Issues in International Commercial Arbitration

right well uh i am jack coe i'm the faculty director of the international commercial arbitration concentration in the llm program and one of the reasons i like working at the strauss institute is that through its programs and other activities and just the culture that has developed here we attract international personalities of great distinction and when that happens we often try to engage them in conversation and whenever possible preserve that conversation today we're very fortunate to have with us ana jubin bretz whose name may already be familiar to you at present she has a boutique practice in paris i guess i could call it a boutique practice specializing in counseling states with respect to dispute prevention dispute settlements treaty policies and all matters related to that by way of education anna did her initial studies at lyon where she did a law degree and an international relations degree followed by advanced studies in law at the sarbonne most americans will have heard of that famous institution wait strauss came to know of ana first when she was at unctad which is let's see if i can recall this i'm so used to using the acronym it's the u.n conference right on trade and development which most of us get in the habit of calling uncted where she was in charge of important advisory work with states not surprisingly in connection with their investment disputes investment policies frameworks associated with managing all of those including capacity building and i think we first might have met at an american society of international law conference ever so briefly and you were telling me about some work you were interested in uh talking more about um indeed and followed then by we spent some time at a conference in kiev and some other things and i of course reported back to the colleagues here about some the interesting work you were doing and during her time at untad uh not only did she consult with governments from virtually every corner of the world she was responsible for what today remained on my bookshelf some of the best resources i have a series of booklets and briefing papers various kinds on investor state disputes treaty practice and trends with respect to treaties investment trees in particular and they're so wonderfully written that a you can carry them on a plane and learn a lot in the course of a short trip they're very accessibly written in that you don't have to have a lot of background to benefit from reading them and i i recommend them to my students whenever possible and in terms of accessibility one can also get them at the website very easily so it's not as if you and unchad were trying to turn it into a revenue stream and so i continue to to alert my students to that and they consult those with the great advantage more recently anna was one of the principal architects of the very new freshly minted rules for investor state mediation and i i underscore mediation because the field tends to be associated with arbitration uh we're going to return to this point uh i hope in a few minutes uh i should mention briefly that between the u.n that you did for several years and you're now your boutique practice she was also a partner at the major firm of foley hoag i think i'm saying the second name right at their paris office so she has definitely experienced a wide variety of of careers and many careers within a career but since both of us have this interest in investor state disputes and both of us have been in those laboring in those vineyards let me just just ask what what do you think justifies calling that sort of a specialization in other words why is it that i'm entitled to teach a special course on investor state disputes as distinct from for example international commercial arbitration well that's a very good question jack and thanks so much uh to for first of all for allowing me to to be here and to share this conversation with you i'm i'm extremely happy and honored to be a strauss institute guest because that's uh one of the world's hubs of dispute resolution so again thanks very much and also for the opportunity of of of this chat it's i'm also interested by your question because i think all of us being lawyers we all think that the field of law we're working on is so special and so interesting and that everybody know ought to know about it well i think there are a couple of things that make investors they dispute settlements so special and i think it's it has first to do with the parties uh we're dealing with states we're dealing with sovereign states here so we're not dealing with a usual b2b relationship or b2b dispute which you know lots of businesses are used to settle their disputes through arbitration states are not states are generally uh you know immune from this kind of disputes uh number one and second um when disputes happen they happen among peers so among states so um i think here that's really what makes this uh area of of dispute resolution if you want on the one hand and this area of international law so specific is that you have an international animal which is the state and you have this inherently private animal which is the investor and you're putting them together and trying to find a framework within within which both can settle their disputes first of all both can establish contracts and when it comes to a dispute deal with it so i think that's the first i would say what really makes this area of the law so specific and the second one and and of course there's the uh the um the the consequence that whatever states do are public policy measures and acts uh states uh regulate states uh take measures states act um and they don't do it uh with a sense of uh doing business uh they do it from another perspective so it's i think this this is really what what makes it so specific on the other hand what what also makes it very specific is that in recent years it has caught a lot of public attention there have been lots of moves towards more transparency and accountability in this area of the law so that it wouldn't be negotiated and and dealt with without having public scrutiny and so i think that has and also the the stakes involved i mean usually you won't go for an international arbitration when it's about hundred thousand dollars so we're talking millions we're talking billions uh at the end of the day we're also talking um compensation through public money so all of this makes this area so i would say fascinating for those of us who who have the luxury of working in it and also for makes it also so sensitive makes it sensitive to the public makes it sensitive to the taxpayers so i would say if you ask me it's really about you know who are the parties who are the stakeholders and you know arbitration is not the usual method of settling disputes uh when states are concerned so that's pretty much that's fascinating uh i've been teaching long enough to know that in fact since 1983 and if i go back and look at my syllabi for let's say international business transactions i would see that in the early days i was focusing on cases like elsi which was a case where the united states brought a claim on behalf of an investor against italy the old espousal model and so today we have this this interesting phenomena as you point out of private entities uncharacteristic of international law traditionally that get to bring a direct claim against a sovereign state and uh i would you agree with me that i mean you as much as said that there are these these asymmetries in the sense that on the one hand the state uh is a regular is a regulator and and deals on behalf of various stakeholders and has different objectives than uh than uh a mercantile entity and so they have the advantage of of being able to sort of make the law and still there accorded a certain regulatory space if we can call it that at the same time in in what is still a rather novel model they're now having to answer private claims in a situation where there's another asymmetry in the sense that only the investor can bring this dispute absolutely and there's still a lot of doubt about whether the host state can bring counter claims yes so from that standpoint there is this asymmetry of the who has standing in the moving party and so you have one entity that's accountable to the citizens for tax dollars and the way they've comported they've executed their their mandate you have another entity that presumably is worried about their shareholders yes absolutely uh with the option of moving forward and as you say these disputes are never small by definition you you could not uh it would not make sense to bring one the uh let's focus on this interesting thing you said about transparency now in this is all by way of me justifying having a separate course in teaching international commercial arbitration one would stress the extent to which hearings are for example private under the the wounds of troll rules and that depending on where the arbitration is seated and certainly by agreement the parties can agree on confidentiality so it's entirely possible that in international commercial arbitration a dispute could arise be arbitrated lead to an award which then is satisfied by the giving of money or whatever it's called for in the award and the public would never know exactly right perhaps to the extent that uh corporation or securities regulation requires disclosure yeah so so a strong emphasis on on that and yet uh the trend is quite the opposite with states absolutely uh you're very right here and i think that's um that's that is we can find a reason for that in the choice that was made about 50 or 60 years ago when deciding that in this field of investment treaties the the method for settling disputes would be patterned on commercial arbitration you would use arbitration as a man a way of settling these disputes because investors uh are feeling comfortable with this way and because there is a genuine and strong distrust on the part of investors as far as the the local courts the domestic courts of the whole state are concerned and so uh the the the model the pattern was really commercial arbitration but commercial arbitration comes with a certain number of features as as you say rightly and it was found when when these the number of cases began to actually uh increase and when when states were repeatedly brought to international arbitration on the basis of these treaties and and some commercial contracts that had or maybe state contracts that had these investment arbitration dispute settlement provisions at that stage it was found that you know there was something which was not quite working and so a number of issues have been discussed um to to adapt uh the the commercial arbitration model to how it works when states are involved and one of the main evolutions one of the main changes that that took place in in in this investor state system as we call it was precisely to bring in an element of transparency it was not easy it took a couple of years and a lot of efforts on the parts of institutions such as exid you know the international center for investor state disputes uh in in washington d.c and more recently on citral that you were mentioning uh where you know discussions have have taken place for for several years before agreement could be reached as to the degree of the fact first of all the fact that these disputes would be publicly known that the outcomes would be publicly available that there would be access to the public including to the hearings themselves that there would be a possibility for amicus friends of the court to make submissions so all of this was part of this trend for more transparency that is very inherent to the fact that you have um states parts uh parties to this dispute so um you know there's there's been a a cultural shift those who have been rolling their eyes at transparency and transparency standards you know how is there a thing like transparency standards but you know all of them are now accepting that this is a an evolution that was required and that is that is making this whole system more acceptable uh if if you want i i think that's uh that's certainly been been my view of it there's an interesting knock-on effect though isn't there now that the awards are publicly available we begin to compare what tribunals are saying oh yes uh about the same piece of treaty language let's say fair and equitable treatment or what constitutes an expropriation or right uh you could mention many other things and not surprisingly we find divergence yes causing some people to say particularly states well where is the predictability that one would like to have any if it's truly exactly a legal system exactly i think the point you make about predictability sort of uh resonates with me uh having worked on investment policy for a long time you always hear the same thing what investors want is a stable and predictable framework and i would say that this is also holds true for states when states are committing to these treaties which are international instruments they also feel that i mean insofar states can feel but at least the negotiators and those who implement and then later on have to deal with these disputes feel entitled to some predictability in what is the way these treaty standards this 3d language is going to be interpreted because of the sheer consequences that it can have on their international responsibility and of course on having to pay compensation i i that's certainly been been my sort of anecdotal take of it as well the other thing i've noticed talking about certainty if you put it to students how does one remedy the situation you can see that states figured out that we need more detail in our bits for one thing so the bilateral investment treaties which are essentially the promises that the states make to the investors right increasingly have more and more detail that eliminate certain fringe interpretations and indeed these bits i find are influencing each other so you'll find in for example the model colombian bit or the korean bit language not unlike what one finds in the canadian and us yes that's right saying here's what we mean by fair and equal treatment in in more specificity and it's it's an interesting thing of course uh because there is this problem of the underlying custom and it's ever been the question to the devil law students now is this treaty text a codification of custom or is it merely a treaty standard if it's merely a treaty standard then these clarifications only apply between in this bilateral relationship yes if it restates custom then we have you know influence beyond the bit so talking to a restatement expert yes yes for my sins yes but but the the the the second thing more ambitious i think and you and i have talked about this is what i'm bringing up is this idea of some sort of an appellate mechanism yeah and presumably it's uh it's one would have a right of appeal and the review would not be like current reviews for just procedure and jurisdiction but actually on the merits that's that's right um i think that's uh it's probably the next big move uh i don't have a crystal ball but having been involved in this uh in this area for for long enough i think um this is probably what's going to change or the discussions that are going to take place in the in the months or maybe a few years to come there is a real um i think there's a genuine concern about uh what is called consistency in the outcome and states um you know states are animals that need a lot of time before um before things change before uh you know even the the law or changes in the law sink in so there's been a lot of adjustments to 3d language and you're very right that you know there's been clarification um if you simply compare the the the sheer size of the dispute settlement provisions of treaties uh of today to those of the early 60s you'll be surprised by you know we it used to be an article which said basically if the parties are not in agreement they can go to international arbitration now we have about 20 plus pages which set the rules of what uh states and investors are going to to use for the settlement of their disputes so i think there's a lot more sophistication there's more clarity there is but again we are i would say stuck with a dispute settlement model which is arbitration which um you know an award is final and binding so once you had a bite at the apple that's about it you you have a decision and you have to abide by it the problem is that we have this consistency issue on the other hand we have other models that states are involved in and particularly i'm thinking about the trade model where in the international trading system we have a two layered um dispute settlement understanding which works in the wto and uh trade and investment always uh or very often go hand in hand in these treaties you know the the latest generation of investment agreements are no longer in bits stand-alone bits but are part of broader trade and investment agreements free trade agreements with investment chapters essentially and so um you know there is this this trade model pattern which is based on we have panels that will hear a dispute and then we have an appellate body and so you know these trade disputes these investment disputes are sometimes you know on very similar or or related even related measures uh taken by the state uh simply they're being interpreted or they're being brought under another chapter different chapters so there's sort of this divide between everything which is investment related which will go to international arbitration and the trade part of it which goes to a system which has these two levels so i really think that um and also we have to take into account that you know now that more and more regions are following the same models which you were talking about the korean recent generation korean treaties or colombian treaties and all of them have uh at least with the u.s have this provision which says that the parties will sit down and work out an appellate mechanism for the treaties so i think this really shows that this is a this is uh there is movement in this direction there are good reasons for that uh i think that um i think it's going to happen uh and probably pretty soon the devil is in the details of course one could set it up on a bilateral basis between the two states on a regional basis on a global basis sort of on some sort of world court model and i guess we'll just have to wait and see but certainly many governments are committed to it as you say the u.s model texts all contemplate that in fact they have to allow for it because it would change certain things in the model depending on whether there's an appellate body or not um which is a nice entree for me to to introduce mediation since this lack of predictability that faced both the investors and the states might cause them to wonder up to the very last moment how they're doing in the arbitration and indeed sometimes they're very disappointed and that disappointment can be quantified in billions of dollars and so it's a system in which uh both sides carry a certain risk that's right it's it's interesting that you raise that because a couple of years ago and and you were there we had this uh this this symposium in in lexington at the washington and lee university and and there were some some preparatory interviews videos uh uh that that are still available on on the internet interestingly um and uh one of our one of the participants uh in this symposium i i think it was mark clartfelter a colleague of mine raised this issue that actually unpredictability that the fact that you cannot predict the outcome is uh an obstacle to mediation and it sounded to me like it would be exactly the other way around that if you cannot predict what the outcome will be you should rather look for a good settlement rather than a bad award that might come you don't know when in addition and cost you a lot of money so i think there are a number of uh elements that are aligning here firstly i think very clearly mediation is is a way that is not totally alien to to these investment treaties because a number of them uh i mean all of them have what is called a cooling off or waiting or amicable settlement i prefer to call it an amicable settlement period which usually goes between three to six months and which is meant for the parties to sit down and discuss the matter settle it before they go to international arbitration and the trend has been that in recent years uh arbitration has sort of become the only way to for the parties to to come to a settlement of the dispute which is binding which comes from outside and i see a lot of merits in having the parties work it out together so i think that's that's one of the elements is the the treaties allow for mediation but on the other hand um there is a maybe a cultural uh uh gap uh for the time being uh that that is that's maybe may still need to be or that there's still needs to be some some work on that but there's another element that strikes me as very interesting and may bring us back to our discussion on transparency and accountability i was surprised to see in recent in recent articles and research academic research to see the the number of cases that actually settle before an award is rendered and there uh you know depending on i've seen studies talking about 30 percent others about 39 even of the case the cases that go to international investor state arbitration and that settle before this famous binding award comes so that to me tells me two things it tells me that on the one hand it's perfectly possible to come to an agreement between the parties without having an binding arbitral award and the second point is that i think that the more these treaties and these cases and these arbitrations and these settlements come under public scrutiny the more it's going to be difficult for uh government officials and even i guess for investors who settle to justify and to say well you know you actually settled this case and you actually agreed voluntarily to pay so much how did you come to this result how did you decide that you would you know what were the factors and how could you commit um to this result and i think here the third party neutral the facilitator as as we like to call mediators is going to be very important because it will show that the settlement this agreement has taken place within a process and that it's not something that was you know dealt with uh behind the curtains as we say in french or under the table but that it is uh actual uh process that has been followed in order to reach this agreement so like uh arbitration is a process that gives some um definite character to this dispute settlement i think mediation has the same role to play well it's a nice uh way of me inviting you next to talk about the iba rules yes which adds the structure that to some extent was needed in in the mediation process with the particular view to in the particularies of investor state disputes yes um well thank you about that yeah thank you very much i'm very happy to to be the one talking about it uh to you because uh actually uh you're uh together with margaret stevens you're the founding father and mother of this initiative uh you're the one who launched this working group in the iba and and was uh met with the first eye rolling yes eye rolling very important concept in the selling of mediation indeed and uh with bart lagam we uh together we took we took over after you actually planted the seeds of uh investor state mediation and and early uh in in this effort um we actually asked ourselves three questions uh if you remember at one iba meeting uh years ago uh i don't know if it was in buenos aires or in madrid anyway the question was uh you know after having assessed that there was a gap here that there was a need for an additional dispute settlement mechanism or an alternative dispute settlement mechanism i think we we came to three main findings one that you know what was missing in order to to promote or to get mediation uh that is as i said you know allowed by the treaties that treaties say that it's possible for the parties to have recourse to other means what we found was lacking was an actual process that the parties could turn to sort of rules that would govern like they do in arbitration this process so again that by committing to going for mediation or by allowing for mediation to to be an option uh it would not be a vague commitment it would not be something that they could not um then justify by saying okay we're we're going for it because we have rules that we that back us in this process the second obstacle if you will that we saw was as far as treaty language is concerned we really found that treaties where okay they were allowing they were making it possible if they the parties really wanted to but they weren't really encouraging and so we thought that this was also an angle we should be working on and i'm quite happy to say uh jack before we turn to the iba rules that there is a lot of uh um well there are important breakthroughs uh currently the the uh european union is now with its mandate to negotiate uh including on investment matters the european union has a an annex on mediation on investor state mediation that forms an integral part of its free trade agreement negotiations and that's not just a line which says the parties may if they want to go for mediation it's a full-fledged mediation set of rules that applies that the parties uh want to to agree to resort to so i find this is an incredible breakthrough the same happens in uh asean the asean aqia the um comprehensive investment agreement uh there are there are other regional treaties that are putting this now on there uh on on in in the the models or in in including in their treaties and i'm quite happy to report that uh just a week ago i was in bangkok working with the thai government precisely on you know having uh building adr into their model treaty so i think you know a lot has been happening on this and of course the third point i will probably talk about a little later which is to have skilled and credible investor state mediators but back to the uh to the iba rules uh you were asking me you know see i'm getting passionate about why we're having this conversation i knew you would mediation um i think what what really characterizes the iba rules is that uh while being a set of rules they're extremely flexible so they give the parties um all the possible leverage and flexibility that is needed while at the same time catering for i think two key interests one is to really give mediation a chance and there is this quite unique feature of having a possibility for co-mediation which i find extremely important given the big cultural difference you have between government officials on one side of the table and and you know general counsel and sophisticated lawyers at the other side of the table including the language gap which very often times is is quite an impediment uh to to communicate of course and then to come to a meaningful uh settlement so uh that's one of the features of the ib rules that i find really quite unique and interesting for states and investors alike the second element which is really important is to flesh out the mediation management conference and to give some meat and some some some items that will serve as a guidance and which also gives states that want to use the iba rules in their treaties some some frame like a checklist kind of like uh exactly an agenda a schedule of uh exactly what things you might think about yes and moving this forward what am i committing to what am i supposed to do now which is what is really you know one of the things we may we may have to work some more on you know so we've agreed to that no now what do we do um and i think that's the third element which is really essential and so specific to investor state mediation we we alluded to in at the beginning of this conversation is is the confidentiality versus transparency issue which is so inherent to having sovereign states involved so the rules are really very uh mindful of the fact that when you have a sovereign state involved and when you have all these transparency requirements you cannot just think that this is going to take place in a closed room and nobody is going to ever know about it because it's public money that is going to eventually be put on the table so this is dealt with by the rules by by having a a default rule the the default rule is if you don't uh i mean the the fact that the mediation is taking place and the outcome of the mediation are not confidential but on the other hand you have the process itself and you have the way i mean i'm talking to an expert here and i'm by far so much to to learn and to get into the the the what is taking place uh within the mediation process and the way the mediator is going to treat information that he she receives and how the parties are going to all of this is utterly confidential and here um i think that's also one of the features that make these rules so in my sense so good right and and uh i think others agree with you uh no there it's it's a wonderful text and and all that you say is true i love the flexibility of them and i like the idea that there is it it it generates momentum to actually convene yes and therefore as we always say the hard part about mediation is just convening the parties and then once the process starts it's often very successful and and uh i've given a lot of thought to the the tension between transparency and the need to be in caucus quite privately so that the candor can flow and and things can be said that that you should never see the light of day and it is a delicate balance yes indeed but it's um you are to be commended on this wonderful text i know that you won't take credit for it by yourself there was a there was a lot of subcommittees one fun meeting we had in geneva and and uh some other phone conferences and things um let's go back to the the essential feature a set of rules is of course wonderful to have and add structure gives certain impromature of the iba something to point to that a bunch of um you know thoughtful specialists said yes this is this is our final text on this but at the end of the day you need good mediators yes and um this in a way is the next step because mediation i think you would agree with me has been underutilized definitely as well and the focus has been on arbitration and so one can certainly identify the list of the the most active 25 investor state arbitrators but if someone says to you please find me an investor state mediator by the end of the week and i guess the first the the first thing i this is controversial but i've often said to my students not naming any names but a world-class arbitrator does not necessarily make a world-class mediator they they're they're different skills totally different um so so how would you see though what are the next steps in putting together this pool this list this panel of mediators well um two two things here um the first is that uh not surprisingly now that the the rules are out and that there is really uh momentum for mediation and you know like uh like in in commercial arbitration there is a strong push towards adr i mean towards mediation i mean at the icc and and other institutions you see clearly that there is more and more of this this mediation or conciliation the not surprisingly they're phone calls being made you know people begin to ask you uh in your view could you suggest who would be good as uh if we want to appoint say on a on a roster like the european union is is now going to to go forward with a roster of mediators and a roster of arbitrators that they have in their treaty so again the question arises you know who who could do that and so the the the point is really to turn to people who um have in our subject matter i think what is important is precisely this uh this subject matter knowledge you know it's uh um we're dealing with international law we're dealing with investment treaties we're dealing with states sovereign measures act so there is this dimension to it but then there's also the village elders if i may use a term that that is being used in this this excellent training program you have here in at pepperdine on on mediation um and i think that's that's also one of the aspects is that you have to find people that will be acceptable to both parties and that will have both an authoritative but also a i would say maybe more than in arbitration the human skills will come into play they will have to ensure that people feel comfortable um and that they can talk to each other so we're we're looking at a variety or a different combination let's put it this way a different combination of skills and they're absolutely and definitely people who meet these combinations what we need now is to hear more about it um to be more uh listening more to experiences of negotiations that have been successful and as i said there have been plenty lawyers that have been involved in these negotiations academics that have had the chance of talking to both sides practitioners you know i'm thinking diplomats i'm thinking of people who have done this shuttle diplomacy for many years and have developed a skill here so i think we're not short of people who will meet this but as you say very rightly we have to come up now with offers so that it's not only about you have rules and you have treaties that enable you to do it but then where do we turn and how do we do it and i i think well it's interesting it will be interesting to see who among the arbitrators will uh be doing both and and there will be some interest interesting conversations had about when you're wearing this hat now not in the same dispute but for this dispute they ask you to mediate now you're and and what switch do you turn in your brain to to make that uh happen uh our friend bart lagum uh likes to talk about giving the parties cover and particularly the states and and one aspect of that is the host state needs to be able to point to the mediator as as you say an authoritative person some someone that the stakeholders that the the answers to would would say oh well in that case you know if this person was so but uh well we we are it's certainly a fascinating process and in our next conversation we'll have to when we get together in another year we'll have to see what kind of progress we've been made but my students would would i know be mad with me if i didn't ask you a little bit about career advice you've you've done so many things and and so many things well um and obviously being brilliant and working hard has a lot to do with it but if if you had to give some advice to some of my llm candidates about how to prepare themselves for the future of dispute resolution as we've experienced it or as one can expect to experience it what would you suggest it's a difficult question um i think that uh one of the one of the things you you really need to prepare yourself for is that there is not one career path so there's not you're most likely not going to have one career in your life but maybe two three four different uh careers you you know i don't want to to bring it back to me but i i started out selling ski lifts and cable cars in a french company that you probably heard about you know palma the pomelifts are also quite popular in the u.s and i did that for about 10 years and then i spent 15 years in the u.n and now i'm working as an arbitrator as a council to states so i would say and and hopefully that's not the end of it so hopefully before i i retire and uh and enjoy my grandchildren i'll have an opportunity to do maybe even other things so i think one one of the important uh um you know it's it's difficult to choose uh one career and and think that you're going to be doing it for the next 40 years that's for sure but on the other hand we don't have the luxury anymore of embracing one career and thinking that maybe in 40 years down the road we'll still be working on this apart from of course some some really uh specific i'm not talking about doctors or surgeons or so that's one thing and the second which really strikes me as i'm as i'm growing in age is the importance of the human factor i'm i'm convinced that you know the best grades don't make everything and being a good person being committed to others being open to others and to their needs and and doing community service i mean going beyond the fact that you know absolutely everything about the writings of or this case or this award that's very important but don't forget that life is much um broader than only uh law studies but that would seem to me to be an ideal place to put a period yes except for me to thank you so very much for this conversation and uh for all the insight you brought and we're just delighted to have you here in in malibu and we look forward to a continuing relationship long and long and enjoyable thank you very much jack thank you for having me and uh for giving me the opportunity to be so passionate about international law and international arbitration thank you so much our pleasure thank you you

Channel: Pepperdine University

Views: 8,083

Rating: 5 out of 5

Keywords: Straus Institute, Duspute Resolution, Arbitration, Mediation, Commercial, Pepperdine Law, Jack Coe, Anna Joubin-Brett

Id: nIRCau9JiiA

Length: 51min 48sec (3108 seconds)

Published: Wed Aug 28 2013