As one of the most prevalently debated and profoundly contested issues in the international arbitration sphere, the Investor-State Dispute Settlement mechanism (ISDS) and the appeal for its reform has increasingly moved to the forefront of intergovernmental efforts to remediate its shortcomings. Despite the complexity of its operation and the intricacy of matters adjudicated in such proceedings, there remains as of yet an absence of ethical rules commonly applied to ISDS hearings.1 Since 2015 the United Nations Commission on International Trade Law (UNCITRAL) Commission has considered proposals aimed at developing a future Code of Conduct applicable to tribunal members. As of 2017 its delegates have collectively answered the call for and importance of such a Code to the affirmative. Since then, its Working Group III (the 'Working Group') has been entrusted with the mandate of ISDS reform, whose mission centres on identifying procedural concerns and offering amendment proposals to the main UNCITRAL body.

This article seeks to highlight the significance of the Working Group's recent Draft Code of Conduct as a product of valuable and long-standing efforts in the ISDS reform process. Despite promising to remedy concerns surrounding uniformity and disclosure, its survival as a lasting rule-based framework for the resolution of investor state disputes hinges on its capacity to extend beyond the 'fragmentation' of 'existing interspersed national codes [.] governing the conduct of international arbitration adjudicators'.2 The first part of this article will draw on narratives in favour of ISDS and arguments put forth by critics calling for its revision. Secondly, it will comment on proposal submissions and touch upon the European Union's approach to address these legitimacy concerns. Lastly, the article will turn upon the Draft Code document itself, outline its provisions and scope as well as offer reflections on its future.

Benefit and Critique

International investment treaties articulate considerable protection standards enabling foreign investors to bring claims against states in ad hoc arbitration tribunals. The prominence of ISDS can be attributed to a number of distinct characteristics. Firstly, it allows for the implementation of investor-state arbitration, offering parties greater flexibility and autonomy in their selection of applicable rules, arbitrators, supervisory institution as well as their preferred working language.3 Beyond the pragmatic nature of ISDS procedures, parties are also afforded an equal opportunity to be heard and defend their respective case, ensuring procedural impartiality.4 Secondly, by resolving disputes through an annulment rather than an appeal process, ISDS warrants award finality thus undermining abuses of process and cost inefficiency.5 Lastly, ISDS has been praised for the international enforceability of awards independently of the respective national system of judicial review, creating a realm of legal certainty and reliability.

Private investment is a key driver of economic growth and indispensable to global development. The ISDS mechanism is hereby instrumental in 'offering foreign investors a legal route to shielding such capital from host-State measures and omissions that may fail to meet international standards of treatment.'6 Yet, notwithstanding the notable benefits of ISDS within the global economic marketplace, its governance has been subjected to an increasing volume of criticism over the past decade, particularly in relation to the ongoing COVID-19 pandemic. In addition to vast awards sums and the delimiting impact on states' regulatory power, ISDS has become the focal point of concern inter alia in relation to the alleged lack of arbitrator independence, inconsistency in investment jurisprudence and absence of procedural transparency.

In this context, the ISDS debate has been pulled into two polar directions - one advocating in favour of 'maintaining the principles of an "arbitration-based" ruling system'7 with some amendments to the existing ISDS setup; the other calling for structural reforms with a two-tier adjudication mechanism.8 Irrespective of whether seeking to 'perfect the existing design'9 or favouring the creation of a new edifice,10 the challenge of its reform lies within ensuring that threatened investment freedoms are protected, while democratic values are upheld to safeguard an 'equal sovereign space between participant states and their right to regulate in the public interest.'11


To address the increasing backlash against the existing ISDS structure, a number of states have submitted reform proposals. Some options have included the establishment of a permanent appellate mechanism to strengthen the system's coherence and enhance legal certainty through fixed procedures, institutions, staff and member states (China).12 Other submissions have considered the possibility of granting access to ISDS on a contractual, case-by-case basis, yet requiring investors to exhaust local remedies and engage in mandatory mediation and ADR procedures prior to the adjudication of such disputes (Indonesia).13

The proposal put forward by the European Union and its Member States deserves singling out. In particular, it focuses on rectifying three main concerns, namely the lack of predictability of arbitral decisions, the absence of a framework to address inconsistencies of decisions rendered and shortcomings relating to diversity and impartiality.14 In order to establish a new and transparent system of ISDS dispute resolution, the EU proposal thus envisions the following:

  • The formation of a two-tier adjudication structure to preside over bilateral EU investment agreements (first instance tribunal/appellate tribunal);15
  • Adjudicators holding full-time, long-term and non-renewable positions without outside activities, obtaining salaries comparable to those of other court systems;16
  • Adjudicators representing a broad range of geographical and gender backgrounds;17
  • The provision of a bilateral agreement to 'ensure that [parties] retain control over the interpretation of their agreement by being able to adopt binding interpretations';18
  • The permission of third parties participating in investment disputes for purposes of ensuring greater transparency;19
  • The use of a standing mechanism for state-to-state dispute settlement;20
  • The development of an assistance mechanism to guarantee access of all disputing parties to 'operate effectively in the investment dispute settlement regime'.21

Despite the creation of an international permanent-multilateral dispute resolution forum still being in its infancy, the procedural innovations presented have already been subject of censure from critics. Commonly named drawbacks include the risk of re-politicisation (e.g. by removing the opportunity to appoint a neutral tribunal);22 decision-making being compromised in terms of quality, efficiency and reliability (e.g. through lack of financial incentives or the authority of the first-instance tribunal being undermined by the appellate body)23 as well as the potentially ambivalent consequences to procedural efficiency, costs and the finality of awards (e.g. possibility of appeal enhancing opportunities to challenge investment awards).24

Although intended to address ISDS deficiencies, it remains to be seen whether these submissions if substantiated would generate greater uncertainty and structural difficulty than they intended to alleviate.

The Draft Code of Conduct

Seeking to combine a variety of reform proposals to counteract fragmentation and realise greater consistency has become the objective of the Working Group's most recent endeavours.

On 01.05.2020, the ICSID and UNCITRAL released a jointly prepared Draft Code of Conduct for Adjudicators in Investor-State Dispute Settlements (the 'Draft Code'). While it sets the table for adopting a universally applicable standard of conduct, it has not yet given place to a corpus of (non-)binding rule parameters.25 Until its next meeting scheduled for 05. - 09.10.2020 in Vienna, the Working Group will continue to discuss options for multilateral reform, offer webinars, present working papers and allow states, international organizations and other stakeholders to submit comments until 30 November 2020.

In its current form the Draft Code26 consists of 12 articles, each accompanied by explanatory commentaries pertaining to the provision's rationale and context. The content of each can be categorised as follows:

Scope: According to Articles 1 and 2, the Code applies to '"all persons serving as adjudicators", i.e. all arbitrators, members of ad hoc, annulment and appeal committees, and judges on permanent mechanisms, including research and legal assistants working under the direction of these adjudicators.'27

Obligations and Duties of Adjudicators: Article 3 provides an overview of adjudicator obligations, including: independence and impartiality, avoidance of (in-)direct conflicts, impropriety and bias; integrity, fairness and competence; diligence, civility and efficiency; and compliance with confidentiality and non-disclosure obligations.28

Conflict of Interest: The obligation to avoid potential conflicts of interest that could arise from a failure to act independently, impartially and in a transparent manner is specifically addressed under Articles 4 to 6 in the form of (non-)optional rules regarding their management.29

Disclosure Obligations: The Draft Code further sets out extensive proposals for disclosure obligations. In seeking to address repeat appointment concerns, Article 5 provides for the mandatory disclosure of 'any interest, relationship or matter that could reasonably be considered to affect their independence or impartiality' [including any] professional, business and other significant relationships within the past [five] years with the parties, the parties' counsel, any present or past adjudicators or experts in the proceeding and [any third party with a direct or indirect financial interest in the outcome of the proceedings]'.30 Presently the Code also calls for the disclosure of '[a]ll ISDS [and other {international} arbitration] cases in which the candidate or adjudicator has been or is currently involved as counsel, arbitrator, annulment committee member, expert, [conciliator and mediator]'.31 The obligations set out under this provision are continuous in nature.

Double-Hatting: Article 6 offers recommendations for regulating the practice commonly referred to as 'double-hatting', which entails adjudicators acting in both the capacity of 'counsel, expert witness, judge, agent or in any other relevant role at the same time as they are acting on matters involving the same parties, [facts and/or treaties]'.32 It is, however, open to Member States whether to prohibit actions designated as double-hatting or request their disclosure.

Competence, Integrity, Diligence, Confidentiality: Article 7 and 8 enunciate ethical duties with regard to integrity, fairness and competence. While the former expands on these obligations by requiring adjudicators to e.g. refrain from engaging in ex parte communications, Article 8 focuses on adjudicators rendering expeditious decisions and ensuring their availability. Article 9 details rules ensuring confidentiality particularly in relation to private information and communications on rulings previously participated in.

Further options include obligations arising in relation to pre-appointment interviews and adjudicator fees as found under Articles 10 and 11. Article 12 addresses possible enforcement mechanisms, such as through incorporation into investment treaties, procedural rules or the adoption of a contextual approach.

Being 'based on a comparative review of the standards of conduct set out in investment treaties, arbitration rules and codes of conduct of international courts,'33 the current Draft Code is reflective of the vast reach of measures needed to strengthen the legitimacy of the ISDS system and the challenges that lie ahead in seeking to unify them. The complexity and impact that such a regulation entails is best exemplified by Article 6. While the restriction of double-hatting may open new avenues for the selection of arbitral appointments to a greater pool of eligible adjudicators, an outright prohibition could pose a significant hindrance to new entrants of diverse gender and regional backgrounds. This is because some candidates may lack the financial means to leave their counsel work upon receiving their nomination as an arbitrator.34 It is thus incumbent on all stakeholders and participants of the 39th session, to be highly sensitive to the impact of proposed restrictions and to exercise far-sightedness when considering the structural and institutional inequities that are intended to be overcome.

The future of ISDS is contingent on the degree to which its revised form can satisfy the vast array of State concerns that are expected to be discussed extensively in the upcoming Working Group deliberations. The success of the Draft Code's implementation and extent of its use, however, will largely depend on the approach adopted by States, particularly those of large consumer economies, in their respective international investment agreements35 and the role they assume in shaping the future of their adjudication.


1 Gioretti, C. (2020) The Draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement: An Important Step Forward in the Reform Process. The European Journal of International Law Blog. Available at: [accessed: 21.09.2020].

2 Palau, M. (2020) ICSID and UNCITRAL release their Draft Code of Conduct for Adjudicators: A Long Road Travelled and Yet A Long Way to Walk. The International Arbitration Blog McCarthy Tétrault LLP. Available at: [accessed 20.09.2020].

3 Charris-Benedetti, J. P. (2019) The proposed Investment Court System: does it really solve the problems? Rev. Derecho Estado No. 42. Available at: [accessed 21.09.2020].

4 Charris-Benedetti, (n iii).

5 Charris-Benedetti, (n iii).

6 Charris-Benedetti, (n iii).

7 Dutta, S. (2020) Will 'Investor-State Arbitration' Survive the COVID-19 Crisis? OpinioJuris. Available at: [accessed 20.09.2020].

8 Dutta, (n vii); Charris-Benedetti, (n iii).

9 Ramirez, P. (2020) Arbitration Reform Efforts Continue Despite Pandemic. Kluwer Arbitration Blog. Available at: [accessed 22.09.2020].

10 Ramirez, (n ix).

11 Zárate, J. M. A. (2019) Legitimacy Concerns of the Proposed Multilateral Investment Court: Is Democracy Possible? South Centre Investment Policy Brief No.18. Available at: [accessed 20.09.2020], p 1.

12 Roberts A.; St. John, T. (2019) UNCITRAL and ISDS Reform: China's Proposal. The European Journal of International Law Blog. Available at: [accessed 20.09.2020]; Dutta, (n vii).

13 UNCTAD (2019) Reforming Investment Dispute Settlement: A Stocktaking. IIA Issues Note International Investment Agreements Issue 1. Available at: [accessed 24.09.2020], p 11.

14 Upreti, P. N. (2019) EU Submission on ISDS Reforms at the UNCITRAL. TTLF Newsletter on Transatlantic Antitrust and IPR Developments. Available at: [accessed 23.09.2020]; UNCITRAL (2019) Possible reform of investor-State dispute settlement. Submission from the European Union and its Member States. A/CN.9/WG.III/WP.159/Add.1. Available at: [accessed 23.09.2020], pp 2-3.

15 UNCITRAL, (n xiv), p 4.

16 UNCITRAL, (n xiv), pp 5, 10.

17 UNCITRAL, (n xiv), p 11.

18 UNCITRAL, (n xiv), p 6.

19 UNCITRAL, (n xiv), p 7.

20 UNCITRAL, (n xiv), p 6.

21 UNCITRAL, (n xiv), p 8.

22 Charris-Benedetti, (n iii).

23 Charris-Benedetti, (n iii).

24 Charris-Benedetti, (n iii).

25 Palau, (n ii).

26 UNCITRAL (2020) Code of Conduct for Adjudicators in Investor-State Dispute Settlement (with annotations). Available at: [accessed 23.09.2020].

27 UNCITRAL, (n xxvi), p 3; Palau, (n ii).

28 UNCITRAL, (n xxvi), p 7.

29 Palau, (n ii).

30 UNCITRAL, (n xxvi), p 2.

31 UNCITRAL, (n xxvi), p 3.

32 UNCITRAL, (n xxvi), p 3.

33 Leathley, C.; Bouchenaki A.; Eaton C. (2020) ICSID and UNCITRAL release draft Code of Conduct for ISDS adjudicators. The International Arbitration Blog McCarthy Tétrault LLP. Available at: [accessed 23.09.2020].

34 Coleman, C.; Bond, L. (2020) Two Heads Are Better Than One: Double Hatting And Its Impact on Diversity In International Arbitration. The National Law Review Vol X, No. 212. Available at: [accessed 24.09.2020]; See also Sucharitkul, V. (2020) ICSID and UNCITRAL Draft Code of Conduct: Potential Ban on Multiple Roles Could Negatively Impact Gender and Regional Diversity, as well as Generational Renewal. Kluwer Arbitration Blog. Available at: [accessed 24.09.2020].

35 Dutta, (n vii).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.