In This Article Expand or collapse the "in this article" section Investor-State Conciliation and Mediation

  • Introduction
  • Origins and Background
  • Primary Works
  • Early Works on Conciliation
  • Definition of Conciliation and Mediation in the Investor-State Context
  • Conciliation and Mediation Rules and Procedures
  • Conciliation and Mediation in Practice
  • Combined Arbitration and Conciliation or Mediation Procedures
  • Relationship between Dispute Prevention and Management Mechanisms and Conciliation and Mediation
  • Enforcement of Settlement Agreements Arising from Investor-State Conciliation and Mediation
  • Reforms to Promote the Use of Investor-State Conciliation and Mediation
  • Potential Advantages of Conciliation and Mediation over Arbitration
  • Potential Obstacles to Conciliation and Mediation and How to Overcome Them
  • Dispute System Design and Conciliation and Mediation
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International Law Investor-State Conciliation and Mediation
by
Romesh Weeramantry, Brian Chang
  • LAST REVIEWED: 26 May 2021
  • LAST MODIFIED: 26 May 2021
  • DOI: 10.1093/obo/9780199796953-0219

Introduction

Conciliation and mediation have great potential to resolve investor-State disputes. Nonetheless, arbitration has significantly overshadowed these two forms of amicable dispute settlement processes. This disparity is slowly changing, and, in recent times, interest has grown in conciliation and mediation, particularly given the duration, complexity, and cost of investor-State arbitrations, as well as concerns as to the substantive content of investor-State arbitral decisions. No clear consensus has emerged regarding the precise definition of either conciliation or mediation. Given the substantial overlap between the two processes, they have often been referred to as functionally equivalent and interchangeable. The best way to identify conciliation or mediation is through close examination of the particular set of rules and practices at issue. But the two dispute settlement mechanisms are generally distinguishable. At its core, conciliation involves a sole conciliator or conciliation commission considering the respective positions of the disputing parties and making nonbinding recommendations for settlement. Conciliation rules typically have flexibility to accommodate other mediation techniques that share the same purpose and may require a conciliator or conciliation commission to produce a written evaluation of the parties’ respective legal positions. In comparison, mediation is a process in which a mediator (1) assists the parties to focus on their real interests rather than legal rights, (2) generally avoids making any merits-based evaluation of parties’ positions, and (3) facilitates a meaningful dialogue between the parties to reach an amicable settlement. Unlike arbitration, in which the disputing parties have no certainty over the arbitrators’ binding decisions, the success of both conciliation and mediation depends on the willingness and cooperation of the parties to reach a voluntary and agreed settlement. A settlement agreement resulting from a mediation or conciliation process may potentially be enforced under domestic laws or in states that have ratified the Singapore Convention on Mediation, an innovation in international dispute resolution that may increase interest in investor-State conciliation and mediation. The UNCITRAL Working Group III is presently considering whether and how to promote conciliation, mediation, and other alternative dispute resolution (ADR) mechanisms in reforms to the present system of investor-State dispute settlement.

Origins and Background

Investor-State conciliation and mediation have common origins in the law of diplomatic protection, under which the home state of an investor may espouse the investor’s claim against a state in which that investor’s investment was made (host state). This system did not guarantee a remedy to investors since home states had discretion to decide whether to intervene and take up the claims of their nationals with the host state, and even if the intervention ended in success, the home state had full control over any settlement proceeds. Conciliation has historic roots in the commissions of inquiry provided for in the Hague Conventions on the Pacific Settlement of Disputes of 1899 and 1907 and the Bryan Treaties of 1913 and 1914. The first detailed conciliation provisions are contained in the 1925 Locarno Treaties, the 1928 General Act on the Pacific Settlement of Disputes, and many bilateral conventions for the settlement of disputes concluded during the 1920s and 1930s. While mediation was included as a mode of dispute settlement in the Hague Conventions, it was then conceptualized as involving the intervention of third-party states or political authorities, which might pursue their own interests through the mediation (Cot 1972, cited under Early Works on Conciliation). See also the Good Offices and Mediation and Conciliation sections of the separate Oxford Bibliographies in International Law article “Peaceful Settlement of Disputes.” Modern investor-State conciliation was conceptualized over fifty years ago during the discussions that lead to the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention). Investor-State conciliation was included in that convention as an alternative to arbitration. At that embryonic stage, Aron Broches, World Bank general counsel and chief architect of the ICSID Convention, took the view that the role of conciliation in the convention’s framework may prove more important than arbitration. Broches’s vision has not come into fruition—at least not yet—but room exists for investor-State conciliation to grow, particularly as it is offered as an alternative to arbitration in many modern investment treaties and investment contracts. Modern investor-State mediation is a relatively more recent development, with few investment treaties explicitly mentioning it and fewer rules of procedure available, although these factors do not prevent investors and states from agreeing to mediation. While mediation was included as an interstate mode of dispute settlement in the Hague Conventions on the Pacific Settlement of Disputes and Article 33 of the UN Charter, and has a long history of use in various domestic contexts, mediation was not formally made a distinct option for the settlement of investor-State disputes until the development in 2014 of the International Bar Association (IBA) Rules for Investor State Mediation. In its current Rules amendment process, ICSID is presently proposing that in addition to its Conciliation Rules, voluntary Mediation Rules be adopted by its member States.

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