The specific procedural arrangements for dealing with disputes submitted to the MIC may be defined either in the MIC Statute itself or in a separate set of MIC procedural rules. As stated above, rules of procedure would especially aim at further substantiation of general rules, but key points or basic procedural principles should be included in the MIC Statute. Rules of procedure specifying these principles could be drafted by the Secretariat and adopted by the Plenary Body, which would also offer the option of easier modification or amendment (see para. 107).
In the following passages there is no direct consideration of the mediation process
. However, a large number of IIAs nowadays provide rules to that end,
214 such as the ICSID Convention
215 or FTAs concluded by the EU.
216 Mediation
has also been suggested in negotiations with,
inter alia, Mexico and in the context of TTIP.
217 The mediation process is an alternative to dispute settlement through court rulings as discussed herein. However, the MIC could offer the possibility of setting up a mediation center in the realm of its organisation in order to better implement this procedural aspect.
4.2.5.1 Compulsory Consultations?
With the objective of leaving
the existing investment protection agreements intact as widely as possible and complementing them “only” with an MIC that replaces the current provisions on investor-state arbitration, procedural steps specific to certain IIAs should continue to apply. Consultation obligations and time limits can be found in almost all IIAs.
218 Before initiating an arbitration procedure, the parties to the dispute (
i.e. the investor and the relevant MIC Member) should first seek to reach an amicable settlement
within a specific negotiation period.
Compulsory consultations
beyond the scope of the IIAs do not appear to be necessary, as at that stage parties are usually already past negotiations. In particular, it is unlikely that investors will bring an action against an MIC Member without due cause. Furthermore, it is certainly not necessary to insist on a consultation in cases where it is clear from the outset that no agreement will be reached; for example, if this has already been made clear by statements made by public authorities of the state concerned. On the other hand, refraining from consultations should not undermine certain explicitly determined cooling-off periods.
219
Consultations
before the MIC may be initiated either by notification of a special agreement or by filing the statement of the claim. In the broadest sense, TTIP,
220 CETA,
221 the EU-Vietnam IPA
222 and the EU-Singapore IPA
223 provide for time limits for consultations and the submission of claims. These time limits aim at ensuring legal certainty.
224 Hence, maximum consultation periods could be established, followed by the submission of a claim or termination of proceedings. However, if such periods deviated from those of the applicable IIAs, the IIA Member States would in turn have to declare their consent by ratifying the MIC Statute.
Although CETA requires the initiation of consultations, it does not provide the extent to which serious attempts of amicable settlement actually need to be undertaken by the parties. At any rate, 180 days after a request for consultations, a claim may be submitted. In fact, this requirement resembles a cooling-off period. It may be useful to provide that, upon request, this 180 day period can be waived and thus be shortened if, for example, it cannot be expected that an agreement will be reached and a further waiting period is unreasonable for the investor.
Parties should have the obligation to communicate about the conduct of consultations to the Secretariat of the MIC to facilitate due administration of time limits. In addition, a maximum time limit should be stipulated for the conduct of consultations that should be prolongable pursuant to an agreement of the applicant and the defending party.
Where IIAs do not stipulate any consultation obligations or any corresponding time limits, the MIC Statute should establish an obligation to consult as well as a time limit if both IIA parties are also MIC Members. If only the respondent is an MIC Member, the MIC should, as stated above, be offered as an additional forum, but with its own consultation obligations and time limits which can be specified in the MIC Statute.
4.2.5.2 First Instance Procedure
The General Procedure
The institution of proceedings
should in principle be effected by submission of a claim
, which is based on the claimant’s contention that an MIC Member has violated the rights of the investor either by action or omission. This contention should be contained in a written statement of claim
to be submitted in compliance with the set time limits. It could be provided that court fees be due upon submitting the claim (see para. 306 et seqq.). In the initial statement of claim, the claimant should have to demonstrate their right to bring a claim and the subject matter of the claim brought (see para. 277 et seqq.). Immediately after the submission of the claim,
225 the President of the Court should assign the claim to a chamber, which should then decide on the jurisdiction of the MIC as well as the admissibility and the merits of the claim. It should be ensured that the workload of the chambers is equally distributed (for the allocation of cases, see para. 169 et seqq.).
226
Immediately upon submission of a claim, the chamber should review
ex officio
whether the claim is inadmissible, manifestly ill-founded or if there is a manifest lack of jurisdiction. This should also be done in order to save costs for all parties concerned. In addition, it could be stipulated, if necessary, that the determination of the correct respondent shall be made within a certain time limit (see para. 293 et seqq.).
227 Moreover, it should be reviewed whether there are any procedural objections impeding further proceedings
. After this preliminary examination
, the statement of claim should be delivered to the respondent; a time limit could be set, within which the defendant shall submit a rejoinder.
Proceedings could—in a way similar to the ICJ—be separated into two phases; after a first phase in which parties exchange written submissions, a second phase could include an oral hearing, where witnesses, experts, representatives as well as interested third parties are heard. It should be provided that, in certain individual cases and after the consent of all parties to the dispute, the court may make its decision without oral hearing.
The respondent should have a certain period of time to submit their rejoinder (cf. the principle of accelerated proceedings, para. 287 et seqq.). The possibilities of surrejoinders should also be taken into account for the specific procedural design of the first phase of the proceedings. Meanwhile, the chamber could at the same time familiarise itself in depth with the claim. It could examine the Court’s jurisdiction and the admissibility of the claim; in order to reduce costs, a preliminary ruling on the jurisdiction of the MIC and the admissibility of the claim could be rendered. The competent chamber should, within the limits of its jurisdiction, deal with all the requirements necessary for a decision on the merits. Due to the comparability of the situation—a private claimant being affected by state conduct—certain elements might be designed in the style of both administrative proceedings at the national level and the action for annulment by individuals under Article 263(4) TFEU at the EU level. Subsequently, the chamber should deal with the substance of the claim and, if necessary, investigate ex officio the relevant facts (see the principle of ex officio investigation, para. 452 et seqq.). In the course of this, the chamber as such should engage in taking evidence (as to the taking and consideration of evidence, see para. 305).
In particular cases, additional interim measures of protection
could be imposed to safeguard specific rights; such a possibility is provided for in almost all national legal systems
228 as well as in international court systems
229 and is generally seen as an inherent part of comprehensive and effective legal protection.
In the following parts, the question as to which procedural principles should apply before the MIC will be addressed. Nevertheless, this aspect cannot be evaluated conclusively in this legal study. Generally accepted procedural principles of international judiciary do not exist. Arbitral tribunals occasionally resort to procedural rules of the national lex arbitri
applicable at the seat of the tribunal. However, this cannot be an option for an international court. Instead, statutes and rules of international courts provide for independent procedural requirements—even if sometimes only in a fragmentary way. The application of certain procedural principles can however be justified for the purposes of an MIC, as set out below, such as the principle of fair trial, the principle of independence and impartiality of judges, or generally accepted principles as to the burden of proof etc.
Proceedings Upon Application, Submission of a Claim and the Statement of Claim
In principle, the initiation of proceedings
should only be possible upon application. The MIC should not be able to initiate proceedings
ex officio. Otherwise, the MIC would enjoy the capacity to continuously exert a control function
vis-à-vis its members, which would not be compatible with the aim of the claims, namely to receive compensation.
230
The claimant should be required to clearly identify the alleged violations of substantive standards and establish the reasons for the violation. The statement of claim
should therefore identify the specific measures at issue and give a summary of the basic legal arguments brought forward by the claimant in his submission. The statement of claim should at least demonstrate the alleged violation of rights and contain a description of all the relevant facts. The latter should enable the chamber to infer the claimant’s right to bring a claim from the description. In this way, the statement of claim should define the subject matter of the claim brought. In WTO Law, the Panel is bound to adjudicate on grounds stated in the claimant’s request.
231 However, in the MIC’s procedural rules, later submission of additional reasons should be admissible at least until the oral hearing
for reasons of effectiveness and efficiency of the remedy, since new claims would be submitted otherwise. In addition, the general principle of
ex officio investigation
needs to be taken into account (see para. 452 et seqq.), which is opposed to an exceedingly narrow confinement to the initially brought subject matter of the claim.
For reasons of transparency (see para. 432 et seqq.) and legal certainty, the claim should be submitted in writing. It should be possible to submit the claim through the Secretariat. Further clarification will be necessary as to whether submissions in electronic form by e-mail could meet the requirements of the written form and, if so, which specific requirements the submission shall meet (such as electronic signature, required file formats etc.).
For reasons of transparency
, basic information regarding claims submitted before the MIC should be published on a website—in a way similar to the WTO Dispute Settlement Procedure and ICSID Arbitration, where this has been practised since about 2006.
232 In particular, the subject matter of the claim should be provided.
Allocation of a Claim to a Chamber
After submission of the claim
(see, for example, the time limits for bringing proceedings, para. 287 et seqq.), the President of the Court should assign the claim to a chamber
(see para. 169) for a decision, in case chambers have been set up. Otherwise, the President of the Court shall make an allocation to the judges designated in accordance with a predetermined allocation procedure/scheme
or by drawing lots (see para. 170).
233
The decision as to which judge or chamber should decide a specific case should not fall within the competence of the Plenary Organ, as this would undermine the right of access to court, which is part of the internationally recognised principle of the rule of law. At the same time, this ensures that the respondent MIC Member cannot prevent or delay the allocation of a case to a certain judge or chamber by exerting its influence in the Plenary Body and cannot in any other way interfere with the constitution of a chamber.
Insofar as the court is equipped with the necessary capacity, claims should not be allocated to single judges, since full-time judges should be remunerated from the budget of the MIC. This could be seen differently if varying court fees were charged depending on whether a single judge, a chamber or even a grand chamber deals with a claim.
Examination of Jurisdiction, Inadmissibility or Manifest Ill-Foundedness
The MIC should be able
to decide on its own jurisdiction.
234 The chamber to which a claim has been allocated should examine as promptly as possible—for this purpose, a time limit may be set—whether:
(1)
The MIC has jurisdiction;
(2)
the claim submitted is inadmissible; or
(3)
the claim submitted is manifestly ill-founded.
The judges competent in a specific case should be obliged to review the claim immediately upon receipt of the statement of claim for possible abuse. In the event of inadmissibility or manifest substantive ill-foundedness, the claim should be immediately dismissed (a limine dismissal). Inadmissibility should generally be presumed if the application is evidently inadmissible, i.e. if the inadmissibility is evident from the documents underlying the proceedings to an unbiased observer who is aware of the relevant circumstances without a detailed evaluation of the essential merits of the case. A manifest ill-foundedness should only be presumed in cases where the claimant’s submission does not show any connection with acts committed by the respondent or is limited to frivolous contentions.
However, the dismissal of a claim as inadmissible or manifestly ill-founded should, from the point of view of providing an effective remedy, be subject to a possibility of appeal.
Time Limits for the Submission of a Claim
Provided that compulsory consultations are required under the applicable IIA, maximum time limits should be set for submitting the claim after the consultations have been terminated. Insofar as regulations in this regard are provided for in the IIA on which the dispute is based, these provisions should be taken into account.
Such time limits may also be established in the MIC Statute if both states are party to an IIA and are Members of the MIC. These time limits would amend the respective IIA. If only the respondent state is an MIC Member, the MIC then only constitutes an additional dispute resolution forum, whose use may be made subject to separate conditions.
In order to ensure legal certainty, submitting a claim should only be possible within 1 year from termination of a national procedure against state acts violating the claimant’s rights. If no national proceedings have been carried out, submitting a claim should only be possible within 1 year from the time when a claimant first had knowledge of the state acts violating their rights. Generally, all claims should be barred after 10 years from the time the respective act of the state was carried out, regardless of the claimant’s knowledge of the state’s acts.
Respondent
Generally, the claim should be directed against a Member of the MIC. Only parties to the MIC Statute would have recognised the MIC’s jurisdiction by ratifying the Statute or by having declared submission to the jurisdiction of the MIC. The claim should in principle be directed against the MIC Members as such and not against federal subunits. Here, a comparison to infringement proceedings in the realm of EU Law can be helpful. These claims are also directed against the nation states as such and not against single federal states, regions or municipalities which are more closely related to the individual cases in question.
However, this can be different for international organisations with autonomous legislative powers, i.e. in the case of the EU and its Member States.
Generally, investors should not appear as respondents before the MIC (with a possible exception in the context of counterclaims against investors). First, they have not given their consent to a decision by the MIC. Second, there is no such need because host states, by virtue of their territorial sovereignty, can use executive and legislative powers to put pressure on investors or can bring action against them in domestic courts.
Determination of the Appropriate Respondent When International Organisations Enjoying Autonomous Legislative Powers and Their Member States Are Concerned
Specific provisions
should be foreseen regarding the determination of the appropriate respondent, in particular in the case of parallel MIC membership of members of an organisation and an international organisation itself. For instance, the EU as well as all its 28 Member States are members of the WTO.
235 Yet there are neither any concrete rules in primary WTO law nor in secondary procedural law addressing the question as to whether dispute settlement proceedings are to be initiated against the EU, its Member States or both. Hence, third countries have a free choice in such cases.
236
Within the framework of the MIC, there are various alternatives for dealing with such “parallel memberships
” in disputes before the MIC:
-
first, as in the case of the WTO, the question of the appropriate respondent might not at all be addressed, leaving the applicant with a free choice;
-
second, at the primary level, i.e. in the MIC Statute itself, a specific provision could be made;
-
third, a provision could be included in the procedural rules which substantiate the MIC Statute.
A specific provision governing this issue is recommended for ensuring legal clarity. Investors should be able to foresee against whom they are supposed to submit their claims, whether it is an “economic superpower” or a single state. It is unacceptable for a claimant from a third state to be forced to examine and decide whether a national measure has its origin in the law of the supranational organisation or it is autonomous and strictly limited to the realm of national law. At the international level, the “bilateral” CETA
237 provides a specific rule governing this question, as do the EU-Vietnam IPA
238 and the EU-Singapore IPA.
239
However, one could argue against stipulating such a rule at the international level because clauses in multilateral treaties can only be changed with great difficulty or at least after lengthy negotiations, in case they turn out to be impracticable at the end of the day. Providing for such a rule in a quasi-bilateral treaty between the EU (as well as its Member States—which in this respect could be obliged to “speak with one voice”) and a third state, such as Canada or Vietnam, seems less problematic than providing for such a regulation in a multilateral treaty with considerably more members. In order to address problems resulting from the distribution of competences, the (at the time) EC had issued a supplementary declaration
240 with respect to the determination of the appropriate respondent in the context of dispute settlement under Article 26 of the ECT.
241 Thus, secondary legislation substantiating the MIC’s Statute in terms of procedural law (see para. 75) or the submission of a supplementary declaration in this regard, as in the case of the ECT, appears preferable.
Secondary legislation determining the appropriate respondent
should specifically make provision for the question as to whether it is up to the international organisation (as stipulated under the EU-Vietnam IPA, the EU-Singapore IPA and CETA) or up to the affected state (as stipulated under the EU Financial Responsibility Regulation)
242 to identify the appropriate respondent or whether a corresponding declaration should be issued by the EU within a short period of time. Both sets of rules have in common that it is an internal decision-making process. Otherwise, the EU should in principle be the appropriate respondent.
Due to its financial strength and technical expertise—as compared to small member states—there is reason to support the idea that in general an international organisation that is an MIC Member, for example the EU, should be considered the appropriate respondent. Moreover, if necessary, an additional short time limit should be provided in which the international organisation and the Member State concerned can jointly formulate a declaration that a Member State is to be considered as respondent. A provision could be included in primary law that supranational organisations may determine such a rule and notify it to the MIC. If the MIC Statute presumes a supranational organisation to be the respondent, unless otherwise notified, it would also be possible to provide for recourse against a Member State in cases where the international or supranational organisation is ordered to pay damages, even though the measure at issue is in fact attributable to one of the Member States of the organisation.
243
Right to Bring a Claim and Subject Matter of a Claim
The claimant
investor should have to demonstrate that their rights have been violated by state acts or at least by acts attributable to the state.
244 In this respect, it will be necessary to clarify which rights the investor can invoke before the MIC, in particular whether these rights, such as protection standards defined in the IIAs, should exclusively concern rights resulting from IIAs.
The respective IIA and not the MIC Statute should state if, in addition to the protection standards, the violation of market access commitments by the state can be invoked before the MIC. This depends on the scope of protection of the specific IIAs, which in principle should remain in force.
The question as to whether agreements signed but not ratified can give rise to actionable investor rights before the MIC and if the infringement of such rights will then be individually actionable by an investor should be answered by recourse to the IIA underlying the dispute (cf. the issue of provisional application in, for example, Article 45 ECT).
It also needs to be decided whether only possible violations of protection standards stipulated in IIAs, which the home state of the investor has concluded with the respondent MIC Member, can constitute the substance of a claim, or whether the investor should be entitled to rights granted by investor-state contracts as well. Investors should only be able to invoke contractual rights that result from investor-state contracts if this has been explicitly agreed on between the respondent and the investor (see the question of applicable law, para. 366 et seqq.).
The possibility of invoking a breach of national law
could lead to great legal uncertainty, in particular with regard to the extent of the claims to be expected. In addition, these are subject matters and infringements that typically have to be brought before national courts. From a EU Law point of view, this would also interfere with the powers of the CJEU and would therefore be difficult to reconcile with EU Law. Therefore, as in CETA, this possibility should be explicitly ruled out.
245
Right To Be Heard Before the Court
The right to be heard
should be guaranteed.
246 The statement of claim should be delivered to parties through the MIC to ensure that due notice of it is taken, as well as the exchange of all other documents. In any case, it should be ensured that parties have the possibility of submitting a rejoinder, a legal opinion etc. The judgment should be based only on facts and evidence the parties are able to comment on. It follows that, for example, the hearing should be reopened
ex officio if a breach of the right to be heard is apparent. Although time limits may be short, they should be chosen carefully to prevent any undue limitation to the right to be heard.
Oral Proceedings and “Free” Consideration of Evidence
Unless otherwise requested
by the parties—due to business secrets of the investor or security interests of the respondent—the MIC should render its decision only after holding an oral hearing. The oral hearing should be public, as provided for in CETA,
247 the EU-Vietnam IPA,
248 the EU-Singapore IPA
249 or the UNCITRAL Transparency Rules
.
250 The principle of holding oral hearings corresponds with the demand for more transparency
251 and is reflected in the more recent transparency requirements of international treaties (see para. 432 et seqq.). The details of the course of oral proceedings should be specified in procedural rules. At the same time, the protection of business secrets of the claimant should be ensured.
Court Fees
It needs to be determined
whether the claimant should pay MIC fees. For example, proceedings before the German Federal Constitutional Court are generally free of court fees.
252 However, an abuse fee may be imposed. Also, for individual complaints before the ECtHR, no procedural fees are charged. The same applies to proceedings before the Courts of the EU.
253 At a national level, however, parties are usually liable to pay the costs of proceedings, as for instance in Germany (with the exception of the Federal Constitutional Court) and Austria.
However, the prescription of court fees would prevent a scenario in which the MIC Members would have to bear all the general costs, especially if some states will probably never appear as respondents before the Court due to a high level of compliance with international investment law. Nevertheless, the court also provides legal remedy to all investors who can be attributed to an MIC Member. In addition, for reasons of higher political acceptance, it should be considered that those investors who use the system should participate in its basic costs by paying court fees. If investors succeed in proceedings before the MIC, they should be reimbursed their expenses (see para. 319 et seqq.).
For reasons of legal certainty and predictability of the proceedings, costs and fees
should be set out in the MIC Statute itself or in the procedural rules substantiating the Statute. However, court fees should not reach a level that would make access to the Court more difficult.
254 For reasons of equity, costs should be reduced on request in particular for SMEs.
The court fees for MIC claims should first be due when the court receives the statement of claim. However, the question which party ultimately has to bear the costs should depend mostly on the outcome of the proceedings (see para. 319 et seqq.).
If fees were to be charged upon receipt of the claim, the Secretariat could, without consulting the parties, provisionally determine the amount in dispute and, based on this provisional determination, calculate the corresponding fees. The final determination could be made in conjunction with the final decision on the distribution of costs as soon as a decision is rendered on the merits or when the procedure ends for another reason.
A framework for the court fees should be established. The amount of fees could be determined according to the economic importance of the case as well as the personnel and material expenditures. A chart of fees could be set up, which could provide that, starting at a certain minimum, the fees could be increased up to a certain maximum. The maximum would have to rank at a level that would ensure that all the costs caused by the procedure before the MIC are covered.
The ICSID administrative costs are charged as an annual lump sum. However, in ICSID proceedings, the administrative costs are charged in addition to the arbitrator costs. Since the MIC incurs fees
for judges in addition to the administrative costs of the Secretariat, the system of annual lump sums would be of only limited benefit. Some inspiration could be drawn from the SCC Rules where arbitrator costs are calculated based not on daily rates but on the amount in dispute (in the same way as other administrative costs).
255 Based on that amount, the court could then, depending on the actual expenditure, increase or reduce the fees.
It would therefore make sense to favour a cost-oriented approach as, for example, in the German court fee system. Fees should not significantly exceed the court’s actual expenses. If, for example, in a matter of considerable economic significance, i.e. when a particularly large amount in dispute is at stake, a decision may be drafted with comparably little effort, the preliminary determination of the fees by the Secretariat, which is based only on the presumed amount in dispute, should be reduced in the final decision on costs taken by the court.
Another decisive factor for a reduction of fees could also be whether the applicant applied for a decision by a single judge.
If the MIC is used by claimants from non-MIC Members or if the respondent is a non-Member—assuming this would be permitted under the MIC Statute—then an increased court fee should be provided for, as the funding of the MIC’s basic costs would at least not be fully covered by the parties to the proceedings or their home states.
Rules on Cost Allocation Schemes, Legal Funding and Legal Aid
Rules on cost allocation are a manifestation of the rule of law principle and are therefore directly linked to the right of access to court. The allocation of the parties’ costs incurred in the proceedings as well as in the process of arranging legal funding (or Third-Party Funding) should be laid down in the MIC Statute and further elaborated in the substantiating procedural rules.
The cost allocation rules only affect the costs claimed by each party. General costs for financing the MIC cannot be allocated to the parties of the dispute (see para. 604 et seqq.). Insofar as general court costs in the sense of court fees (depending on the amount in dispute) are included in the Statute, these should also be part of the cost allocation and thus the cost decision of the MIC.
Due to the general freedom of investment tribunals in deciding on the costs of the procedure, the practice of cost allocation in the past has been inconsistent.
Originally, most cost decisions in investment arbitration followed the principle that each party generally had to bear its own costs and the costs of the tribunal were shared
256; only in some cases, the costs were divided according to the criteria of good or bad procedural practice by the parties of the dispute. Only recently, there have been numerous cost decisions following the principles of “costs follow the event” or “loser pays”, according to which the losing party of the proceedings has to bear all costs.
257 A common practice has emerged according to which procedural “bad faith” of the litigants is sanctioned in the cost decision. In most cases, such procedural actions are either unsubstantiated, malicious, unduly delaying the proceedings or otherwise abusive.
258
However, too rigid rules with regard to the decision on costs should be avoided. It should rather remain largely at the discretion of the MIC. Nevertheless, the “loser pays” principle should generally be considered relevant
259 in order to reduce abusive submissions. According to this principle, only the necessary or reasonable costs of the other side should be borne by the loser. It would also make sense to establish a catalogue of criteria that sets out exceptions to this principle, addressing for instance the question as to whether SMEs can be ordered to pay the entirety of costs when being subject to cost allocation.
As far as the costs are concerned, it is still to be determined whether legal funding
shall be permissible, and if so, to what extent it must be disclosed to the court.
260 Legal funding by third parties could also enable less financially strong investors to enforce their rights by submitting a claim
261 and could support the establishment of a certain “equality of arms
” in the proceedings.
262 Additionally, the claim is presumably not ‘meaningless’ or ‘futile’ if it is financed by legal funding.
263 As a counterargument, this can however lead to judges being “biased”, as they are aware that a positive preliminary examination of the claims has already been carried out.
264 In addition, in the past, the possibility of conflicts of interest regarding arbitrators has been an increasingly discussed topic. Arbitrators may have acted as counsel in other proceedings where they might have been paid by litigation funders
.
265 The latter argument, however, does not apply to full-time judges. Since there can be no conflicts of interest regarding judges in this respect, little opposes the permissibility of legal funding. For this very reason, it should also be considered that the parties’ corresponding disclosure obligations in the case of the use of legal aid should be waived.
With regard to SMEs
in particular, who may have difficulties in enforcing their rights due to a lack of financial resources, the idea of setting up a legal aid scheme seems worth considering.
266 The CJEU has in the CETA-Opinion 1/17 dealt with the requirement of accessibility from the point of view of financial risks.
267 International dispute resolution institutions, such as the PCA, the WTO or the ICJ provide for financial support
from funds to which both states and natural and legal persons can contribute voluntarily.
268
In the case of the ITLOS, developing countries acting as parties to the dispute before the Tribunal may also apply for financial assistance to cover their legal fees or the travel and accommodation costs of their delegations incurred during oral hearing held in Hamburg. This assistance is available through a voluntary trust fund set up by the UN General Assembly and maintained by the United Nations Division for Ocean Affairs and the Law of the Sea (DOALOS).
Non-appearance Before the MIC and Default Judgments
If a party does not appear in court
, a default judgment should be allowed, as provided for in various procedural rules.
269 This has been widely practiced in arbitration, for example in the Libya cases.
270
In principle, the non-appearance of a party should not result in the termination of the proceedings, but the party appearing—normally the claimant—should be allowed to ask the court to rule in accordance with its claim. In this case, the court should examine whether the claim is admissible, as well as factually and legally well-founded. It should also be taken into account that the principle of ex officio investigations should apply.
Intervention and Hearings of Interested Third Parties
In other international proceedings
, it is sometimes possible that third parties may join a dispute if their legal interests are affected by the proceedings.
271 This possibility was also included in the EU’s TTIP
272 proposal for the ICS. The previously, widely recognised principle of an effect of ISDS procedures exclusively
inter partes is currently undergoing a change.
A provision should also be made in the MIC Statute or in its procedural rules that an MIC Member who demonstrates a legal interest in a pending dispute can be admitted by the MIC as an intervening third party. This would be particularly relevant when it comes to the interpretation of an agreement to which the MIC Member is also a party. If necessary, a third-party intervention could even be permissible in cases where MIC membership is not (yet) available. The provision of the EU proposal for the TTIP Investment Protection Chapter goes even further, as any natural or legal person able to show an interest in the procedure is allowed to intervene.
273
In the event that a possibility of intervention is provided, it should also be taken into account in connection with the cost allocation rules. An intervening third-party who participates in the proceedings before the MIC should—due to the adversarial character of the procedure—be judged according to the principles governing the proceedings. Generally, interested private third parties wishing to participate in the procedure should not be reimbursed. This may be different in the case of states intervening as third parties. In such circumstances, it could be provided that in exceptional cases a reimbursement of expenses is left to the discretion of the MIC.
Experts
Chambers should be able to consult experts
to clarify special questions. Questions in the fields of environmental protection, specific technology, health etc. should be answered in writing or in the course of oral hearings.
274
Withdrawal of a Claim
In addition to the principle of investigation
, one will often find the so-called principle of “free disposition” by the parties in international courts. The claimant can therefore withdraw their application/claim in almost all legal proceedings. Given that the initiation of proceedings before the MIC should only be possible upon application (see para. 277 et seqq.), the disputing parties should also be able to dispose of the subject matter of the claim in full. It should therefore also be up to the claimant before the MIC to withdraw their claim, although—if appropriate—the Court should be able to issue a decision on the costs.
275
Statement of Reasons and Minority Opinions
The chamber
should in principle decide in the form of a judgment after holding oral hearings
. Judgments must be fully reasoned in order to ensure the rule of law and increase confidence in the judgments.
276
It should be determined whether dissenting or separate concurring opinions
of certain judges can be attached to the decision (for example, ICJ judgments provide this possibility).
277 This possibility can serve the judicial independence and transparency of the decision.
278 Therefore, dissenting or separate concurring opinions should also be possible under the procedural rules of the MIC. In particular, dissenting opinions underline that a court has dealt extensively with the case. By virtue of additional reasoning, the quality of the judgments
increase. The general confidence in judgments could increase, especially if the disclosure of counterarguments can promote further development of the law. In addition, dissenting or separate concurring opinions can also be seen as evidence of the impartiality and independence of judges. Providing for dissenting or separate concurring opinions would altogether support the possible positive effects of the establishment of an MIC.
Interim Measures and the Protection of the Claimant’s Rights
As is usually the case
before national
and other international courts, as well as before ICSID arbitral tribunals,
279 provision should be made for preliminary protection of the claimant’s rights. During ongoing proceedings before the MIC, the parties should comply with any interim measures
so that the final decision on the merits is not deprived of its purpose and effect—for example if serious irreparable damage has already occurred and the payment of compensation would not make sense. It is questionable whether interim measures can also lead to a duty of omission of a state. The final decision should always only require states to pay compensation and not to refrain from specific measures.
280 Thus, interim measures of omission cannot aim at general political regulations,
281 but they can oblige a state to provisional omission of coercive measures and criminal prosecution.
282
Interim measures should contribute to the taking of evidence
for the proceedings.
Counterclaims
Counterclaims
are currently being discussed extensively in investment protection law. It has to be decided whether the possibility of counterclaims should be provided for at the MIC or whether, on the contrary, that possibility should be explicitly excluded. In practice, the claimant’s behaviour is taken into account in the context of counterclaims.
283 However, counterclaims
are explicitly excluded under CETA in certain cases.
284 Counterclaims should, if at all, only be allowed to a limited extent. Although they would facilitate a comprehensive consideration of the facts, they would require full consideration of questions of national law, because counterclaims could often be reviewed under national private or administrative law, which should not form part of the law to be applied by the MIC. In individual cases, an MIC Member submitting a counterclaim could expressly allow the MIC to treat national issues as well. It would also be possible to add a final, enforceable and undisputed counterclaim to the calculation when it comes to assessing the amount of compensation so that the court only decides on the difference. However, this possibility would have to be examined in more detail, since it must be made sure that abusive judgments are not used to eliminate legitimate claims at MIC
level.
Mass Action
Another highly discussed topic
is the admissibility of mass and class actions, which according to recent practice is partly affirmed, when it is not excluded in IIAs.
285 However, it is argued that the reform of investment arbitration must be designed in such a way that German and continental European legal traditions are taken into account and that class actions should therefore be explicitly ruled out.
286 However, this thinking ignores the fact that mass or class actions could also serve to protect shareholders and smaller companies, who otherwise may not be able to go through independent investment protection proceedings. Therefore, consideration should be given to the possibility of providing for collective proceedings in the MIC Statute at least in clearly defined cases, such as for individual claimants, shareholders and SMEs.
Finality and Legal Effects of Judgments
The MIC judgments
should—for giving effect to the principle of celerity (see para. 343 et seqq.)—become final if they are not appealed within a short period of time.
Decisions of international courts in general have effect only between the parties involved in the proceedings (
inter partes).
287 Since the MIC should only be able to award individual compensation,
288 the principle of
inter partes effect
should also be expressly provided in the MIC Statute.
Legal Representation Before the Court
It is questionable whether a strict statutory requirement of representation by counsel should be provided. MIC Members should rather have the possibility of being represented by government representatives, civil servants or lawyers. Due to the possibly very high costs incurred throughout the proceedings (both because of the risk of a claim of being qualified as abusive and a possible “loser pays” principle) claimants will in general prefer to rely on qualified representation during proceedings. Hence, corresponding regulations do not appear to be necessary.
4.2.5.3 Second Instance Procedure/Appeal
So far, appeals mechanisms
against decisions of international courts are rare. For instance, appeals are possible against decisions of the General Court of the European Union (GC) before the CJEU.
289
Under investment law, an appeal option has been considered in various treaties since 2002, notably in agreements with the US,
290 and subsequently in agreements with Canada,
291 Australia,
292 South Korea and China,
293 as well as in the CPTPP.
294 Thus, a larger number of states have already indicated that they consider the introduction of an appeal mechanism to be favourable or at least conceivable. Also, within the framework of ICSID, such an amendment has already been discussed extensively,
295 however without any precise results.
296 There have also been discussions within the framework of the OECD Investment Committee regarding this issue.
297 Most recently, the option of a second instance had been introduced into treaty practice by the EU with CETA,
298 the EU-Vietnam IPA
299 and the EU-Singapore IPA.
300 Due to a proposal by the Commission as to the TTIP Investment Protection Chapter
301 as well as the Investment Protection Chapter in the EU-Mexico Agreement (under negotiation),
302 the issue of a second instance is now being discussed in connection with further agreements.
303 The Commission’s Impact Assessment regarding a multilateral reform of investment dispute resolution also mentions that there should be a possibility of appeal in the context of a multilateral investment court.
304
The following parts demonstrate how a second instance could be designed as part of a possible MIC. It seems reasonable to gear the design of the MIC particularly towards that of the CETA Investment Protection Chapter.
The General Procedure of Appeals
The second instance procedure
begins at the time of the filing of the appeal by the parties involved in the first instance procedure, i.e. the claimant investor or the respondent state. The possibility of lodging an appeal would therefore be open only to the parties of the first instance.
If an appeal is filed against a judgment, the legal effect of the latter should be suspended. Securities could be required from the appellant.
305 In the event that a fund system was provided for (see para. 538 et seqq.), it would not be necessary to furnish security to the extent that it could be covered by the fund. If the claimant investor files an appeal, it should provide a security up to the amount of costs allocated to it in the first instance judgment.
It needs to be clarified whether intervening third parties should also be entitled to lodge an appeal. The DSU expressly excludes this possibility for the WTO Dispute Settlement Procedure.
306 However, similar to the WTO Appellate Body procedures, at least the right to make a statement should be granted to intervening third parties.
307
As is the case with CETA, the competence to review a decision in a second instance should, in principle, only exist in respect of first instance judgments, which should already have been ruled on. An exception to this rule could only consist in cases where the impartiality of individual first instance judges is questioned (see para. 159).
Furthermore, appeals against first instance decisions should only be possible within narrow time limits. If appeals are not filed within this period, the judgments of first instance become final. For example, the TTIP stipulates a time limit of 90 days.
308 The WTO DSU sets a time limit of 60 days for lodging appeals.
309 A shorter time limit of only 1 month (30 days) would be another viable option. Should the claimant decide to appeal, it should be afforded an additional period of 1 month within which it should submit the grounds for their appeal.
310 Of course, this could lead to the lodging of appeals as a mere precautionary measure. Such appeals might later be withdrawn when the reasons of the appeal are drafted and a detailed analysis of the first instance judgment takes place. Therefore, a court fee—as long as fees are generally provided for—should be stipulated for the mere filing of the appeal. A time limit of 60–90 days seems reasonable for filing an appeal.
The grounds of the appeal should indicate both the scope of the appeal and the arguments why the appellant claims an infringement of rights and on which grounds they base their legal opinion.
In the second instance, too, decisions should be rendered by judgment.
The appellate instance
should be able to confirm, amend or annul the judgments of the first instance.
311 In addition, the second instance could be equipped with the power of “referring issues back to the Tribunal for adjustment of the award,”
312 while the first instance Court would have the obligation to reach a new decision in consideration of the legal opinion of the appellate instance. The introduction of this possibility of referring cases in CETA was presumably motivated by the fact that it allowed decisions to qualify as awards under the ICSID Convention so that it can be enforced pursuant to the ICSID Convention. However, the power to refer cases to lower courts could raise concerns because of the possible consequence of delays to proceedings. As in the WTO DSU procedure, the appellate instance should therefore make the final decision and not refer the case to the court of first instance.
313
In addition, referring cases back to the first instance would not be necessary if the second instance had its own extensive investigatory powers
.
314
The procedural principles of the first instance—the principle of investigation (see above at para. 274), celerity (see above at para. 337) and oral hearing (see above at para. 305), as well as the principle of transparency (see above at para. 279, 280, 305, 332)—should apply analogously to the second instance. The second instance procedure could be similar to the first instance procedure and should be divided into a written and an oral procedure. Facts and evidence already submitted in the first instance should generally be taken into account. Insofar as decisive declarations and evidence have not been put forward in the first instance in spite of demand and time limits, these should generally be precluded during the appeal procedure or be admitted only under strict conditions.
It should be possible, as is the case of the claim in the first instance, to withdraw the appeal at any time. However, a decision on costs should be possible in this case, if necessary, at the request of the respondent of the appeal. The withdrawal of the appeal should give legal force to the judgment of the first instance and, at the same time, result in the loss of the possibility of a new appeal.
Duration of Proceedings
For example, in the EU-Vietnam
IPA
315 or in the WTO DSU,
316 maximum duration of proceedings
is stated for the second instance according to the first instance rules. Depending on whether at the level of the second instance only a review of the legal assessment
or also an assessment of the facts
should be carried out, the appropriate length of proceedings needs to be measured. The TTIP proposal, as well as the EU-Vietnam IPA establish a length of proceedings of up to 180 days, but in no case proceedings before the appellate instance should take more than 270 days.
317 The WTO Dispute Settlement Procedure generally states a time limit of 60 days for the review of appeals, which in no case should take more than 90 days.
318 As in the first instance procedure, the principle of celerity of proceedings should apply; the consequences arising out of this principle should apply as well. Full-time judges should be able to render a decision within a maximum of 2 months in cases where the facts are mostly clear. In individual cases, however, the respective chamber must be free to extend the duration of the proceedings for an important reason.
If there are repeated procedural extensions due to an overload of the appeal mechanism, this is an indication for the Plenary Body to increase the number of judges in the second instance.
Scope of Review and Investigative Competence
In the WTO Dispute
Settlement Procedure, the competence of the Appellate Body is limited to the legal issues dealt with in the panel report and the corresponding interpretation of the law by the Panel.
319 Primarily, the purpose of the appeal procedure is objective legal control. However, particularly serious errors can lead to reversal of a panel report.
320 The ICSID proposals of 2004 provide that an appeal could be brought against decisions based on the grounds listed in Article 52 ICSID Convention, but also because of a “clear error of law” or a “serious error of fact”.
321 Similarly, in CETA, in addition to the grounds set out in Article 52 of the ICSID Convention,
322 an appeal is also possible due to “errors in the application or interpretation of the applicable law”, due to “manifest errors in the appreciation of the facts, including the appreciation of the relevant domestic law.”
323 It is criticised that two different concepts—annulment and appeal—would be mixed together.
324 However, it is not clear why an appellate instance should not have the jurisdiction to deal with annulment as well as with appeal. In particular, if there is no provision for the remanding of a case back to the first instance, the review and corresponding decision-making jurisdiction of the second instance should be widely used.
The applicable law
in litigation at first instance must also include procedural law,
i.e. there must be a possibility of reviewing compliance with the procedural principles. This is already required under rule of law principles.
325 The question as to whether the investigation of the facts/fact-finding was carried out correctly by the first instance can also be regarded as a legal question, namely whether an “objective assessment of the facts” has been carried out.
326 In addition, according to the drafts previously available, a review of “serious errors of fact” should also be expressly made.
327
Generally, it would be necessary to clarify whether a reference to Article 52 ICSID Convention should be made—and thus the interpretation of this provision by ICSID Arbitral Tribunals should be given greater consideration—or whether the grounds for annulment listed in Article 52 ICSID Convention should be included in the MIC Statute, thus allowing for a full independent interpretation by the MIC. In view of the creation of an independent new institution and the avoidance of conflicts of interpretation or problems of delimitation with other institutions, we believe that the latter should be preferred as far as is practicable (see para. 556 et seqq.).
Chamber or Plenary Decisions In This Sense, Alvarado Garzón (2019), p. 491.
The ICSID proposal
for the establishment of an appellate instance provided for an Appeals Panel of 15 judges of different nationalities.
328 The WTO Appellate Body, however, has only seven members three of whom shall serve on any one case.
329 This relatively low number of Appellate Body members has so far had no negative impact on the acceptance of the WTO DSU System. Based on this, it is also determined in CETA that decisions should be made in the second instance in panels of three appellate body members.
330
At the level of the second instance of the MIC, it should be possible to have a decision by chambers or by the plenary of judges. Plenary decisions would have even greater significance and would prevent substantively divergent decisions between different chambers. However, if it is assumed that an MIC is successfully established and accepted, a high utilisation of the MIC with its appellate instance could argue against the possibility of a plenary decision. It should therefore be applied very restrictively. Chambers should thus decide unless a plenary decision is requested by one of the parties in dispute “for important reasons”, such as divergences in the decisions.
When the MIC is established, there should be enough judges to allow for decisions in larger adjudicating bodies, which might lead to higher acceptance of judgments. If chambers are introduced, a requirement to exchange arguments between all judges of the appellate instance might also be stipulated, as is the case with the WTO
Appellate Body.
331
Second Instance Judgments As Precedent?
As is usually the case with international courts, a formal precedent of judgments in the sense of a case law system should not be provided for. From the principles of predictability and legal certainty, a de facto precedent should only be adopted for the interpretation of specific provisions of the agreement on which a specific decision has been taken. Irrespective of this, however, through a permanent staffing of the chambers and, if necessary, an obligation to consult fundamental questions between all judges of the second instance, constant lines of authority would still develop.