International Arbitration in Times of Economic Nationalism
The contemporary economic reality is rapidly changing in response to pressures from states, corporations, and other interest groups. One of the areas impacted by this pressure is international arbitration as the preferred means of commercial and investment dispute settlement. One of the principal new phenomena in the economic reality worldwide is the spread of economic nationalism. This explains why the Biannual Symposium on Salient Issues in International Commercial Arbitration, organized by the Center on International Commercial Arbitration at American University Washington College of Law on November 14, 2019, took place under the theme International Arbitration in Times of Economic Nationalism. The Center offered a forum for debate and discussion among the twenty-eight attending practitioners and scholars about the question of how should the dialogue between the seemingly opposed poles of globally valid and circulating arbitral awards be articulated with the growing wish for national autarchy prevailing among many businessmen and politicians.
The Symposium was a genuinely global event, as it had the institutional sponsorship from a global array of institutions: the German Arbitration Institute (DIS) in Bonn (Germany), the World Trade Institute in Bern (Switzerland), the Sharjah International Commercial Arbitration Centre (United Arab Emirates), the School of Law of the Tsinghua University (China), the Externado University in Bogotá (Colombia), and the American Society of International Law (USA).
For decades, international arbitration professionals advocated for homogeneous rules to settle international commercial and investment disputes. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards laid the groundwork for the widespread use of international commercial arbitration in the 1990s and 2000s. The New York Convention became seen as the epitome of a transnational arbitral order that could offer an efficient legal framework for global international business. In 1965 followed the ICSID Convention for investment disputes. After a timid start—and similarly to commercial arbitration—the 1990s and 2000s saw a stark uptick in the use of the procedures laid out in the ICSID Convention for company-to-state disputes with growingly homogeneous, international obligations for the treatment of foreign direct investment. In both fields of international arbitration, the recourse to independent tribunals—separate from the judicial systems of either the interested states (the state of one party or investor) and the state of the other party or the state where the investment was made)—was seen as a guarantee against the lack of fairness, national bias, corruption, and unenforceability of awards.
However, over time some cracks appeared in the faith for international arbitration. One of the most notable topics discussed during the Symposium was the European Court of Justice’s Achmea decision in March 2018. The decision stated that European
Union (EU) Law precludes the application of intra-EU Bilateral Investment Treaties (BITs). Some fear that this is the end of the international investment regime as we know it. Following a EU’s initiative, the UNCITRAL set up a Working Group to study alternatives and possible reforms to the international system of investment dispute settlement (ISDS). Among the proposals discussed are permanent investment courts. During the Symposium the question was raised and discussed whether these may or may not be more exposed to interference from powerful states than the traditional arbitral tribunals. The ICSID has responded to these proposals, and to other criticisms that exist in international investment arbitration, announcing its own new rules of procedure.
In the Middle East, international arbitration appears to be developing robustly. At least this conclusion emerged from the case studies of the United Arab Emirates (UAE). The data shows high enforcement rates of foreign arbitral awards. The existence of special economic zones demonstrates the willingness of the UAE to provide favorable regulatory environments for multiple types of business activities, including favorable rules for the settlement of commercial disputes. However, it was noted that challenges persist for the coordination of procedures in case of parallel litigations and other situations that have effects across UAE internal boundaries.
In Africa, economic nationalism has gained traction in various countries. This is especially noticeable in the mining sector, where some states are claiming control over their natural resources, such as Mozambique and the Democratic Republic of Congo. Other states are considering amending their legislation to make it more difficult for foreign companies to own stakes in the mining and other nationally important sectors. These states are embedded in a dilemma between the need to attract foreign direct investment and the need to protect their national economies.
Similarly, in Latin America the tension between openness and state control—which is no new phenomenon in the continent—have led to the disclosure of large scale corruption schemes, such as the one spearheaded by the construction company Odebrecht. The result is that the public private partnerships (PPPs) as a vehicle for infrastructure and other public service development need to be more closely monitored to avoid loopholes that diminish corporate governance in the region.
The Symposium offered also an opportunity for in-depth analysis of the United States-Mexico-Canada Agreement (USMCA), which the U.S. recently ratified as the last of the three state parties. The USMCA was seen as a sign for the growing retreat of investment arbitration as the method of choice for states in investment disputes. During the Symposium, some authors identified parallelisms to the developments in Europe. At the same time, one of the panelists noted that Canada does not really follow a clear investment treaty policy, as each of its recent trade and investment agreements with Asia, the U.S./Canada, and Europe are each very different from another.
Finally, as to China, the panelists highlighted the commitment of the country to allow for arbitration and judicial settlement (through the International Commercial
Courts) on a parallel track, depending on the choice and preference of the parties. The panelists put the Chinese initiative of creating an International Commercial Court into perspective with the fact that also many European and other countries around the world have such an institution, and that they generally do not compete with, but rather support and complement arbitration.
These are just a few observations from the Symposium that illustrate that the evolution of international arbitration is a continuous dialectic process between restricting forces—sometimes supported by broader nationalist movements— and globalist forces that advocate for the use of international arbitration as the lingua franca of dispute settlement.
ABOUT THE BIANNUAL SYMPOSIUM
The Symposium on Salient Issues in International Commercial Arbitration is organized biannually by the Center on International Commercial Arbitration. The purpose is to present a global perspective of current developments in international arbitration throughout the world. The Symposium hosts prominent speakers and generates a dialogue about salient issues in international commercial arbitration, as well as current developments in BIT and ICSID arbitration, in the Americas, Europe, Africa, the Middle East, and East Asia.