Interview with Professor Rudolf Dolzer

Should investment arbitration be reformed? Is it essential to have “antenna for politics” to succeed as an arbitrator? What makes energy disputes one of the most exciting cases in arbitration? Which principles should guide an expert in an arbitration case? What should law students focus on today?

Professor Rudolf Dolzer, co-author of the “bible” of international investment law, addresses these and some other questions in his recent interview to the Arbitration Center at the Institute of Modern Arbitration (IMA).

The Arbitration Center at the IMA expresses its gratitude for assisting in taking this interview to Nikita Kondrashov (Associate, Luther Rechtsanwaltsgesellschaft mbH, Hamburg), Elena Burova and Ksenia Koroteeva (Experts at the Administrative Office of the Arbitration Center at the IMA).

I. ACADEMIC EXPERIENCE

1. You regularly deliver lectures in the universities all around the world and interact a lot with students and young arbitration practitioners. What, in your opinion, differ young generation of law students of these days from the one of your time? What would you recommend law students and young practitioners to pay more attention to?

The main difference is certainly the internationalization of the legal education. When I was student, it was considered exotic for a law student to study abroad. In a seminar that I taught recently in Bonn, 14 out 18 of students were Germans who had studied abroad or foreign students who had come to Bonn. And most of the arbitrators have in common that they have studied abroad. This is not surprising, given the nature of international arbitration which often involves more than one legal system and also requires language skills. It is well-known that international arbitration has borrowed many features from the Anglo-American sphere, and an understanding of U.S. law or English law therefore will promote a career in international arbitration, regardless of personal preference.

Another aspect of legal education has been changing in many parts of the world, perhaps less noticeable at first sight. I refer to the difference between a strictly theoretical-conceptual approach to teaching (as often found formerly in civil law systems with abstract codifications) and a manner of teaching which also helps the student to focus on the special facts and circumstances of a given case. My experience has been that a good legal education has to teach the student both dimensions of the law and the legal process. In Europe and in other regions, we need to improve the skills of students to apply the law to a case; in the Anglo-American sphere, capacity of conceptual thinking can often be improved. I believe that legal writing and legal teaching has been changing in the past decades in this respect in some ways, but I also think there is much room for improvement.

A third difference is that today students are more focused on their specific curricula and good grades which help them in their careers. Formerly, students often pursued broader interests and attended more courses which were not decisive for their grades. Sometimes I wish today that students would have more time and leisure to look beyond their daily task of attending their prescribed courses.

2. You co-authored one of the leading books on international investment law, an absolute must-read for every student and young lawyer specializing in this field.[1] The book has now come through two editions. Are there any plans (that you are ready to reveal) to present a new edition of the book? If yes, what new aspects and perspectives do you plan to address in the new edition?

Yes, Professor Schreuer and myself plan to write a third edition of “Principles of International Investment Law”. The second edition was written in 2011, and thereafter more than 200 new awards were rendered, bringing significant new developments. We would like in our new edition to update the book in the light of the new awards and trends. Possibly, the new publication will appear in 2018.

The basic concept of the book will not change. In contrast with other books, the strong focus is on the law as its stands, in the light of the existing jurisprudence. We seek to place the law into its proper context, and our primary aim is not to produce our subjective viewpoints. From a strictly academic viewpoint it may be more interesting to portray the law as it should be or might be, but we think it is important in the first place to make the students familiar with the law as applied, so that they will be able to use their knowledge in practice. I think that the success of the book supports and justifies this approach. Also, we shall again seek to present the state of the law, to the extent possible, in clear and simple terms with reference to basic principles.

In our view, this is the best way to allow students and young practitioners to understand the law. In this sense, we shall also continue to quote passages of important decisions so that the reader has a clear view of what was said or not. With the sharply rising number of new awards, our approach to present basic and comprehensive principles will become more difficult to achieve.

II. EXPERIENCE IN INVESTMENT ARBITRATION

1. You have some considerable career background in politics – does this experience anyhow help you working in international investment law and arbitration?

Only very few arbitrators have experience in the political level. In other words, political experience is in no way necessary to be successful as an arbitrator. There is no single path to become an arbitrator. Most come from important law firms, some come from academia. Some are specialists in procedural law, others in private law or, as in my case, in international law. I know of one arbitrator who was chosen because of his new political experience. I have seen no case in which the arbitrator had a famous name known in international politics. However, that person was not nominated in a second case.

Knowledge of arbitration law and the skill to apply it to a case is necessary, also, nominating parties will seek a person able and willing to communicate with their arbitrator colleagues and convince them of their viewpoint.

Nevertheless, my experience has been that an antenna for politics can sometimes be helpful. In investor state arbitration, it is not uncommon that cases are connected with political events or developments. And in these cases, political experience may help better to understand and evaluate relevant factual situations.

2. You acted as an emergency arbitrator in one of the first known emergency arbitrations in investment treaty dispute. In your opinion, does the mechanism of emergency relief in disputes against States need to be improved? If yes, how?

Emergency proceedings have now become accepted by most of the major arbitration institutions. The traditional rules have not always allowed a response that was fast enough to secure legitimate interests of a claimant.

We shall have to wait and see how emergency proceedings work out in practice. In the first place, the balance of speed and thoroughness has to be considered. The second issue concerns recognition and enforcement of emergency decisions by national courts; compliance may often depend on the willingness of national courts to give effect to a decision. In the case in which I acted under the emergency rules of the SCC, the competent Ukrainian Court recognized the legitimacy of the decision rendered.

3. You were involved in different capacities (both as an arbitrator and an expert) in several investment arbitration disputes in the energy sector. What makes this sector so interesting for you in terms of arbitration?

Energy is the lifeblood of each economy.

And the sources of traditional energy are spread around the world, independent of the places where they are used. So sovereignty plays a central role, as does the need for transborder cooperation.

The international governance of energy has become a laboratory for the conduct of international relations. Fifty years ago, the Western oil companies (“the Seven Sisters”) controlled 90% of the global oil reserves, today that figure is about 15% – the biggest transformation of economic geopolitics in modern history. I was always curious to study the details of this narrative and of today’s arrangements.

When I become involved in energy arbitrations, I have found out that no systematic comprehensive studies existed of the petrobusiness from the viewpoint of international law. I started to make notes and decided to write my own book on the subject matter and signed a contract with an English publishing house. I think the book will now be finished in 2018. It will focus on upstream contracts between States and foreign companies.

The energy sector accounts for more than 25% of all major arbitrations, and many cases reflect fascinating political developments. I am convinced that the sovereign right to dispose of energy sources and access to these sources may be the real international currency of the future.

4. Your arbitration profile involves many cases where you acted as an expert. From your expert’s perspective, what can you name as best practices of a party-appointed expert in terms of (i) acting in front of the arbitral tribunal; (ii) interacting with a party that appoints an expert?

A party-appointed expert has to declare that he is independent and that he states his view according to his belief.

Often, the client will ask the expert to review an issue and to discuss it.

Here, the expert will best serve that client’s interest when he is open and frank in pointing to the pros and cons of a position, so that the client will know what to expect from the opponent and from the tribunal. Sometimes, this may mean that the client will refrain from an engagement or will not submit an expert report to the tribunal.

As regards the appearance before a tribunal, the task is in principle the same. Given the Anglo-American tactics of cross-examination, sometimes in rough ways, experience of the expert is important and equally, thorough reflection and preparation which allows the expert to focus on the real issues and not to be confused by particular questions asked by Counsel. With no notes and documents, experts have to respond for three or four hours in important cases, and in some respects their task will be amongst the most difficult ones in the proceedings.

My experience has been that the expert must have a full understanding of the case, including the factual submissions. In most cases, the opponent (or the tribunal on its own) will ask the expert to apply the law to the facts. In case the expert has to admit that he is not aware of the factual submissions of the parties, his answer will not be helpful enough. Often, the application of a rule or principle may be as difficult, and important, as the abstract content.

4. You co-authored one of the first publications on bilateral investment treaties.[2] What do you see as the main directions for future treaty-making? What future treaty drafters should particularly focus on to make a workable and efficient investment treaty?

The purpose of BITs was to promote cross-border investments, and more than 3000 such treaties have contributed to this goal, as one element in the formation of the investment climate. Many states continue to rely on foreign capital, skills and know-how for the development of their economy, but they have to compete with neighbours and other states when they seek to attract foreign companies. China has been the recipient of most foreign investment in the Southern hemisphere, and China has concluded most BITs.

Over time, BITs have become more lengthy and complex, especially those of the United States. Environmental concerns, but also labor issues and social matters found their way into BITs as a result of domestic political processes.

Now, the task is to concentrate, once again, on the basic purpose of BITs as investment agreements and to find the right balance without losing sight of that purpose. Each State has the sovereign right to determine its own policies and to make the choices which it deems useful for its society.

6. Do you consider the existing investor-state dispute settlement (ISDS) mechanism to be “dead”? Shall it be subject to significant changes? Is it possible to find a better ISDS mechanism than arbitration? What do you think about an idea of an “institutionalized investment court” put forward by EU-Commission?

The ISDS system has been criticized from many corners, informed and uninformed, but it is far from dead.

Before we introduce a basic reform, we need to assure ourselves that the cure will bring real improvements. Yes, ISDS has its weaknesses. But the crucial point is whether we find a better system. Sometimes, we simply have accepted side effects.

Of course, we need to stop and ask where deficits can be improved. The ISDS was accepted in practice, has contributed to a rule-based international economy and has helped to depoliticize investment disputes, its downsides notwithstanding. Reforms should take these features into account. So far Europe was the most active player calling for basic reforms such as the introduction of a permanent investment court. But the United States, for instance, or Japan have not been convinced about the need for such a change. In my view, we should not hasten to give up the positive sides of ISDS.

[1] Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law.

[2] Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties, 1995.