For three days in mid-June this year, CEDR partnered with the International Centre for Settlement of Investment Disputes (ICSID), International Mediation Institute (IMI) and the International Energy Charter, to conduct the first Investor State (IS) mediator training at the World Bank in Washington, D.C.  Whether a Windfarm in Chile or a Hydroelectric Plant in Indonesia, there are many different kinds of problems that can arise from a state-financed project, all of which can trigger an Arbitration. Yet through mediation we have the ability to manage these matters differently.

Arbitration for Investor State disputes is a well-established and well-known process; however its use has garnered criticism from the international community. Firstly, the costs of arbitration have increased several-fold in recent years, bringing into question its status as a low-cost alternative to litigation. Secondly, there are serious concerns over the social justice implications of the process. Significant concerns were raised by among others, the European Union over the secretive nature of the process whereby multinational companies can challenge under international trade agreements and potentially influence governmental legislative and policy programs behind closed doors without public input and debate. Finally, the process can consume time and energy while national and business needs may not be met.

Consequently, there have been consistent voices calling for the exploration of mediation as a means to resolve investor state disputes. Training mediators to handle such disputes offered a platform to explore a number of different topics.

Process and Training Considerations

Just as arbitration has recognised investor state disputes as a specialist category of practice, it is likely that mediation practice needs to adapt. Investor-state questions can involve greater complexity, challenges to traditional expectations of confidentiality, issues over authority and decision making processes. These kinds of special elements merit a more well prepared and reflective mediation intervention.

Co-mediation, a rarity in commercial mediations is potentially more appropriate when mediating Investor State disputes. There are of course also a number of considerations when assessing whether this approach is suitable in a particular case and what kind of co-mediation team might be most appropriate.

The complexity of the issues involved and the inter-mingling of legal and technical issues may warrant the presence of more than one mediator, each with a different background and area of expertise. Cross-border disputes by their very nature may justify at least two different nationalities of mediator. Mirroring the different nationalities among the parties, or having a mediator familiar with the language or cultural or legal background of both sides can remove any perceptions of bias. Finally, co-mediation can add credibility to the process. In a dispute between a state and a multinational company, both sides will demand of the mediator differing competencies. The state will likely want a mediator fluent in their language and familiar with the local law and governmental practice. On the flip side, the company may prioritise subject matter expertise, independence and a more commercially focused mediator.

The training addressed some of the special contextual circumstances of Investor State mediation, as well as analysing process requirements and the demands of co-mediation. It also enabled participants to practice the skills involved by way of engagement in Investor State scenarios drawn from real life.

Intercultural Competency

Investor State disputes will more often than not involve parties comprising different cultural and legal backgrounds. Co-mediation can help accommodate these differences, but all IS mediators need to have a certain level of intercultural competency.

This necessitates an understanding of culturally-shaped preferences and expectations as well as an appreciation for potential differences in organisational culture in both governments and businesses. While the mediator should be alive to these differences, it is important not to pigeon-hole people based on where they are form and endeavour to work with the individuals and not pre-conceived notions.

Moving Forward

The programme, the first of its kind was tremendously well received and laid the foundation for further developments in this field. With the proliferation of Investor State treaties and therefore disputes on the rise, the international community needs to explore and have available all avenues of dispute resolution.

Mediation offers a plethora of process benefits upon which parties can capitalise including initiating or improving communication and understanding the merits and weaknesses of both your case and your opponents; learning what is needed to progress to settlement, understanding the key obstacles to settlement in a particular case.

Investor State mediation is growing, but two challenges present themselves. Firstly ensuring states and commercial parties alike are aware of the process, where it might be appropriate and how to use it. Secondly, establishing and maintaining standards for Investor State mediators. On the latter, the IMI is exploring further how this might be achieved, but this collaborative venture with CEDR, ICSID and the Energy Charter group has offered up a powerful channel of influence and exploration of capabilities.

Dr. Karl Mackie a mediator and Chief Executive for The Centre for Effective Dispute Resolution (CEDR).