An Appellate Mechanism for Review of Arbitral Decisions in Investor - State Disputes: Prospects and Challenges

Abstract

Current support for such an appellate mechanism is largely derived from Congressional and NGO concerns regarding certain arbitral decisions rendered under NAFTA’s Chapter 11, where questions as to the consistency of tribunal interpretation of investment rules have been raised. Incorporation of such a mechanism or mechanisms in free trade agreements and bilateral investment treaties is effectively required by the President’s 2002 “Trade Promotion Authority.” Negotiation and drafting of an agreement establishing such a mechanism will commence shortly (three months) after the United States – Central America – Dominican Free Trade Agreement enters into force, probably January 1, 2006. The article discusses the genesis and rationale for the appellate mechanism concept; existing procedures under ICSID and elsewhere for review of arbitral awards; and the legal challenges for the negotiators. This last group includes questions relating to the standard of review; various procedural and jurisdictional issues; transparency arrangements; a possible bonding requirement; choice of law; structure and membership; situs of the mechanism; dealing with member conflicts of interest; and the need to modify existing FTAs and BITs.

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