications for the Tribunals differed. It was also generally felt that the members of the Tribunals shall be elected by secret ballot.
- Term of office: there is a general support in the WG for a non-renewable term of nine years to ensure independence and avoid politicisation of Tribunals. It was also agreed that half of the members selected by a lot would serve for a term of six years. It was further agreed that regardless of the term, no member would be eligible for reappointment.
- Removal, resignation, vacancies and replacement: It was highlighted that the process to remove a member of a Tribunal should be initiated by the President or the Vice-President (in case it related to the President) through a recommendation to the respective Tribunal. It was further agreed that the basis of such recommendation should be a serious breach of the Protocol (which included the Code and the regulations adopted by the Conference on the conduct as well as professional and ethical obligations) or a failure to perform the duties. It was also agreed that the decision be made by a three-fourths majority of the members of the respective Tribunal excluding the member under scrutiny and that the President or the Vice-President would need to inform the Conference of any such decision before it took effect.
The WG also started in January 2025 the discussions on the Appeals Tribunal.
- Jurisdiction: it was agreed that this issue will be discussed at a later stage.
- Request for appeal, the WG agreed that a request for appeal shall be made within 120 days from the date of award or decision. It was widely felt that the time frame should begin when the award or decision was rendered.
- Chambers and the assignment of appeals: Whereas pre-established Chambers would ensure independence and efficiency, complexities were highlighted and the Secretariat was requested to revise the provision to reflect that Chambers would be constituted after a request was registered, in a manner to ensure independence, neutrality and opportunity for the members to serve (for example on a random rotation basis)
Draft Procedural and Cross-Cutting Issues Provisions
In September 2024, ASA’s Investment Arbitration Task Force, chaired by Michele Potestà and composed of Diana Akikol, Dolores Bentolila, Bernhard Berger, Anya George, Christine Kaddous, and Yoshimi Ohara, submitted written comments on several key draft provisions. These included third-party funding (TPF), reflective loss, counterclaims, damages, security for costs, evidence, and statutes of limitation. The full commentary is available on UNCITRAL’s website.
September 2024 Discussions: Controversial Provisions
During the September session, states focused on the most contentious provisions, namely Third-Party Funding (TPF), Counterclaims, and Damages. A noticeable divide emerged between capital-exporting and capital-importing countries regarding their approaches to these provisions.
- Third-Party Funding (TPF): Capital-importing countries advocated for a more restrictive regulatory framework that extends beyond the disclosure obligations outlined in the 2022 ICSID Rules. These states view enhanced regulation as necessary to address concerns over conflicts of interest and excessive litigation financing. Conversely, capital-exporting countries favored maintaining the status quo, arguing that existing rules and standards sufficiently address these concerns. Despite intense discussions, no consensus was reached, leaving the issue open for further deliberation.
- Counterclaims: Another critical area of debate revolved around counterclaims, particularly concerning domestic law claims. Capital-exporting countries, such as many Latin American and African countries, expressed support for strengthening counterclaims, arguing that investors should be held accountable under host-state laws. However, several states, including Australia, England, and Canada, opposed this approach, asserting that investment tribunals should not adjudicate domestic law claims. The chair insisted on obtaining a compromise which includes the possibility of hearing domestic law counterclaims subject to some requirements such as connectedness and a waiver of parallel proceedings.
- Damages: The discussion on damages mirrored the broader divide between capital-importing and capital-exporting countries. While the former sought to introduce reforms that would recalibrate the balance in ISDS proceedings, such as the exclusion of compound interest, excessive awards, and future cash laws, the latter preferred to maintain existing approaches in line with international law standards. As with TPF, no definitive agreement was reached.
January 2025 Discussions: Less Controversial Provisions
In contrast to the September meeting, the January 2025 session adopted a more measured approach, focusing on less contentious procedural provisions. These included: bifurcation, evidence, interim measures, and early dismissal.
The discussions on these provisions proceeded with fewer points of contention, reflecting broader consensus among states. Despite this, the Working Group made little progress in refining these procedural aspects of ISDS reform as some uncontroversial provisions were discussed in depth.