Mediation of Investor–State Disputes: A Treaty Survey

The concept of mediation is not new. Long before law was established, courts were organized, or judges had formulated law, people resolved their disputes informally through negotiation or mediation. Historically, states also used mediation to resolve their conflicts. In some cultures, such as China’s deeply rooted Confucian philosophy emphasizing harmony and conflict avoidance, mediation was used not an alternative, but an essential—and integral—part of the dispute resolution system.In modern society, mediation and other forms of alternative dispute resolution (“ADR”) regained popularity in reaction to the increasing proceduralization, formalization, and judicialization of arbitration, or the colonization of arbitration by litigation. This is particularly true in the field of investor-state disputes. Investor-state arbitration is becoming more confrontational, more lengthy and costly, and more judicialized. The final result may be unsatisfying, even to a winning party. For instance, in the case of Metalclad Corporation v. The United Mexican States, after winning a seventeen million dollar arbitral award against Mexico, the Chief Executive Officer of Metalclad expressed regret at having resorted to this mechanism by noting that despite “winning” the case, the arbitration had been so dissatisfying that he wished the company had relied on other options to resolve the dispute. The proceedings had spanned approximately five years, involved a battle in domestic courts, and the claimant’s side alone had an estimated four million dollars in direct and indirect costs. No doubt there were considerable costs endured by Mexico as well. This case shows “how the nominal winner is often a real loser—in fees, expenses, and waste of time,” as President Abraham Lincoln famously noted.In the widely discussed case of Achmea BV v. Slovakia, the arbitral tribunal remarked at the close of the hearing that it had a sense “that a settlement in this case would be a good thing, in that the aims of both sides seem to be approximately aligned, and that the black and white solution of a legal decision in which one side wins and the other side loses is not the optimum outcome in this case.”In light of some Governments’ and Non-Governmental Organizations’ (“NGOs”) increasing distrust of investor-state arbitration, mediation regained its momentum as a method of resolving investor-state disputes (“ISD”). Consider, for example, the inclusion of mediation in the dispute settlement provisions of a growing number of international investment treaties (“IIAs”), including Model Bilateral Investment Treaties (“BITs”), and multilateral investment treaties. Mediation’s momentum is also reflected by the Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”), a new multilateral framework for the recognition and enforcement of mediated settlements. The Singapore Convention opened for signature in August 2019 and has been signed by forty-six nations so far, including China and the U.S. Although the Singapore Convention only applies to commercial disputes, the spirit and mechanism it embodies would apply with equal force to state-to-state and investor-state disputes. In this context, what are the challenges and values of using mediation to resolve investor-state dispute? What is the existing framework with respect to the use of mediation in investor-state disputes, including treaties and soft laws? What will the future look like? This Article intends to address these questions surrounding the use of mediation to resolve ISD. Section II will address the challenges of investor-state disputes. Section III will discuss why mediation might be particularly beneficial in the ISDS context. Section IV will examine the existing legal framework with respect to investor-state mediation through an extensive treaty survey. Section V looks at the “soft laws” that provide specific guidance on mediation for ISD. Finally, Section VI concludes with prospects to the future