On 30 August 2024, a conference entitled “Investor-State Mediation: changing the mindset – In conversation with the practitioners” was organized by CIL’s International Dispute Resolution Programme, in conjunction with Singapore Convention Week 2024.* The Singapore Convention Week, organised by Singapore’s Ministry of Law, is an annual event dedicated to dispute resolution, encompassing arbitration, mediation and litigation.

The objective of the CIL conference was to bring together experienced practitioners to discuss how, in the very specific context of disputes involving States and foreign investors (“Investors”), to advance a tailored approach to dispute settlement, doing away with an automatic and exclusive recourse to arbitration.

The panel was moderated by Natalie Morris-Sharma, Legal counsel at the Attorney-General’s Chambers of Singapore where Ms Morris-Sharma advises and represents the Government on international law issues.

Introductory remarks were provided by Celine Lange, Development Lead, CIL’s International Dispute Resolution Programme, and concluding remarks by Dr Nilufer Oral, Director of CIL.

Introduction

• Investor-States disputes are predominantly resolved by the exclusive recourse to arbitration, but mediation has been gaining traction, and Investor-State disputes do settle

Arbitration is the preferred method of dispute resolution for disputes between Investors and States. It is the dispute resolution mechanism provided for in most International Investment Agreements (IIAs). The dispute resolution clauses in IIAs also typically provide for a “cooling off” period during which consultations or mediation can be attempted. However, while many IIAs mention or encourage it, almost none of them subject parties to compulsory consultations, negotiations, or mediation/conciliation (see Overview of Investment Treaty Clauses on Mediation, ICSID, July 2021).

In the recently released SIDRA International Dispute Resolution Survey 2024, which focuses exclusively on the users of dispute resolution mechanisms, only 11% of the participants responded that mediation was their most commonly used method of dispute resolution for Investor-State disputes. Arbitration appears dominant (95% of participants used institutional arbitration), and very seldom used in conjunction with mediation (only 5% of participants indicate that they used hybrid methods of dispute resolution). Nevertheless, 74% of respondents indicated a willingness to further engage in hybrid methods – page 82 of the SIDRA Survey.

Yet, Investor-State disputes do settle: UNCTAD World Investment Report 2024 - page 31 - indicates that 18% of known ISDS cases were settled between 1987 and 2023. However, information is not available on the way they were settled, for instance if mediation or conciliation were used. ICSID statistics provide the number of ICSID cases where conciliation was used (13 to date), but data are not available for mediation, which may or may not have been used in the “Disputes settled or proceedings otherwise discontinued” category – see ICSID Caseload Statistics 2024- 2. There are consequently information gaps on mediation in Investor-State cases, partly for reasons of confidentiality, and therefore there are not many success stories to share in order to encourage the use of Alternative Dispute Resolution (ADR) methods.

Mediation has, nevertheless, gained traction as it has been increasingly discussed and encouraged over the past few years, predominantly for commercial cases, but also for ISDS cases. Increasing guidance and new tools are available in that respect, including the 2022 ICSID Mediation Rules, the 2023 Draft UNCITRAL guidelines on investment mediation, and the 2019 Singapore Convention on Mediation, applicable to both commercial and investment cases.

• Investor-State disputes come with specific concerns and “mindset” plays a crucial role

It is however important to remember that Investor-State cases come with specificities, because one of the parties to the dispute is a State. In 2018, CIL conducted a survey on Obstacles to the Settlement of Investor State Disputes, which found that the most significant obstacle to settlement is the desire of parties to defer the decision-making responsibility to a third-party, typically a tribunal, rather than engaging in a voluntary resolution process led by them. It is especially the case on the government’s part because of various concerns specific to States: fear of public criticism, fear of corruption allegations, difficulties related to the structure of the State, with multiple agencies etc.

These fears indicate that the discussion on the use of ADR for Investor-State disputes needs to take into account the mindset of the actors involved in these disputes and their resolution, and how this mindset might play against the use of non-adversarial processes. Detailed dispute resolution clauses that are seen in modern IIAs to encourage the use of ADR methods will prove useless if misconceptions, concerns and habits prevent these actors from even considering ADR.

Panellists’ discussion

Mariam Gotsiridze, who was for 10 years a Head of Department in the Ministry of Justice in Georgia where she was representing the State in international arbitrations, brought the Government’s perspective to the discussion, and shared ways to support the engagement of government officials in the use of ADR methods. She highlighted the importance of structures promoting transparency and accountability, and the related role of financial planning, joint government bodies for decision-making and the relevance of experts.

Frauke Nitschke, Senior Counsel / Team Leader at ICSID, who has been leading ICSID’s Investor-State mediation activities, shared her institutional perspective. She explained why ICSID decided to offer mediation in addition to conciliation (available since1967), and how the 2022 ICSID Mediation Rules were closely related to the adoption of the Singapore Convention on Mediation. She also shared, inter alia, how parties’ concerns towards ADR mechanisms can be alleviated by the intermediary role of ICSID, for instance through the transmission of the offer to mediate to the other party.

Lim Tat spoke from the mediator’s perspective and emphasized the multiplicity of qualities that a mediator needs in order to deal with mediations involving States: a training in international law and alternative dispute resolution, as well as a high level of emotional and cultural intelligence –culture of various geographies and types of organisations. He also insisted on the importance for counsel to proceed at the outset to a deliberate design of the dispute process, including the possible use of early assessment. Discussions on hybrid mechanisms and the modalities to engage stakeholders such as affected communities would also be part of this design process.

The crucial role of counsel as advocates of the appropriate method of dispute resolution was also highlighted by Robert Houston. He emphasized the need for counsel to take a step back and pursue a true client-oriented approach rather than a race to arbitration, and called for a re-definition of what constitutes a “win” in the resolution of a dispute. In this holistic approach to lawyering, counsel actively identifies the underlying needs of their clients, beyond the limited scope of engagement. In line with this call for holistic lawyering (Robin G. Steinberg), Donna Ross, who teaches students of the NUS Graduate Certificate in International Arbitration & Dispute Resolution, insisted on the importance of the type of dispute resolution education provided to young lawyer. She emphasized that the discussed change of mindset requires ADR methods to be taught to law students on the same level as arbitration, an endeavor going well beyond simply raising awareness. Training efforts should not be limited to future counsel but also to future civil servants in order to address the general unfamiliarity with ADR processes, concerns and possible mistrust in these methods.

The discussion concluded on the determining role arbitrators can play in opening the mediation door at the outset of an arbitration, keeping it open throughout the process and making sure parties remember that this door is open at all times.

* CIL’s 2023 SCW partner event was an online webinar entitled “Getting the Most Out of the Singapore Convention in Investor-State Disputes”