An Outlook for the Possible ISDS Mechanism of China-EU Comprehensive Agreement on Investment — from the Perspective of ISDS Reform

The CAI aims to replace and unify the bilateral investment treaties (BITs) entered by China and 26 out of the 27 member countries of the EU respectively so as to establish a unified multilateral institutional framework, which covers, inter alia, the market access commitments, information transparency, fair trading and competition, fair labor treatment, sustainable development and etc. It is worth noting that, in regard to the dispute resolution mechanism, the CAI has not directly set out a set of rules for the Investor-State Dispute Settlement (“ISDS”), but adopted the similar route as is in the Regional Comprehensive Economic Partnership (RCEP), which was signed by and among China, Japan, Korea, Australia, New Zealand and the 10 member countries of the Association of Southeast Asian Nations on 15th November 2020. That is, the signatory parties vowed to conclude the negotiations on ISDS mechanism within 2 years after the signing of the CAI. China and the EU had also specifically agreed that such ISDS mechanism would take into account of the ISDS reform currently carried out by the United Nations Commission for International Trade Law (“UNCITRAL”). In this regard, what kind of ISDS mechanism that will be finally adopted in the CAI is particularly worth the attention.

《中欧全面投资协定》旨在取代中国和欧盟其中26个成员国之间现有的双边投资条约，建立一个统一的制度性框架，其中涉及市场准入、透明度、公平竞争、劳工待遇、可持续发展等等方面。然而，值得注意的是，《中欧全面投资协定》中关于投资者-东道国争端解决（Investor-State Dispute Settlement，“ISDS”）机制方面没有具体规定，而是采取类似于中国与日本、韩国、澳大利亚、新西兰及东南亚国家联盟十国共十五方于2020年11月15日正式签署的《区域全面经济伙伴关系协定》（Regional Comprehensive Economic Partnership，“RCEP”）中的约定，即缔约方承诺在该协议签署后的2年内完成ISDS机制的谈判。中欧双方在CAI中还特别承诺，该ISDS机制的设立将会考虑联合国国际贸易法委员会（UNCITRAL）组织下的ISDS改革（“ISDS改革”）方面获得的相关工作成果。[2]如此一来，《中欧全面投资协定》最终将采取何种ISDS机制，就尤为值得关注与期待。

In light of the above, this article will first introduce the ISDS reform led by the UNCITRAL with particular attention paid on the reform submissions by China and the EU, which may shed a light on the possible positions to be adopted by China and the EU in the CAI with respect to ISDS mechanism. Based on the above analysis together with the consensus and progress achieved so far in the ISDS reform, this article will then look forward to the ISDS mechanism that may be eventually adopted in the CAI. 

有鉴于此，本文将首先梳理UNCITRAL组织下的ISDS改革，并就其中欧盟与中国关于部分关键问题的立场进行简要分析，以期窥见双方在《中欧全面投资协定》项下ISDS条款的商定中可能倾向采取的立场。最后，基于上述分析以及ISDS改革目前已取得的共识与阶段性进展，本文将对《中欧全面投资协定》可能最终呈现的ISDS机制进行展望。

As an essential part of international investment dispute resolution, ISDS mechanism has now been adopted or incorporated into many International Investment Agreements (IIAs). While ISDS provisions in investment treaties may vary, they normally have an arbitration-based dispute settlement mechanism with the following features: (i) the claimant/investor may bring a claim directly against the host State; (ii) the dispute is resolved by an arbitral tribunal constituted ad hoc for that particular dispute; and (iii) both parties to the dispute, i.e., the claimant/investor and the respondent/State, play an important role in the appointment and selection of the arbitrators. It is undeniable that the ISDS mechanism plays a crucial part in the protection and promotion of investment. The ISDS mechanism empowers the investor to protect their interests against the States in a more active and fairer way compared to the diplomatic protection provided by the investors’ own countries.

作为国际投资争议解决机制中极为重要的一部分，ISDS机制已被大多数国际投资条约纳入。虽然投资条约中ISDS条款各不相同，但它们通常都规定了基于仲裁的争议解决机制，并且具有以下特征：1）投资者可直接针对东道国提出请求；2）投资者与东道国之间的争议由专为该争议组成的仲裁庭解决；3）争议双方，也即投资者和东道国，均有权利参与仲裁员的提名。[3]不可否认的是，目前通行的ISDS机制在促进外商投资、保护投资者方面发挥了重要的作用。通过ISDS机制，投资者将不再必须通过母国的外交保护去实现自己的投资利益，而可通过以提起仲裁这一更为主动、也更为平等的方式向东道国主张自己的权益。

However, in recent years, the drawbacks of the current ISDS mechanism have become increasingly pronounced, especially the lack of consistency and coherence in the arbitral awards. First of all, there is a lack of coherence and consistency in the investment protection standards. The current international investment treaty regime is rather fragmented. Multilateral investment treaties are rather rare while most of international investment treaties are only bilateral and investment protection standards provided in these BITs vary widely. This problem is magnified by the fact that the language of some BITs, especially of those earlier treaties, are relatively vague and broadly-defined, leaving arbitrators with rather unrestricted discretion in interpretation and application. Secondly, the facts that ISDS cases are heard by arbitral tribunals constituted ad hoc and there is no strict doctrine of precedent in arbitration lead to the widespread conflicts in arbitral awards. In practice, different tribunals sometimes have different conclusions even on the same standards drawn from the same investment treaty. For example, regarding the “fair and just treatment” under the North American Free Trade Agreement (NAFTA), in S.D. Myers, Inc. v. Canada the tribunal held that this provision cannot be read in the vacuum, but should be interpreted with reference to other international treaties, while in Metalclad Corporation v. United Mexican State, another tribunal took the view that the so-called “fair and just treatment” should be independent of the custom international laws and means the host State should provide extra fairness and justness to the investors. Thirdly, the ISDS arbitral awards are normally final with very limited appeal and review mechanisms. For example, in an arbitration case administered under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (“ICSID”), the annulment proceeding can be brought under Art. 52 of the ICSID in extremely limited situations that only relate to the procedural aspects. The restricted access to appeal and review further exacerbates the consistency and coherence in the ISDS arbitral awards. Besides, in respect of the arbitrators, under the current ISDS mechanism, there is no code that may regulate the arbitrators’ conduct and no mechanism to hold them accountable for any misconduct, which endangers the impartiality and independency of the arbitrators. Moreover, with respect to the procedural matters, ISDS cases may involve increasingly high costs and lengthy proceedings and etc, which cause unnecessary burden upon the parties, especially from the claimant/investor’s perspective. These concerns are all negatively affecting the legality and effectiveness of the ISDS mechanism.

但是近年来，目前通行的ISDS机制的问题日渐彰显，其中尤为突出的问题在于投资仲裁的结果严重缺乏一致性。具体而言：第一，在投资保护标准方面的不一致。目前的国际投资条约体系呈现“碎片化”的特征，现有的大部分国际投资条约几乎都是各国之间签订的双边投资条约（Bilateral Investment Treaty，“BIT”），而少见多边投资条约，而各BIT之间的具体条款规定不尽相同，由此在根源上导致了各国乃至各案之间的投资保护标准不同。此外，很多投资条约，尤其是第一代投资条约，用语相对宽泛模糊，给予裁判者极大的解释空间，加剧了投资保护标准的不一致性。第二，在仲裁庭方面，由于投资者与东道国之前的投资争议通常是由专为该争议组成的临时仲裁庭解决，仲裁庭也并无遵循先例的强制性义务，这就导致仲裁裁决结果容易相互冲突，甚至于不同仲裁庭会就相同投资条约中相同标准得出不同结论，[4]例如，对于《北美自由贸易协定》（North American Free Trade Agreement，NAFTA）下约定的“公正与公平待遇”的标准认定，在S.D. Myers, Inc. v. Canada案中，仲裁庭认为“公正与公平待遇”条款不能单独理解，应该参考其它国际条约，[5]而在Metalclad Corporation v. United Mexican States案中，仲裁庭认为“公正与公平待遇”条款应独立于习惯国际法解释，意味着东道国额外给予的公平公正待遇。[6]第三，缺乏有效的复审或者上诉机制。国际投资仲裁裁决具有终局性，在国际投资争端解决中心（ICSID）仲裁下，虽然当事人可以根据《解决国家与他国国民间投资争端公约》（Convention on the Settlement of Investment Disputes Between States and Nationals of Other States，“《ICSID公约》”）第52条申请撤销裁决，但其所允许的裁决情形极为有限，通常都是与正当程序相关，对于实体问题的错误，则几乎求告无门。[7]除仲裁结果缺乏一致性之外，在仲裁员方面，虽然在现有的ISDS机制下，仲裁员可由当事人双方指定，但由于缺乏硬性的仲裁员行为规范、监督与问责机制，仲裁员的独立性和公正性难以保障。同时，在仲裁程序方面，投资者与国家间争议解决存在时间漫长、费用繁杂等等问题。[8]这些都对ISDS体制的合法性和有效性造成了不小的冲击。[9]

Against this backdrop, the UNCITRAL initiated the ISDS reform in 2017, which consists of a three-stage scheme, i.e. (i) to identify and consider concerns regarding ISDS; (ii) to consider whether reform is desirable in light of any identified concerns; and (iii) if the reform is desirable, any relevant solutions should be formulated.

正是在这样的背景下，UNCITRAL于2017年启动了对现有ISDS的改革工作，整体改革基于三步走的方案，也即：首先，确定和审议有关ISDS改革的具体问题；其次，审查对已确定的具体问题进行改革是否可行；最后，提出具体可行的改革方案建议。[10]

According to the 2018 Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-sixth session, the identified concerns mainly cover the inconsistency of ISDS, absence of review mechanism, impartiality and independence of arbitrators, and third-party funding. Regarding these concerns, the EU points out that the identified concerns are intertwined and systemic, and addressing such specific concerns in a piecemeal approach would leave some concerns unaddressed. Thus, to address these concerns, the EU proposes a systematic and holistic approach, that is, the establishment of Multilateral Investment Court (MIC) which is consistent with the nature of international investment treaty regime.

根据UNCITRAL于2018年发布的报告，目前各国就ISDS改革达成一致的具体问题包括：ISDS机制具有不一致性，ISDS机制缺乏上诉机制，仲裁员的公正性与独立性，ISDS程序成本高，第三方资助等等。[11]其中欧盟进一步指出，这些已确定的需要改革的具体问题是相互交织和系统性的，如果仅仅以零敲碎打的方式解决，难以彻底解决所有问题。[12]对此，欧盟提出，应当着手建立与国际投资条约体系特征一致的“多边投资法院（Multilateral Investment Court，MIC）”。

According to the submission of the EU and its member states, the Multilateral Investment Court functions as follows:

根据欧盟及其成员国提出的意见，多边投资法院体系的主要设计如下：[13]

1) Two levels of adjudication: a standing mechanism with full-time adjudicators should have two levels of adjudication. A first-instance tribunal would hear disputes. It would also deal with cases remanded to it by the appellate tribunal where the appellate tribunal could not dispose of the case. An appellate tribunal would hear appeals from the tribunal of first instance. In the Submission, it is suggested that grounds of appeal could be errors of law (including serious procedural shortcomings) or manifest errors in the appreciation of the facts. But appellate tribunal’s power of factual review should be strictly limited that it should not undertake a de novo review of the facts;

1）两层级裁决：多边投资法院将是一个常设机构，而且有着两层级裁决。初审法庭将进行争端的审理。它还将审理上诉法庭不能审理的发回重审的案件。而上诉法庭将审理来自初审法庭的上诉。上诉理由可以是法律错误（包括严重的程序缺陷），也可以是对事实判断上的明显错误。但上诉法庭对事实的审查应受严格限制，不应对事实重新进行全面的审查。

2) Adjudicators: adjudicators would be employed full-time. It is suggested to use comparable qualification requirements as for other international courts. And the appointment process should be transparent and robust, candidates for the standing mechanism could be both proposed by the contracting parties and apply directly for appointment. To hear each particular case, adjudicators would be appointed to divisions of the standing mechanism on a randomized basis to ensure that the disputing parties would not be in a position to know in advance who will hear their case. To ensure the impartiality and independence, the adjudicators would be subject to strict ethical requirements, and have disclosure obligation;

2）审判员：审判员为全职审判员，并且可以对他们采用与其他国际法院类似的任职要求。在任用程序方面，应制定强有力和透明的任命程序，常设机制的审判员候选人既可由缔约方提出，也可直接申请任命。为了审理每一具体案件，将随机指定常设机制的审判员，以确保争议各方无法事先知道将由谁审理其案件。此外，审判员将受到严格的道德要求，并且具有披露义务，以保障审判员独立性和公正性。

3）Enforcement: Given that there would be an appeal mechanism, there is no need for review of awards at the domestic level or through ad hoc international mechanisms, i.e. the function of annulment or setting aside currently exercised by national courts and ICSID annulment committees would be exercised by the broader review provided by the appeal mechanism. Besides, awards under a future standing mechanism could additionally be capable of enforcement under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Award；

3）执行：鉴于多边投资法院将具有上诉机制，目前由国内法院和ICSID撤销委员会行使的撤销职能将由上诉机制所提供的更广泛的复审来行使。而且未来多边投资法院作出的判决还应能够根据《纽约公约》进行执行。

4）Financing: Contributions to the financing of a standing mechanism would be made, in principle, by the contracting parties. These would be weighted in accordance with their respective level of development.

4）出资安排：原则上，多边投资法院的资金应由各缔约方提供。具体出资将考虑各缔约方各自的发展水平。

Part of the ideas of Multilateral Investment Court has already been enshrined into several international investment agreements concluded by the EU in recent years. For instance, Art. 3.10 of Canada-EU Comprehensive Economic and Trade Agreement and Art. 3.39 of EU-Vietnam Free Trade Agreement provide for the establishment of a permanent Appeal Tribunal to hear the appeals of the investment disputes.

以上多边投资法院中的部分理念也在欧盟近年签署的几项国际投资条约中有所体现，如《加拿大-欧盟全面经济与贸易协定》第3.10条和《欧盟-越南自由贸易协定》第3.39条中就规定协定双方设立常设上诉机制，以处理投资争端双方关于仲裁裁决的上诉。

Meanwhile, to address these identified concerns, China also proposes the establishment of a permanent appellate mechanism. Such mechanism will improve the review mechanisms and enhance the predictability of ISDS arbitral awards. However, disapproving the idea of a permanent first instance tribunal, China emphasizes the importance and dispensability ofthe right of parties to appoint arbitrators at the first-instance stage of investment arbitration. China believes that such right would not only help to boost the confidence of the claimants/investors in the ISDS mechanism and, by choosing the arbitrators possessing particular industrial understanding and experience, it would improve the professionalism and efficiency in the often-complicated international investment arbitrations as well. In addition, China also agrees with the need for a code of conduct for arbitrators to discipline the behaviors of the arbitrators, thereby improving the impartiality and independence of arbitrators.

与此同时，根据中国向UNCITRAL提交的意见书，为了解决这些已确定的ISDS改革的具体问题，中国同样建议建立一个基于国际条约的常设上诉机制，以此完善ISDS机制下的纠错能力，提高ISDS裁决的一致性与可预测性。但是中国反对设立常设性质的初审机构，相反，中国坚持应当赋予当事人在投资仲裁一审阶段指定仲裁员的权利，认为这种权利不仅有助于建立投资者对ISDS机制的信心，同时通过选择具有专门行业知识和相关经验的仲裁员，可以使复杂的国际投资仲裁更具有专业性与效率性。此外，中国也提议制定仲裁员行为守则，从而对仲裁员相关行为进行规制，确保仲裁员的独立性与公正性。[14]

Comparing the submissions by China and the EU, we can see the consensus of China and the EU are the need for the establishment of standing appellate mechanism and the need for the code of conduct for arbitrators. The notable differences are that China sticks to the traditional ad hoc arbitration mechanism at the first-instance stage and wishes to maintain the right of parties to appoint arbitrators, whereas the EU promotes a two-tier standing mechanism with tenured adjudicators. Based on this, the ISDS mechanism of CAI may have a compromised setting that incorporates only the standing appellate mechanism while sets out a specific code of conduct for arbitrators.

比较中国和欧盟的主张，不难看出，欧盟和中国就ISDS机制的主要共识是建立有着常设上诉机制的争端解决机制与制定仲裁员行为守则。而双方主张的主要不同之处在于，中国在一审阶段坚持原来的为特定争端设立的临时仲裁，坚持当事人指定仲裁员的权利，而欧盟则主张建立两层级的有着专职仲裁员的常设机制。据此分析，《中欧全面投资协定》的ISDS机制可能纳入常设上诉机制，并制定专门的仲裁员行为准则。

According to the current progress of ISDS reform, UNCITRAL has taken a magnificent step in the appellate mechanism and code of conduct for arbitrators by publishing the Possible Reform of Investor-State Dispute Settlement (ISDS) Appellate Mechanism and Enforcement Issues (the “Appellate Reform”) and the Draft Code of Conduct.

根据目前UNCITRAL的ISDS改革进展，UNCITRAL在上诉机制的设立以及仲裁员行为准则等方面已经取得较大的阶段性成果，并发布了《投资者-东道国争端解决机制中上诉机制和执行的改革方案》（“《ISDS上诉改革方案》”）与《仲裁员行为守则草案》。

Under the Appellate Reform, there are well-drafted provisions on the scope and standard of review, appealable decisions, effect of appeal, case management, appeal periods and etc. Regarding the scope of review, the Appellate Reform sets out several options for the states to choose, e.g., the parties may appeal against certain errors in law, or errors in fact finding, or the combination of both. With regard to the appeal mechanism, albeit China’s comments have not yet been released, the EU holds the opinion that while errors in the interpretation or application of the law shall be a good reason for the appeal, only manifest errors in facts shall be appealable. Correspondingly, the EU comments that while the appeal court or tribunal may fully examine the legal errors but should only be allowed to have a second look at the factual basis if the factual errors are manifest and obvious, such that the appellate mechanism may maintain efficient. As a result, it is reasonable to expect that the EU’s pro-appeal attitude and strong stance on the appealability of factual errors would be reflected in the CAI as well.

《ISDS上诉改革方案》在上诉理由、复审标准、可上诉的裁定、上诉的效力、上诉的时间期限、上诉的费用担保、执行等等方面均作出了具体规定。[15]其中针对关键的上诉事由方面，其设计了几种不同的选项，例如，上诉机制缔约国之间可以选择仅把法律错误作为上诉理由，也可以仅把事实错误作为上诉理由，双方还可以选择把法律与事实错误共同作为上诉理由。就此方面，虽然UNCITRAL尚未公开中国的评论意见，但欧盟在其评论意见中认为，上诉理由可以包括法律适用与解释上的错误，事实认定的明显错误也可以单独作为上诉理由，并且对国内法适用与理解上的错误也属于事实认定错误的范畴。[16]同样地，在上诉审理标准方面，欧盟则认为，上诉庭应该对法律问题进行全面审查，而对事实的审查方面，为了保持效率，应该限制在明显的错误上。[17]有理由相信，欧盟对上诉机制的支持态度及对事实错误可上诉性的强硬立场可能亦会体现于最终的《中欧全面投资协定》中。

Concerning the arbitrators’ conduct standards, the Draft Code of Conduct sets out comprehensive rules which include impartiality and independence of arbitrators, the disclosure obligation, the diligence obligation and so forth. Given that the rules set out in this Draft Code of Conduct are not much debated, it is very likely that in future the CAI would develop a code of conduct for arbitrators along the lines of the Draft Code of Conduct, or incorporate it directly into its ISDS mechanism.

在仲裁员行为准则方面，UNCITRAL公布的《仲裁员行为守则草案》进行了全面的规定。具体内容涉及仲裁员的披露义务、独立公正、廉洁勤勉等，[18]各方对此均无太大争议，《中欧全面投资协定》未来也很有可能参照《仲裁员行为守则草案》制订相关仲裁员行为规范，或直接将该草案纳入其关于ISDS的约定当中。

According to the partial text of CAI that has been released, the specific ISDS mechanism is still subject to further negotiation between China and the EU in the next two years with due regard being given to the ISDS reform led by UNCITRAL. Therefore, based on the submissions by China and the EU on the ISDS reform, it is anticipated that the ISDS mechanism of the CAI would refer to the Appellate Reform to establishes a permanent appeal institution with a wider range of grounds for appeal. It is also expected that a set of conduct code for arbitrators would be provided in the CAI which mirrors the Draft Code of Conduct published by UNCITRAL. Furthermore, as more progress will be made under ISDS reform in the next two years, we can be optimistic that the final ISDS mechanism of CAI would incorporate more outcomes reached in ISDS reform and would provide wider and better protection for the interests of the investors’ from both China and the EU.

根据《中欧全面投资协定》目前公布的文本，具体的ISDS机制仍需要中国与欧盟在未来两年里完成协商谈判，并且该协商谈判需要考虑UNCITRAL组织下的ISDS改革的进展。在此基础上，根据中国与欧盟及其成员国在ISDS改革下的主张，可以预期，《中欧全面投资协定》的ISDS机制可能会参考UNCITRAL的《ISDS上诉改革方案》，设置常设上诉机构与更为宽泛的上诉理由,同时参考或直接引用《仲裁员行为守则草案》制定相关仲裁员行为规范，以进一步提高仲裁庭独立性与公正性。特别地，考虑到届时UNCITRAL的ISDS改革应会取得更多的进展，因此可以期待，最终公布的《中欧全面投资协定》的ISDS机制势必将会有更多改革成果纳入其中，为未来的中国与欧盟投资者提供更高标准、更全面的权利保障。

[2]《中欧全面投资协定》第六节第二节第三条规定：“双方进行投资争端解决磋商时，应考虑到联合国国际贸易法委员会（贸易法委员会）范围内投资争端解决的结构改革的进展。”

[3] Potesta, Michele, and Gabrielle Kaufmann-Kohler. “Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism?–Analysis and Roadmap”. Analysis and Roadmap (June 3, 2016).

[4] A/CN.9/WG.III/WP.142 - Possible reform of investor-State dispute settlement (ISDS) .

[5]S.D. Myers, Inc. v. Canada, Award (2000) (UNCITRAL) partial award, (last visited April 22, 2009).

[6] Metalclad Corporation v. Mexico, ICSID Case No. ARB(AF)/97/1 (NAFTA), final award, (last visited April 22, 2009).

[7] 《ICSID公约》第52条规定：“任何一方均可基于以下一种或多种理由，以书面形式向秘书长提出要求撤销裁决的请求：（1）法庭的组成不适当；（2）法庭明显超出其权力；（3）某仲裁庭成员有贪污行为；（4）严重偏离基本程序规则；或者（e）该裁决未能说明其裁决依据。”

[8] 同注5。

[9] Franck, Susan D. “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions” Fordham L. Rev. 73 (2004): 1521.

[10] A/CN.9/930/Add.1/Rev.1 - Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session - Part II. .

[11]  A/CN.9/964 - Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-sixth session .

[12] A/CN.9/WG.III/WP.185 - Appellate and multilateral court mechanisms .

[13]同上。

[14] A/CN.9/WG.III/WP.177 - Submission from the Government of China .

[15] A/CN.9/WG.III/WP.202 - Possible reform of investor-State dispute settlement (ISDS) – Appellate mechanism and enforcement issues. < http://undocs.org/en/A/CN.9/WG.III/WP.202>.

[16]同上。

[17]同上。

[18]A/CN.9/WG.III/WP.201 - Possible reform of investor-State dispute settlement (ISDS) – Draft Code of Conduct. .