An Article in the Series: Harvard ILJ Symposium 2013: Investment Treaty Arbitration—Approaching the System’s Adulthood
On March 8, 2013, the Honorable Charles Brower offered a vociferous defense of the international commercial arbitration regime in his keynote address, “From ‘Dealing in Virtue’ to ‘Profiting from Injustice’: Tending Toward the Re-Statification of International Investment Dispute Resolution.”
Judge Brower has, among other positions, served as a judge of the Iran–United States Claims Tribunal in the Hague, the Netherlands; a Judge Ad Hoc of the Inter-American Court of Human Rights; and as a leading arbitrator.
Judge Brower began his talk by discussing recent “assassination attempts on the system” of international arbitration. He cited Profiting from Injustice, a recent report by the Transnational Institute that is highly critical of international arbitration. Bolivia, Venezuela, and Ecuador have all withdrawn from ICSID; Venezuela has taken the further step of denouncing all bilateral investment treaties (BITs). Australia’s current Labor government, too, has announced that it will no longer enter into treaties providing for international arbitration.
These critics claim that investor–state arbitration is “antithetical to sustainable development” and imperialistic, Judge Brower said. Yet “the critics are operating totally based on emotion and not on data, not on fact.”
Southern states have signed many BITs between themselves, Judge Brower pointed out, and the terms of those treaties are not much different from those signed with countries in the global north. Moreover, studies suggest that BITs produce investment and are positively correlated with foreign direct investment.
Another criticism of arbitration panels is that arbitrators—“yours truly and others,” as Judge Bower put it—are prejudiced against states. The late President Hugo Chávez of Venezuela claimed in a speech made in early 2012 that ICSID tribunals sided with investors 232 times out of 242 in 2010. But this is not true, Judge Brower argued. ICSID’s own statistics [pdf] show that, of all cases decided up until June 30, 2012, investors only won in 48% of cases. In 22% of cases, tribunals declined jurisdiction; they dismissed all claims in 29% of cases; and dismissed claims as manifestly without merit in 1% of cases. Judge Brower mentioned a study from 2009 by Susan Franck that came to a similar conclusion.
Judge Brower also responded to critiques of particular cases, noting that “the fact that someone disagrees with the result does not necessarily mean that it is wrong, let along that it is the result of prejudice.”
Finally, Judge Brower took aim at critics of international investment arbitration who claim that investment treaties limit democracy and the freedom of action in the host state. Treaties, he noted, are an exercise of a state’s sovereignty—“that is a principle so well established that it is beyond serious doubt”—nor, he said, has he “seen evidence to the effect that governments fail to act because they are afraid of what will happen to them under the treaty.”
What is worse than leaving the system? Tinkering, said Judge Brower. He was particularly critical of proposals to create a sitting appelate tribunal, noting that this may lead to greater politicization as arbitrators jockey for appointment by their states. By contrast, the current system of serving as an international arbitrator “is the highest merit system you can imagine.” He added, “You’re never better than your last case.”