A/69/299
64. The amount of compensation awarded runs into millions of dollars and is an
additional blow to developing States, especially those undergoing or recovering
from crisis. For example, in Al-Kharafi v. Libya, the claimant was awarded more
than $935 million. 58 The enormous size of such awards can have a negative effect
on the State’s ability to implement health policies. For example, in CME v. Czech
Republic, 59 the compensation awarded to the investor was equal to the entire health
budget of the State. 60 States may also have to bear not only legal costs incurred by
them during arbitration but also those incurred by the successful claimant. 61 Even
where States are successful, they may have to pay a heavy fee for the arbitrators. 62
65. Moreover, arbitration proceedings are opaque. Except in some cases, no public
notice of the arbitration may be issued. 63 Persons not party to the arbitration are
often unable to participate in the process as amicus or as an audience to the
proceedings. Under some rules, however, non-disputing parties may be able to make
submissions under very limited circumstances and at the discretion of the tribunal. 64
In addition, arbitration proceedings are conducted in camera, which prevents
persons from following the arbitration unless, as is allowed under some rules, both
parties agree to hold an open hearing. 65 Furthermore, the award of the tribunal is
often binding on the parties, with no appeal permitted. 66
66. A public, democratic, open and accountable system of domestic courts has
been replaced with private, closed and unaccountable arbitration. Arbitration lacks a
system for review that can check arbitrariness. The opaque nature of arbitration,
under which some awards are not even made public, protects the parties from the
accountability that ensues from an open and transparent system.
67. A transparent and open arbitration system, accountable to communities in host
States, should be established urgently to remedy problems plaguing the current
system. Arbitration should also be conducted in host States, to facilitate access by
affected communities. Disputes could be decided by a panel of arbitrators, selected
from an international, permanent and regionally representative pool. Arbitrators
should not be allowed to practise as counsel or advisers to investors or States in
cases of arbitration.
__________________
58
59
60
61
62
63
64
65
66
14-59014
See www.italaw.com/sites/default/files/case-documents/italaw1554.pdf.
See http://italaw.com/documents/CME-2003-Final_001.pdf.
M. Desai and A. Moel, “Czech mate: expropriation and investor protection in a converging
world”, European Corporate Governance Institute Working Paper No. 62/2004, April 2006 .
United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules,
art. 42.
Mahnaz Malik, “The stakes of States in defending investment treaty arbitrations: a game of luck
and chance?”, International Institute for Sustainable Development, 2011, p. 3.
International Centre for Settlement of Investment Disputes, Administrative and Financial
Regulations, regulation 22, Publication.
bid., Rules of procedure for arbitration proceedings, rule 37, Visits and inquiries; submissions of
non-disputing parties; Methanex Corporation v. United States of America, 15 December 2001,
para. 52; International Centre for Settlement of Investment Disputes, Biwater Gauff (Tanzania)
Ltd. v. United Republic of Tanzania, case No. ARB/05/22), procedural order 5.
UNCITRAL Arbitration Rules, art. 28 (3). http://www.uncitral.org/pdf/english/texts/arbitration/
arb-rules-revised/pre-arb-rules-revised.pdf.
Convention on the Settlement of Investment Disputes between States and Nationals of Other
States, art. 53 (1).
19/22