UNFURLING THE AMICI PARTICIPATIONS IN INVESTMENT ARBITRATION: AN ANTIDOTE NEEDED?

-Alay Raje and Samridhi Shrimali*

Seconds Runners Up, 1st RGNUL Arbitration Essay Writing Competition

Introduction:

A fool repays a salve by a stab, and a stab by a salve

The escalating concerns surrounding the participation of amicus curiae [“amicus”] in investment arbitrations can be truly sketched by the above quote, meaning that; only a fool mistakes a foe for a friend and a friend for a foe. Resolving disputes involving investment treaty law is in itself a tricky terrain, and amicus participation do not ease the trouble. As explicated by the  arbitral tribunal in Suez v. Argentina, an amicus is a non-disputing third party in a proceeding and has been called to participate in the proceeding as a ‘friend of the court’, who aids the arbitral tribunals with unique insights, expertise, and arguments to help it make a decision. Thus, it is important to determine which entity is a true amicus and which is an entity vested with personal interests aiming at directing the arbitral tribunal on a biased course. Given the nature of this uncharted territory, historically, the international instruments on investment arbitration were silent on the issue of participation of amicus. However, the newer instruments and the subsequent amendments to the pre-existing instruments such as the North American Free Trade Agreement [“NAFTA”], the 2006 International Centre for Settlement of Investment Disputes [“ICSID”] Arbitration Rules, and the 2014 United Nations Commission on International Trade Law [“UNCITRAL”] Transparency Rules permit amicus’ participation subject to certain conditions.

The Methanex v. United States judgment [“Methanex”] was among the earliest instances of the arbitral tribunal enabling amicus participation in investment arbitration. The arbitral tribunal mirrored the powers of the WTO Panel laid down in the Appellate Body Report in the US–Shrimp case, and observed that allowing amicus submission come under the ambit of its discretionary authority. Moreover, this authority is vested for effective fact-finding and legal interpretation. A similar rationale was observed by the arbitral tribunal in UPS v. Canada, while allowing the requests to make amicus submission. Recently, the arbitral tribunal in Windstream Energy LLC v. Canada,determined that it had the authority to permit or bar participation of amicus. Thus, the arbitral tribunals have made significant contributions to the jurisprudence that has led to the widely accepted practice of including amicus in the dispute resolution process and opened the floodgates to climbing requests for amicus submission.

Thus, the theme of this article is analysing the past and the future trends of amicus submission in investment arbitration, with specific reference to this concept’s legal pitfalls and its suggested remedies. Therefore, the present paper through a case law-based analysis will trace the development of amicus participation, starting with (I) the evolution of the concept; then (II) the fallacies of the mechanism; (III) suggesting methodological remedies for such fallacies; and lastly in conclusion (IV) deliberate upon the way forward.

Evolution of the concept of Amicus Curiae:

An examination of the numerous instances involving the participation of an amicus reveals that disputes involving unconventional questions of law, that routine investment arbitrations do not address, have necessitated the involvement of amicus. For instance, the initial cases involving amicus participation were disputes relating to Human Rights and Environmental Law, which were not a part of traditional investment disputes.

The progression of these third-party participations in investment arbitration becomes evident from the insertion of Rule 37(2) in the ICSID Arbitration Rules, 2006, incorporation of Article 1128 of Chapter Eleven to the NAFTA, as well as formulation of UNCITRAL Transparency Rules, 2014, to name a few. The criterion for the amicus submissions in these regimes are not exactly identical but they function on similar grounds. The arbitral tribunals have agreed that amicus submissions should be permitted primarily when: [a] a significant public interest is present; [b] amicus arguments should remain within the parameters of the dispute; [c] amicus’ relevant expertise on the subject of the dispute must be there; [d] amicus should be independent; and [e] they should not put the disputing parties under undue burden/prejudice.[1]

Methanex, is a notable case in this context, wherein the environmental activists raised concerns about pollution caused to ground water and surface due to the  investor’s business of methyl tert-butyl ether gas. The arbitral tribunal reasoned that the dispute involved several critical issues of public interest, as a violation of the right to water was alleged. The United States as a respondent placed reliance on Article 15(1) of the 1976 UNCITRAL Rules, and argued in favour of amicus participation. Accordingly, the arbitral tribunal concluded that it had the authority to do so, even though neither the NAFTA nor the 1976 UNCITRAL Rules granted express authority to the arbitral tribunal for permitting amicus submissions. The basis of such adjudication was, Article 15(1), which gave a wide discretion over the manner for the conduction of the proceeding,  thereby,  giving implied  authority to the arbitral tribunal to accept amicus participations.

Biwater Gauff v. Tanzania, is another intriguing case, wherein NGOs petitioned to be included as amici in an investment dispute arising out of the UK–Tanzania BIT. The issue at hand dealt with the right to water, which was being curtailed by foreign investors. The arbitral tribunal referred to the amici submissions under Rule 37(2) of the 2006 ICSID Arbitration Rules, through which the arbitral tribunal ensures docile cooperation of the non-disputing to arbitration and observed that the foreign investors’ activities shall be in compliance with the host state’s environmental and human rights obligations. Similar rationale was adopted in Glamis Gold v. USA, where the allegations were raised that the mining techniques adopted by the Claimant, i.e., Glamis Gold, harmed that the Native American religious and cultural heritage sites.

In Aguas del Tunari v. Bolivia, the water supplies were privatized leading to a steep increase in the price of the water,and in Pezold v. Zimbabwe, [“Pezold”] where the ICSID Tribunal considered the issue of blatant violation of human rights and environmental norms, the participation of amicus was permitted. Furthermore, the arbitral tribunal with the aid of amicus briefs adjudicated upon the environmental concerns with regards to issuing of investor’s mining licenses in Pac Rim v. El Salvador, and in Piero Foresti v. South Africa, the extinction of mineral rights and curtailment of certain human rights enabled the ICSID Tribunal to allow the participation of amici curiae.

Fallacies in the Amicus Acceptance:

With the rapid escalation of the acceptance of a non-disputing third party via all the major investment arbitration regimes, there is an inevitable proliferation in the number of complex concerns that pose questions on independence, fairness, and, interpretation of the prerequisites for admission of such participation out of many others.

This section accounts for the major inconsistencies in the participation of amicus curiae.

Paradoxical ‘legitimacy’

One of the requirements for the admission of any amicus submission is that it ought not to be unfairly prejudicial towards any disputing party. This becomes ironic when the submissions are made in a manner that strikes the politicization of the matter and hampers the interest of the parties.[2] On one side the amicus participation acts as a defence for lack of transparency in investment arbitration or as a pillar for legitimizing the system viz-a-viz public interest. However, on the other side, the same amicus participation augments towards unilateral and biased approach towards the proceedings. In Methanex,the arbitral tribunal put forth the concern that the submissions are inclined towards the arguments of the host state and creates negative biases towards the claimants/foreign investors.

The high influx of petitions for amicus in the cases where the third party is not independent unnerves the legitimacy of the system. The same could be seen in Pezold, where the arbitral tribunal first acknowledged indigenous groups and their leaders as independent, and the relation between the State and these petitioners of the amicus submission to be within the limits of neutrality. It was only after the explicit revelation of the fact that the petitioner, i.e. the indigenous community and its chief has an intrinsic relation with the State, as the appointment and dismissal of such chiefs was done by the Zimbabwean President, that the arbitral tribunal sought the refusal of such participation.

Vexatious Cost and Confidentiality

The increase in the cost of the arbitral proceeding caused by the participation of amicus disproportionately burdens the parties. Amicus submissions have damaging cost effects in terms of resources, and time taken owing to increased submissions. As laid down in the case of Merrill and Ring Forestry L.P. v. Canada, the acceptance of amicus participation if given liberally, would become unmanageable and will complicate the matter for the disputing parties to be called upon to respond to humongous materials provided via amicus submissions.[3]

The repercussions of the cost given, in terms of time taken by the amicus to submit the brief after assessing the matter, results in unnecessary delay. This delay results in puzzling stance for the public whose interest the amicus brief tries to defend, as it equates the investment arbitration proceedings to litigations, thereby making the speedy dispute resolution aspect go in vain. Speed and economy are the essentials for any investor/state opting for arbitration instead of litigation, and thus, these negative effects may influence investors to rethink their choices.

Another risk that haunts the parties is the diffusion of the confidential information like trade secrets etc., in the lieu of greater transparency.[4] Prima facie it may seem that it could be resolved through redaction of such information but the same will instead open doors to “re-politicize” the dispute and the involvement of such third party may lead to the transformation of the arbitral proceeding into the “court of public opinion.”

Incoherent Interpretation

In Eco Oro v. Colombia, the arbitral tribunal noted that petitioners for amicus participation claimed that the decision of the case holds a ‘lasting interest’ of the Colombian public. The petitioner’s inability to explicate as to why this ‘lasting interest’ gives them “significant interest” in the matter, was highlighted. The rightful interpretation of the requirements for allowing such admissions becomes paramount for reducing the burden on arbitral tribunals as well as the parties.

It is reasonable to say that allowing the amicus participation to the arbitral proceeding without anticipating such predicaments would subvert the essence of investment arbitration rather than legitimizing the same. To mitigate any such disruption and to have efficient praxis for the admission of amicus submissions, the arbitral tribunals could utilize the below mentioned series of restorative proposals to improve the current standards of amicus submissions.

An Err on the Side of Caution – Drawing a Line Between Friends and Foes:

Awarding Cost Orders

Although, amici curiae are, by definition, not a party to the proceedings, but they submit themselves to the arbitral tribunal’s authority for that particular dispute when such petition is admitted.[5] There thus exists an implicit authority of the arbitral tribunal upon such amici, using which it can make cost orders against the amici.[6] The arbitral tribunal could use this feature to alleviate the disproportionate cost or disruption in the arbitration proceedings that the amicus submissions may cause. This mechanism could work through an undertaking given by amicus, that in advance delineates and acknowledges the potential cost consequences as well as the clarification regarding arbitral tribunal’s authority, to satiate any subsequent cost order by the arbitral tribunal.[7] Commentators would say that this would create a ‘chilling effect’ on the amicus participation. In sooth, these cost orders would rather re-establish the control of the arbitral tribunal to protect the parties from the unnecessary cost or delay and prevent any procedural misconduct. Further, the present remedy would not threaten the participation of an amicus that has a “significant interest” in the dispute, as it would be in proportion with the nature, magnitude, and extent of the amicus participation.

Establishing ‘Significant Interest’ and ‘Public Interest’ with Conclusive Evidences

To give a conclusive definition to the notion of interest could be tricky. However, the evidences proving the legitimacy of the interest in the subject matter has to be demonstrated by the petitioners of the amicus, in order to negate the temptation of petitioners to use this institution for political or popularity purposes.

Formalizing a stable criterion for Third Party Participation in Investment Proceedings

The existence of the various investment arbitration institutions regimes makes it onerous to fashion a harmonized proposition for the involvement of a third party via amicus submissions. The same could be mitigated through a clear set of regulations or guidelines that ought to be included in all the major investment arbitration regimes. For instance, UNCITRAL could stipulate new explicit provisions on third party applications for investment arbitrations where state is a party and transparency holds primary importance, as contrast to the international commercial arbitration proceedings.[8] Once there exist provisions in one of the central regimes, the others like, NAFTA, ICSID, etc., may follow in order to have a harmonized approach, as different institutions in investment arbitration get influenced by the impact of the amendments in the other regimes.

Way Forward:

The authors advocate that the causes of concerns arising from the participation of amicus in investment arbitrations have to be mitigated; Otherwise the propensity of parties to proceed with resolving their dispute through arbitration may diminish. Amici submissions are a great aid but if the friends of the court are in fact the foes of the court, then it could undermine the very arbitration regime it is supposed to strengthen. Interestingly, with the proliferation of private investors in the space industry, resolving complex cross-border space-related disputes between investors and states through arbitration is going to be the new tomorrow. However, there are several concerns that plague this idea, such as; (a) the interpretation of the space activities related technicality in the treaty; (b) answering question of space law and customary obligations of international law; (c) determining the breach caused over the use of space objects; and most importantly, (d) security, transparency and confidentiality maintained during the operation of the space vehicle.

Foreseeably, a panacea to all these problems can be the participation of amicus in such proceedings, given its special assistance and ability of answering unconventional questions of law and fact. In order to do justice to the potential for future growth that amicus submission holds, it is apposite to understand its pitfalls, and implement certain procedural safeguards, such as those outlined by the authors, at the soonest.


*Alay Raje and Samridhi Shrimali are 4th students of B.A.LLB. (Hons.) at Institute of Law, Nirma University. They can be emailed at alay.raje09@gmail.com and samridhishrimali2001@gmail.com respectively, and are available on LinkedIn here and here respectively.

[1] Chen Yu, Amicus Curiae Participation in ISDS: A Caution Against Political Intervention in Treaty Interpretation, in (Meg Kinnear and Campbell McLachlan eds.), 35(2) ICSID Review – Foreign Inv. L. J. 223, 228 (2020).

[2] M.Sornarajah, The International Law on Foreign Investment 105 (3rd ed. 2010).

[3] Nigel Blackaby and Caroline Richard, Amicus Curiae: A Panacea for Legitimacy in Investment Arbitration?, in The Backlash against Investment Arbitration 253 (Michael Waibel and Asha Kaushal eds., Kluwer Law International) (2010).

[4] Christina Knahr & August Reinisch, Transparency versus Confidentiality in International Investment Arbitration—The Biwater Gauff Compromise, 6 The Law and Practice of International Courts and Tribunals 97, 110-111 (2007).

[5] Tobias Zuberbu¨hler, Non-Signatories and the Consensus to Arbitrate, 26(1) ASA Bulletin 18, 21 (2004).

[6] Singapore International Arbitration Centre (SIAC) Investment Arbitration Rules 2017, rule 29.4; see also The Arbitration Institute of Stockholm Chamber of Commerce (SCC) Arbitration Rules 2017, art 3(10); see also Proposal for Amendment of the ICSID Rules – Consolidated Draft Rules 2019, Vol. 2, rule 48.

[7] Gary B. Born and Stephanie Forrest, Amicus Curiae Participation in Investment Arbitration, in (Meg Kinnear and Campbell McLachlan eds.), 34(3) ICSID Review – Foreign Inv. Law J. 626, 641 (2019).

[8] Fiona Marshall & Howard Mann, Revision of the UNCITRAL Arbitration Rules: Good Governance and the Rule of Law: Express Rules for Investor-State Arbitrations Required, Int’l Inst. For Sustainable Dev, International Investment and Sustainable Development Team, (2006).


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