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编者按：“北仲杯”高校仲裁有奖征文大赛旨在鼓励高校法学专业学生熟悉仲裁，为更多青年才俊将来成为仲裁事业推动者奠定基础。大赛自2013年首次举办以来，吸引了众多学子参与，在仲裁界具有广泛的影响力。为了满足读者需要，进一步丰富和繁荣商事仲裁理论研究成果，《北京仲裁》第122辑（2022年第4辑）作为第十届“北仲杯”的获奖论文专刊，在征得获奖作者同意后，将其中8篇获奖论文予以刊载。
本文系第十届“北仲杯”三等奖作品《论上诉机制与ICSID公约和UNCITRAL仲裁规则的兼容性》，作者为莱顿大学刘文慧。
Abstract
This thesis provides a comprehensive analysis of the essential issues to be considered in establishing an appellate mechanism in current investment arbitration. Identifying the incompatibilities of the new mechanism with the existing regime for international investment arbitration is the focus of this work， along with a seeking of a reasonable appellate mechanism and its coordination with the two main systems， namely arbitrations under the ICSID Convention and the UNCITRAL Arbitration Rules. This thesis considers that a standing and multilateral appellate mechanism could be more consistent with the purpose of establishing such a mechanism. Only manifest legal errors and serious factual errors could be the grounds for appeal. The errors should be raised by parties and necessary for the settlement of the dispute. Besides， annulment could be replaced by an AM in which the annulment grounds are covered by the scope of appellate review. It is possible to resolve the incompatibilities of the new mechanism with the current ISDS regime and a standing appellate mechanism could be introduced in a multilateral framework in the form of an opt-in convention. Finally， a decision made by the appellate tribunal could be enforced under the New York Convention， and certain grounds for refusal of enforcement that are irrelevant to public policies could be waived by the parties to ensure the maximum finality of an appeal award.
Key Words
ISDS，appellate mechanism，investment arbitration，ICSID，UNCITRAL
1. Introduction
1.1. Background
The current system of Investor-State Dispute Settlement （ISDS） has been under challenge for some time. The legitimacy of investment arbitration continues to be criticised. Those generalized criticisms include conflicting awards， time and expenses， the potential challenge to national sovereignty and the independence and impartiality of the arbitral tribunal， etc. The question of ‘consistency， coherence， predictability， and correctness of arbitral decisions by ISDS tribunals’ is foremost among them. The issues that have been raised are not new. However， the United Nations Commission on International Trade Law （UNCITRAL） mandated Working Group III respond to the concerns raised in the current ISDS regime and develop possible reforms that could improve the system. This is the first time that a large number of states have been involved in the reform of ISDS.
Among the numerous reform options proposed to address the above challenges， the introduction of some types （ad hoc， a standing appellate body， or as the second tier of a standing court） of appellate mechanism （AM） is likely to get the most attention and to be one of the most significant suggestions. Some states consider that it is envisaged that an AM could review and correct the decisions rendered by ISDS tribunals， thus providing a consistent and fair decision for all parties. It is also pointed by certain states that with the increased number of investment arbitration cases， the development of an AM would improve the coherence and predictability of the investment regime. However， the addition of an appeals procedure， on the other hand， would undoubtedly increase the complexity of the issues under discussion， both substantively and procedurally. This reality may lead to some new barriers for countries to participate in international investment arbitration.
In February 2021， the UNCITRAL Working Group III discussed the draft provisions relating to the nature， scope and effect of an AM. The proposal for establishing an AM could more than ever be a potential solution to ISDS reform as a response to demands for a more coherent and consistent ISDS regime.
One important and complex issue is the impact of the new mechanism on the existing ISDS system， and a strong obstacle in this context is the lack of compatibility of the new mechanism with current prevailing procedures， more precisely， with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States （ICSID Convention） as well as the UNCITRAL Arbitration Rules. There are many discussions on the necessity and possibility of an AM in investment arbitration， a systematic and deeper examination of the question presented above is however required to ensure the interaction of the new mechanism with the current ISDS system.
1.2. Structure
This thesis is divided into five chapters. Chapter one provides the background for this research. This includes an introduction to the ISDS reform in the UNCITRAL Working Group III， the objective， research methodology and the structure of this thesis.
Chapter two looks at the existing ISDS regime and surveys the main legal issues at the early stage of the establishment of an AM. Section one focuses on the two most important rules governing ISDS， the ICSID Convention and the UNCITRAL Arbitration Rules， providing an overview of the current ISDS regime. Section two explains the reason why an appeal proposal is acceptable and in the Section three， a detailed analysis and suggested elements are given to address the main legal issues in an AM.
Chapter three respectively explores the incompatibility of the new AM with the arbitration under the ICSID Convention and the UNCITRAL Arbitration Rules. Corresponding advice will also be given after the conflicts raised. Besides， Section three will introduce a possible multilateral AM to Existing IIAs.
Chapter four deals with the issues of annulment and enforcement of appellate awards. Section one examines the relationship between the AM and annulment and suggests the possible approaches to be compatible with the ICSID Convention and the UNCITRAL Arbitration Rules. Section two addresses the enforcement issues in different legal regimes. Finally， in Chapter five， conclusions are briefly reached.
2. The existing ISDS regime and a possible reform option：Appellate Mechanism
The existing ISDS regime has long been under public scrutiny. Its legitimacy crisis has triggered a broad discussion on reforming the ISDS system during the last few decades. The idea of creating an AM for investment arbitration is not a new topic. Early in 2004， observing some state practice in bilateral investment treaties （BITs） that the intention of states to have an appellate review of investment disputes has been showed， the ICSID Secretariat proposed that a single Appeals Facility might be created as a substitute for multiples AMs raised in different treaties providing for an appellate review of awards. In the lack of active response from ICSID member states， the proposal was eventually suspended and was deemed as not mature enough at that stage. Nevertheless， the availability of appeals mechanisms in investment arbitration is a ‘recurrent feature’ in the debate about ISDS， notably as the number of investor-state disputes has increased significantly and so has the inconsistency of interpretation in the system. The ongoing discussion at Working Group III of UNCITRAL indicates that a number of states now have great concerns regarding consistency， coherence， predictability and correctness of arbitral decisions by ISDS tribunals. Therefore， numerous reform suggestions have been made and not surprisingly the establishment of an AM has gained prominence among them.
This chapter will introduce two prevailing regimes for investment arbitration：ICSID and the UNCITRAL Arbitration Rules and then clarify the reasons for creating an AM in current system. Moreover， this part will deal with the legal issues when designing an AM and will give corresponding advice to these issues.
2.1. The current regimes in ISDS
In order to examine the question of the compatibility of an AM with the first-tier arbitral decisions， it is required to understand which regimes the AM might coordinate with， as well as the relevant rules governing the potential coordination. The current ISDS regime was established mainly through International Investment Agreements （IIAs）， allowing foreign investors to directly initiate arbitrations against host states. Within the system， arbitration can be conducted in a number of institutions or under certain arbitration rules. Basically， the disputing parties have a choice between institutional arbitration supported by a selected institute and ad hoc arbitration based on an arbitration agreement. The former is usually taken place in ICSID but other institutions not excluding investment arbitration are also eligible. The latter is most commonly conducted under the UNCITRAL Arbitration Rules. This section will introduce two main types of foreign investment arbitration：arbitration under the ICSID Convention and arbitration under the UNCITRAL Arbitration Rules.
2.1.1. ICSID
Most IIAs provide for ICSID arbitration under the ICSID Arbitration Rules， but many also give a choice of arbitral rules upon the claimant， for example， the ICSID Additional Facility Arbitration Rules， or the UNCITRAL Arbitration Rules. Currently， the majority of cases are brought under the ICSID Convention. By now， 164 states are signatories to it.
The admissible investment disputes under the ICSID Convention require a legal nature between a member state and a national of another contracting member. In addition， a membership of the Convention does not necessarily mean an establishment of ICSID’s jurisdiction over the disputes relevant to them. The parties to an investment dispute shall submit their consent to jurisdiction to ICSID.
The ICSID Convention provides a self-contained ISDS arbitration system. Article 53（1） of the Convention provides that the award ‘shall not be subject to any appeal or to any other remedy’. The sole process by which the effectiveness of an ICSID award could be reviewed is through the provision for annulment. In other words， only in rare circumstances， arbitral awards rendered by ICSID tribunals might be reviewed. In principle， an ICSID award is final and binding to the parties.
Another important feature of ICSID awards is the enforcement regime. Members of the Convention are required to recognise and enforce monetary awards ‘as if it were a final judgment of a court in that State.’ Enforcement of an ICSID award is automatic， which means it is not subject to an additional recognition procedure in the territory of the member states. Although Article 55 of the ICSID Convention preserves the law on State immunity， leaving the issue to domestic courts and causing challenges to ICSID awards， this is a general issue beyond the enforcement of ICSID awards， and the compliance has prevailed since the ICSID Convention entered into force.
A distinction needs to be made between the arbitration under the ICSID Additional Facility and under the ICSID Convention. The former is governed by the ICSID AF Arbitration Rules rather than the ICSID Convention. The ICSID AF Rules mainly involves the cases where either of the parties to an investment dispute is not a contracting member to the Convention. It follows that the self-contained nature of the ICSID regime is not applicable to the arbitration under the Additional Facility. The recognition and enforcement of its awards is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Award of 1958 （the New York Convention）.
2.1.2. The UNCITRAL Arbitration Rules
Despite the fact that ICSID has become the main venue for resolving investment disputes， BITs usually provide other choices of arbitration outside ICSID， including ad hoc arbitration and arbitration supported by other private arbitration institutions such as the Arbitration Institute of the Stockholm Chamber of Commerce （SCC）. In practice， arbitrations outside the ICSID forum may take place under the UNCITRAL Arbitration Rules， or the ICC Arbitration Rules or under the LCIA Arbitration Rules， etc. All procedures have some rules in common like the parties’ control of the composition of the tribunal.
Thereinto， the UNCITRAL Arbitration Rules are the most widely used and are considered as ‘a modern， universally established set of international arbitration rules.’ They provide the parties with great discretion to design an administrative structure of a case. The UNCITRAL Rules could set up an ad hoc tribunal at any location as long as the parties agree. Also， an arbitration institution may apply the UNCITRAL Rules for specific cases. For treaty-based investment arbitration， the arbitration conducted under the UNCITRAL Rules may additionally subject to the UNCITRAL Rules on Transparency in Treaty- based Investor-State Arbitration （UNCITRAL Rules on Transparency）.
It is worth noting that national law works differently and has different impact on the control of awards in the arbitration initiated under the ICSID Convention and under the UNCITRAL Rules. As noted above， the ICSID Convention provides a self-contained ISDS arbitration system governed by public international law and give the ICSID awards an automatic recognition and enforcement. Conversely， the validity of an arbitral award made according to the UNCITRAL Rules is subject to lex arbitri， normally being governed by the arbitration law of the seat of arbitration. UNCITRAL has developed a proposal for national arbitration legislation called the UNCITRAL Model Law on International Commercial Arbitration to facilitate international arbitration. Moreover， the annulment， recognition and enforcement of the awards rendered under UNCITRAL Rules fundamentally differ from ICSID awards， which are subject to a national law and the New York Convention.
2.2. Reasons for an appellate mechanism
2.2.1. ‘Consistency， coherence， predictability， and correctness’
While the concerns raised about investor-State arbitration are manifold， the most salient are those contradictory decisions of ISDS tribunals that have undermined the legitimacy of the present regime. For instance， in CMS v. Argentina， Sempra v. Argentina and Enron v. Argentina， the arbitral tribunals rejected the argument of necessity raised by the State， whereas in LG&E v. Argentina and Continental Casualty v. Argentina， the tribunal admitted this same defence argument. The inconsistency between the awards was due to differing interpretations of the concept of state of necessity under a bilateral investment treaty and under international customary law. So it is not surprising that there are some comments like the current ISDS regime addresses ‘the integrity and fairness of the process’ rather than the consistency， coherence or correctness of the outcomes.
There is a general sense among some views that an AM could bring consistency to awards and thereby improve coherence and predictability， finally strengthening the legitimacy of ICSID. However， this general agreement remains being questioned. The opposite opinion argues that the current ISDS system is constructed of a number of inconsistent BITs that it is likely for similar provisions to be interpreted differently. Therefore， in such circumstance， introducing an AM would not achieve the objective of enhancing the consistency and coherence of international investment law. Similarly， it is said that consistency and coherence are not objectives in themselves to take the AM reform option as the underlying investment treaty regime itself is not uniform.
However， the establishment of an AM is not necessarily premised on a uniform substantive law. It seems that an AM could be an important way to promote the formation of a coherent investment law. Primarily， in terms of the issue of inconsistency， it is mainly due to the different positions of the arbitral tribunal on the same issue. If an AM could establish principles on the position of these fundamental issues， it would be helpful to improve the consistency of international investment law. Besides， in some inconsistent awards， the explanation of some tribunals may be more reasonable than the analysis of others on the same issue. However， there are no criteria for assessing this kind of differences without a centralised AM. In this regard， a standing AM seems to contribute more to the consistency and coherence of the ISDS system.
Furthermore， an AM could promote the correctness of arbitral awards. When the first-tier tribunal is aware that its award may be subject to appeal， the rationale for its decision would be more fully developed， hoping its findings could be upheld by the appellate tribunal. While an AM implies more scrutiny of arbitration awards， the investment arbitration mechanism would be more coherent if more correct and consistent appeal awards could be rendered. In order to meet this purpose， a similar suggestion is made that a standing character of an AM is more helpful than an ad hoc nature.
Besides， increasing the neutrality and independence of the appellate tribunal will also contribute to achieving more correct and consistent awards， therefore strengthening the predictability of awards in investment arbitration. From the perspective of procedural law， the objective of consistency， coherence， predictability， and correctness in awards must be achieved by the arbitrators who explain and apply investment law and render awards. It seems that appointing standing arbitrators would minimise the neutrality issue of arbitrators due to conflicts of interest.
In conclusion， an AM is more than a second opportunity to substantive review of a certain investment dispute. To some degree， it would facilitate the application of international investment law by rendering more consistent and correct awards， depending on the appeal rules. On the one hand， the appellate tribunal’s authoritative interpretation of legal issues would provide references to disputing parties and arbitrators， as well as contribute to the correctness and consistency in current ISDS system. On another hand， the neutrality and independence of arbitrators in the appellate tribunal is likely to be increased to make more correct and coherent awards. Meanwhile， the creation of an AM implies a limitation on the discretion of arbitrators when interpreting legal rules and principles.
2.2.2. Other reasons
Furthermore， despite the broad criticism， arbitration is still the most prevailing way to resolve international investment disputes currently. An important reason is the finality authority of the arbitral awards. It can be argued that in present finality has taken pride of place over the principle of correctness. However， the alleged efficiency and economy attached to the finality character of arbitration currently is not evident. One of the criticisms on investment arbitration is timing and costs. In fact， the efficiency and economy of arbitration is not merely depending on the finality authority. The objectives can also be achieved by streamlining the arbitral process， limiting the duration of arbitration and reducing the costs， which is conceivable when design an AM.
The original and main purpose of an investor choosing international investment arbitration and excluding local remedies is to avoid litigation in the respondent state so that a fairness award could be expected. Therefore， the correctness of awards is also significant in ISDS. Most importantly， investment arbitration has a special character distinct from commercial arbitration that public law values cannot be ignored. Might for this reason， compared to commercial arbitration， the demand for correctness and predictability of awards in ISDS is more stronger. It follows that the finality principle of arbitration could be broken down appropriately in the condition that the fairness and correctness of awards is at risk. And the efficiency and economy issue might be compensated by the approaches discussed above.
In addition， an AM proposal can accompany any other option as one part of a package of reforms that address the concerns other than predictability and correctness. For instance， the criticisms of the constitution of tribunals， conflicts of interest for counsel and arbitrators and the lack of clarity regarding standards on independence and impartiality， etc. Besides， either a standing or ad hoc appeals body could preserve the structure of the existing investment arbitration mechanism. Such an incremental reform option can be relatively well adapted to existing investment arbitration regime.
Overall， in a Note of 28 August 2018， the UNCITRAL Secretariat analysed the concerns raised in ISDS. and in April 2009， Working Group III agreed that those key concerns about ISDS， including the issue discussed in above section， were well-founded and serious enough to justify systemic reforms. On this account， it demonstrates that an attempt to establish an AM is necessary.
2.3. Main elements in the setting-up of an appellate mechanism
2.3.1. The nature of the appellate mechanism
When considering the establishment of an AM， one threshold question is what the nature of the AM should be：ad hoc or permanent， bilateral or multilateral? Different nature will affect the design and content of the AM. There are some options for the establishment of the AM. Generally， those potential options could be broadly divided into two groups：a model appellate mechanism and permanent multilateral appellate body.
2.3.1.1. A model appellate mechanism
A model AM could be developed for either treaty parties， disputing parties or ISDS institutions. All of these parties and institutions could include the model in their treaties， agreements or arbitration rules. However， the AM in this case would function in a decentralized manner as the current ISDS regime. First of all， the AM could be developed simply in the form of ad hoc appellate tribunals case by case. Such appellate bodies are supposed to be constituted by parties in the context of particular disputes， following a similar way that the original arbitral tribunals were established. This kind of the purely ad hoc appeal body is mainly designed for non-treaty specific based disputes. It is conceivable that it may ensure the correctness of arbitral decisions but indeed have limited impact on the improvement of consistency and predictability.
The second form of the potential AM is the treaty-specific AM. This is the appellate body in a BIT or a multilateral agreement， expressly indicating the parties’ intent to establish an AM in the future. Certain investment treaties have envisaged the possibility of establishing such an appeal body. Article 28（10） of the 2004 US Model BIT， as mentioned above， is an example of such treaty language. The treaty-specific model could be either on a multilateral or bilateral basis.
Another form is to be set up as an option available under the rules of institutions handling ISDS cases， mainly under the ICSID Convention and Rules. However， the precondition of such an option is that the relevant institutions would permit an appellate mechanism.
2.3.1.2. Permanent multilateral appellate body
Considering the comprehensive objectives of consistency， correctness and predictability， establishing a permanent multilateral appellate body has been mostly proposed， which could either complement the existing arbitration regime or constitute the second tier in a standing court. It is argued that regulating an AM by formulating multilateral rules might be more efficient than doing so through bilateral investment agreements.
The first choice is to establish a standalone appellate body as a complement to the current ISDS regime. Technically， it would help the current regime improve the correctness of arbitral awards， strengthen legal expectations for investment dispute settlement and establish limitations for the conduct of arbitrators.
A permanent multilateral appellate body could also be designed as an integral part of a multilateral investment court. In this context， the second-tier appeals body would be constituted by professional judges and supported by a permanent secretariat. Such an option should be considered together with the multilateral investment court proposal in which arbitration might not be the preferred method to settle investment disputes and the first-tier tribunal would be replaced by the court. So this option might be only amendable to new IIAs.
2.3.1.3. Suggested nature of the appellate mechanism
Evidently， all the options raise complex questions regarding their compatibility with the existing ISDS system. The development of an AM would in any case require close coordination with the existing ISDS system. It follows that an AM needs to be designed to avoid unnecessary procedural and substantive confusion.
Generally speaking， in spite of the model AM available under the framework of a specific arbitration institution， a model AM in the form of ad hoc appellate tribunals or treaty-specific mechanisms is likely to be ad hoc and to present a bilateral character. In the later two circumstances， multiple AMs would appear， which could actually further fragment the current ISDS regime. It can be seen from these potential types of a model AM that this proposal in general adheres to the present fragmented ISDS practice. As a result， it is less possible to improve the consistency and predictability of arbitral awards as a whole.
As concluded in Chapter 2.2.1， a well-designed AM would somewhat contribute to the consistency， coherence， predictability， and correctness in arbitral awards and to some degree foster the development of international investment. As commented that the appellate arbitral is not simply a body to bring proceedings on the same facts again. Besides， the inconsistency and incoherence of awards within the ISDS mechanism is due to the fact that an ad hoc tribunal itself is not conceived to serve those purposes. Such objectives were not achieved by ad hoc tribunals before and is unlikely to be achieved in the future. Therefore， a standing nature would be more consistent with the motivation for establishing an AM.
It seems that a multilateral AM is more suitable for a standing AM though it is not always the case. In other words， a standing appellate body may be conceived in a BIT and a bilateral one might be developed in a multilateral instrument. However， an AM on a bilateral basis only resolves investment disputes between the parties and may not really contribute to the improvement of application of investment law. And it would result multiple AMs as discussed above. Considering a standing AM would be a better option， establishing an AM under the multilateral agreement would be more suitable. In fact， some have pointed that any reform attempt would not be successful if the proposal does not ‘achieve a critical mass to be multilaterally implemented.’ So it is better to start with a multilateral framework.
From the foregoing， a standing AM could be established through a treaty or an understanding or memorandum in a multilateral framework. However， the acceptance of the AM could be determined later by the choice of bilateral or regional free trade agreements. This approach leaves room for states and helps to reach consensus for the establishment of an AM. That is， consent to the establishment of an AM does not in itself imply a necessary consent to the jurisdiction of the AM in each case， which in practice the appeal procedures need to be applied either by the confirmation in BITs or agreements between disputing parties.
2.3.2. The scope of appellate review
Many questions need to be carefully considered when deigning the rules for an AM. Despite divergent considerations in each form， some common elements are crucial to the functioning of an AM. Working Group III has discussed some draft provisions governing the appellate procedure. Among other things， the grounds for appeal and the standard of review are at the heart of the AM proposal.
2.3.2.1. The grounds of appeal
What matters could be grounds for appeal is the primary question regarding the design of an AM. Seeing the appeal practice at international courts or tribunals as well as the national courts， the issue here remains about the errors of law and/or fact. Basically， errors of law refer to the errors in the interpretation and application of laws， and errors of fact are those errors in the finding of facts in a case. Should the review of errors in the interpretation and application of the law be limited to certain types? And an error as to finding of facts could also be a ground for appeal?
Some States suggest that appeals should be limited to errors in the application of the law so that the appellate procedure could be more efficient and faster. However， observing the practice of WTO dispute settlement， it is not that simple. The WTO Appellate Body （AB） was criticised for exceed its power to review the panel repower as Article 17（6） of the Understanding on Rules and Procedures Governing the Settlement of Disputes （DSU） limits the scope of an appeal to ‘issues of law’ and ‘legal interpretations’， whereas the AB has made findings on issues of fact. Indeed， the AB found that the issue of fact and the issue of law cannot be separated in many cases.
Such finding could be more evident in ISDS. That is because investment disputes require， first and foremost， the determination of a large number of complex factual issues. Some provisions in BITs also need to be examined in the context of facts. Besides， certain investment treaties provide that the errors of fact and some grounds for annulment under the ICSID Convention could be the grounds of the AM. Even in the current ICSID annulment process， errors of fact sometimes occur， ‘appearing as a claimed failure to state reasons or breach of procedural rules’. Therefore， although limiting the grounds for appeal to legal issues may speed up the process of review and effectively control the number of appeal cases， it would be reasonable for the scope of appeals to include errors of fact. An AM that addresses both legal and factual errors could ensure a comprehensive review function to achieve its institutional value.
Regarding the annulment grounds， the suggestion and treaty practice that these grounds could be appealable have been reflected in the draft provisions of Working Group III. The working document of Working Group III has proposed that the grounds for annulment and the grounds for refusing recognition and enforcement of an award may all be included in the grounds of appeal. This question should be discussed together with the relationship between the annulment and an AM. This thesis takes the view that the grounds of annulment could be covered by the scope of appeal. It will be examined in Chapter four below.
2.3.2.2. The standard of appellate review
The scope of the appellate review also raises the question is to what degree an error of law and/or fact could be review in the appeal procedure? As discussed， an inevitable disadvantage of extending the scope of appellate review to errors of fact is that it will take more time to complete the review. Furthermore， if a de novo review of all facts is conducted again during the appeal process， the appellate tribunal is more likely to reach conflicting conclusions. It is necessary thus to establish a stand of review to improve the efficiency of the appeal arbitration procedure.
A suggestion was made that the AM should only be able to review， in addition to legal questions， manifest errors in the finding of fact and a de novo review of facts is not necessary. Such a position has been practiced in the EU investment treaties， for instance， Article 8（28） of CETA explicitly limits the review of facts to ‘manifest errors’ while ‘errors in the application or interpretation of applicable law’ are all permitted.
As for the issue of law， however， the ICSID 2004 Proposal suggested that only ‘a clear error of law’ could be challenged. Looking at the draft provisions， Working Group III provided two options regarding the error of law. Option 1 has limited words as ‘material and prejudicial’ while option 2 lists several essential concepts in investment arbitration like ‘expropriation， fair and equitable treatment and non-discrimination’ without any wording limiting ‘error’. However， it is not difficult to see that this is only a formal difference. The application and interpretation of the listed legal standards is usually at the centre of an investment dispute and the result could be decisive for the final outcome of a case. That means an error of law on these issues is equal to a ‘material and prejudicial’ error.
Additionally， it is noted that the Working Group III distinguish ‘［E］rrors in the application or interpretation of law’ （Article X 1.a） to ‘［A］n error in the application of the law to the facts’ （Article X 1.c）， and there is no adjective modifying the degree of error in the latter. It seems that a discrepancy exists in the standard of review here. Nevertheless， the situation set out in Article X 1.c itself is manifest enough. Because establishing a correct connection between the facts of a case and the corresponding legal rules is the preliminary step before interpreting and applying the rules and is the most basic legal analysis. Assuming that rule of law A shall be applicable to the facts in a case， but it turns out that rule of law B shall be actually applied. There is no controversy here， but a manifest error. Therefore， in general a manifest or clear error of legal issues would be required to limit the scope of appellate review， whatever the formulation is like.
Errors of fact are more difficult to define than errors of law. Disputing parties may submit plenty of factual evidence to argue a slight error of fact for the purpose of an additional review of the case or for a delay of the game. Therefore， the ground of errors of fact should be strictly construed as the ‘clearly’ and ‘manifest’ used in draft provisions. Not only for limiting the scope of appellate review but also for due respect to the findings of fact given by the original arbitral tribunal. But concerns may raise in practice of determining what kind of a factual error is a manifest one. Indeed， manifest shall be somehow serious.
It is noteworthy that as a response to the criticism of the expanding power of the AB to review appeals， two additional conditions were added to the scope of appellate review in the Multi-party Interim Appeal Arbitration Mechanism in WTO. The new standards are ‘necessary for the resolution of the dispute’ and ‘raised by the parties’. Such standards might be helpful to limit the scope of appellate review in the AM.
To conclude， an AM could both deal with errors of law and fact， but the scope of review should be limited to manifest legal errors and serious factual errors raised by parties， which would be necessary for the resolution of the dispute.
2.3.3. The effect of appeal
There is little doubt that the appellate tribunal may confirm， modify or reverse the decisions on appeal. The disputed issues are whether the appeal tribunal is able to annul the decisions of the original tribunal and whether it could refer the matter back to the first-tier tribunal.
The issue of remand authority is complex and controversial. The answer to this question would significantly alter the structure of the potential AM. If the appellate tribunal is permitted to return the case to the original tribunal， is it possible for the disputing parties to appeal again after a remand? If there is no further appeal， then the original tribunal would make a final award. If further appeals are allowed， then the process will be repetitive and the overall duration of the proceedings will be greatly prolonged， along with the increased costs.
In the domestic litigation system， returning a case to the original court usually for two general purposes. The first is to improve the efficiency of facts-finding process. It is usually more efficient for the original court to re-undertake this obligation because the original court is more familiar with the dispute. So the grounds for remand normally include unclear or insufficient facts. Another purpose is to ensure the dispute not be deprived of any opportunity to be examined in due process. Thus， another common ground for remand is procedural errors in the first-tier review. Allowing the appellate court to send the case back is helpful to maintain the justice and efficiency in litigation.
However， in the case of investment arbitration， even if the remand is implemented in a restrictive manner， the case may go through at least four rounds of review， from appeal to remand and back again， which would cause serious delays and eliminate the advantages of arbitration. This would somehow deviate from the purpose of establishing an AM. Therefore， considering the introduction of remand in an AM would bring the possibility of multiple tiers of review， it would be preferable not to accord an appellate tribunal the remand authority.
The appeal practice in WTO dispute settlement system offers a reference at an international level. Pursuant to Article 17（13） of the DSU， the WTO’s AB is accorded to ‘uphold， modify or reverse the legal findings and conclusions of the panel’ . Clearly， the WTO appellate proceedings do not have a remand mechanism. And as noted above， the scope of appeal in WTO in theory shall limit to legal issues and exclude the factual matters. Thus， in the cases where the finding of facts is not sufficient or not correct， the AB cannot send the case back and on another side the AB might fail to analyse thoroughly to modify or reverse the original panel report in the absence of factual review.
The ICSID Secretariat mentioned the remand issue when an AM was first conceived. In its proposal， if a dispute remains unresolved in the appeal award， the appellate tribunal may send the case back to the first-tier tribunal or the disputing parties may be permitted to request for a new tribunal. Generally， this proposal aimed to limit the grounds for remand so that avoid unnecessary applications. However， if remand is permitted in such cases， further controversy arises about the unresolvable disputes. If it is up to the appeal tribunal to decide whether a disputed is settled or not， the question in substance still relates to the review of factual issues. It is unlikely for a tribunal to state that a dispute with clear facts cannot be resolved under current legal rules and legal interpretation.
In conclusion， the intended purpose of remand as discussed before could be remedied by the extent of the scope of appeal to issues of fact. If issues of fact can be ascertained at the appeal stage， the primary function of the remand mechanism is no longer necessary. As clarified above， the review of facts should be limited to serious factual errors that necessary for the resolution of the dispute. By establishing a strictive standard for factual review， it is possible not only to replace the function of remand， but also to address its shortcomings at the same time. As for the function of correcting procedural errors in the remand mechanism， annulment proceedings might play the role， which will be discussed in Chapter four.
3. The incompatibility with current regimes
The issue of incompatibility of an AM with existing ISDS regime differs in different frameworks governing arbitrations. This chapter will identify the incompatibilities respectively under the ICSID Convention and the UNCITRAL Arbitration Rules and give corresponding suggestions.
3.1. Arbitration under the ICSID Convention
3.1.1. Appellate mechanism for ICSID in practice
The self-contained character of the ICSID regime establishes a closed system for the remedy of arbitral awards rendered under it. The closed system without any appeal finds explicit wording in Article 53（1） of the ICSID Convention that the award ‘shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention’ . In the current ICSID system， possible remedies of awards are set out in Articles 49-52， not including the appellate review. Besides， the exclusivity rule contained in Article 26 ICSID Convention also indicates the impossibility of any appeal. It is certainly clear that an AM is incompatible with the current text of the ICSID Convention.
The Convention， on the other hands， is open to revision. Article 66 of the Convention provides one way for establishing an AM in the ICSID regime：an amendment of Article 53. A fact is that， as so far， no contracting party has submitted a request for amending the Convention. Any amendment of the ICSID Convention would be extremely difficult because Article 66（1） requires the amendment proposal be approved by all 164 member states. Obtaining the consent of all parties is almost impossible. And even if all states parties agree to amend the Convention， the amendment may be challenged as being contrary to the purposes of the Convention.
3.1.2. Suggested approach：an inter se modification of the ICSID Convention
Another possible way to integrate an AM into the ICSID regime is that contracting parties agree to a modification inter se. Relevant rules are regulated in Article 41 of the Vienna Convention on the Law of Treaties （VCLT）. The rules has been considered as customary international law that might be applicable to the ICSID Convention. By this way of a separate plurilateral protocol， willing states can establish a special regime for an AM applicable between themselves. The question arises that whether inter se modification is possible for Article 53（1） ICSID Convention.
Noting that the modification of Article 53（1） is not prohibited by the ICSID Convention thus the examination of Article 41（b） of VCLT is the focus of the discussion. The subparagraphs of Article 41（b） require the modification （1） does not prejudice the rights and obligations of other members under the ICSID Convention；and （2） is compatible with the object and purpose of the ICSID Convention.
The travaux preparatoires of the ICSID Convention make it clear that the reason why Article 66 of the Convention requires the unanimous consent of all states parties is to avoid a situation in which states parties that do not consent to an amendment are forced to accept it. If the Convention is amended only between certain parties， it does not in fact lead to an addition to the obligations or a reduction in the rights of other parties that are not parties to the amendment. Nor would it result in a forced acceptance of the amendment by those states which have not agreed to it. Therefore， in accordance with the treaty interpretation rules set out in Articles 30 and 31 of VCLT， the ICSID Convention should allow for an inter se modification.
Furthermore， the objective and purpose of the Convention， provided in Preamble and Article 1（2） is to facilitate conciliation and arbitration in investment disputes. The introduction of an AM would better preserve the parties’ expectations of procedural and substantive fairness and achieve a balance between private and public interests. Not only will this not undermine the objective of the Convention， but it may also actually help to improve the legitimacy of ISDS.
In fact， the consideration of such an approach originated with the proposal of the ICSID Secretariat. It was argued that an inter se modification by member states who are willing to accept the proposed AM might be an approach. Although the ICSID Secretariat did not give any opinion on whether the conditions of Article 41 of VCLT would be satisfied in the ICSID context， an affirmative answer to the possibility of this approach has been concluded from the foregoing analysis. Gabrielle Kaufmann-Kohler and Michele Potesta also in their report stated that inter se agreements between states parties meet the conditions set out in Article 41 of VCLT. Other states parties that do not agree to join the inter se agreement are not bound by the AM under Article 54 of the Convention. They are in a situation similar to the relationship between non-ICISD states parties and ICSID awards.
In conclusion， an inter se modification of the ICSID Convention is legally permissible pursuant to Article 41 of VCLT and it might be the most possible way to introduce an AM in the ICSID regime. ICSID is a multilateral forum that may be an example or even a model to establish a multilateral AM. The possibility of introducing a multilateral AM to the ICSID Convention and other treaties will be discussed at the end of this chapter.
3.2. Arbitration under the UNCITRAL Arbitration Rules
3.2.1. Appellate mechanism for UNCITRAL Rules in practice
Article 34（2） of the UNCITRAL Arbitration Rules provides that all awards ‘shall be final and binding on the parties. The parties shall carry out all awards without delay’ . Unlike the ICSID Convention， the parties to a dispute initiated under the UNCITRAL Arbitration Rules are able to modify the rules by mutual agreement， which means the disputing parties who are open to an AM can modify the finality rule of awards. The biggest obstacle presented in ICSID cases， finality of arbitral awards， is not the main problem here.
However， Article 1（3） of the UNCITRAL Rules indicates that an arbitration that takes place under the Rules is subject to a national law applicable to it. The question arises here that an appeal of an arbitral award may be in conflict with the provisions of the national arbitration law at the place of arbitration.
Arbitral appeal is not prohibited in some countries like the UK. Section 58 of the UK Arbitration Act stipulates that an arbitral award is final ‘unless otherwise agreed by the parties.’ Netherlands is another example where arbitral appeal is not prohibited. Articles 1061a to 10611 of Netherlands Arbitration Act set out the appeal rules in detail. In those countries where appeal is permissible in arbitration law， the national courts will certainly play an important role in the future AM especially regarding the control of the arbitration. In this context， the decision made by an appellate tribunal would， the same as a first-tier award， be governed by setting aside provisions in the national law as well as the enforcement rules in the New York Convention in third countries.
However， an AM for arbitral awards would be fundamentally incompatible with a national law in the country where arbitral appeal is not allowed. One example is China Arbitration Act. Article 9 of the Chinese Arbitration Law confirms the finality of arbitration in the first sentence and then further clarifies that any arbitration institution or national courts shall not admit any dispute that has been arbitrated. So arbitral awards governed by such rules are impossible subject to appeal from the outset. This incompatibility cannot be resolved unless a revision of national law.
3.2.2. Suggested approach
In such case， there are two ways to integrate an AM into investment arbitration. The simple one is to avoid the potential conflict by the choice of parties. If the parties wish to reserve their rights to appeal， they are well advised to expressly choose an appropriate seat of arbitration where arbitral appeal is permissible.
The second approach is for the country to revise its arbitration law. However， this approach makes little sense if only a few countries are willing to amend their domestic laws. But predictably， it is unlikely that most countries will agree to revise national arbitration law in a limited period of time for the purpose of being compatible with the AM. Therefore， it is not an ideal choice for those countries that are willing to establish an AM in ISDS. They may tend to look for other possible options instead of amending their national law. A much simpler approach has been given before. Besides， it seems that for the willing countries， working together to establish a multilateral AM excluding the application of national law might be a more effective way than mass revision of their domestic rules to address the mentioned incompatibility. This approach will be further discussed as below.
3.3. The applicability of a multilateral appellate mechanism to existing IIAs
3.3.1. The feasibility of an opt-in convention
As suggested before， a standing nature would be more consistent with the motivation for establishing an AM and a multilateral one is better suited to a standing AM. In the CIDS report， a ‘Mauritius-like’ approach was introduced to create an AM in the current fragmented ISDS regime. The main idea of this proposal is that the Mauritius Convention on Transparency can be a model for a potential AM.
The model is on a multilateral basis， but it could enable itself integrated into bilateral treaties. Article 2 of the Mauritius Convention includes both ‘bilateral or multilateral application’ and ‘unilateral offer of application’. The two types of its application aim to provide a flexible way for IIAs in force prior to the effective date of the UNCITRAL Rules on Transparency. As so far， 23 countries have signed or ratified the Convention. However， the UNCITRAL Rules on Transparency is not only applicable to the parties to the Convention. Other countries could make separate consent that their existing investment treaties would be governed by the UNCITRAL Rules on Transparency.
Furthermore， under the Mauritius Convention， the UNCITRAL Rules on Transparency could be applied in any type of investment arbitration and are not limited to arbitrations conducted under the UNCITRAL Arbitration Rules. In addition， parties to the Mauritius Convention are able to make three reservations in respect of their acceptance of the Convention.
The Mauritius Convention has become effective with a lower threshold for entry into force. Although not many states have committed themselves to the Convention， it did come into force， breaking with the previous practice of requiring the support of multiple countries. It can be considered as a valuable example of a multilateral path to revise bilateral agreements. In brief， ‘the multilateral instrument and the IIAs will co-exist’ in this context. That is to say， the existing IIAs could be supplemented by an opt-in convention with respect to an AM. All states are welcome to join the convention or use the rules providing for appeal in specific cases at any time. The consensual nature of applying an AM would be well maintained because of the flexibility of the opt-in convention. The multilateral convention would either provide the rules for arbitral appeal itself， or like the Mauritius Convention， refer to arbitration rules that are otherwise created or already exist.
In that instance， the appellate rules may be applicable to all investment arbitral awards， irrespective of the type of the first-tier arbitration. This character was early proposed in the ICSID 2004 Proposal that the creation of an ICSID Appeals Facility could apply to ICSID and non-ICSID awards. The question arises that whether it is necessary to maintain the discrepancy between ICSID system and non-ICSID system in appeal， which has already existed in now ISDS regime. Or it that possible to adopt a single track for all types of first-tier arbitral awards? To put it another way， the question is in essence about a choice between the applicable law governing the appeal proceedings：retaining a margin of application of domestic law or excluding national law but only applying international law.
The opt-in convention containing the appellate rules or any other instruments establishing a new appellate body should make this question clear otherwise the AM would be complicated and full of uncertainties. For instance， at the first-instance level， an arbitration may be governed by a national law of the place of arbitration while a treaty law is entirely applicable at the appeal stage. It is important to note that， unlike the Mauritius Convention， an AM， as a stage of dispute resolution， faces a more complex balance of interests and design of structure. Undoubtedly， drafting the opt-in convention for an AM is a tricky task.
3.3.2. Suggested framework for an appellate mechanism
In conclusion， it is not easy but possible for states to establish a multilateral AM as a supplement to the current ISDS system. On the basis of the opt-in convention， as proposed in Chapter 2.3.1 that the multilateral framework is only used to obtain the consent of states to establish an AM while the acceptance of AM could be determined in the specific case. Of course， it depends on the parties’ willingness if such a statement or reservation is necessary. Such flexibilities are reflected not only in the manner of application， but also in greater freedom in the timing of the acceptance of the appeal mechanism. The parties may reach an agreement to accept the jurisdiction of the AM at several stages， either before， during or after the first-level arbitration proceedings. In short， this approach shows great respect to the consensual nature of an AM.
Furthermore， the ICSID seems to be an idea platform to introduce such an AM. Primarily， an inter se modification of the ICSID Convention is in theory permissible. The modification may be in the form of a ‘Mauritius-like’ approach. Furthermore， the ICSID is professional in investment arbitration， and it might be better to select a mature forum to develop an AM than creating a new one full of uncertainties. Most importantly， an AM established under the framework of the ICSID Convention is likely to adopt an Article 54- type enforcement regime， which means appeal awards would exempt from the judicial review by national courts. Besides， in this scenario， the incompatibility of an AM with finality rules of national law in UNCITRAL cases， which presented in Chapter 3.2.2， would be solved at the same time.
4. Challenge and enforcement of an appellate award
What kind of law， international law alone or also national law， would be governing the new AM is particularly important for the annulment and enforcement of appeal awards. This is because that the arbitral awards rendered under the ICSID Convention are excluded from the judicial review by domestic courts， whereas arbitrations under the UNCITRAL Arbitration Rules are subject to a potential challenge in the country of origin and to an enforcement under the New York Convention in other states.
The following sections will examine the issues of annulment and enforcement of an appellate award respectively under the ICSID Convention and the UNCITRAL Rules. And it needs to be mentioned that the below discussion is based on the conclusion that Article 41 of VCLT and the ICSID Convention in theory permit an inter se modification of the Convention and on the assumption that a standing appellate body could be created through an opt-in convention.
4.1. Relationship between an appellate mechanism and annulment
4.1.1. Appeal as a substitute for annulment
As discussed in Chapter two， the grounds for annulment are suggested to be included in the scope of appellate review in the draft provisions. The idea behind this suggestion is that an AM might serve as a substitute for annulment in current ISDS procedures. The existence of the annulment （setting aside） proceedings or not is important for the institutional arrangement of an AM with respect to the scope of review， costs， timing and the finality of awards， etc. It would be useful to start this question with the relationship between annulment and appeal.
Annulment is fundamentally different from appeal. Either the annulment grounds under Article 52（1） of the ICSID Convention or the grounds for setting aside under Article 34（3） of the UNCITRAL Model Law deal with the validity of the procedure itself. Any criticism of the merits of the correct findings or errors is not permitted. In another word， annulment in principle merely deals with the legitimacy of proceedings， whereas appeal includes the review of substance of the dispute. Therefore， a narrow use of annulment is in principle and should be taken as an exception to the original award. Obviously， the remedies for errors provided by the ICSID Convention or the UNCITRAL Rules are not sufficient.
Perhaps it is the reason why in practice the border between appeal and annulment sometimes was crossed. In the first-generation jurisprudence， failure to apply applicable law could result in manifest excess of powers. Such approach attracted some criticism for blending the border between the two procedures. ICSID tribunals then became more cautious in the application of Article 52 of the ICSID Convention. That means an ad hoc committee for annulment would remain an error in the award even if it is aware of that. It is argued that such a practice ‘would contradict the customary norms applicable to the interpretation of international treaties by permitting an absurd effect’. From the perspective of the object and purpose of the ICSID Convention， legal errors and factual errors should have the possibility to be corrected.
Besides the fact of crossing the border between appeal and annulment and the extremely limited scope of annulment grounds， costs and timing of annulment proceedings remain problematic. On the one hand， a study has shown that from 2007 to 2012 the average time between the registration of an annulment case and the final decision is 26 months， and that the length of the annulment process tends to increase exponentially. An already time-consuming arbitration can become exceedingly lengthy when annulment proceedings are initiated. The study also showed that during the period between 1971 and 2010， nearly one-third of all ICSID arbitral awards have been subjected to annulment proceedings. The abuse of annulment occurs when the parties in fact use annulment as an inefficient appeal procedure.
On the other hand， the expanding functions of annulment proceedings has resulted in unnecessarily frequent application of annulment， leading a significant increase in costs. Although Article 61 of the Convention provides for the possibility of recovery of legal fees by the successful party， the ad hoc committee might generally allow both parties to share the costs equally.
Therefore， the annulment procedure could be replaced by the AM in the way of adding the annulment grounds into the scope of appellate review. Firstly， the scope and review function of annulment proceedings could be covered by the AM because the scope of appellate review is border than annulment. More than just a second chance to review the disputes， the AM would have additional functions， addressing not only errors but also inconsistencies in awards， the legitimacy of the tribunal and the application of international law， etc. Furthermore， by designing a time framework the AM could make the original annulment review process more efficient. In short， worries about the timing and costs of annulment will no longer exist. Finally， cancellation of annulment would ensure the finality of an appeal award. The co-existence of appeal and annulment would in fact result a three-tier review system， which is inconsistent with the purpose of establishing an AM. In conclusion， countries willing to accept an AM may consider replacing the annulment procedure with the new mechanism.
4.1.2. Coordination with current regimes
Following the previous assumption that the introduction of an AM would replace the annulment remedies either for the ICSID awards and the UNCITRAL awards， different approaches should be adopted to coordinate the new AM and the original annulment provisions.
For ICSID awards， due to the closed nature of the ICSID regime， the annulment proceedings are conducted by an ad hoc committee pursuant to Article 52 of the Convention. The only thing that needs to be done is to exclude the application of Article 52 by an inter se modification of the ICSID Convention.
The situation for arbitrations under the UNCITRAL Arbitration Rules is more complex. For sure， it would also require the appellate rules exclude the setting aside proceedings under domestic law. The question is how to achieve this. An approach is provided in the first CIDS Report that a waiver of judicial review of appeal awards could be included in the proposed AM rules. The Annex of the UNCITRAL Arbitration Rules provides a model statement of waiver that ‘［T］he parties hereby waive their right to any form of recourse against an award to any court or other competent authority， insofar as such waiver can validly be made under the applicable law’ .
By this way the setting aside challenge under a national law might be substituted by the new AM. However， it can be seen from the wording of the waiver and the principle contained in Article 1（3） of the UNCITRAL Rules that the validity of the exclusion is subject to the applicable law. It is reported that Belgium， France， Panama， Peru， Sweden， Switzerland， and Tunisia are the examples where in certain circumstances the setting aside actions might be excluded as long as an agreement is reached by the parties.
The question follows that not all the states would recognise the waiver of judicial review and thus the setting aside proceedings would remain in place. Such circumstance would result in different coverages in the two types of disputes， ICSID cases and others. To avoid this， it is suggested that the contracting parties should affirm the effectiveness of a waiver of grounds for seeking annulment before their courts through legislation. Besides， it is necessary to provide that the arbitration shall be seated in a contracting party to the AM rules. Only if those conditions are met， the AM would be compatible with the current regime and serve as a substitute for setting aside procedures. However， this approach is considered impractical as such a waiver is not commonly permitted in most countries and only seldom jurisdictions allow it.
In conclusion， despite the advantages of replacing annulment with an AM， the issue of compatibility of the new mechanism with annulment procedure appears in non-ICSID cases due to the governing domestic law. It is possible， in some countries， for the new AM to be compatible with the national law but the scope of such compatibility is predictably not broad. So even if the suggestion that appeal could be a substitute for annulment will be adopted by the Working Group III， the implementation of such rules might be not admitted in some jurisdictions in respect of non-ICSID cases.
4.2. Enforcement of an appellate award
4.2.1. Under the ICSID Convention
Providing that the AM would retain two legal frameworks for enforcement， in the context of ICSID， the rules of enforcing an appeal decision on an ICSID award may differ between the contracting parties to the inter se modification of the ICSID Convention and other ICSID member states.
For the contracting parties to the AM rules， by the way of an inter se agreement， they would be likely to establish a special regime for the enforcement of an appeal award like Article 54 of the ICSID Convention if they want to maintain the advantages of the ICSID automatic enforcement rules. The enforcement in contracting parties would be subject to the new rules reflecting Article 54， which means likewise there would be no place for national courts to control the ICSID appeal awards. Nevertheless， the question may appear that under the ICSID Convention， the AM would create two arbitral awards. It is contrary to the fact that an ICSID tribunal renders only one award. This concern may also be addressed in the inter se modification of the ICSID Convention for instance by interpreting the ‘award’ as ‘award in force’ or ‘final award’ so that the award made in the first level would not be regarded as an ‘award’ between the contracting parties.
However， other ICSID member states （non-contracting parties） will not be constrained by the revised rules. For the issue of the enforcement of an appeal award rendered under the ICSID framework in their territories， the situation of these non-contracting parties is similar to that of non-ICSID member states in regard to an ICSID award. The result is that in this situation the appeal award could be at least enforced pursuant to the New York Convention.
4.2.2. Under the New York Convention
4.2.2.1. Meaning of ‘arbitral awards’
Pursuant to Article I （1）， the New York Convention applies to the recognition and enforcement of ‘arbitral awards’ which fall within its scope. In terms of a decision rendered under the AM， the first question is that if it qualifies as an ‘arbitral award’ under the New York Convention. In fact， the difficulty is ‘there is no universally accepted definition of arbitration’ .
There is no definition or explanation of ‘arbitral awards’ given by the New York Convention itself. But in the preparatory work of the Convention， one suggestion was made that it is up to the competent domestic court where recognition and enforcement is sought to decide when a decision is an arbitral award under the New York Convention. Similarly following this explanation， the meaning of ‘arbitral awards’ could be governed by an opt-in convention that confirm the nature of the decision made by the appellate body.
Furthermore， the UNCITRAL Secretariat gave two suggested criteria to help determine an arbitral award：‘the finality and the binding effect of an award’ . For the new AM， providing a waiver of setting aside action is effective in the country where the enforcement is sought to or in the case where setting aside proceedings were not initiated， the final decision rendered by the appellate body would of course meet the criteria. Besides， in accordance with Article I （2） of the New York Convention， ‘arbitral awards’ shall include awards made by ‘permanent arbitral bodies’ . For the AM conceived in this thesis， a standing appellate body is created that within the scope of Article I （2）.
Observing that unless a disruptive reform of the ISDS regime in which arbitration is no longer the primary means of settling investment disputes， an AM would inevitably rely on the existing arbitration rules under the current ISDS system， and in particular would not be separated from the ICSID Convention and the UNCITRAL Arbitration Rules， as discussed in the thesis. From the foregoing， the final award made by the appellate body falls within the scope of ‘arbitral tribunal’ in the New York Convention. So basically， appeal awards are enforceable under the New York Convention.
4.2.2.2. Waiver of grounds for refusal of enforcement
Unlike the automatic recognition of ICSID awards， Article V of the New York Convention provides the grounds for national courts to refuse a foreign arbitral award. To ensure the maximum finality of an appeal award and decrease differences in coverage between ICSID and UNCITRAL arbitrations， a waiver of grounds for refusing the enforcement of an appeal award could be considered， which is similar to the waiver of seeking setting aside action.
However， the same question in a waiver of setting aside arises here in a waiver of refusal of enforcement. Would third countries be willing to accept such a waiver? It seems that the answer to this question would be that it is up to the state to confirm the validity of a waiver of grounds for refusing enforcement within its jurisdiction. Yet， the effectiveness of the waiver may depend on the nature of grounds. An argument is that ‘the grounds for refusal of enforcement in paragraph 2 of Article V of the New York Convention are legally not capable of being waived or contracted out of’ because that the matters of public policy shall be applied by national courts themselves. For other grounds listed in Article V of the New York Convention， it might be possible to waive because these grounds need to be raised and proved by the invoking party.
5. Conclusion
After the discussion about the interaction of a potential AM with the ICSID Convention and the UNCITRAL Arbitration Rules， a conclusion has been drawn here that the introduction of an AM to the existing ISDS regime is legally possible. The barriers regarding the design of structure and legal elements to the establishment of an AM are not insurmountable and could be overcome through certain approaches.
For the fundamental incompatibility of an AM with Articles 26 and 53（1） of the ICSID Convention， Article 41 of VCLT provides a possible way to resolve the problem， which the ICSID member states may refer to. An inter se modification of the ICSID Convention meets the conditions set forth in the Article 41 of VCLT. Therefore， the ICSID members who are willing to develop an AM could modify the ICSID Convention between themselves to create a special regime for appeal， including the issues of annulment and enforcement of appeal awards. The special regime is only applicable to the contracting parties to the inter se modification and other non-contracting ICSID members are not bound by it.
For arbitrations under the UNCITRAL Arbitration Rules， the disputing parties are able to modify Article 34（2） of the UNCITRAL Rules （finality rule of awards） to accept an AM as the UNCITRAL Rules are subject to the agreement of the parties. However， he UNCITRAL Arbitration Rules at the same time are governed by lex arbitri， usually the national arbitration law at the place of arbitration. In the countries where arbitral appeal is not allowed， the AM would be not applicable. Therefore， the parties who want an appeal review of the first-level arbitral award are suggested to choose an appropriate seat of arbitration in which arbitral appeal is permissible.
Additionally， following the practice of the Mauritius Convention， states may integrate an AM to existing IIAs by an opt-in convention， which is multilateral and stand-alone. By this way the existing IIAs could be supplemented with an AM. Most importantly， the consensual nature of applying an AM would be well maintained because of the flexibility of an opt-in convention. The drafting work of such a convention is challengeable because it would face a threshold and difficult issue that to establish a single regime governing both ICSID awards and non-ICSID awards or to remain a dual track for the two kinds of arbitral awards. The answer to this question is particularly decisive to the issue of annulment and enforcement of an appeal award.
But in general， appeal is suggested to serve as a substitute for annulment under the ICSID Convention or setting aside proceedings under a national law. In the latter situation， a waiver of seeking setting aside action by an agreement of parties would be possible and recognized in several states but most countries may tend to refuse such a waiver. In terms of the enforcement of an appeal award， the inter se modification of the ICSID Convention may create a special enforcement regime between the contracting members but the new regime is not applicable to other ICSID members that are not the parties to the inter se modification. For them， the New York Convention might be applicable to the enforcement of an appeal award in their territories. In the context of this thesis， an appeal award is within the meaning of ‘arbitral awards’ in the New York Convention so it would be enforceable under the Convention.
In fact， at this stage， conceiving an attractive framework may be a focus of the introduction of an AM. There is no rush to address all issues at the beginning and it might be better to leave some rules open to avoid unnecessary conflicts. However， several essential legal issues shall be carefully considered before establishing an AM. The first one is the nature of the AM. Considering that the introduction of an appeal layer not only aims to a second chance of review but also to make the arbitral awards in ISDS more coherent and predictable， a standing nature would be preferable. It follows that a multilateral AM is more suitable and acceptable in this case. Another important legal issue is the scope and the standard of appellate review. From the experience of appeal practice in WTO and the draft provisions provided by the Working Group III， the scope of review may include both the errors of law and fact， as well as the grounds for annulment. However， the scope shall be limited to manifest legal errors and serious factual errors raised by parties， which would be necessary for the resolution of the dispute. As for the effect of appeal， the second-tier tribunal may confirm， modify or reverse the original decisions， but it is not suggested to accord an appellate tribunal the remand authority because preserving remand in an AM would bring the possibility of multiple tiers of review， which could cause serious delays and derogate the benefits of arbitration.
In all， if an AM is to be established， it seems that a standing and multilateral AM， as a supplement to the current ISDS system， is preferred. And on this basis， the ICSID Convention could be the multilateral platform to develop such an AM， mainly because it is better to choose an existing and tested forum that is specifically designed for investment arbitration rather than creating a new one full of uncertainties， and the ICSID Convention may allow the appeal awards exempt from the review by competent domestic judicial institutions after awards. Besides the choice of multilateral platform， as proposed in the text before that the multilateral framework could be only used to obtain the consent of states to establish an AM while the acceptance of AM could be determined in the specific case. This approach aims to provide maximum freedom of choice for the state to facilitate the establishment of an AM at the early stage. Admittedly， a creation of an AM is not easy and a number of obstacles still remain， both legally and politically.
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