Wed 11 March 2020
By Jayne He
Member of Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre Associate Professor Kun Fan’s paper, which has been presented at the plenary session of the American Society of Comparative Law (ASCL) 2019 Annual Meeting Program, will be published in the coming issue of Journal of Dispute Resolution, a leading legal publication in the area of alternative dispute resolution.
Full text of the article, titled “Mediation of Investor-State Disputes: A Treaty Survey: Time to Take the Horses to the Trough?”, is available on SSRN. In the article, Associate Professor Fan noted that the concept of mediation is not new. It existed “long before law was established, courts were organised, or judges had formulated law” and it was the way people and states resolve conflicts back then.
She pointed out that due to the increasing proceduralisation, formalisation, and judicialisation of arbitration, mediation and other forms of alternative dispute resolution (“ADR”) have regained popularity in the modern society, especially in the field of investor-state disputes (ISD). The costs of ISD arbitration – both in money and time, are enormous to both sides of a dispute. She gave the example of Metalclad Corporation v. The United Mexican States, where the “winning” company spent 5 years and 4 million US dollars to get the result but wished they “had relied on other options to resolve the dispute”.
Associate Professor Fan argued that the popularity of mediation as a method of resolving ISD is reflected by the inclusion of it in a growing number of bilateral or multilateral investment treaties, including the Model Bilateral Investment Treaties.
In this article, Associate Professor Fan discussed the questions surrounding the use of mediation to resolve ISD, namely, what are the challenges and values of using mediation to resolve ISD? What is the existing framework with respect to the use of mediation in ISD, including treaties and soft laws? What will the future look like?
By looking at the adoption of mediation in a number of treaties and soft laws, Associate Professor Fan argued:
“Looking into the future, mediation may offer a ‘soft’ opening of the otherwise increasingly formalised and proceduralised arbitration proceedings, particularly in investor-state arbitration … We should be doing more to encourage the litigants to use mediation to settle their ISD. The more we do, the more likely they are to settle their disputes that way.”