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Multilateral Investment Court: A Promise Which Has the Potential to Deliver

Archita Sharma [i]



In April 2019, the United Nations Commission on International Trade Law’s (UNCITRAL) Working Group III (WG III) concluded in its report that the current system of investor -State Dispute Settlement (ISDS) requires reforms. The findings of the committee affirmed the long-standing complaints about the ISDS system raised by multiple states. Amid these concerns, the European Union (EU) in 2018 gave the European Commission (EC) the mandate to negotiate the establishment of a Multilateral Investment Court (MIC) on its behalf. An MIC presents a complete overhaul of the current ISDS system by establishing a standing court with permanent arbitrators for settling investor-State disputes. Presently, the EU has moved away from the ad hoc dispute settlement system by providing for permanent Investment Court Systems in multiple international investment agreements.

In this article, I argue that the MIC is a positive step which can solve the flaws of the current ISDS system. First, I show that the MIC provides for better enforcement and transparency in the settlement process, which was one of the main criticisms of the ISDS framework. Second, I respond to the concerns of politicization and lack of impartiality of the MIC. Finally, I discuss the issue of funding of the standing court and a plausible way to maintain financial independence of the institution. Since the WTO Dispute Settlement Mechanism (DSM) has been widely accepted as a permanent body for international dispute settlement and has inspired the MIC proposal, the article compares the MIC with DSM.

Issues with the ISDS System

Lack of transparency of dispute settlement proceedings is a major criticism of the current ISDS framework. The proceedings are not made public, information regarding the stakes involved in the dispute is kept confidential and, at times, the judgment is not fully disclosed. This raises serious issues as the tribunals deal with cases that are of great of public importance and several times involve the validity of legislations passed by sovereign States. In order to address this concern, the MIC provides public hearings and a public procedure for selection and appointment of arbitrators. All States would have access to the arguments made in a case and the decision rendered by the Court. Academics will also be able to subject the judgment to greater scrutiny on account of enhanced transparency. This would allow for greater legitimacy, transparency, and trust in the system.

Effective enforcement of arbitral awards against State parties is also seen as lacking in the current system. In Cairn Energy PLC and Cairn UK Holdings Limited v. The Republic of India, India was asked to pay damages to Cairn for violating the Bilateral Investment Treaty. Since the grant of the award in December 2020, Cairn had been filing suits in various jurisdictions to recover the damages from Indian assets abroad. However, all of these suits were withdrawn in 2021 after India agreed to refund the tax collected albeit without interest and penalty contrary to what was envisaged in the award. This case is only an instance of an existing trend of States not complying with investment arbitration rulings.

The WG III in its 40th session discussed the establishment of an appellate mechanism and the enforcement of arbitral awards through either a standalone appellate body or an appeal mechanism to a permanent court such as the MIC. I argue that a replication of the WTO Dispute Settlement Body (DSB) is a useful model. The DSB works as an independent plenary body that looks into the adjudication process and enforcement of awards through sanctions. A similar plenary body constituted of representatives of all States accepting jurisdiction of the MIC would be able to look over the adjudication process and provide for uniform and effective enforcement of awards. Such an independent body may have the power to impose sanctions. However, it is unclear what kind of sanctions the body will impose since unlike the WTO, parties to investor – State disputes are not in a cooperative trade scheme where the benefits from such a scheme can be taken away as part of sanctions. The same is a shortcoming of the MIC., however, this is also true for the current ISDS framework. Nevertheless, an independent body would be an improvement as it would provide a dedicated set of individuals to look over the process of implementing the MIC awards and could work in complementing the provisions of the New York Convention.

Criticisms of the MIC

a. Packing the Court

Born argues that the MIC proposal is similar to that of the US’ proposal to increase the bench strength of the US Supreme Court. He argues that the MIC will be ‘packed’ with arbitrators selected only by State parties and hence would suffer from pro-state bias. Consequently, investor interests will be completely left behind

This criticism is incorrect because the EU’s proposal takes into account such a concern. It proposes a robust set of rules for the appointment of arbitrators. For example, there is a proposal that an independent appointing authority may be created that would apply a uniform procedure for selecting arbitrators. The independent authority would create a roster of arbitrators from which the disputing parties can choose their panel. Roberts argues that States play a dual role in an investment system – one of a disputing party and the other of a treaty party. States while negotiating treaties and institutional designs act as treaty parties. As treaty parties, they would require that the balance struck in investment treaties is upheld in resolving disputes since the State could be the respondent or their nationals could be the claimant investors. She argues that since States appoint arbitrators before any dispute has arisen, they do so as treaty parties and require arbitrators that would be faithful to the bargain they have struck in their investment treaties and interpret the same with neutrality. Hence, Born’s concern that arbitrators will have a pro-state bias does not stand.

b. Politicization of the Court

Concerns have been raised regarding impartiality and independence of the arbitrators appointed to the MIC. There is a fear of politicization of the selection process, which can lead to powerful economies exercising greater control in the appointment of arbitrators. This would result in developing countries being treated unfairly and threaten the legitimacy of the institution.

Gomez argues that diversity provides an effective mechanism to ensure the legitimacy, impartiality and independence of international judicial systems. International bodies such as International Tribunal for the Law of the Sea and the Caribbean Court of Justice have adopted a similar approach to ensure legitimacy and have been largely successful. The current EU proposal requires representation from diverse geographic areas, genders and legal systems in the roster of arbitrators selected. This, along with a public selection procedure, will counter politicization of the process.

Another way to prevent powerful economies from wielding undue influence in the MIC would be to give a right to the least developed and developing countries to have at least one member from similar economies in the adjudicatory panel. The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides similar rights. However, in the WTO settlement procedure, once the Secretariat proposes the nominated panellists for adjudicating the dispute, the parties cannot oppose such nominations except for compelling reasons.[i] By contrast, the MIC gives the parties the freedom to pick and choose from the roster of arbitrators created by the independent body. This is a significant departure from the WTO system and reduces the risk of politicization.

Financing the MIC

Financial independence is an integral aspect of freedom from political bias. Therefore, a funding mechanism that upholds the financial independence of the MIC is crucial. WG III in January 2020 discussed the financing of the permanent court. The discussion provided that the overall administrative cost is to be borne by the all the parties to the MIC, except the cost of the ISDS cases which shall be borne by the disputing parties. It stated that the same was necessary to ensure that there are no routine appeals or frivolous claims.

One criticism of such a set-up is that investors from developed countries do not find trouble bearing the cost of dispute proceedings, while developing countries face severe issues in financing the dispute settlement process. The January 2020 WG III Report addresses this concern. The remuneration of the arbitrators or the privileges that they receive have not been included in the dispute costs. These are to be born equally by all parties to the MIC. Therefore, even though the current proposal does not fully eliminate the financial constraints faced by developing states in the dispute settlement process, it reduces the cost of such a dispute to a substantial extent. Moreover, the States which were earlier not able to file cases against investors due to high costs will now be more able to lodge complaints.

Such a mechanism would also be an improvement from the funding framework of the WTO DSM. The DSU provides that the expenses for the panellist and members of the appellate body shall be met from the WTO Budget. The contributions to the WTO budget is determined by the share of trade of various States. Consequently, developed countries having greater shares in global trade contribute more towards the finances of the DSM. Such financial control will be precluded in the MIC system where all parties will bear equal cost towards running the court.


An MIC might not be a standalone solution to remove all the flaws from the ISDS system. However, it certainly overcomes these defects to a large extent and instils greater transparency, and efficiency in the system. The concerns of politicization and independent financing of the court can be addressed and would enhance the legitimacy of the MIC. Therefore, States would do well to work out the nuances of the system and arrive at a consensus for the establishment of the MIC.


[i] The Understanding on rules and procedures governing the settlement of disputes, Article 8(6).

Archita Sharma is a second year B.A.LL.B (Hons.) student at the National Law School of India University and is serving as an editor at the Indian Journal of International Economic Law. Her interests lie in international law, arbitration law and international humanitarian law. For any discussion related to the article, she can be contacted via mail

Multilateral Investment Court A Promise Which Has the Potential to Deliver
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