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Law school practical: Non-disputing party system underutilized

Thursday, September 03, 2020 @ 1:10 PM | By Bo Kruk


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Bo Kruk
During my journey through law school at the University of Ottawa, I was fortunate to participate in a joint economic law clinic, part of the Trade Lab international economic law network. This two-part series is based on my group’s work involving taking stock of non-disputing party (NDP) participation in the Investor State Dispute Settlement system (ISDS). The first part of this series looked at the history of ISDS and NDP participation. In this part, I continue the discussion by showing how the NDP system is underutilized, underscore why law reform should be an ongoing process, as well as illustrate the benefits of practical classes in law school.

Existing literature has long suggested that the NDP model in ISDS is underutilized. Empirically, the most recent data available from the United Nations Conference on Trade and Development (current until July 31, 2019) confirms this suggestion. In practice, NDP participation is limited. Out of 195 concluded cases, only 15 (roughly 7.7 per cent) of them involved any NDP participation and 47 out of 290 pending cases involve NDP submissions (16.2 per cent). Moreover, of the 485 cases, only 62 cases (12.8 per cent) involved a third party that was not a state.

Despite the somewhat discouraging data, there are a few cases that illustrate how the NDP system has been used successfully, proving the system can work — such as Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7. That case involved claims of indirect expropriation and breaches of fair and equitable treatment by the investor. Two parties brought applications as NDPs — the World Health Organization (jointly with the WHO Framework Convention on Tobacco Control Secretariat) and the Pan American Health Organization. Both submissions sought to place the contested Uruguayan measures within a broader public health discussion. The submissions were accepted, and, in fact, the tribunal referenced them throughout the final award.  

The type of cases that make use of an ISDS mechanism might also explain the lack of a substantial volume of cases involving NDPs (7.7 per cent concluded cases and 16.2 per cent pending cases). That is to say, they may be limited to a contractual dispute between the foreign investor and the host state where NDP participation is non-existent. Nevertheless, it does raise the question as to the extent to which interested parties attempting to voice their concerns recognize the existing NDP system within ISDS.

Underpinning an NDP application is the requirement that the application aids the tribunal in its decision. In a case involving a mining project in Colombia, six civil society organizations sought to participate as NDPs. The tribunal found their applications “limited” and was unable to conclude whether the necessary threshold of aiding the tribunal under ICSID had been met. Consequently, their applications were rejected. While this might have been an error in drafting, it underscores the need for a general understanding of the requirements needed to be able to validate one’s interests in the realm of ISDS. Interestingly, based on the data and the types of parties participating as a prospective NDP, it appears that the ISDS tribunals may have left the door open specifically for specialized groups. As an intervener in domestic Canadian courts must outline how their submission will aid the tribunal, these groups would serve in much the same manner.

A surprising fact revealed by the data is the number of times the European Commission sought to participate in an ISDS dispute as an NDP: 17.7 per cent of all cases. Some of these attempts related to the application of treaty-based ISDS after the Slowakische Republik (Slovak Republic) v. Achmea BV, C-284/16, ECLI:EU:C:2018:158 decision from the European Court of Justice, while other cases focused on the application of a specific EU treaty. This raises the question once again of how NDP participation in ISDS can be improved to give groups impacted by foreign investment a seat at the table.

Discussions on reforms of NDP participation are generally split into two groups: (i) proposals that seek to improve the role of NDPs within the existing framework by improving the flow of information within the ISDS process; and (ii) proposals that seek to give under-represented interests a seat at the table in the arbitration process by expanding the ISDS process to accurately reflect its non-binary nature and consider more than the interests of the investor and the state. An examination of ISDS reforms is currently being undertaken by UNCITRAL’s Working Group III. This undertaking acknowledges that the reality of the current systems is far from what’s suggested on paper. The world has started to change at a breakneck speed and this endeavour is a step towards meeting one of the many challenges now facing law.

For law students, looking to practical classes and projects is a must on the law school journey. Textbooks and lectures can outline the fundamentals, but as the lawyers of tomorrow it is our responsibility to constantly look for ways to improve the system. Practical classes and projects help us develop the necessary critical thinking skills to do so. Times change and the world evolves. It took a pandemic for digital hearings to become commonplace; it shouldn’t take a crisis of similar proportions for the legal system to make another leap forward.

This is the second in a two-part series. Read part one: Law school practical: Clinic on non-disputing party participation in investor state disputes.

Bo Kruk has just graduated from the University of Ottawa’s Programme de common law en français. While he fell in love with several areas of law at law school, he is most passionate about how the law can be used to promote access to justice for equity seeking groups.

Illustration by Chris Yates/Law360

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