TY - JOUR AU - Cheng,, Teresa AB - I. INTRODUCTION: A TALE OF TWO CITIES FOR ISDS In discussing the current situation with respect to investor–State dispute settlement (ISDS), I can find no better way to start than by referring to the very famous opening of Charles Dickens’ A Tale of Two Cities: ‘It was the best of times, it was the worst of times’. It is the best of times for ISDS, as is evidenced by the international community’s high level of attention to the subject, as well as the empirical data: as of 31 July 2019, the number of publicly known treaty-based ISDS claims had already increased to more than 980,2 with more than 70 new cases having been filed each year in the past three years,3 and there is no sign that the momentum of the upward trend in the number of ISDS cases is slowing. However, paradoxically, it is also the worst of times for ISDS. The arbitration community is witnessing that ISDS is currently facing a challenge to its legitimacy. In its factsheet, published in July 2018, the European Commission announced that ‘[a]nything less ambitious [than the investment court system], including coming back to the older Investor-to-State Dispute Settlement, is not acceptable. For the EU ISDS is dead’.4 ISDS has been relentlessly criticized by the media and civil society, which have described it by using names such as ‘secret corporate courts’5 and ‘kangaroo courts’.6 Some States have lost their faith in ISDS, as is shown by Bolivia, Ecuador and Venezuela’s denunciation of the ICSID Convention7 and the increase in the termination of bilateral investment treaties (BITs).8 It is in this context that I will explore the chaos in the landscape of ISDS and attempt to map the way forward in the search for order by evolution, not revolution. As we embark on this voyage in the sea of chaos, let us briefly reflect on the history of ISDS and, as a prelude, look at the major concerns. I will then set out the diverse attempts at reform that have been made and, lastly, propose a ‘double helix’ approach to the search for order. II. REFLECTIONS ON THE HISTORY OF ISDS AND THE NATURE OF INVESTMENT ARBITRATION In the early days, foreign investors could resort to the domestic courts of host States or appeal to their home States only to initiate diplomatic protection under international law.9 Then there was ‘gunboat diplomacy’, as is illustrated by the Don Pacifico affair, which involved a British citizen who suffered damage caused by a riotous mob in Greece, which then led to the sending of British military ships into the Aegean Sea to seize Greek property in compensation for the damage.10 It is against such a background that the world saw the need for a peaceful, depoliticized, credible and rule-of-law-based dispute resolution mechanism, and that is where international arbitration came into the picture of ISDS. It is apt to remind ourselves of the basic features of arbitration, which we might summarize as two main tenets: (i) agreement to arbitrate, which results from a simple and informal process creating a formal and binding award;11 and (ii) party appointment of arbitrators.12 The merits of such basic features of arbitration have been illustrated in the Alabama Claims Arbitration, under the Treaty of Washington of 1871 between the United States and Great Britain. This successful arbitration managed to avert an imminent war between the nations, caused by Great Britain’s failure to use due diligence in the performance of its neutral obligations during the American Civil War. As is chronicled in Johnny Veeder’s ‘The Historical Keystone to International Arbitration’, the success of the Alabama Claims Arbitration in resolving the dispute peacefully was very much a result of the party-appointment model, under which a five-person tribunal was formed, with one arbitrator nominated by the United States, one by Great Britain and three by neutral States. 1959 was a symbolic year for the ISDS regime, in which we saw the conclusion of the world’s first BIT, between Germany and Pakistan.13 As Professor Karl-Heinz Böckstiegel remarked, BITs have created a universal system of substantive and procedural investment protection, which is a fundamental and most relevant part of the international legal and economic order14 —a milestone that has replaced the traditional David-and-Goliath relationship between foreign investors and host jurisdictions, at least procedurally, by providing a level playing field.15 It is worth noting that the Germany–Pakistan BIT contained only the State-to-State dispute settlement mechanism. It was not until the introduction of the BIT between Italy and Chad in 1969 that BITs began offering investment arbitration between foreign investors and host jurisdictions.16 As the story goes, Hong Kong, a city in the East, has somehow played an important part in the rich history of treaty-based ISDS. A Hong Kong-incorporated company and a Sri Lankan shrimp farm were all that it took to trigger the exponential growth in treaty-based ISDS that we are witnessing today. In the famous AAPL v Sri Lanka case,17 a Hong Kong-incorporated company invoked the UK–Sri Lanka BIT, which was extended to Hong Kong in 1981, with respect to the destruction of a shrimp farm by Sri Lankan Government security forces. That case culminated in an award in 1990 and the birth of the idea of arbitration without privity’, in which a standing offer to arbitrate is made by a host State in an investment treaty that is subsequently converted into an agreement when a foreign investor ‘perfects’ that consent through a request for arbitration.18 Nevertheless, as was also remarked by Jan Paulsson in his seminal piece in 1995: ‘[a]rbitration without privity is a delicate mechanism. A single incident of an adventurist arbitrator going beyond the proper scope of his jurisdiction in a sensitive case may be sufficient to generate a backlash’.19 Hong Kong might have contributed to the current situation of ISDS in some respects. Hong Kong is not a sovereign State, but within the framework of ‘one country, two systems’ and as provided for in the Basic Law, the Central People’s Government has authorized Hong Kong as a special administrative region to enter into 21 investment promotion and protection agreements (IPPAs) with foreign economies, one of which was with the United Kingdom and was concluded in 1999. All these IPPAs contain the investment arbitration mechanism, and one very high-profile case is Philip Morris Asia v Australia,20 in which Philip Morris invoked the 1993 IPPA between Hong Kong and Australia in order to challenge the tobacco plain packaging regulation. Cases such as Philip Morris Asia v Australia, which concern important public policies, are indeed the types of sensitive cases that might be said to have brought us to the current backlash against ISDS, the growing disenchantment with the investment treaty regime and the skepticism, whether rightly or wrongly held, that the regime is heavily skewed towards the benefits of multinational corporations at grave expense to host States and the public interest.21 III. MAJOR CONCERNS AND CRITICISMS OVER ISDS: THE PRELUDE TO THE CHAOS A. The Perceived Inconsistencies in ISDS Awards Inconsistencies may arise when different tribunals come to different conclusions about the same standard in the same treaty.22 They may also arise when different tribunals organized under different treaties reach different decisions about disputes involving the same facts, related parties and similar investment rights, as well as when considering disputes involving similar situations and similar investment rights.23 No one would deny that some awards may be irreconcilable, such as the two cases relating to Argentina’s economic crisis in the early 2000s: CMS v Argentina24 and LG&E v Argentina.25 However, one would reasonably suspect that the extent of inconsistencies in ISDS awards might have been overstated and exaggerated.26 Absolute consistency in ISDS is but an illusion—like a desert mirage. Even in the context of domestic court systems with appeal mechanisms, perfect consistencies do not exist27 and it is not uncommon to see dissenting views in court judgments slowly evolving to become law over time. In fact, as Johnny Veeder said: ‘arbitration can benefit from “good” dissenting opinions … Such dissents are more often (if rationally and courteously expressed) a sign of healthy intellectual rigour within arbitral deliberations’.28 As Brigitte Stern said at an ISDS Reform Conference held in Hong Kong in February 2019, ‘inconsistency is part of life … when contradictions stop, it is death’.29 Inconsistency is an inevitable part in the development and evolution of any body of law. If we take Emmanuel Gaillard’s Darwinist view on the matter, with its continuous stream of investment jurisprudence and growing doctrinal analysis, the best decisions will emerge as jurisprudence constante and prevail over those isolated mishaps.30 However, it appears that patience may have been lost, and some feel that they can no longer wait for the ISDS regime to ‘self-correct’ to address the concern over inconsistencies. In the context of investment treaty arbitration, it appears that, as compared with international commercial arbitration, which usually concerns contractual transactions between private parties,31 a higher level of consistency and coherence is expected of awards when matters of public importance are at stake. B. Impartiality and Diversity of Arbitrators Another criticism closely related to the inconsistencies of ISDS awards is concerned with the decision makers: the arbitrators. These days, party appointment has become an ‘original sin’, with arbitrators perceived as being influenced by their desire for further appointments instead of only the merits of the case, and as being biased in favour of multinational corporations.32 Nevertheless, if one takes an objective view of the empirical evidence, as of July 2019, 35.5 percent of known treaty-based ISDS cases were decided in favour of respondent States, compared with 29.5 percent in favour of claimant investors.33 That said, diversity of arbitrators may be something that can be further improved in the context of ISDS.34 Diversity is a broad concept that relates to gender,35 age, ethnicity and geography.36 Enhancing diversity is an aspirational goal to pursue, but one also needs to take into account the reality that ISDS cases often involve very high stakes, both monetarily and in relation to public importance, and host jurisdictions should not be blamed for sticking with the ‘usual suspects’ – experienced and well-respected arbitrators of high standing. Enhancing diversity must be grounded in reality and will require long-term and persistent effort,37—for example, through capacity building, diversity policy in appointments by arbitral institutions and encouragement of disputing parties to incorporate ‘diversity’ into their selection criteria for arbitrators.38 C. Excessive Cost and Duration The cost and duration of investment arbitration have also been criticized for being excessive, resulting in enormous financial burdens on investors and States, and not being inclusive to small and medium enterprises. Existing empirical studies have shown that ISDS does not come cheap, with the average party costs standing at approximately US$6 million for claimants and approximately US$4.9 million for respondents.39 In contrast, the mean ICSID tribunal costs and the mean United Nations Commission on International Trade Law (UNCITRAL) tribunal costs were approximately US$920,000 and US$1.1 million respectively.40 The lengths of investment arbitrations have also raised concerns, as it takes an average duration of almost four years for arbitration proceedings to result in an award.41 Such excessive cost and duration may even render a successful claim in an investment arbitration a hollow victory. In the famous North American Free Trade Agreement (NAFTA) case Metalclad Corporation v Mexico,42 while the claimant company was eventually awarded approximately US$17 million, the proceedings lasted for approximately five years, with costs of approximately US$4 million.43 In fact, the former chief executive officer of Metalclad was so dissatisfied with the arbitration experience that he said that if he had to do it over again, he would not pursue arbitration.44 States are also concerned with the high cost of ISDS because such cost is paid with public funds. In fact, such high cost may impose a disproportionately heavy burden on developing States with scarce financial and human resources and compete with other urgent developmental needs of those States.45 Some may dismiss such concerns as not genuine. Nevertheless, the question is no longer whether those concerns over ISDS are real or whether ISDS is indeed in a legitimacy crisis. Neither is it whether ISDS really needs to be reformed. Unfortunately, the battle on those fronts has already been lost and the debate has long moved past those questions. The criticisms of ISDS and the negative perception resulting from misinformation have apparently become so entrenched that even UNCTAD has concluded that ISDS faces a ‘perceived deficit of legitimacy’.46 IV. ‘CHAOS’ IN THE EVOLUTION OF ISDS In light of these concerns and criticisms, various international organizations, such as UNCTAD, UNCITRAL, the Organisation for Economic Co-operation and Development (OECD), the International Centre for Settlement of Investment Disputes (ICSID) and the Energy Charter Conference, are simultaneously undertaking projects on ISDS reform, but with different scopes. Since 2017, UNCITRAL has embarked on probably one of its most ambitious projects, through its Working Group III. More than 400 delegates from around 106 States and 66 observer organizations participated in its 38th session in Vienna in January 2020.47 The representatives of the Department of Justice of Hong Kong also joined the Chinese delegation in order to participate in the process. Genuine tension was felt in the room. Every working session was characterized by fierce debates, with constant ‘tugs of war’ between States who wanted a complete overhaul of the ISDS regime and those who believed that incremental enhancements of ISDS were the way to go. At the same time, some jurisdictions apparently want both structural and non-structural reforms of ISDS, while others, such as Brazil, signaled, at the very beginning of the Working Group, that they would not go down the path of ISDS. Two years into the project, we have not yet seen the light at the end of the tunnel, with some States continuing to express dissatisfaction with the mandate of the Working Group for being narrowly confined to ISDS procedural reform and treaty-based ISDS.48 In the words of Stephan Schill, Working Group III is like a ‘Gordian knot’ of competing investment dispute settlement designs.49 ICSID and the Energy Charter Treaty Secretariat are amending their rules and introducing protocols to address these concerns. States have also taken diverse approaches with respect to their investment treaty practices. On one hand, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) adopts incremental enhancements to the ISDS mechanism.50 On the other hand, the United States–Mexico–Canada Agreement (USMCA) heavily restricts the scope of the ISDS mechanism, as compared with NAFTA.51 In respect of the Regional Comprehensive Economic Partnership Agreement (RCEP),52 while text-based negotiation has concluded, it remains to be seen whether ISDS provisions are already in the agreed text or have been put in a future work programme to be further negotiated following the entry into force of the RCEP.53 Brazil has completely parted ways with ISDS by adopting its own model of Cooperation and Facilitation Investment Agreements (CFIAs), which focuses on dispute prevention and the use of ombudsmen to resolve disputes. We also see the re-emergence of the ‘Calvo doctrine’,54 for example, in the new model BIT of India, which requires exhaustion of local remedies before resorting to ISDS.55 These approaches have been adopted in recent years56 and attempted to shift the paradigm away from traditional ISDS. We might describe the present landscape of ISDS as being one that is characterized by diversity or we might describe it as chaos. V. SEARCHING FOR ORDER WITHIN CHAOS: A ‘DOUBLE HELIX’ APPROACH Nevertheless, just as contradiction is an essential element of life, chaos is not necessarily a bad thing. In fact, to quote José Saramago, a Portuguese writer and recipient of the 1998 Nobel Prize in Literature, ‘Chaos is merely order waiting to be deciphered’. I began by referring to Charles Dickens’ A Tale of Two Cities. Now, venture to propose A Tale of Two Options—a ‘double-helix’ approach to deciphering the order within the chaos in the evolution of ISDS. To start with, we need to be clear about our precise objective: it should be to restore confidence in ISDS in order to overcome the current legitimacy crisis, while preserving the essential attributes of ISDS that make it work in the first place. In this regard, the G20 Guiding Principles for Global Investment Policymaking, agreed at the G20 Ministerial Meeting in 2016, are particularly instructive on what the essential elements of ‘legitimacy’ are. According to those principles, dispute settlement procedures for investment disputes should be fair, open and transparent, with appropriate safeguards so as to prevent abuse.57 It is clear that the ISDS regime should be based on the rule of law and provide legal certainty and access for investors to effective mechanisms for the prevention and settlement of disputes.58 With that objective in mind, my proposed ‘double-helix’ approach will seek to address both structural and non-structural reforms and encourage the complementary use of different types of disputes resolution mechanisms to enrich the practice of ISDS. A. First Strand of the ‘Double-Helix’ Approach The first strand of the ‘double-helix’ approach focuses on the structural reform of investment arbitration, and in particular on the option of a standalone ISDS appellate mechanism. (i) ISDS appellate mechanism: the conceptual model A standalone appellate mechanism is an aspirational concept, but it must be able to cover the two types of investment arbitration, broadly described as ‘ICSID’ and ‘non-ICSID’.59 The ICSID Convention60 provides a self-contained ISDS treaty-based arbitration system with automatic enforcement of ICSID awards, without the possibility of national courts reviewing them on the basis of grounds of refusal of enforcement. On the other hand, non-ICSID arbitration is, in principle, governed by national arbitration laws, with ISDS awards being subject to the possibility of setting-aside actions at the place of arbitration and to enforcement actions under the New York Convention61 in other jurisdictions.62 If we are to work on an appellate mechanism, it must be clear that it should be introduced to address the unjustified inconsistencies in the interpretation of the treaty provisions and other principles of international law by tribunals.63 While the idea of ‘appeal’ may have some tension with the attribute of ‘finality’ in arbitration, it is not necessarily an ‘enemy’ to investment arbitration, which generally involves matters of higher public interest. In fact, in the report of the Departmental Advisory Committee on Arbitration (DAC) on the UK Arbitration Bill in 1996, with respect to the suggestion on the abolition of the right of appeal, it was concluded that: a limited right of appeal [on point of law with sufficient safeguards in place] is consistent with the fact the parties have chosen to arbitrate rather than litigate … [because it] can be said with force that … the parties have agreed that the law will be properly applied by the arbitral tribunal, with the consequence that if the tribunal fails to do so, it is not reaching the result contemplated by the arbitration agreement64 Section 69 of the UK Arbitration Act 1996 is a fine example of providing for a limited right of appeal on point of law,65 which is a model to which we can refer in designing an ISDS appellate mechanism. Hong Kong’s Arbitration Ordinance has also provided for an opt-in scheme for making an appeal against arbitral awards on questions of law, which is similar to section 69 of the UK Arbitration Act 1996.66 Conceptually, one can look at international practice. Only a few international tribunals feature appellate mechanisms for reviewing decisions at first instance.67 Some examples include the Appeals Chambers of the International Criminal Tribunals for the Former Yugoslavia and for Rwanda. Of course, in Geneva, one can find the ‘Crown jewel’ of the World Trade Organization: its standing appellate body, which may directly address concerns regarding inconsistencies. (ii) Structure of the ISDS appellate mechanism: centralized or decentralized? First, if the objective is to ensure consistency and coherence in ISDS awards, we are probably looking at a centralized standalone appellate mechanism—one that is based on a multilateral treaty—instead of leaving appeals to be conducted by bilateral appellate mechanisms formed under individual BITs or domestic courts, which would most likely further aggravate inconsistencies in ISDS awards as a result of the different approaches and different standards of review adopted in appellate procedures. (iii) Scope of review of the ISDS appellate mechanism Next, we will look at the scope of review of the ISDS appellate mechanism, and a very important question is whether it should be limited to errors of law but not errors of fact. An appeal is a balancing act between finality and correctness. In this regard, section 69 of the UK Arbitration Act 1996 provides for a limited right of appeal on a point of law. Within this limited scope of review, the English courts have recognized that appeals will not be granted lightly and a degree of deference will be accorded to the arbitrator’s decisions on questions of law.68 In reviewing whether there is an error of law in an arbitral award, an English court will read it in ‘a reasonable and commercial way’, without approaching it ‘with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards, and with the objective of frustrating the process of arbitration’.69 While the question of law that is dealt with under section 69 of the UK Arbitration Act 1996 is one of English law, it provides a basic blueprint from which we can build an appellate mechanism for ISDS.70 If we look at the WTO’s Appellate Body model, the scope of review is also confined to ‘issues of law covered in the panel report and legal interpretations developed by the panel’71 and the Appellate Body has no authority to take up the role of ‘triers of fact’ to examine new factual evidence or re-examine existing factual evidence upon which the panel report is based.72 Even if we follow section 69 of the UK Arbitration Act 1996 or the WTO Appellate Body model to confine the scope of review to errors of law, it is inevitable that the ISDS appellate mechanism will have to address difficult questions when the losing party tries to disguise an error of fact as an error of law, as well as when an application for appeal involves a mixed question of fact and law. In the context of the UK Arbitration Act 1996, the English courts have been strict in rejecting attempts to dress up erroneous factual findings or procedural errors as errors of law73 and, with respect to a mixed question of law and fact,74 adopted a high threshold under which it will interfere only if ‘on the facts found as applied to that right legal test, no reasonable person could have reached that conclusion’.75 In the context of the WTO, there have been attempts to characterize errors of fact as errors of law. In this regard, the WTO Appellate Body has also reminded us, in a number of cases, that its role is different from that of the panel, which has exclusive jurisdiction over factual assessment, and its scope of review is limited to issues of law covered in the panel report and legal interpretations developed by the panel.76 Under such a mandate, it is considered that even a manifest error of fact should not be reviewable by the Appellate Body.77 There is, of course, the complicated question of whether an egregious error of fact can constitute an error of law. The jurisprudence on section 69 of the UK Arbitration Act 1996 is also uncertain on this point, with some cases holding that factual findings made by the arbitrators, which have no basis whatsoever in the evidence, amounted to errors of law.78 Similarly, there are some uncertainties on this tricky issue under the WTO jurisprudence,79 but it also points to a very high threshold under which the egregious error of fact has to call into question the good faith of a panel—one that may be described as ‘deliberate disregard’ and ‘willful distortion’ of facts.80 The latter may be a better approach to discharge attempts to raise an egregious error of fact. (iv) ISDS appellate mechanism: as of right or with leave Another aspect that should be considered is whether an appeal should be as of right or should be allowed only with leave. From the experience of the WTO Appellate Body, in which an appeal is essentially as of right,81 an average of 68 percent of the panel reports were appealed, with the rate of appeal in some years reaching more than 80 percent (2014) or even 100 percent (1999).82 Given that the stakes in ISDS disputes are generally quite substantial, both host jurisdictions and investors would tend to lodge appeals if they were unsuccessful in the first instance arbitral award. As a result, it would be sensible to model upon section 69 of the UK Arbitration Act 1996 to require an applicant to obtain leave to appeal from the standalone ISDS appellate mechanism, to filter out frivolous appeal applications. In the interests of time, I will not go into the test of granting permission as laid down in the case law. As one may observe, section 69 of the UK Arbitration Act 1996 demonstrates a fine balance between finality and ensuring correctness in the application of law through a permission system83 to filter out frivolous appeal applications. (v) Status of the awards made by the ISDS appellate mechanism: a doctrine of stare decisis? The doctrine of stare decisis is a common law concept that may not be applicable in the context of international law. It functions well within a sovereign State in which the constitution provides for a judicial approach that protects and respects that. This concept has no bearing on international law, yet previous decisions always have referential values. To take the words of Christopher Thomas, ‘a simple priority in time does not create a priority in law’,84 and one should not assume that the precedent originating from an earlier decision of the ISDS appellate mechanism will necessarily be good law. In the practice of the WTO Appellate Body, there is not a formal doctrine of stare decisis. Rather it operates a de facto form of precedent under which a panel would not depart from the reports of the Appellate Body absent cogent reasons, especially when the same legal question is at issue.85 (vi) The adjudicators of the ISDS appellate mechanism A very important question in respect of the ISDS appellate mechanism is what gives the decisions of the appellate tribunal higher authority and a higher quality than those of the first instance tribunal. To quote Sir Eli Lauterpacht in his seminal ‘Aspects of the Administration of International Justice’ [t]he mere fact that one person has been set in a position to pass judgment on the verdict of another does not give the second decision a greater quality than the first … the concept of appeal … reflects [an] unarticulated assumption … that those to whom appeal lies are as judges in some way better than, or superior to, those whose judgment is being reviewed. If that element of superiority is lacking, appeal … is merely the substitution of one person’s view of the situation for that of another. That brings us to the very important question of who will be the adjudicators for this standalone appellate mechanism and how they will be selected. An important lesson from the WTO is concerned with the current paralysis of the Appellate Body when only one member remains in the seven-member Appellate Body.86 This is mostly a result of the WTO’s consensus-based procedural practice87 and the United States’ blockage of the appointment of Appellate Body Members.88 Then we look at the use of elections to appoint people of high standing and integrity, with knowledge of public international law and experience in handling investment disputes. Nevertheless, the use of an election system should be considered with caution. Speaking from his experience with the International Court of Justice, Sir Christopher Greenwood, in a lecture given at the Department of Justice of Hong Kong in 2018, reminded that while attracting the right sorts of lawyers with the right sorts of knowledge should be the objective for the composition of the adjudicators of the standalone ISDS appellate mechanism, in reality, the nationality of a candidate might often be the decisive factor if an election system is adopted. An option that is worth considering is forming a pool of adjudicators, similar to the ICSID Panels of Arbitrators, to hear the ISDS appeals. On one hand, this can ensure diversity of adjudicators, and on the other, address concern over the appellate mechanism being overloaded with cases. (vii) Interface of the ISDS appellate mechanism with the existing ISDS regime For ICSID arbitration, while article 53 of the ICSID Convention provides that the award ‘shall not be subject to any appeal’, the multilateral treaty for the establishment of the appellate mechanism can overcome this by operating as an inter se amendment to the ICSID Convention among the relevant Contracting States.89 For non-ICSID arbitrations, the interface will be more complex. National laws have to cater for different remedies for recourse to arbitration—whether an appeal is one as of right as well as the scope of the appeal. If the centralized appellate mechanism model is to be adopted, the national courts will have to surrender their jurisdictions over such non-ICSID arbitration and treaty-based arrangements have to be in place. (viii) Enforcement of awards made by the ISDS appellate mechanism Of course, an important consideration is the enforcement mechanism for awards made by the appellate mechanism. While it is open to the multilateral treaty for a new centralized appellate body to provide for its own enforcement mechanism, a more practical option would be to find ways to allow such awards to be enforceable under the ICSID Convention and the New York Convention.90 However, this will raise a host of complex technical issues, especially for enforcement of such awards in jurisdictions that are not parties to the multilateral treaty for the establishment of the centralized appellate mechanism.91 (ix) Institutional design of the ISDS appellate mechanism: a new permanent body or building on existing platform? For the establishment of a centralized standalone ISDS appellate mechanism, a fundamental consideration is whether we should set up a completely new permanent body or build on the existing mechanism. The establishment of a new permanent body can potentially be a daunting task as it is necessary to figure out how such a body is to be funded and how to set up the secretariat support as well the potentially complex question of deciding which jurisdiction should physically host the appellate mechanism.92 All this will take time. If it is believed that a standalone appellate mechanism can address the ‘perceived legitimacy deficit’ of ISDS, a more practical option is to build on the existing platform of ICSID.93 Given that ICSID is a dedicated and sophisticated platform with a demonstrable track record in handling ISDS disputes,94 we can use the annulment procedure as a model to devise an appellate mechanism that reviews not only the procedural integrity of the arbitration, but also any error of law in arbitral awards. In fact, the Panel of Arbitrators, from which the Chairman of the Administrative Council appoints the members of the ad hoc Committee for the annulment procedure of ICSID,95 can readily serve as a pool of diversified, experienced and knowledgeable adjudicators for the ISDS appellate mechanism. (x) Multilateral investment court: a revolutionary option? In respect of the possible structural reform options for ISDS, the Multilateral Investment Court (MIC) proposal has attracted much discussion in the current debate. In the words of Judge Charles Brower, the MIC can be monstrous, and he calls it the ‘Fifteen-Headed Hydra’.96 His greatest concern over the MIC proposal is that it would take away party appointment and result in re-politicization of international investment disputes,97 which are the very elements that make ISDS work in the very first place. Party appointment is the second tenet of arbitration, and a reflection of the principle of party autonomy in arbitration. As Judge James Crawford has observed, the elimination of party appointment for investors under the MIC proposal would further limit the pool of adjudicators98 and aggravate concern over the lack of diversity of adjudicators.99 He also seemed to be concerned that the MIC proposal would be biased towards States.100 At the end of the day, investors are practical and business savvy. In the Alexander Lecture in 2013, Judge Charles Brower coined the term ‘investomercial arbitration’ to describe any third-party mechanism, whether contractual or treaty-based, for the settlement of disputes between foreign investors and host States as a ‘hybrid’ phenomenon that escapes the strict public–private and domestic–international dichotomies.101 With the ‘investomercial arbitration’ concept in mind, some are concerned that102 moving to the ‘MIC’ will only leave a gap in the system, resulting in multinational corporations with strong bargaining power opting for entering into investment contracts instead with the host jurisdictions, which contain an international arbitration mechanism that is similar to the current ISDS regime,103 but with fewer safeguards and less transparency, and SMEs being practically excluded from an effective dispute resolution process for investment disputes. On the one hand, critics are not appeased by the MIC proposal104 and continue to see it as ‘ISDS in disguise’,105 while users of the regime feel that the MIC proposal is one that ‘throws the baby out with the bathwater’.106 In such circumstances, we may wish to consider thoroughly whether the MIC proposal is indeed a revolution at all.107 B. The Second Strand of the ‘Double-Helix’ Approach In this regard, we should perhaps ‘think outside the box’. As the second strand of the ‘double-helix’ approach, promoting the greater use of investment mediation can potentially enrich the practice of ISDS by giving it a new look and new life, in particular when investment mediation is already an option that has enjoyed much consensus among States.108 While investment mediation is not a panacea that can address all concerns, if we compare it with investment arbitration it does offer some unique benefits, such as providing host jurisdictions and foreign investors with a high degree of autonomy, flexibility and creative, forward-looking and consensual settlement arrangements in resolving investment disputes, and preserving the long-term relationships between the disputing parties.109 Investment mediation emphasizes harmony and can avoid creating arbitral awards that may be seen by some as politically unacceptable or intruding into the regulatory sovereignty of host jurisdictions. Given the consensual nature of mediated settlement agreements, the disputing parties will most likely comply with such agreements voluntarily, thus potentially saving the cost and resources required in post-award procedures such as annulment, setting aside and enforcement proceedings.110 Certainly, there is ample room for mediation and arbitration to work hand in hand as a complementary hybrid procedure such as Med-Arb, Arb-Med-Arb and even the concurrent shadow mediators procedure as advocated by experts such as Professor Jack Coe of the Pepperdine Law School.111 (i) CEPA investment mediation rules as a potential model protocol I turn to highlighting an innovation in the Investment Agreement112 under the framework of the Closer Economic Partnership Arrangement (CEPA) concluded between Mainland China and Hong Kong. While the CEPA Investment Agreement is an arrangement within one country, it contains provisions, such as fair and equitable treatment, and prohibition against illegal expropriation, which are commonly found in modern international investment agreements. Investment mediation is the only available detailed mechanism for resolving investment disputes under the CEPA Investment Agreement.113 Should mediation fail to resolve the dispute, the disputing parties may resort to litigation in courts. The CEPA Hong Kong Investment Mediation Rules114 set out a basic framework for the disputing parties to work on and leave ample room for them to customize the mediation process in light of their preferences and the nature of the dispute.115 Under those Rules, the disputing parties may, in accordance with the principle of voluntary participation, choose whether to participate in or to withdraw from mediation, and the disputing parties are required to cooperate with the mediators and each other in good faith and to participate in the mediation actively so as to advance the mediation expeditiously and efficiently.116 A distinguishing feature of the CEPA Hong Kong Investment Mediation Rules is that the default position is for a mediation commission consisting of three mediators,117 which is similar to the party appointment mechanism in investment arbitration. In this regard, the CEPA Investment Agreement requires that mediators shall have attained the relevant qualifications in mediation, and shall have professional knowledge and experience in the fields of cross-border or international trade and investment and law.118 A sophisticated code of conduct of mediators is provided under the CEPA Hong Kong Investment Mediation Rules119 to ensure their independence and impartiality. To nurture talented candidates in taking up the role of qualified mediators for investment disputes, the Department of Justice has been a pioneer in Asia in partnering up with the Asian Academy of International Law, ICSID, the Centre for Effective Dispute Resolution and the Energy Charter Treaty Secretariat to provide capacity building and professional training. With their three-member mediation commission model and robust qualification requirements on mediators, the CEPA Hong Kong Investment Mediation Rules allow a greater diversity of mediators in terms of linguistics, cultural and technical backgrounds to collaborate in the process,120 potentially creating a greater balance in the team and facilitating the ‘brainstorming’ of creative settlement arrangements. Those may include, but are not limited to, the grant or renewal of a license and the swapping of deals for other types of investment contracts or obligations.121 The CEPA Investment Agreement also provides flexibility in the confidentiality obligation to accommodate the needs and policies of host governments on transparency in ISDS and public disclosure for individual cases.122 In this regard, the default position under the CEPA Hong Kong Investment Mediation Rules provides that the confidentiality obligation shall not extend to the fact that the disputing parties have agreed to mediate or that a settlement has been reached from the mediation.123 Indeed, the CEPA Mediation Rules can serve as a template protocol for incorporation into international investment agreements or even for structuring a multi-tiered dispute resolution process such as ‘mediation first, arbitration next’. The ‘mediation first, arbitration next’ structure also echoes with a useful suggestion made in the CIArb’s discussion papers for UNCITRAL Working Group III of mandating disputing parties to attempt mediation before filing a claim in ISDS. To take the idea a step further, we may even render the initiation of the mediation automatic in order to address concern over the perception that the making of an invitation to mediation by a disputing party may be interpreted as a sign of weakness.124 VI. LOOKING FORWARD: ‘EVOLUTION, NOT REVOLUTION’ IS THE PATH TO FINDING ORDER WITHIN CHAOS The evolution of ISDS will be a long-term and gradual process that requires collaboration and the making of effort by all the stakeholders. Nevertheless, the key to deciphering order in the current chaotic picture of ISDS reform is always there, waiting to be discovered. As is revealed by the history of ISDS, the key has always been the need for a peaceful, depoliticized and rule-of-law-based dispute resolution mechanism that has the trust of both host jurisdictions and foreign investors in resolving international investment disputes. Evolution along the historical trajectory of ISDS, but not system-overhauling revolution, is therefore the path to finding order within chaos. There is a Chinese saying that ‘in every crisis, there lies an opportunity’. The legitimacy crisis faced by the ISDS may present an opportunity to enrich its practice by capitalizing on the strength of investment mediation to synergize with the practice of investment arbitration while exploring the use of a well-balanced ISDS appellate mechanism to achieve the higher standard of legitimacy that is expected of ISDS. Acknowledgement This article is based on the 45th Alexander Lecture of the Chartered Institute of Arbitrators delivered by Ms. Cheng in Hong Kong (16 January 2020). The author wishes to thank David Ng, Senior Government Counsel (Secretary for Justice's Office), for his assistance in preparing this article. Footnotes 2 " The United Nations Conference on Trade and Development (UNCTAD), ‘Investment Dispute Settlement Navigator—Known treaty-based ISDS cases’ (30 September 2019) accessed on 16 January 2020. 3 " UNCTAD, ‘IIA Issues Note—Fact Sheet on Investor-State Dispute Settlement Cases in 2018’ (May 2019) accessed on 16 January 2020. 4 " European Commission, ‘Fact Sheet on EU–Japan Trade Agreement’ (July 2018) accessed on 16 January 2020. 5 " ISDS Platform, ‘Why we must ban secret corporate courts from trade deals’ (2 May 2018) accessed on 16 January 2020. 6 " The Hill, ‘New NAFTA must terminate corporate kangaroo courts’ (9 November 2017) accessed on 16 January 2020. 7 " Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (ICSID Convention). Charles Brower and Sadie Blanchard, ‘What’s in a Meme? The Truth about Investor-State Arbitration: Why It Need Not, and Must Not, Be Repossessed by States’ (2014) 52 Colum JTransnatl L 689, 692. 8 " Bolivia, Ecuador, Venezuela, South Africa, Indonesia and India have terminated their bilateral investment treaties in recent years (See Chin Leng Lim, Jean Ho and Martins Paparinskis, International Investment Law and Arbitration: Commentary, Awards and other Materials (CUP 2018) 491. See also Leon Trakman and David Musayelyan, ‘Caveat investors—where do things stand now?’ in Chin Leng Lim (ed), Alternative Visions of the International Investment Law on Foreign Investment—Essays in Honour of Muthucumaraswamy Sornarajah (CUP 2016) 69, 96–8. 9 " Charles Brower and Shashank P Kumar, ‘Investomercial Arbitration: Whence Cometh It? What Is It? Whither Goeth It?’ (2015) 30(1) ICSID Rev—FILJ 35, 36. See also ‘There’s “no alternative” to investment arbitration, says Schreuer’ (Global Arbitration Review, 22 December 2017) accessed on 16 January 2020; and Lim, Ho and Paparinskis (n 8) 4–5. 10 " See Lim, Ho and Paparinskis (n 8) 4–5. 11 " ‘Chapter 1. An Overview of International Arbitration’ in Nigel Blackaby, Constantine Partasides and others, Redfern and Hunter on International Arbitration (6th edn, OUP 2015) 1–70. 12 " VV Veeder, ‘The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator—From Miami to Geneva’ in David Caron, Stephan Schill and others (eds), Practising Virtue: Inside International Arbitration (OUP 2015) 127, 148. See also Brigitte Stern, ‘To Examine the Desirability (or Undesirability) of Replacing Ad Hoc Arbitrator by Full-Time Judges’ (Proceedings of ISDS Reform Conference 2019—Mapping the Way Forward, Asian Academy of International Law 2019) 190, 192, 195 and 196. 13 " See Lim, Ho and Paparinskis (n 8) 59–60. In the Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investment (signed 25 November 1959, entered into force 28 April 1962) (Germany–Pakistan BIT), most of the provisions have antecedents in the friendship, commerce and navigation (FCN) treaties, with exception of two new substantive provisions on national and most favoured nation (MFN) treatment with respect to compensation for losses due to armed conflict, revolution or revolt, and the requirement on observing any other obligation that it may have entered into with regard to covered investments. It is also noteworthy that the Germany–Pakistan BIT does not contain the fair and equitable treatment (FET) provision commonly found in modern international investment agreements (Kenneth J Vandevelde, ‘The liberal vision of the international law on foreign investment’ in Lim (ed) (n 8) 43, 55. 14 " Karl-Heinz Böckstiegel, ‘The Future of International Investment Law—Substantive Protection and Dispute Settlement’ in Marc Bungenberg and others (eds) International Investment Law: A Handbook (CH Beck, Hart and Nomos 2015) 1863, 1863–4. 15 " Karl-Heinz Böckstiegel, ‘Clayton Utz Lecture: Enterprise v. State: The New David and Goliath?’,(2007) 23(1) Arb.Intl 93, 104. 16 " Rudolf Dolzer and Christoph Schreuer, ‘History, Sources, and Nature of International Investment Law’ in Principles of International Investment Law (2nd edn, OUP 2015) 7. 17 " Asian Agricultural Products Ltd v Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) (AAPL v Sri Lanka). 18 " M Sornarajah, ‘Creating jurisdiction beyond consent’ in Resistance and Change in the International Law on Foreign Investment (CUP 2015) 136, 140. See also Lim, Ho and Paparinskis (n 8) 87–95. 19 " Jan Paulsson, ‘Arbitration without Privity’ (1995) 10(2) ICSID Rev—FILJ 232, 257. 20 " Philip Morris Asia Limited v The Commonwealth of Australia, UNCITRAL, PCA Case No 2012-12, Award (8 July 2017) (Philip Morris Asia v Australia). 21 " See Lim, Ho and Paparinskis (n 8) 73. 22 " Susan Franck, ‘The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions’ (2005) 2(3) Transnatl Disp Mgmt 1545–6. 23 " ibid. 24 " CMS Gas Transmission Company v The Republic of Argentina, ICSID Case No ARB/01/8, Award (12 May 2005) (CMS v Argentina). 25 " LG&E Energy Corp, LG&E Capital Corp, and LG&E International, Inc.v Argentine Republic, ICSID Case No ARB/02/1, Award (25 July 2007) (LG&E v Argentina). Brigitte Stern, ‘The Future of International Investment Law: A Balance between the Protection of Investors and the States’ Capacity to Regulate’ in José E Alvarez and Karl P Sauvant (eds) The Evolving International Investment Regime: Expectation, Realities, Options (OUP 2011) 174, 181–6. 26 " Albert Jan van den Berg, ‘Appeal Mechanism for ISDS Awards: Interaction with New York and ICSID Convention’ (Proceedings of ISDS Reform Conference 2019–Mapping the Way Forward, Asian Academy of International Law 2019) 52, 54–8. See also Stanimir A Alexandrov, ‘On the Perceived Inconsistency in Investor-State Jurisprudence’ in Alvarez and Sauvant (n 25) 60–9. 27 " Stephen M Schwebel, ‘Keynote Address: In Defence of Bilateral Investment Treaties’ in Albert Jan van den Berg (ed), ‘Legitimacy: Myths, Realities, Challenges’, ICCA Congress Series, vol 18 (Wolters Kluwer 2015) 1, 8–9. 28 " Veeder (n 12) 148. 29 " See Stern (n 12) 190, 200. 30 " ‘Gaillard’s Chaos Theory—Is Harmony in International Arbitration Overrated?’ (Global Arbitration Review, 22 December 2017) accessed on 16 January 2020. 31 " James Crawford, ‘The Ideal Arbitrator: Does One Size Fit All?’ (2017) 32(5) Am U Intl L Rev 1003, 1005. 32 " See Schwebel (n 27) 1, 6. 33 " See UNCTAD (n 2). 34 " UNCITRAL, ‘Report of Working Group III (Investor–State Dispute Settlement Reform) on the work of its thirty-sixth session (Vienna, 29 October–2 November 2018)’ (6 November 2018) UN Doc A/CN.9/964) accessed on 16 January 2020, paras 91– 8. 35 " According to the data in 2017, among the top 25 arbitrators in terms of the number of appointments (which has taken up one third of all arbitral appointments), only two of them are female. In terms of statistics, a detailed study conducted by Susan Franck in 2006 found that in the then 102 publicly available awards five out of 145 arbitrators were women (approximately 3%). It also found that, as of 1 March 2012, based on the 254 concluded cases from 1972 to 2012 published on the ICSID website, 43 out of 745 arbitrators were women (5.63%) (See UNCITRAL, ‘Note by the Secretariat on arbitrators and decision makers—appointment mechanisms and related issues’ (30 August 2018) UN Doc A/CN.9/WG.III/WP.152 accessed on 16 January 2020). 36 " According to the data in 2017, among the top 25 arbitrators in terms of the number of appointments (which has taken up one third of all arbitral appointments), with the exception of four arbitrators, all are listed as nationals of Western States. However, even the four exceptions are not particularly representative of the rest of the world, with one coming from Eastern Europe but having resided in the United States for decades, the other three from Latin American States but maintaining their professional practices in the United States or Western Europe, and none from Asia or Africa. (See Malcolm Langford, Daniel Behn and Runar Hilleren Lie, ‘The Revolving Door in International Investment Arbitration’ (2017) 20 J Intl Econ L, 301, 309–10.) Furthermore, among the ‘top 10 nationalities’ (France, United States, United Kingdom, Canada, Switzerland, Spain, Australia, Germany, Italy and Mexico), which have taken up more than 50% of the appointments, arbitrators from France, the United States and the United Kingdom have consistently been the three largest groups of appointees and have taken up almost 30% of the appointments. (See Adrian Lai, ‘Appointment of Arbitrators and Related Issues’ (Proceedings of ISDS Reform Conference 2019—Mapping the Way Forward, Asian Academy of International Law 2019) 419, 450–1.) 37 " Lucy Reed, ‘Keynote Address’ (15th Annual ITA-ASIL Conference: Diversity and Inclusion in International Arbitration—The Math: Caution + Habit + Bias’, Washington, DC, April 2018) accessed on 16 January 2020. 38 " See eg, [2018] ICSID Rep 48–9 on the steps taken to enhance gender diversity. In the case of ICSID, there has been constant improvement on gender diversity, with 12.3% of total female arbitrator appointments in 2015 rising to 24% in 2018. (See Lai (n 36) 419, 455.) Further, according to an analysis for institutional appointments in international arbitration more generally (ISDS and international commercial arbitration), the percentage of female arbitrator appointments has increased from 6% in 2011 to 17% by 2016. 39 " Matthew Hodgson and Alastair Campbell, ‘Damages and Costs in Investment Treaty Arbitration Revisited’ (Global Arbitration Review, 14 December 2017). accessed on 16 January 2020. 40 " ibid. 41 " Jeffery Commission, ‘How Long is Too Long to Wait for an Award’ (Global Arbitration Review, 18 February 2016). accessed on 16 January 2020. 42 " Metalclad Corporation v The United Mexican States, ICSID Case No ARB(AF)/97/1, Award (30 August 2000) (Metalclad Corporation v United Mexico). 43 " Jack J Coe Jr, ‘Towards a Complementary Use of Conciliation in Investor-State Disputes—A Preliminary Sketch’ (2007) 4(1) Transnatl Disp Mgmt 27. 44 " Jack J Coe Jr, ‘Should Mediation of Investment Disputes Be Encouraged, and, If So, by Whom and How?’ in Arthur W Rovine (ed), ‘Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (2009)’ (Martinus Nijhoff Publishers, 20 May 2010) 339–40. 45 " UNCITRAL, ‘Note by the Secretariat: Possible reform of investor–State dispute settlement (ISDS)—cost and duration’ (31 August 2018) UN Doc A/CN.9/WG.III/WP.153 accessed on 16 January 2020, para 8. 46 " UNCTAD, ‘IIA Issues NoteReform of Investor–State Dispute Settlement: In Search of a Roadmap’ (June 2013) accessed on 16 January 2020. 47 " UNCITRAL, ‘UNCITRAL Working Group on investor–State dispute settlement (ISDS) continues work on reforms’ (24 January 2020) accessed on 16 January 2020. 48 " UNCITRAL, ‘Report of Working Group III (Investor–State Dispute Settlement Reform) on the work of its thirty-fourth session (Vienna, 27 November–1 December 2017)’ (19 December 2017) UN Doc A/CN.9/930/Rev.1 accessed on 16 January 2020, paras 20, 27–30. See also UNCITRAL, ‘Submission from the Government of South Africa on the possible reform of Investor-State Dispute’ (17 July 2019) UN Doc A/CN.9/WG.III/WP.176 accessed on 16 January 2020, paras 19 and 20. 49 " Stephan W Schill and Geraldo Vidigal, ‘Cutting the Gordian Knot: Investment Dispute Settlement à la Carte’ (November 2018) accessed on 16 January 2020. 50 " The Investment Chapter of the CPTPP accessed on 16 January 2020. Code of conduct on arbitrator for the CPTPP accessed on 16 January 2020. 51 " The Investment Chapter of the USMCA accessed on 16 January 2020. 52 " Joint Leaders’ Statement on the Regional Comprehensive Economic Partnership (RCEP) (4 November 2019, Bangkok, Thailand) accessed on 16 January 2020. 53 " ‘India’s not joining the latest free-trade deal which limits Australia’s market access’ (The Conversation, 4 November 2019) accessed on 16 January 2020. See also ‘Suddenly, the world’s biggest trade agreement won’t allow corporations to sue governments’ (The Conversation, 17 September 2019) accessed on 16 January 2020. 54 " The Calvo doctrine emerged during the 1800s, against a background in which Latin American countries experienced diplomatic and military intervention by foreign investors. The doctrine was named after the Argentinian diplomat and jurist Carlos Calvo, who considered that ‘it is certain that aliens who establish themselves in a country have the same rights to protection as nationals, but they ought not to lay claim to a protection more extended’. Calvo felt that recognition of the international law concept would result in allowing ‘an exorbitant and fatal privilege, especially favourable to the powerful states and injurious to the weaker nations, establishing an unjustifiable inequality between nationals and foreigners’. (See James Baker and Lois Yoder, ‘ICSID and the Calvo Caluse—A Hindrance to Foreign Direct Investment in LDCs’ (1989) 5(1) J.Disp Resol 75, 90.). It is of interest to note that the Max Planck Encyclopedia of International Law considers that the Calvo doctrine nowadays seems obsolete because the ISDS mechanism has evolved in such a way as to render it useless. (See Patrick Julliard, ‘Calvo Doctrine/Calvo Clause’ (2007) Max Planck Encyclopedia of International Law.) Professor Christoph Schreuer has remarked that we should be wary of the tendency for the re-emergence of the Calvo doctrine or its variations. (See Christoph Schreuer, ‘Calvo’s Grandchildren: The Return of Local Remedies in Investment Arbitration’ (2005) accessed on 16 January 2020.) 55 " See Model Text for the Indian Bilateral Investment Treaty (2016) accessed on 16 January 2020. 56 " As of December 2019, India has signed only one BIT that is based on its new model: Treaty between the Republic of Belarus and the Republic of India on Investments (signed 24 September 2018, not yet entered into force) (Belarus–India BIT). As for Brazil, since the adoption of the CFIA in 2015, only the BIT with Angola has entered into force. 57 " G20 Guiding Principles for Global Investment Policymaking (2016) accessed on 16 January 2020, Principle III. 58 " ibid Principles III and IV. 59 " According to the statistics on known treaty-based ISDS cases (as of July 2019), available on UNCTAD’s Investment Policy Hub accessed on 16 January 2020, approximately 60% of the 983 known treaty-based ISDS cases were administered under the ICSID Arbitration Rules and the ICSID Additional Facility Rules, with approximately 31% being administered under the UNCITRAL Arbitration Rules and approximately 5% under the SCC Arbitration Rules. 60 " (n 7). 61 " Convention on the Recognition and Enforcement of Foreign Arbitral Awards (signed 10 June 1958, entered into force 7 June 1959) (New York Convention). 62 " See van den Berg (n 26) 52, 70–7. 63 " See UNCITRAL (n 34) paras 91–8. 64 " The Report of the Departmental Advisory Committee on Arbitration Law on the Arbitration Bill (February 1996) paras 284–92. 65 " UK Arbitration Act 1996, s 69(1) provides that: " Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. " An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section. 66 " See ss 5–7 of sch 2 to the Arbitration Ordinance (Cap 609 of the Laws of Hong Kong). 67 " Chester Brown, ‘Supervision, Control, and Appellate Jurisdiction: the Experience of the International Court’ (2017) 32(3) ICSID Rev–FILJ 595, 596. 68 " See Kershaw Mechanical Services Ltd v Kendrick Construction Ltd [2006] EWHC 727 (TCC), which has been cited in PEC Ltd v Thai Maparn Trading Co Ltd [2011] EWHC 3306 (Comm) and Seagrain LLC v Glencore Grain BV [2013] EWHC 1189 (Comm). See also Silverburn Shipping (IoM) Ltd v Ark Shipping Company LLC [2019] EWHC 376 (Comm). 69 " See Polaris Shipping Co Ltd v Sinoriches Enterprises Co Ltd [2015] EWHC 3405 (Comm). 70 " Robert Merkin, Arbitration Act 1996 (3rd edn, Informa Law 2005) 177. 71 " See WTO Dispute Settlement Understanding art 17.6. 72 " World Trade Organization, ‘The Stage in a Typical WTO Dispute’ in A Handbook on the WTO Dispute Settlement System (2nd edn, CUP 2017) 49, 105–6. 73 " The classic test for distinguishing between questions of law and of fact is set out in Finelvet AG v Vinava Shipping Co Ltd (The Chrysalis) [1983] 2 All ER 658, which stated that: " the answer is to be found by dividing the arbitrator's process of reasoning into three stages: (1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision. " … " The second stage of the process is the proper subject matter of an appeal under the 1979 Act. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where a correct application of the law to the facts found would lead inevitably to one answer, whereas the arbitrator has arrived at another; and this can be so even if the arbitrator has stated the law in his reasons in a manner which appears to be correct: for the court is then driven to assume that he did not properly understand the principles which he had stated. (emphasis added) 74 " See Merkin (n 70). 75 " David Wolfson and Susanna Charlwood, ‘Chapter 25: Challenges to Arbitration Awards’ in Julian David Mathew Lew, Harris Bor and others (eds), Arbitration in England, with chapters on Scotland and Ireland (Kluwer Law International 2013) 527, 547–9. 76 " Appellate Body Report, ‘United States—Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities’, WT/DS166/AB/R (22 December 2000) paras 150–1. 77 " Rüdiger Wolfrum and Peter-Tobias Stoll (eds), ‘Max Planck Commentaries on World Trade Law—Institution and Dispute Settlement’ (Max Planck Institute for Comparative Public Law and International Law 2006) 458. 78 " See eg, Fence Gate Ltd v NEL Construction (2001) 82 Con LR 41. See also Merkin (n 70) and Wolfson and Charlwood (n 75) 527, 547–8. 79 " A relevant issue is related to the function of WTO Panels under art 11 of the WTO Dispute Settlement Understanding, which provides that [t]he function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution (emphasis added). 80 " See Wolfrum and Stoll (n 77) 457. 81 " See WTO Dispute Settlement Understandin art 17g. 82 " Zhang Yuejiao, ‘Whether an Appeal Mechanism for ISDS is Desirable and Practicable in the Light of the Experience of the WTO Appellate Body and ICSID’ (Proceedings of ISDS Reform Conference 2019—Mapping the Way Forward, Asian Academy of International Law 2019) 129–3, 137. See also Freya Bartens, ‘Judicial Review of International Adjudicatory Decisions: A Cross-Regime Comparison of Annulment and Appellate Mechanisms’ (2017) 8(3) JIDS 432, 438. 83 " According to the statistics of the English Commercial Court, in the period from 2015 to early 2018, there were 162 applications for leave to appeal under the UK Arbitration Act s 69, with leave to appeal being granted in only 30 (approximately 18.5%) and only five successful appeals (approximately 3%). (See Judiciary of England and Wales, ‘Commercial Court Users’ Group Meeting Report—March 2018’ (3 May 2018) accessed on 16 January 2020) The statistics indicate that the threshold for granting leave to appeal under the UK Arbitration Act s 69 is high. 84 " John Christopher Thomas, ‘The Evolution of the ICSID System as an Indication of What the Future Might Hold’ in Albert Jan Van den Berg (ed), International Arbitration: The Coming of a New Age?, ICCA Congress Series, vol 17 (Kluwer Law International 2013) 563, 602–3. 85 " Appellate Body Report, United States—Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R (30 April 2008) para 160. 86 " Philip Blenkinsop, ‘U.S. files appeal into WTO system it has broken’ (Reuters, 19 December 2019) accessed on 16 January 2020. See also WTO, ‘Appellate Body Members’ (2019) accessed on 16 January 2020. 87 " Article 17.2 of the WTO Dispute Settlement Understanding provides that ‘[t]he DSB shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once’. Article 2.4 further provides that ‘[w]here the rules and procedures of this Understanding provide for the DSB to take a decision, it shall do so by consensus’. Specifically, footnote 1 to art 2.4 provides that ‘[t]he DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision’. 88 " Geraldo Vidigal, ‘Addressing the Appellate Body Crisis: A Plurilateral Solution?’Amsterdam Center for International Law, No 2019-03 accessed on 16 January 2020. 89 " See van den Berg (n 26) 52, 75–8. 90 " See ibid 52, 85–110. 91 " See ibid 52–119. 92 " Lucy Reed and Christine Sim, ‘Potential Investment Treaty Appellate Bodies: Open Questions’ (2017) 32(3) ICSID Rev–FILJ 691–5. 93 " See van den Berg (n 26) 52, 108–9. As remarked by Zhang Yuejiao, a former Appellate Body member of the WTO, while it is desirable to establish an appellate mechanism in ISDS, it will be more difficult than establishing the Appellate Body in the WTO. In her view, a reason for the establishment of an ISDS appellate mechanism is to correct manifest legal errors in ISDS arbitral awards. She also considers that it is much less difficult to modify the existing annulment ad hoc committee system within ICSID or create a new Appellate Body within ICSID than establishing a new Appellate Body mechanism from scratch in other international forums. (See Yuejiao (n 82) 129, 140–2). 94 " According to the statistics on known treaty-based ISDS cases (as of July 2019), available on UNCTAD’s Investment Policy Hub accessed on 16 January 2020, 62.6% of the 983 known treaty-based ISDS cases were administered by ICSID. 95 " See ICSID Convention (n 7) art 52. 96 " Charles N Brower and Jawad Ahmad, ‘From the Two-Headed Nightingale to the Fifteen-Headed Hydra: The Many Follies of the Proposed International Investment Court’ (2018) 41(4) Fordham Intl LJ 791. 97 " See Brower and Blanchard (n 7) 689–779. See also Stern (n 12) 190–201. 98 " See Crawford (n 31) 1018–22. See also Böckstiegel (n 14) 1863, 1870, and ‘Schwebel criticizes EU act of ‘appeasement’’ (Global Arbitration Review, 24 May 2016) and ‘Fortier on the cola wars’ (Global Arbitration Review, 18 October 2019). 99 " See Stern (n 12) 190, 199. 100 " See Crawford (n 31) 1018–22. 101 " See Brower and Kumar (n 9). 102 " Charles Brower, ‘State Parties in Contract-based Arbitration—Origins, Problems, and Prospects of Private-Public Arbitration’ (2019) accessed on 16 January 2020. See also ‘Veeder and van den Berg on the future of investment arbitration’ (Global Arbitration Review, 11 April 2019) and ‘Nassib Ziadé on ‘Do we need a permanent investment court’’ (Global Arbitration Review, 13 February 2019). 103 " Charles Brower considers that it is an absolute fallacy—a false trichotomy—to consider that there are clean borders separating commercial arbitration, treaty-based investor–State arbitration and inter-State forms of dispute resolution involving foreign investments. In his view, what matters is not the stage on which the dispute is played out, but rather the competing private and public interests at stake (see Brower (n 102)). 104 " M Sornarajah, ‘An International Investment Court: panacea or purgatory’ (August 2016) accessed on 16 January 2020. 105 " Red Carpet Courts, ‘Still rolling out the red carpet: The EU’s ISDS push for VIP corporate privileges’ (June 2019) accessed on 16 January 2020. 106 " See Brower and Ahmad (n 96). See also Charles Brower and Jawad Ahmad, ‘Why the “Demolition Derby” That Seeks to Destroy Investor-State Arbitration?’ (2018) 91(6) S Cal L Rev 1140; and CIArb, ‘Evolution not Revolution: CIArb sets out its approach to the question of ISDS reform’ (14 February 2019) accessed on 16 January 2020. 107 " In fact, the concept of an investment court is not new. During the previous negotiations for the multilateral investment agreement under the OECD, while Norway put forward a proposal to establish an international investment tribunal, the negotiators did not consider such a proposal as a viable alternative to investment arbitration (see Walid Ben Hamida, ‘The First Arab Investment Court Decision’ (2006) 7(5) JWIT 699). One of the rare examples of investment courts is the Arab Investment Court, established under the Unified Agreement for the Investment of Arab Capital in the Arab States (‘Unified Agreement’). The Arab Investment Court has compulsory jurisdiction over investment disputes between investors and the host States arising under the Unified Agreement. However, such compulsory jurisdiction is secondary in the sense that recourse to the Court is allowed only if disputing parties fail to agree to submit the case to conciliation or arbitration, if the conciliator fails to reconcile the parties or if the arbitrator(s) fail to make a ruling within the specified period. (See John Gaffney, ‘The EU proposal for an Investment Court System: what lessons can be learned from the Arab Investment Court’ (29 August 2016) accessed on 16 January 2020.) It should be noted that while the Arab Investment Court was established in 1985, it only became operational in 2003. (See Hamida above 699, 700.) It has also been reported that despite the existence of the Arab Investment Court, an Oman investor opted for making an investment arbitration claim against the Republic of Yemen to an ICSID tribunal in 2006 (Desert Line Projects LLC v The Republic of Yemen, ICSID Case No ARB/05/17) (see Ning Hongling and Qi Tong, ‘A Chinese Perspective on the Investment Court System in the Context of Negotiating EU-China BIT’ (2018) 11(1) Tsinghua China L Rev 91–127, fn 134). 108 " See eg, UNCITRAL, ‘Submission from the Government of China on the possible reform of investor-State dispute settlement’ (19 July 2019) UN Doc A/CN.9/WG.III/WP.177 accessed on 16 January 2020; ‘Submission from the Governments of Chile, Israel, Japan, Mexico and Peru’ (2 October 2019) UN Doc A/CN.9/WG.III/WP.182 accessed on 16 January 2020; ‘Submission from the European Union and its Member States on the possible reform of investor-State dispute settlement’ (24 January 2019) UN Doc A/CN.9/WG.III/WP.159/Add.1 accessed on 16 January 2020; ‘Submission from the Government of Thailand on the possible reform of investor-State dispute settlement’ (8 March 2019) UN Doc A/CN.9/WG.III/WP.162 accessed on 16 January 2020; ‘Submission from the Government of South Africa on the possible reform of investor-State dispute settlement’ (17 July 2019) UN Doc A/CN.9/WG.III/WP.176 accessed on 16 January 2020; ‘Submission from the Government of Indonesia on the possible reform of investor-State dispute settlement’ (9 November 2018) UN Doc A/CN.9/WG.III/WP.156 accessed on 16 January 2020. 109 " UNCTAD, ‘Investor-State Disputes: Prevention and Alternatives to Arbitration’ (2010) accessed on 16 January 2020. See also Edna Sussman, ‘The Advantages of Mediation and the Special Challenges to its Utilization in Investor State Disputes’ (2014) 11(1) Transnatl Disp Mgmt. 110 " See Sussman (n 109) 8. 111 " See the discussion on the different types of arbitration-mediation hybrid procedure in David Ng, ‘Investment Mediation’ (Proceedings of ISDS Reform Conference 2019—Mapping the Way Forward, Asian Academy of International Law, 2019) 290, 326–32. 112 " Investment Agreement and Agreement on Economic and Technical Cooperation under the framework of the Mainland and Hong Kong Closer Economic Partnership Agreement (signed 28 June 2017) accessed on 16 January 2020. 113 " See ibid arts 19 and 20. 114 " The texts of the CEPA Mediation Mechanism and the CEPA Hong Kong Investment Mediation Rules accessed on 16 January 2020. 115 " Under CEPA Hong Kong Investment Mediation Rules art 1(2), it is provided that, save for certain fundamental provisions, the disputing parties may agree to exclude or vary any of the rules. 116 " See CEPA Hong Kong Investment Mediation Rules art 3. 117 " See ibid art 5(1). 118 " See CEPA Mediation Mechanism para 1.6. 119 " CEPA Hong Kong Investment Mediation Rules art 7(1) provides that each mediator shall be independent and impartial and shall mediate the dispute in a manner that is transparent, objective, equitable, fair and reasonable. " Under art 7(3), mediators are required to avoid their performance from being affected by their own financial, business, professional, family or social relationships or responsibilities. " Moreover, according to art 7(4), unless otherwise agreed by the disputing parties, by accepting an appointment as mediator of a dispute under the CEPA Investment Agreement, the mediator is deemed to agree not to act in any other role (including but not limited to counsel, arbitrator, expert or witness) in respect of: (i) any differences or disputes which are the subject of the mediation; or (ii) any other differences or disputes in which a disputing party is involved as a disputant pending the resolution of the dispute in mediation. " Furthermore, CEPA Hong Kong Investment Mediation Rules art 7(6) requires that if the disputing parties are unable to resolve the dispute through mediation, the mediators who were appointed to conduct the mediation shall not be appointed as judge, arbitrator, agent or legal adviser of any disputing party in any subsequent proceedings (including litigation and arbitration proceedings) of the same or related dispute, unless the disputing parties otherwise agree. " Article 7(5) of the Rules also requires that, if, during the course of the mediation, a mediator becomes aware of any facts or circumstances that may call into question the mediator’s independence or impartiality in the eyes of the disputing parties, the mediator is required, under the Rules, to disclose those facts or circumstances to the disputing parties in writing without delay. 120 " In terms of the mediation process, the CEPA Hong Kong Investment Mediation Rules seek to ensure efficiency by introducing the mechanism of mediation management conference (see art 9). 121 " According to CEPA Hong Kong Investment Mediation Rules art 12(2), the solutions under the mediated settlement agreement shall be confined to the following: (i) monetary compensation and any applicable interest; (ii) restitution of property or monetary compensation and any applicable interest in lieu of restitution of property; and (iii) other legitimate means of compensation agreed upon by the disputing parties. Such legitimate means of compensation may include a wide variety of non-monetary remedies, such as: (i) provision of a different location or project for the investment as an alternative compensation for the denial of a permit or license to operate a particular investment; (ii) re-negotiation of the terms of a concession project; (iii) re-evaluation of the return of a project and provisions of additional guarantees or sources of revenue; and (iv) self-assessments and reappraisals by governments of problematic measures they have enacted (see UNCTAD (n 109) 32). 122 " See Coe Jr (n 43) 27 and 40. For example, in the standard contract of the Government of the Hong Kong Special Administrative Region, it is provided that the Government may disclose the outline of any terms of settlement for which a settlement agreement has been reached with the contractor or the outcome of the arbitration or any other means of resolution of dispute to the Public Accounts Committee of the Legislative Council upon its request. 123 " See CEPA Hong Kong Investment Mediation Rules art 11(4)(a). Pursuant to art 11(4)(b)(i), the confidentiality obligation does not apply where the disclosure of mediation communication is agreed by the disputing parties and the mediation commission, and for such purposes as approved by them. 124 " See Coe Jr (n 43) fn 129. © The Author(s) 2020. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) TI - The Search for Order within Chaos in the Evolution of ISDS JF - ICSID Review: Foreign Investment Law Journal DO - 10.1093/icsidreview/siaa003 DA - 2009-02-01 UR - https://www.deepdyve.com/lp/oxford-university-press/the-search-for-order-within-chaos-in-the-evolution-of-isds-CkdFuVJINh SP - 1 VL - Advance Article IS - DP - DeepDyve ER -