Mediation as a tool to spearhead Disputes in International Trade Agreements

Note on how to cite this journal:

Author, Date of the post, WMO Conflict Insight, Title of the post,  ISSN: 2628-6998, https://worldmediation.org/conflict-insight 

Abstract:

Parties are increasingly seeing the opportunities to use dispute resolution mechanisms under international trade and investment agreements to enforce their rights and protect their commercial interests. International investment agreements (IIAs) time and again rely on arbitration as the principal dispute settlement process, but they rarely regulate mediation. However, the legal landscape changes due to the inclusion of mediation clauses and specific rules by international bodies. Investment mediation comes as a complementary tool that prevents the intensification of conflicts. It is more effective and efficient, leading to fewer disputes in the investment environment. Contemporary developments show an increasing significance in investor-state mediation. Earlier, the intermittent discussion around investor-state mediation has not been real but more often skeptical. Multilateral negotiations over trade liberalization move very slowly, leading to much less success in liberalizing trade in certain international commerce areas, which presents a grey place for possible disputes. Significant mediation centers on voluntary, good faith participation and states’ positive perception using any dispute resolution process. Given the unusual crisis the world is presently facing, the need to employ mediation in an investor-state context has grown. Arbitration, used as a standard tool for resolving these disputes, has its limitations. Against this backdrop, the main aim of this research paper is to explore recent developments in investment mediation, focusing on the role mediation plays in international trade agreements and its associated challenges.

Keywords: Dispute Resolution, Investment Mediation, International Investment Agreements, Multilateral Negotiations, Settlement Agreements.

Introduction:

Due to different jurisdictions’ laws, it is difficult for global partners to reach trade agreements without forgoing one benefit. Parties then have to come upright with their “BATNA” should negotiations fail without reaching an agreement. No matter how carefully drafted the agreements, one cannot avoid possible disputes as long as human beings implement and execute those agreements. Conflicts, and for that matter, disagreements are inevitable. It is “a reality of life and a human predicament.” Countries and their governments are no exception to this setback. In the quest to promote general sanity, peace, and security, it is critical for nations to find a dispute resolution mechanism that seeks to provide predictability and efficiency to trading, given that it would be easy to enforce negotiated results. Mediation comes to mind as it requires the parties to approach the table to resolve their disputes with a neutral third party’s aid. Quite recently, the United Nations (UN) member states signed an international treaty that aims at resolving cross-border trade disputes through mediation. Members, including the United States and China, approved the settlement in Singapore. Interesting to note is the signing of the African Continental Free Trade Agreement signed in Kigali, Rwanda, by African Union (AU) member states to improve trade in the sub-region. 

Global and African leaders do their best not to disregard initial conflicts during the signing of treaties and agreements. Its acknowledgment will aid future mitigation strategies geared toward trade disputes and their resolutions, thus; safeguarding sustainable peace in the quest for global and African unity. This publication looks at the role mediation plays in spearheading international trade agreements to promote trust, peace, and security to deepen international relations. It also seeks to assess the challenges and impact of mediation in resolving international trade disputes and its global acceptance. Governments and nations desire to improve upon existing trade negotiations mechanisms by adding a more formal dispute mechanism to the agreement by a neutral third party that ensures mutually beneficial outcomes.

The Nature of International Trade Agreements:

Brexit’s transition period will cause a shift towards London-seated arbitration in international trade and investments for all intent and purposes. Disputes arising out of such contracts may turn into a long term trend in mediation or arbitration. Negotiations at this level may also drag as parties become confused as to relying on which jurisdiction. Aside from Brexit, China’s Belt and Road Initiative is arguably the most significant investment and construction program that has ever been undertaken by any government. Foreign arbitration institutions are likely to benefit from this investment, which poses numerous disputes that are likely to arise from the many complexes, multi-party projects that make up the Belt and Road Initiative. The time to advocate for western and eastern collaboration where the world will witness mainland China opening to foreign arbitral institutions. 

Notwithstanding, chaos in Hong Kong seems to affect business confidence in that area, stretching down to its inland economy and institutions. It testifies that one cannot successfully embrace arbitration’s full benefits in trade investments without appreciating the political atmosphere. If the chaos is not fully resolved, anything related to cross-border disputes and their arbitration within Hong Kong may shift to Singapore, its closest neighbor, who seems to be enjoying a peaceful economy and political atmosphere. Current trends show that various arbitration rules, such as the International Centre for the Settlement of Investment Disputes (ICSID), will be updated to adjust to the new measures. Many disputes are resolved through negotiations, but if no solution is forthcoming, the panel’s report is circulated and considered at a meeting of the GATT Council, which decides by consensus, including the disputing parties, whether to adopt the panel’s report and recommendations. For instance, they would use secured virtual arrangements to resolve many disputes than face-to-face due to the current Covid-19 pandemic. The future of investor-state disputes settlement will also see a radical change as alternative approaches have been put in place to safeguard investors’ resources, costs, and time. For instance, the EU has included an investment court system, rather than arbitration, in the EU-Canada Comprehensive Economic and Trade Agreement (CETA). 

Another trend in investment trade disputes is the strengthening of litigation and mediation as alternatives to commercial arbitration. It is being achieved by introducing global regimes for the cross-border enforcement of court judgments and mediated settlement agreements to rival the New York Convention regime for enforcing arbitral awards. First, the Hague Convention on Choice of Court Agreements 2005 entered into force in 2015. Then the Hague Judgments Convention was concluded in July, with the Singapore Mediation Convention in 2019. It means is that the court judgments and mediated settlement agreements may be as easy to enforce across borders as we have for arbitral awards. Parties will no longer have to rely on bilateral reciprocal arrangements or purely national laws. 

Conclusion:

Fortunately, Parties continue to be entitled to appoint arbitrators of their choice who will decide on disputes in a neutral venue and whose awards are enforceable worldwide thanks to the New York Convention. On the other hand, political instability may occasionally create a notion of legal uncertainty, impairing businesses’ confidence in arbitrating the affected jurisdiction. However, such perception can be alleviated by a clear demonstration of the rule of law and judicial independence. Parties will continue to invest and do business regardless of any political developments. International arbitration as a dispute resolution method is not subject to political interferences and will remain the preferred means to resolve cross-border financial and commercial disputes. Even though the global economy is highly politicized, the impact of political events on international arbitration should not be overstated. Trade agreements should still regard international arbitration, mediation, or a combination of both (med-arb) as the best alternative to litigation to maintain a mutually beneficial relationship within the transactions.

References:

1) Cajetan Ebuziem and Sandra Chiaka Emenyonu, “The Roles of Dialogue and Negotiation as Strategies for Educational Conflict Resolution in Mission Secondary Schools in Okigwe Education Zone II, Imo State, Nigeria,” Journal of Education and Practice 10, no. 26 (2019): 114.

2) United Nations, “United Nations Convention on International Settlement Agreements Resulting from Mediation (New York, 2018) (the ‘Singapore Convention on Mediation’) | United Nations Commission On International Trade Law,” last modified December 20, 2018, accessed November 10, 2020. 

3) African Union, “Agreement Establishing the African Continental Free Trade Area.” Adopted March 21, 2018, accessed November 10, 2020.

4) Gary Carpentier, “Trade Agreements and Dispute Settlement Mechanisms in the Western Hemisphere, J. Holbein and G. Carpentier, 25 Case Western Reserve Journal of International Law 531, Summer 1993.,” Case Western Reserve journal of international law 531 (June 1, 1993): 537.

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