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Conference Presentation: Mediation as an ISDS option

The ongoing investor-state dispute settlement (ISDS) reform is one of the latest and significant developments in the field of international economic law. On 19 November 2020, UNSW Law’s Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre member Associate Professor Kun Fan took part in the discussion on “Outstanding Issues of ISDS Reform: Perspectives from Asian-Pacific Stakeholders” organised by the American Society of International Law and shared her views on “Mediation as an ISDS option”.

As investor-state arbitration is getting more time consuming and costly – the median length of arbitration proceedings is four years and four months and the median costs are approximately USD 4.2 million for claimants and USD 3.4 million for respondents – mediation offers a viable alternative to investor-state arbitration.

Unlike arbitration where a private arbitrator is endorsed to render a decision against a state’s regulatory acts, it is the disputing parties who are the decision-makers in mediation. Especially under the context of the pandemic, mediation takes account of broader economic goals and may offer a more flexible approach rather than a black and white solution of a legal decision in which one side wins and the other side loses, as suggested by the tribunal in Achmea BV v. Slovakia. Mediation can also avoid the escalation of politically-sensitive disputes.

However, according to Singapore International Dispute Resolution Academy’s International Dispute Resolution Survey (“SIDRA IDR Survey”), only 14% of the respondents indicated that they had been involved in ad hoc mediation and 7% in institutional mediation. This is in contrast to 82% in arbitration, 23% in international courts and 22% in domestic courts. Result of the survey also suggested that enforceability is the main consideration for users in choosing the mechanism of ISDS.

The future of mediation as an alternative way to resolve investor-state dispute is positive – Associate Professor Fan’s recent treaty survey (full paper available here) found that explicit reference to mediation is becoming increasingly common in international investment agreements (IIAs). In addition, the entry into force of the Singapore Convention on Mediation will enhance the enforceability of mediated outcome and thus boost the user's confidence on mediation. 

“So the issue of increased use of mediation for resolving investor-state disputes is not a matter of ‘whether?’ and ‘when’, but rather, ‘how?’,” said Associate Professor Fan, adding that she believed Asia-Pacific states would play an increasingly important role to the reforms of ISDS going forward.

“Given the long tradition of mediation based on deeply rooted Confucian philosophy emphasising on harmony and conflict avoidance, Asia-Pacific stakeholders could play a leading role in actively promoting mediation to resolve investor-state disputes in reaction to the ISDS challenges.”

Recording of the panel is available here (Associate Professor Fan’s talk starts from 38:45). Other speakers include Georgios Dimitropoulos, Kevin Nash, Catharine Titi, and Xi Zhang. This panel was moderated by Manjiao Chi.