Panel Presentations – Dispute Settlement in International Law @ 10th International Conference on International Law
Ronjini Ray, Arnav Sharma, Dr. Harisankar K Sathyapalan, Dr. Saravanan A
Panel on Dispute Settlement in International Economic Law sponsored by the NLSIU Ministry of Commerce Chair at the 10th Conference on International Law organised by the Indian Society of International Law held between 25th to 27th October 2024.
The Ministry of Commerce (MOC) Chair at the National Law School of India University, Bengaluru (NSLIU) sponsored a dedicated panel on Dispute Settlement in International Economic Law at the 10th International Conference on International Law, scheduled from 25th to 27th October 2024 in pursuance of its objective to systematically impart knowledge on the practice of international trade agreements and related laws.
The panel included presentations on varied areas of international economic law including international commercial arbitration, international investment law, laws of the World Trade Organisation (WTO) and Free Trade Agreement (FTAs). The panel touched upon the following key topics:
Dr. Harishankar Sathyapalan analysed the application of ‘commercial’ element in international arbitration to include or exclude ‘investment’ treaty arbitration and treaty awards from the scope of jurisdiction of national courts, focusing on the conflicting positions adopted by Indian courts on this issue.
Dr. Saravanan A examined the impact of amicus submissions on outcomes of investment disputes. Specifically, he analysed the participation of non-disputing parties in investment disputes highlighting the relevance of transparency and public participation in investment arbitration.
Ms. Ronjini Ray analysed the EC Enforcement Regulation through the lens of WTO law and public international law. She discussed the approach being adopted by the EU against Indonesia in context of Indonesia – Raw Material (DS592) and the way forward with respect to India — Tariffs on ICT Goods (EU) (DS582).
Mr. Arnav Sharma explored an Indian approach to dispute settlement in FTAs, particularly with respect to sustainability issues such as those on labour and environment. He examined the EU and the UK’s approach with respect to sustainability chapters to guide the approach that may be adopted by India.
A detailed write up of the key arguments made by the panellists on the topics are laid down below. The panellists thank the NLSIU MOC Chair for sponsoring the panel. The views expressed by the authors are personal.
The Commercial-Investment Dichotomy in International Arbitration and its Interplay with National Courts
Dr. Harishankar Sathyapalan
Associate Professor of Law, NLSIU
The normative architecture of international commercial arbitration is built around the relationship between public courts and private arbitral tribunals. Accordingly, two significant contact points exist where arbitration and national courts can interact. First is by way of curial supervision at the place of arbitration, and second is the judicial control of arbitral awards at the place of enforcement. However, the exact representation of a legal framework may not be expedient when a state is one of the parties to an international arbitration. Investment treaty arbitrations, rooted in public international law, do not generally entail comparable interventions of national courts at the arbitral seat to those of commercial arbitration. While the International Centre for Settlement of Investment Disputes (ICSID) Convention represents a delocalized framework that disallows national courts’ intervention, the arbitration laws of non-ICSID countries can theoretically extend their supervisory arms to investment treaty arbitrations. However, the lack of a unified legal representation for international arbitration, irrespective of the nature of disputes and parties involved, can pause challenges to national courts dealing with matters involving investor-state arbitrations. Further, the commercial reservation under the New York Convention (NYC) and various national arbitration laws may obviate the courts from enforcing investment awards. Against this backdrop, the piece examines the existing Indian judicial approach in suits related to international investment arbitration.
Commerciality under the National Arbitration Law
The commercial character of disputes is quintessential to international commercial arbitration. Many jurisdictions mandate the commerciality of arbitrations to apply the respective national arbitration laws. It can have two implications. First, the national courts may not permit non-commercial arbitrations to take off by not enforcing such agreements. Second, the enforcement of foreign arbitral awards can be subject to the commercial reservation under the NYC. Indian arbitration law, for example, restricts its application to ‘disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India.’ Similarly, India has also adopted the commercial reservation under the NYC. However, Indian courts have given a broader meaning to commerciality inspired by an extensive list of transactions under the Model Law’s definition of ‘commercial.’ The courts in the recent past have, however, grappled with the question of whether such a broad approach in extending the curial supervision is possible in investment treaty-related cases.
National Courts and Investment Treaty Arbitration
Arbitration under the ICSID convention signifies a certain amount of autonomy from national laws and courts. However other rules, such as the UNCITRAL Arbitration rule, that apply to investment arbitrations allow judicial interference. While the primary supervisory responsibility rests with the courts at the place of arbitration, other national courts may intervene in the arbitration in support of the arbitral process. Rarely, such jurisdictional interventions may also include the issuance of anti-arbitration injunctions.
Interestingly, Indian courts’ engagement with investment arbitration has thus far only dealt with applications for anti-arbitral injunctions. In the very first case of this nature, the High Court of Calcutta restrained a French investor from continuing treaty arbitration against a sub-national agency along with the Union of India. The court held that an entity not party to the basic treaty cannot be made the respondent in an international arbitration. The judgment assumed the applicability of Indian arbitration law to ITAs sub silentio. The commercial character of the dispute rationalizes the court’s assumption of jurisdiction to grant an anti-arbitral injunction in this case.
The Delhi High Court had the opportunity to be involved in two investment treaty-related cases in later years. In both cases, the court declined to exercise jurisdiction based on the negative competence-competence principle in international arbitration law, where the courts are restrained from exercising jurisdiction at the gateway of arbitration. The principle of non-justiciability also forbids the courts from exercising jurisdiction. While the decisions are hailed as arbitration-friendly and upholding the minimum intervention policy of the UNCITRAL Model Law, the observation by the court that the act applies only to commercial arbitrations is problematic. The Model law and the national legislation based on it are indeed designed to cater to international commercial arbitration; however, it does not prohibit judicial interventions in investment treaty arbitrations. Interestingly, the Delhi HC decisions have generated a certain sense that investment treaty awards are not enforceable in India due to the non-applicability of the Indian arbitration law.
Conclusion
Much of the investment treaty arbitrations stem from commercial transactions, and the awards are enforced under the NYC. As far as the Indian position is concerned, the Delhi High Court decisions are certainly not the final word on the enforcement of awards in India. Subject to the grounds under the NYC, enforceability is still achievable in the light of the broad interpretation of commerciality by Indian courts. Further, to tackle the commercial reservation under the NYC, the Indian Model BIT (Art 27.5) considers investment arbitrations to arise out of commercial relationships or transactions.
Participation of Amicus Curiae or Non-Disputing Parties in Investment Treaty Arbitration
Dr. Saravanan A
Assistant Professor of Strategy, Indian Institute of Management, Ahmedabad
According to Black’s Law Dictionary, Amicus Curiae means ‘A person who is not a party to a lawsuit but who petitions the court to file a brief in the action because that person has a strong interest in the subject matter’. International law scholars have confirmed that the domestic courts in the UK and USA accepted amicus briefs (briefs from non-disputing party) during 17th century, and later accepted before international adjudicatory forums such as international PCIJ, ICJ, ECJ, ECHR and etc.
Amicus requests have a long list such as “standing as a party, leave to submit written submissions, access to case documents, to take part in court hearings, make oral submissions, respond to the questions, to review memorials, and declare observer status”. The WTO- DSB has a long-standing rule governing non-disputing parties’ involvement in its dispute resolution process. It is interesting to note that the WTO’s notable decisions of US-Shrimp Case and EC-Asbestos case are evident of it. Also, the reason is clear because of the close bonding between economic interest and the public interest. The practice set in motion by WTO-AB has influenced other fields of international law. More particularly International Investment Law, also developed on same lines as WTO.
Submission of Amicus briefs before Investment Arbitral Tribunals
The number of disputes administered before investment tribunals (ITA) for the defence of human rights, public health, and the environment has significantly increased in the recent past. Additionally, civil society has been more involved in these tribunals as nondisputing parties seeking access as amicus curiae. The first recognition of acceptance of such submissions from non-disputing party was observed in the North American Free Trade Agreement (NAFTA, Chapter XI) administered Methanex Corporation v USA and subsequently followed by the International Centre for Settlement of Investment Disputes (ICSID) in Vivendi, Aguas Provincials and other cases. The earlier trend was to reject such involvement entirely.Subsequent requests gained momentum and various amendments have been brought to international investment instruments to comply with the amicus requirements.
Diversification of 3rd Parties or Non-Disputing Parties
Initially, only NGOs were allowed to submit their amicus briefs before the investment arbitration tribunal. This practice had shifted later, to accept amicus briefs from home-state submissions, international communities such as EC and WHO, even individuals in some cases.
Requirements under the NAFTA, ICSID, and UNCITRAL Rules
Various amendments were made to various international investment instruments such as NAFTA- Chapter XI, the ICSID Arbitration Rules and the UNCITRAL Arbitration Rules to addresses the challenges being faced by Investment tribunals. For instance, Article 1128 of the NAFTA was amended to grant permission to amicus participation after Methanex Case. Subsequently, ICISD Convention was also amended in 2006 to allow submission from non-disputing parties. Similarly, the UNCITRAL Rules were also amended in 2013 for the same. The detailed provisions on these instruments can be found below.
Source: Saravanan & Subramanian (2016); (2018)
The ITA’s Practice on Admission of Amicus Submissions
Please find below the summary of ITA disputes wherein tribunals accepted amicus briefs.
Source: Saravanan & Subramanian (2016); (2018)
Conclusion
The acceptance of amicus participation in ISDS disputes is a new development in international law. The international economic legal jurisprudence on amicus submissions originated from WTO-DSB, and was further refined by NAFTA Rules, after ICISD Arbitration Rules and finally elaborated well by the UNCITRAL Arbitration Rules. Though this might be a great step forward to address transparency in ISDS disputes. The Investment arbitral tribunals ought to carefully balance the necessity for confidentiality with the pursuit of transparency. The global community at large will surely gain a great deal from this balance.
Analysis of the EC Enforcement Regulation – Implication for India
Ronjini Ray
Assistant Professor of Law, NLSIU
On 11 December 2019, the WTO’s Appellate Body (AB) lacked its requisite quorum of three members to decide an appeal to a panel report. Consequently, the functioning of the appellate stage of the WTO dispute settlement mechanism (DSM) came to a standstill due to the United States blocking appointments of new AB Members. While the panel stage of the WTO DSM continues to function, the fate of an issued panel report has become uncertain without the AB.
Status of Dispute Settlement at the WTO
After the issuance of a panel report in a dispute, WTO Members have three options available: (i) adopt the panel report that was issued, (ii) refuse to adopt the panel report and appeal it “into the void” and (iii) consider agreeing to address select issues in the panel report by way of arbitration under Article 25 of the Dispute Settlement Understanding (DSU). After the AB stopped functioning in December 2019, at least 13 panel reports have been adopted but around 25 panel reports have been appealed into the void. Article 25 of the DSU provides an alternative dispute resolution mechanism through expeditious arbitration to resolve disputes concerning issues clearly defined by the parties. However, some WTO Members, led by the European Union (EU), have utilised Article 25 of the DSU to establish the Multi-party Interim Appeal (MPIA) arbitration mechanism on 30 April 2020.
The MPIA is an ad hoc interim process created to ensure access to a two-tiered dispute settlement system. It utilises the constructive ambiguity in Article 25 of the DSU to build an entireappellate arbitration mechanism for a few WTO Members without the consensus of the entire Membership. However, an appeal arbitral award issued under the MPIA does not have the authorisation of the Dispute Settlement Body (DSB) and is only required to be notified to the DSB and the Council or Committee of any relevant agreement. Effectively, the MPIA is a voluntary system of review of a panel report that has no legal value, except for on the parties to the dispute.
Enforcement Regulation
Currently, 27 WTO Members are part of the MPIA but key participants in the WTO DSM such as the United States and India are missing. In order to incentivise greater participation in MPIA and avoid such non-adoption of panel reports, the EU implemented the EC Enforcement Regulation (No 2021/167) (“Enforcement Regulation”). This Regulation allows the EU to unilaterally suspend concessions against a WTO Member that appeals a panel report where the EU is a complainant into the void.
Such a unilateral suspension of concessions under the Enforcement Regulation would be inconsistent with Article 23 of the DSU, which mandates WTO Members to seek the redress of the DSU in case of any violation or nullification and impairment under the WTO agreements. This is because the Enforcement Regulation allows the EU to suspend concessions against another WTO Member without the authorisation of the DSB as required under Article 22 of the DSU. In the US – Section 301 Trade Act, the panel report found that Article 23.2(a) of the DSU prescribes that it is for the WTO through the DSU process, and not an individual WTO Member like the EU, to determine that a measure is inconsistent with WTO obligations.
While not expressly stated in the Enforcement Regulation, it appears that the EU seeks to justify such a possible unilateral suspension of concession as a countermeasure under general international law as prescribed under the ILC Draft Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA). Article 55 of the ARSIWA specifies that it does not apply to implementation of the international responsibility of a State that are governed by special rules of international law like WTO law. Considering a special mechanism for countermeasures exists under the DSU, it may be incorrect to resort to the ARSIWA. However, authors have argued that relevant provisions of general international law provisions will apply in case of failure of special laws to appropriately address its objectives. While Article 22 of the ARSIWA prescribes countermeasures as a circumstance precluding the wrongfulness of the State, such measures are required to be undertaken in accordance with Chapter II of part II of the ARSIWA. Article 50 (a) of the ARSIWA specifies that such countermeasures shall not affect any dispute settlement procedure applicable between the relevant parties. In this case, any countermeasure under the Enforcement Regulation by being inconsistent with Article 23 of the DSU would affect the applicable procedures under the DSU violating Article 50 of ARSIWA. Moreover, the EU’s possible suspension of concessions under the Enforcement Regulation also does not comply with rules of retaliation as prescribed under Article 22 of the DSU. Countermeasures under the Enforcement Regulation may also be considered to be inconsistent with ARSIWA Article 52.3 (b) as any panel report appealed into the void would technically also be considered a dispute pending before a court, provided the AB is reinstated. Thus, the EU will face difficulty in justifying any potential measures under the Enforcement Regulations.
Currently, the EU has commenced two consultations on use of the Enforcement Regulation: (i) Indonesian nickel export restrictions and (ii) Information and Communication Technology (ICT) goods subject to import duties by India. These consultations have been initiated against Indonesia and India due to these countries appealing the panel reports in Indonesia – Raw Material (DS592) and India — Tariffs on ICT Goods (EU) (DS582) respectively.
The consultations against Indonesia began on 7 July 2023 and concluded on 1 September 2023. While the report of the consultations does not appear to be available, the Commission website notes “an estimated the direct effect of the nullification and impairment to be around €350 million, while the indirect impact would be up to four times higher”. It further notes that steel and stainless steel products as possible products for countermeasures. The Commission provided a period of 2 months for interested stakeholders to provides their views but, it is not clear as to the manner in which it arrived at its conclusion.
On the other hand, the consultations against India are on-going and the deadline for stakeholders to provide comments is on 10 February 2025. Based on the results of the consultation, the EU may proceed to propose countermeasures that could include the imposition of duties or quantitative restrictions on imports/exports. Without clarity as to method of determination of such alleged nullification and impairment, the EU’s countermeasure may also be considered inconsistent with Article 51 of the ARSIWA which requires such measure to be commensurate with the injury suffered.
Conclusion
While the EU may attempt to justify the Enforcement Regulation under ARSIWA, any measure under the Enforcement Regulation that fails to comply with the proportionality requirement will lead to violation of general international law. The process adopted by the EU under the Enforcement Regulation appears to take into account the concerns of stakeholders but, the final measure determined appears to be unilateral, non-transparent and coercive.
Considering India is on the receiving end of the EU Enforcement Regulation, it may consider raising concerns with the EU either at the WTO or bilaterally. Further, Indian stakeholders and industry may participate in the consultation process in determining the exact degree of the measure. However, such participation itself may seem like a tacit acceptance of the EU’s unilateral measure.
The Trade and Sustainability Question in FTAs:
Exploring an Indian approach to dispute settlement in non-trade disciplines in FTAs
Arnav Sharma
Assistant Professor of Law, NLSIU
Contemporary developments in International Trade Law, particularly in the domain of trade agreements can be characterized by an increased focus on non-trade issues. Environmental concerns occupy a centre stage in this respect. As deep trade agreements and mega regional agreements proliferate across regions, their approach towards obligations on the environment emerges as an important area of inquiry especially for developing states.
Sustainable development and environmental protection form a part and parcel of the goals covered in the WTO, especially under the Marrakesh Agreement.[1][2][3] As the international relevance of environmental protection grew, international trade also saw increasing discussions. GATT framework also saw increasing discussions and release of reports on questions concerning trade and environment.[4] That said, this has not materialised in the form of any dedicated obligations for environment apart from its possible coverage in some GATT exceptions.[5] The utilisation of these exceptions by GATT violative measures that are aimed at protecting or preserving the environment is a possibility under the existing GATT rules, provided it meets certain standards and thresholds set under Article XX of GATT and its subparagraphs.[6][7] In addition to these developments, there have been disputes in the past which witnessed a utilisation of these exceptions. These particularly include disputes surrounding measures that were aimed at: protecting certain marine and terrestrial species; promoting clean air by regulating use of fossil fuels; promoting the use and adoption of renewable energy inter alia. Other WTO agreements that are relevant for environmental protections include the GATS, TBT Agreement which deals with technical standards; SPS Agreement which deals with health and safety standards; and the Agreement on Subsidies and Countervailing Measures (SCM) Agreement. It must be noted here that these norms do not foster protection of the environment but rather focus on reinforcing non-discrimination and domestic protectionism within distinct specialised elements of global trade. Thus, their interaction with environmental issues also fosters these two goals.
Rise of Multilateral Environmental Treaties and Contemporary Trade Agreements
The proliferation of Multilateral Environment Treaties (MEA) has introduced new challenges to the domain of international trade.[8] Multiple MEAs propose norms which call for a regulation, and in some instances even prohibition of some commodities such as endangered plant and animal species; pollutants, agricultural products and hazardous wastes. In terms of dispute settlement, states increasingly rely on MEAs to introduce measures that may restrict trade in goods and services in lieu of protecting the environment which leads dispute settlement tribunals to increasingly rely on and interpret these treaties. The proliferation of MEAs has also impacted regional and free trade agreements with states introducing advanced and WTO plus disciplines on environment and sustainability. Multiple factors have influenced developments in this direction. One end of this discussion is the inability to incorporate dedicated sustainability obligations within the WTO framework in light of opposition and procedural requirements around consensus. Another end points towards the ability to build a critical mass of sustainability related obligations bilaterally or within a smaller regional grouping through dedicated chapters. These developments bring forward new challenges and offer another array of disputes which may lead to interesting implications.
India’s Foray into Deep Trade Agreements
India is uniquely located in this regard as it has undertaken a recent expansion in the realm of free trade agreements and is perusing obligations pertaining to the environment with a sense of care and concern. It is pertinent to note that India’s first trade and sustainability chapter came into existence upon the conclusion of the India EFTA Trade and Economic Partnership (TEPA). From a perusal of the text, the following general inferences may be drawn. Firstly, it seems that India’s response at present is to limit any dispute settlement related provisions to consultations; maintain confidentiality of reports and consultation request; restrict third party participation. Secondly, India has also keenly articulated the need for balancing sustainable development with trade interest in a manner that environmental measures do not become a tool for restricting trade. This aligns with India’s multilateral position as well.
Obligations in Trade and Sustainability Chapters FTAs and their potential impacts
Dispute settlement under certain renditions of Trade and Sustainable Development (TSD) Chapters reflects differing approaches between jurisdictions. The European Union (EU) adopts a promotional model, emphasizing consultative and cooperative mechanisms. It relies on a panel of experts serving as a recommendatory body, with no provision for sanctions. In contrast, states like the United States incorporate a sanctions-based approach in their TSD Chapters, allowing for the possibility of punitive measures to ensure compliance.
The EU has a well calibrated approach towards designing sustainability provisions in its FTA which tends to balance the need to operationalise certain MEA treaty obligations with its trade interests. It also aligns with internal measures within the EU common market that generate trade implications. The EU’s FTA practice indicates a progressive dispute settlement framework which fosters consultations at different levels before proceeding with a formal dispute. In addition, the EU’s approach in this regard has also seen an evolution from its earlier FTAs to the more contemporary ones. For example, the 2015 agreement with Korea had a two-track approach – expert panel and extensive discussions. By contrast, the EU-New Zealand FTA (2024) incorporates TSD provisions directly within the broader dispute settlement chapter, introducing more stringent measures while retaining the specialised character of TSD. Furthermore, the agreement also strengthens obligations aimed at monitoring compliance with the provisions, illustrating a move in the direction of a more comprehensive enforcement of the commitments made under the TSD Chapter.
Conclusion: Challenges for India
Considering the novel circumstances India faces with respect to TSD chapter obligations in FTAs, some challenges are inevitable. The first challenge primarily concerns the distinctions between India’s internal regimes and the nature of obligations suggested under such chapters. In this regard, some thematic areas where issues may arise based on an analysis of the EU’s practice include transparency, particularly with respect to third-party and civil society participation, which may not align with domestic practices. Additionally, while committees are common in Indian FTAs, Domestic Advisory Groups are not a prevalent feature.
The second set of challenges pertains to the nature of treaty negotiations within India and the need to strengthen institutional memory on international law and Indian state practices. Since TSD chapters lie at the crossroads of trade, labor, and environmental obligations, India must effectively align its state practices across international treaties, conferences, and submissions at other relevant forums addressing environmental, trade, and labor law issues. This alignment would help ensure consistency between India’s positions in bilateral agreements, such as FTAs, and its multilateral and general stance in international law.
India must also consider the cross-cutting implications of obligations in other chapters on trade and sustainability. For instance, the EU’s FTAs include chapters on related themes such as Good Regulatory Practices, Energy and Raw Materials, Transparency, Subsidies, and Dispute Settlement, which may have significant implications for the TSD chapter.