Ms. Samira Sulejmanovic is the Head of Unit for Bilateral Trade Relations, Ministry of Foreign Trade and Economic Relations of Bosnia & Herzegovina. She oversees the negotiation and implementation of international agreements (trade and economic cooperation, FTAs and PTAs, bilateral investment promotion agreements) and monitors and studies the conditions and various phenomena in bilateral trade cooperation.
The recent signing of Trans-Pacific Partnership(TPP) among twelve Pacific Rim countries and ongoing negotiations of Transatlantic Trade and Investment Partnership (TTIP) is leading to a change in the way we perceive Investor–State Dispute Settlement. Do you think the world is gradually moving away from existing Multilateralized system of international investment law and trying to harmonize the regime?
I am afraid that the ongoing process is far from harmonization and goes in quite an opposite direction. First of all, in absence of a multilateral agreement on the core issues to reform in the IIAs (international investment agreements) network, countries decided to go their own way. These ways, so far, happen to be quite diverse. Thus, while we believe we have addressed the problems identified it may be that we are creating new ones which are only to emerge in this new and changed IIAs setup. Secondly, only limited number of countries can actually become parties to these mega trade and investment agreements. Therefore, irrelevant of their comprehensiveness these agreements can have limited effect to multilateral regime which is still being reshaped by numerous country-specific actions.
What do these Agreements signify for Bosnia & Herzegovina, both in terms of trade opportunities and investor governance?
If you refer to these mega trade and investment agreements in terms of possible direct effects they can have quite limited positive effects particularly to small and geographically remote countries like Bosnia and Herzegovina. The preferences granted among parties to the agreement are aimed to boost trade between them primarily and competitiveness of the countries outside the zone is normally decreased. Therefore, small economies have little power to either maintain significant presence on the zone’s market or even gain market access for the first time. The second effect is indirect and, depending on a number of factors, can have positive and negative effects to small economies. Namely, these mega trade and investment agreements are setting the standards in many areas and all wishing to trade with these countries have to comply whether they like it or not. At that point, it can turn to be a positive engine pushing small economies to accelerate reforms needed and introduce these, usually high, standards. In some cases it can require too high price which small economies cannot afford for different reasons kicking them this way out of the game.
Do you think the present Investor-State Dispute Settlement regime balances interests of both Investors and States?
It is really hard to say simply “yes” or “no”. Number and nature of ISDS cases to present as well as numerous studies and analysis are telling us there is a problem in relation “rights of investors v. rights of the host state”. I personally believe that this balance does not exist at the moment and that it should be re-established. On the other hand, I cannot simply claim that the balance does not exist because someone wanted it to be like that. It is rather due to two facts: 1) at the time most of IIAs were negotiated legislators and negotiators could not have been aware of all circumstances that could require further state regulation in the future, and 2) most of us certainly could not imagine how wide IIAs provisions could be interpreted.
Confidentiality still remains an important unresolved issue in investment arbitration. The current practice is to address the issues of confidentiality in ICSID Arbitrations on a case by case basis. How can the stakeholders balance the general interest for transparency with specific interests for confidentiality of certain information and/or documents, considering the necessity to preserve confidentiality of certain government information/documents? To what extent do the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration resolve this issue?
Another difficult question to which there is no simple answer. One thing in for sure, the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration are not addressing all issues. They, in fact, present a common denominator over which UN Members could agree. Knowing how diverse interests of so many countries could be, the solution makes the perfect sense. Without further elaboration, I personally believe that the rules preserve the needed level of confidentiality bur take the transparency of the process further to the next level. Both parties in the arbitration (investors and states) have their own reasons to be reluctant about increase of transparency in the process. Still, as far as it may sound idealistic, I am convinced that transparency in a long term shall be beneficial to all stakeholders.
The recent Philip Morris case against Australia is being increasingly compared with the Vattenfall case, where an investor challenged Germany’s decision to phase out nuclear power. Do you think the states’ right to regulate in good faith and for a legitimate purpose is increasingly being undermined by the existing system of ISDS ?
I am personally not aware of sufficient number of ISDS cases which would support such statement at present. Nevertheless, the number of pending cases where states are being challenged before international arbitration for regulating under specific circumstances gives us right to be worried. There is also frequently denied “chill-out” effect where states simply discontinue further regulation in fear of claim. These situations are rarely recorded and known to the public in smaller economies and that is why it is difficult to say with certainty that such practice exist. The states’ administrations, however, know that such practice is all but unusual.
In light of numerous inconsistent decisions in investment treaty arbitration, what reforms can be undertaken to make the investment arbitration regime more coherent and harmonized?
I believe a multilateral action or agreement is the only effective and sustainable solution and this statement can be supported by many arguments. First of all, we need to have a harmonized IIAs regime. To explain to those who now raise an eyebrow, by saying harmonized I mean a coherent system of rules which can then be interpreted in a same consistent manner. The existing network of so many different IIAs can hardly be qualified as harmonized. Secondly, we need all-inclusive reform. Today we have over 3,000 IIAs and they cannot be reformed unless all parties are willing to do so. Some developed economies still believe they can and should “profit” from those old agreements with less developed countries and refuse to get into revision or reform. At the same time, they strongly advocate for protection on their own rights in agreements with equal or stronger economies. Thirdly, as already mentioned in answer to your first question, acting in groups or individually we may be changing the part of these huge inheritance of over 3,000 IIAs but creating, at the same time, new challenges and problems which can only be comprehend in 20 or more years of future case law. When it comes to possible reform of the arbitration system as such I would definitely give serious attention to proposals coming from the expert circles. They best know what the loopholes are in the system at present.
Gary Born is advocating for ‘Bilateral Arbitration Treaty’ (BATs) for providing default arbitration mechanism for the resolution of defined international commercial disputes. The mechanism aims to utilize the UNCITRAL Arbitration Rules, providing an expert, efficient and enforceable means of resolving commercial disputes when nationals from contracting states had not agreed upon an alternative means of dispute resolution. What are your views on it?
I generally believe that argument-based proposals should not be dismissed without giving it a due consideration. While I am aware of the idea, I had no opportunity to take a deeper look into the proposed text. Still, we are already witnessing strong opposition of some countries to an idea of having an international arbitration mechanism at all allowing the investors to bring claims against host states. These countries claim that their national judicial system has capacities and is professional and independent enough to protect rights of the investors. For smaller countries with overloaded national courts the idea may, however, gain more support.
(The views expressed by the author are of the author alone and do not reflect the position of the Government of Bosnia and Herzegovina.)