Conventional wisdom suggests that the best way to resolve a dispute is to avoid it altogether or resolve it at an early stage. In this respect, an increased resort to so-called alternative dispute resolution (ADR) methods and dispute prevention policies (DPPs) may be beneficial. ADR and DPPs can be either enshrined in IIAs or implemented at the domestic level, without any specific references in the IIA.
224 A system where judges are assigned to each case, as opposed to being appointed by the disputing parties, would also save significant resources currently spent on researching arbitrator profiles.
225 An obvious analogy is the European Court of Human Rights, which adjudicates claims brought under the European Convention for the Protection of Human Rights and Fundamental Freedoms.
As discussed above,226 non-binding ADR methods, such as conciliation and mediation, seek not to apply the law in a rigid manner but to find a solution to a dispute that would be acceptable to both parties.
ADR methods can help to save time and money, find a mutually acceptable solution, prevent escalation of the dispute and preserve a workable relationship between the disputing parties. However, there is no guarantee that an ADR procedure will lead to the resolution of the dispute; an unsuccessful procedure could simply increase the costs involved. Also, depending on the nature of a State act challenged by an investor (e.g., a law of general application), ADR may not always be acceptable to the government. A pre-condition for an effective ADR system is an adequate institutional arrangement within a government that allows relevant officials and agencies to propose, conduct and implement the ADR procedures.
ADR could go hand in hand with the strengthening of dispute prevention and management policies at the national level. Such policies aim to create effective channels of communication and improve institutional arrangements between investors and respective agencies (for example, investment aftercare policies) and between different ministries dealing with investment-related issues. An investment ombudsman office, or a specifically assigned agency that takes the lead should a conflict with an investor arise, can help resolve investment disputes early on, as well as assess the prospects of, and, if necessary, prepare for international arbitration.227
In terms of implementation, this approach is relatively straightforward, and much has already been done by some countries.
Importantly, given that most ADR and DPP efforts are implemented at the national level, individual countries can proceed without the
226 Section II.C.5.
227 See further UNCTAD, 2010a; UNCTAD, 2011a.
need for their treaty partners to agree. However, ADR and DPPs do not solve key ISDS-related challenges. The most they can do is to reduce the number of full-fledged legal disputes, which would render this reform path a complementary rather than stand-alone avenue for ISDS reform.
* * *
Among the reform options outlined above, some imply individual actions by governments and others require joint action by a significant number of countries. Most of the options would benefit from being accompanied by comprehensive training and capacity-building to enhance awareness and understanding of ISDS related-issues.228
While the collective action options would go further to address the problems posed by today's ISDS regime, they would face more difficulties in implementation and require agreement between a larger number of States. An inclusive, universal and transparent multilateral policy dialogue on ISDS could help to develop a consensus on the preferred course for reform and ways to put it into action. The time is ripe.
228 Such capacity building activities are, among others, being carried out by UNCTAD (together with different partner organizations). Latin American countries, for example, have benefitted from UNCTAD’s advanced regional training courses on ISDS on an annual basis since 2005.
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