States, investors and local communities all hope to have long-term and positive relationships. As such, the agreement should create a mechanism preventing minor conflicts from escalating to contentious proceedings that will likely damage the relationships among the stakeholders. This requires putting into place institutions (for example, the establishment of contact points, joint committees, ombudsmen) and processes.35
Option 1:Establish effective cooperation and information-sharing mechanisms between state and non-state actors, as well as focal points, joint committees and other tools to foster dispute prevention
May prevent disputes from escalating and engaging the ISDS.
Examples
“The Parties shall establish Focal Points (“Ombudsmen”), whose principal function will be to provide governmental support to the investments of the other Party in their country.
…
The Focal Point shall have the following responsibilities, among others:
- i. employ efforts to follow the recommendations of the Joint Committee and interact with the Focal Point of the other Party, in accordance with the terms of this Agreement;
- ii. interact with the competent government authorities to evaluate and recommend, when appropriate, the due treatment for suggestions and complaints received by the governments and investors of the other Party, informing the government or the interested investor about the results of the actions carried out;
- iii. act directly to prevent disputes and to facilitate their resolution in coordination with the competent government authorities and in collaboration with the appropriate private entities;
- iv. supply useful and timely information to the Parties on legal matters related to investments in general or to specific agreed-upon projects;
- v. report to the Joint Committee on its activities and measures.
…
Each Party shall designate as its Focal Point only one body or authority, with competence to monitor the implementation of this Agreement, which shall make its official contacts available and shall respond with swiftness and attention to the communications and requests of the other Party. …” (Brazil – Angola Agreement on Cooperation and Facilitation of Investment, Article 5) (unofficial translation)
How Commonly Used
Option 2:Require conciliation, mediation or other alternative dispute resolution mechanism as a mandatory precondition to the more formal settlement of disputes, such as arbitration and adjudication
This enhances the effectiveness to these non-adjudicative dispute resolution processes.
Examples
Disputes between a Contracting Party and an investor of the other Contracting Party relating to an investment of the latter in the territory of the former, which concern an alleged breach of this Agreement (hereinafter referred to as “investment dispute”) shall, without prejudice to Article 13 of this Agreement (Disputes between the Contracting Parties), to the extent possible, be settled through consultation, negotiation or mediation (hereinafter referred to “procedure of amicable settlement”). (Egypt-Swiss BIT, Article 12, para. 1)
How Commonly Used
Examples
For no less than six (6) months after receipt of the notice of dispute, the disputing parties shall use their best efforts to try to resolve the dispute amicably through meaningful consultation, negotiation or other third party procedures. In all such cases, the place of such consultation or negotiation or settlement shall be the capital city of the Defending Party. (Indian Model BIT, Article 15.4)
How Commonly Used
Examples
“The complaining Party that made a request for consultations under Article 15.4 may request in writing the establishment of an arbitration panel to the Party complained against,
- if the Party complained against does not enter into such consultations within 30 days, or within 15 days in cases of urgency including those concerning perishable goods, of the date of receipt of the request for such consultations; or
- if the Parties fail to resolve the dispute through such consultations within 60 days, or within 30 days in cases of urgency including those concerning perishable goods, of the date of receipt of the request for such consultations.” (Korea – Vietnam FTA, Article 15.6(1))
How Commonly Used
Option 3:Include a cooling-off period between an initial notice of a dispute and initiation of a formal arbitration process
This allows more time for the parties to seek to settle amicably or through alternative dispute resolution mechanisms.
Examples
“If there still exists a dispute between the parties after 24 months from the date of notification of the above-mentioned procedures the investor may submit the dispute to international arbitration under the Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of other States, unless the parties agree otherwise.” (Germany-UAE BIT, Article 8.3)
How Commonly Used
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Brazil’s treaties can serve as models for those countries that wish to resolve disputes at the state–state level only and also emphasize dispute prevention over formal and adversarial dispute settlement.