The International Business Transactions Blog

Schiefelbein Global Dispute Resolution Conference: Panel 4 Summary

By John Contrera
Law Student Guest Editor
Yuki Taylor
Law Student Editor

The fourth and final panel of the Schiefelbein Global Dispute Resolution Conference, dealing with innovation in investor-state arbitration, was moderated by Prof. Roger P. Alford of Notre Dame Law School. The panelists were:

  • Christina L. Beharry, Foley Hoag LLP (Washington, D.C.)
  • Alejandro A. Escobar, Chair of Public International Law at Baker Botts LLP (London, UK)
  • David Ingle, Allen & Overy LLP (Washington, D.C.)
  • Martina Polasek, Deputy Secretary-General of the International Centre for Settlement of Investment Disputes (“ICSID”) (Washington, D.C.)

Ms. Polasek opened the panel’s discussion on new trends in investment arbitration, specifically discussing the new ICSID rules issued in 2022. She noted that ICSID hopes the new rules will bring greater transparency to proceedings, and specified how they would alter the time and cost of proceedings, the requirement for disclosure of third-party funding agreements, security for costs, and the participation of non-disputing treaty parties. ICSID is closely monitoring how the implementation of the new rules may affect arbitral proceedings in practice.

Mr. Escobar discussed abuse of process in international arbitration cases. Arbitral tribunals have the power to prevent unfair or improper use of arbitration procedure. Mr. Escobar highlighted several recent awards that were overturned or criticized on abuse of process grounds. He stressed that tribunals must take control of proceedings in the face of unfairness to a party, or in order to avoid the risk bringing themselves into disrepute, even though a party’s conduct may comport with the literal application of the procedural rules.

Mr. Ingle focused on issues of inequity in international arbitration cases. He discussed how larger foreign investors reap the benefits of bilateral investment treaties (BITs) due to the high costs imposed on claimants. Similarly, large investors can negotiate an arbitration clause in contracts with host States, while smaller investors may lack such bargaining power. Mr. Ingle viewed innovation to provide smaller investors with adequate remedy as necessary. He also discussed the recent push towards expedited arbitration for disputes below a minimum threshold, limiting potential costs of proceedings and discovery. Arbitration institutions are also moving toward allowing parties to negotiate the costs of proceedings among themselves, which may be cheaper and faster for the parties involved. Mr. Ingle stressed the importance of such innovations in establishing a more equitable playing field in international arbitration.

Ms. Beharry discussed innovations in the awarding of damages in international arbitration. Damages awards have significantly grown in recent years since the late 1990s, from the tens of millions in U.S. dollars. Now, UNCTAD’s Investment Dispute Settlement Navigator indicates that approximately 27% of investment claims involve damages upward of US$ 500 million, with 14% over one billion U.S. dollars, pushing states to seek innovative ways in order to avoid such large damages against them. Additionally, parties are seeking consistency in awards. Ms. Beharry discussed cases where analogous fact patterns and breaches incurred different damages awards based on the differing valuation methods used by tribunals. In response, some States have begun revising their model BITs, in particular the valuation methodologies used when calculating damages and applying commercially reasonable interest rates. In the future, Ms. Beharry predicts more States will amend their model BITs and seek guidance from other sources on how to limit damages awards preemptively.