Symposium: 125 years of the Permanent Court of Arbitration: A Retrospective and exploration of New Frontiers
The distinctive role of the Permanent Court of Arbitration in shaping the future of international dispute resolution
by Celine Lange
Published on 12 December 2024
Panellists at the Singapore Commemorative Event on the 125th anniversary of the Permanent Court of Arbitration (PCA or ‘the Court’) on 25 July 2024 discussed the key factors contributing to the PCA’s longevity, the innovations introduced by the Court, and its anticipated developments over the coming century. In its Resolution adopted on the occasion of the Court’s anniversary, the United Nations General Assembly (UNGA) emphasised that the establishment of the PCA was the ‘crowning achievement’ of the 1899 International Peace Conference and acknowledged that the Court had evolved into a ‘modern, multifaceted arbitral institution in response to the dispute resolution needs of the international community’. The Court has also significantly expanded its geographical reach and accessibility, with the establishment of six offices worldwide. This post, situating the PCA within the broader context of international dispute resolution for disputes involving States, seeks to demonstrate that the Court’s unique position equips it with the potential to best address the new types of disputes that have been emerging before courts and tribunals, in particular with relation to the environment, climate change and human rights. Given this distinctive role, the PCA is well-positioned to play a pivotal role in shaping the future of international dispute resolution.
1/The PCA occupies a unique position in the international dispute resolution landscape for disputes involving States.
The Court shares commonalities with both standing international courts and arbitral institutions. Like the ICJ (International Court of Justice) and ITLOS (International Tribunal for the Law of the Sea), the PCA handles inter-State disputes. And like ICSID (International Centre for the Settlement of Investment Disputes), it administers disputes between States and investors. The PCA is therefore in the unique position of offering an expertise in both Inter-State and Investor-State dispute resolution.
While the PCA was created as a forum for disputes between States, it progressively started to administer arbitrations between States and private parties. Today, Investor-State arbitrations represent almost half of the PCA cases. This capacity to adapt to an evolving demand has enabled the PCA to sustain a steady level of activity in the last 30 years – 2024 marked the largest number of new registry cases ever received by the Court in a single calendar year. As Philippe Sands aptly put it in his remarks on the occasion of the Centenary of the PCA, ‘States now have a number of institutional options for resolving some of their disputes’ and ‘it could be said that a market of sorts has emerged, reflecting developments in the international legal order.’
2/International developments and the evolution of PCA cases.
Some of these global developments are clearly reflected in the evolving nature of the cases administered by the PCA, which, for instance, has observed a notable increase in contract-based disputes. In 2023, 45% of the PCA’s Investor-State arbitrations arose under bilateral/multilateral investment treaties or national investment laws, while 49% were based on contracts involving a State, intergovernmental organisation, or other State entity, a number that grew from 35% in 2020. This strengthening of contractual arbitration against treaty arbitration, while it is not observed in ICSID cases, is also seen in the statistics of the ICC Court of Arbitration showing that almost 25% of new cases in Investor-State arbitration arose out of investment contracts. It bears noting that, to certain commentators investment contracts are the best avenue to reform Investor-State arbitration towards sustainability.
Another general trend also reflected in PCA cases is the growing number of energy disputes and the emergence of climate change cases as States adopt measures and regulations to meet their Paris Agreement targets and promote investments in renewables (for instance, Europa Nova v. Czech Republic). Climate change is among the key issues of the public interest that the PCA has identified as novel questions likely to gain increasing prominence in the future, alongside human rights, sustainable fisheries management, and taxation.
3/The PCA’s potential to play a crucial role in addressing these new types of disputes thanks to its foundational features.
Two key elements that are at the basis of the PCA framework are particularly pertinent for managing these new categories of disputes: the preferred use of diplomatic means of dispute resolution (alternatives to arbitration), and the adoption of specialised rules tailored to specific disputes.
The primacy of non-adversarial methods of dispute resolution: mediation, conciliation, good offices
These non-adversarial methods of dispute resolution may be particularly compelling in cases where it is important to consider the interests of more than just two disputing parties, such as in disputes related to climate change or human rights.
The Hague Conventions of 1899 and 1907 have codified mediation as a method of dispute settlement. Already in the 1899 Hague Convention (‘the Convention’), which established the PCA, good offices were recommended as the preferred method to resolve Inter-State disputes: Article 2 provides for good offices to be available throughout the dispute ‘even during the course of hostilities’. It bears noting that ‘good offices’ and ‘mediation’ seem to be used interchangeably in the Convention, both referring to a discreet diplomatic exercise rather than to the process of mediation as we understand it today, where the third party is involved in the facilitation of negotiations. The Convention even provides for a ‘special mediation’ mechanism (Article 8) in case of ‘serious difference endangering the peace’ whereby, for a maximum period of thirty days ‘the mediating Powers (…) use their best efforts to settle the dispute’, with the disputing States ceasing all direct communication.
Conciliation is not mentioned in the Convention and its adoption originated from the Court’s practice. In 1996, the PCA adopted its Optional Conciliation Rules modelled after the UNCITRAL Conciliation Rules (1980). Conciliation is a more formal method of dispute resolution, compared to mediation and good offices, and entails a different role for the third-party: while the mediator facilitates discussions between the parties towards a settlement, the conciliator recommends a solution in the form of a report. The PCA administered the first compulsory conciliation under UNCLOS (the Timor-Leste/Australia conciliation, 2016-2018), and to this day, this case remains an exemplary success story, where the use of conciliation enabled the settlement of a long-standing deadlock.
The PCA’s Special Rules
The adoption of special rules aimed at catering to specific types of disputes is part of the PCA practice. In 2001, the PCA adopted the Optional Rules for Arbitration of Disputes Relating to Natural Resources and the Environment (‘the Environment Rules’). They are the result of early discussions on this matter at the PCA, which started in 1993 during the First Conference of the Members of the Court, when the idea of the PCA as an appropriate forum for the resolution of environmental disputes arose.
Cases brought under the Environment Rules remain relatively limited in number. While precise statistics are not publicly available, as full details are not disclosed for all cases, the disputes that have garnered the more attention are the six cases related to carbon trading in relation to the Clean Development Mechanism of the1997 Kyoto Protocol.
Under the Environment Rules, specialised arbitrators can be appointed, with the PCA’s Secretary-General keeping a list of specialised arbitrators from which parties are free to select. A very valuable aspect of these rules, in environmental/climate change disputes which often have ramifications beyond the immediate dispute between the parties, is that they place tribunals in a proactive position. A key provision in that respect is the possibility for the tribunal under Article 27 (1) to ‘appoint one or more experts to report to it’ on issues it has determined. An indicative list of scientific experts is provided to that effect by the PCA’s Secretary-General. Such a provision has the potential to encourage arbitrators to adopt a more inquisitorial role, particularly crucial in climate change or environmental cases that are often very technical. In addition, tribunals might also be encouraged by Article 24(4) to consider information beyond the immediate remit of the dispute as they are able to request from the parties a ‘non-technical document summarising and explaining the background to any scientific, technical or other specialised information which the arbitral tribunal considers to be necessary to understand fully the matters in dispute’. Another empowering provision concerns the possibility for the tribunal to ‘take any interim measures including provisional orders (…) it deems necessary to preserve the rights of any party or to prevent serious harm to the environment’ (Article 26).
The Environment Rules are also innovative due to their broad scope of application, being ‘available to States, international organizations, and private parties’. Furthermore, they can be modified as necessary as to jurisdiction ratione personae to allow for the participation of non-State actors.
A set of special rules for Disputes Relating to Natural Resources and the Environment is also available for Conciliation (2002). Under these Rules, the parties are free to choose conciliators and experts from the special lists of arbitrators and experts mentioned above. The conciliator is given a broad mandate which includes making ‘proposals to preserve the respective rights of the parties, and to prevent and/or mitigate serious harm to the environment falling within the subject-matter of the dispute’ (Article 7 (2)). Another noteworthy provision aims at strengthening the implementation process of any settlement, giving more ‘teeth’ to a method of dispute resolution that is sometimes described as soft. Under Article 12 (4), the ‘conciliator may propose the establishment of an implementation committee (…) to assist the parties in implementing the settlement agreement’.
Finally, it is important to note that, under both sets of Rules, the broadest possible scope of application is provided as the characterisation of the dispute as ‘relating to natural resources and/or the environment’ is not necessary to establish jurisdiction as long as the parties have agreed to settle their dispute under these Rules. By contrast, for the submission of disputes to the ICJ’s Chamber for Environmental Matters, parties would have to agree on the ‘environmental’ qualification.
4/Realising the PCA’s full potential.
In its Resolution on the Commemoration of the PCA’s 125th anniversary, the UNGA encouraged all UN Member States to ‘make use of the PCA’s services in arbitration, conciliation, mediation, commissions of inquiry, and other peaceful means of dispute resolution’. In line with this call, it is suggested that more can be done to fully harness the potential of the dispute resolution methods and tools outlined above, to further promote the selection of the most appropriate approach for each dispute.
Updating the PCA Arbitration Rules?
The PCA Arbitration Rules were updated in 2012. While they are based on the 2010 UNCITRAL Arbitration Rules, these have since been updated (in 2021), to notably include the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. While the PCA seems to have historically favoured the protection of confidentiality in its rules, one might question this approach for cases dealing with matters the Court has itself labelled ‘novel questions pertaining to the public interest’. The Environment Rules also prioritise confidentiality, which somewhat contrasts with the increasing emphasis on transparency and public access in Investor-State disputes, and, more broadly, within environmental law. In connection with this involvement of the public, the inclusion of a provision on non-disputing party submissions, similar to the approach taken in the 2022 ICSID Rules, could also be beneficial.
An update of the PCA Arbitration Rules may therefore be desirable to bring these aspects in line with current practices and incorporate them in the PCA’s reference set of rules. Although parties have the freedom to select the UNCITRAL Rules, or other rules, for their disputes, if they do choose the PCA Rules, aligning these with the latest developments in arbitration practice would likely be well-received. In that respect, it will be important to monitor the developments related to the recent procedural additions approved by the Administrative Council of the PCA in September 2024, under the Optional Protocols on Expedited Procedure, Scrutiny of Awards and Emergency Interim Measures.
A broader scope for Fact Finding, and a new set of Human Rights Special Rules?
Fact Finding is available under the PCA Rules and detailed in the Optional Rules for Fact-finding Commissions of Inquiry (1997). Since 1899, the PCA has administered five fact-finding commissions of inquiry. While the investigation envisaged by the PCA Rules is on ‘facts with respect to which there is a difference of opinion between’ the parties, ICSID Fact Finding Rules extend the scope of the enquiry to ‘facts that may be relevant to an on-going or future dispute’. A scope of application encompassing any fact relevant to a PCA dispute, whether current or prospective, would strengthen this dispute resolution supporting tool, which can be particularly pertinent for cases related to climate change and human rights.
The PCA has started to be involved in human rights cases with the Bangladesh Accord Arbitrations. For this category of disputes, the adoption of a special set of PCA rules for human rights related disputes could be envisaged, in line with the PCA’s special rules practice. They could facilitate the appointment of arbitrators with human rights expertise, empower tribunals to adopt interim measures for the protection of the individuals at risk, and provide rules of engagement for third-party involvement, along the lines of the Hague Rules on Business and Human Rights Arbitration (2019). There is after all, in the 14 June 2024 Resolution, a call to support the PCA’s ‘ongoing efforts in pioneering dispute resolution solutions, including in the fields of climate change, international trade, international taxation, and business and human rights’.
More awareness on PCA’s available tools
Despite the innovative character of the Environment Rules, and the PCA’s long-lasting involvement in environmental disputes and discussions, these rules have been used in only a limited number of cases although they offer many advantages, including procedural flexibility, access to technical experts and arbitrators and the possibility of multiparty involvement. It seems that further direct and systematic awareness efforts are needed towards arbitrators, parties and their counsel to make use of the full potential of these rules discussed earlier.
Similarly, while the Timor-Leste/Australia conciliation was a landmark case and a victory for the peaceful settlement of disputes which created great enthusiasm, the number of conciliations administered by the PCA remains extremely low. This phenomenon is not limited to PCA conciliations (or mediations), as several obstacles to the settlement of disputes involving States by non-adversarial methods are at play. International legal institutions are nonetheless in a privileged position to develop parties’ awareness of these mechanisms, address reluctances and practically guide them.
The PCA’s acknowledgement of the need to raise awareness is reflected in the Resolution of the Congress of the Members of the Court adopted on 14 June 2024. However, this represents a broad appeal, and it remains to be seen how this call will be effectively realised, possibly in cooperation with the ‘academic and professional training institutions in the field of international dispute settlement’ mentioned in the Resolution.
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This post has sought to highlight the unique position occupied by the PCA within the international dispute resolution landscape, demonstrating how its distinctive features position it to effectively address the new types of cases that have been arising recently in the various fora.
PCA tribunals might in the process contribute to reshape the practice of Investor-State arbitration, at a time when its legitimacy is questioned and its reform high on the agenda including at the PCA, by empowering tribunals to adopt a pro-active and more inquisitorial approach. Such approach could contribute to fully grasp the various aspects of disputes with a high public interest content, and their implications beyond the immediate disputing parties. Additionally, this post has proposed some updates and enhancements aimed at further equipping the PCA to best address future disputes. However, the best tools in a box are as good as the knowledge of their existence and utility. Therefore, increased advocacy and outreach efforts are essential, and the PCA, as a neutral intergovernmental organisation, is particularly well-positioned to lead such initiatives.
Celine Lange is Lead, Programme Development, International Dispute Resolution at the Centre for International Law (CIL) at the National University of Singapore (NUS).