PCA Arbitration in the Public Interest
Beyond traditional areas of arbitral justice, a variety of novel questions pertaining to the public interest – including climate change, human rights, sustainable fisheries management, and taxation – have been addressed in arbitral proceedings and are likely to witness increasing prominence in the future. As an intergovernmental organization, the PCA is particularly well-suited for supporting the settlement of international disputes in the service of the public interest.
Photo: Review Panel Established Under Article 17 and Annex II of the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean (PCA Case No. 2023-33)
Known in societies around the world for thousands of years, arbitral justice may be considered the original form of peaceful dispute resolution. At the international level, the essential role of arbitration in supporting cross-border commerce and investment is well-documented. The PCA, for its part, has administered hundreds of mixed arbitrations in those areas, involving States and private entities. Arbitration also underpins the system of justice between States: arbitral proceedings before ad hoc tribunals and semi-permanent bodies account for a large proportion of the jurisprudence in modern international law. The PCA’s docket is again a case in point. In the past twenty-five years alone, the PCA has supported over thirty-five inter-State tribunals and commissions in various fields of international law, including territorial delimitation, the law of the sea, environmental law, and the legal consequences of armed conflict.
Beyond these traditional areas of arbitral justice, a variety of more novel questions pertaining to the public interest – including climate change, human rights, sustainable fisheries management, and taxation – have been addressed in arbitral proceedings and are likely to witness increasing prominence in the future. As new international and transnational rules emerge in these fields, special arbitral mechanisms are increasingly being seen as preferred methods for settling disputes that may arise. As an intergovernmental organization, the PCA is particularly well-suited for supporting the settlement of international disputes in the service of the public interest.
Business and Human Rights
In 2011, the United Nations Human Rights Council endorsed the Guiding Principles for Business and Human Rights, establishing an international soft-law framework for corporate responsibility for human rights violations. Five years later, the PCA was selected as the forum for what may be the first international business and human rights proceedings: labour union federations commenced arbitration against global fashion brands on the basis of the Accord on Fire and Building Safety in Bangladesh, which had been signed by over 200 global brands in response to the 2013 collapse of a garment factory building in Dhaka, Bangladesh. The proceedings concluded in amicable settlements in July 2018.
These proceedings may set a precedent for future cases: in 2019, a Working Group on International Arbitration of Business and Human Rights adopted a bespoke set of rules of procedure, entitled the Hague Rules on Business and Human Rights Arbitration (the Hague Rules). The Hague Rules are intended to provide for a “culturally appropriate and rights-compatible process for resolving the parties’ dispute, including in particular by giving due regard to the urgency of addressing the alleged human rights impacts.” They contemplate roles for the PCA as appointing authority, registry, and transparency repository.
The 1992 United Nations Framework Convention on Climate Change (UNFCCC) has the objective of achieving “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” While the inter-State dispute settlement mechanism of the Convention has so far been of no relevance (including because States parties have not yet drawn up an “annex on arbitration” as called for by the Convention), arbitral tribunals in mixed arbitrations and arbitrations between private entities have already dealt with important aspects of the practical implementation of the UNFCCC.
The PCA notably has handled a number of contract cases arising from the 1997 Kyoto Protocol, which related to certified emission reduction credits under the Protocol’s Clean Development Mechanism and Joint Implementation scheme. Moreover, disputes arising from the operations of the primary finance body connected with the UNFCCC, the Green Climate Fund, may in the future be settled by PCA-administered arbitration as the “Accreditation Master Agreements” between the Fund and national development banks refer disputes to the PCA.
At the policy level, an International Bar Association Task Force has proposed the creation of an arbitration-based ad hoc “International Tribunal for the Environment,” which could eventually evolve into a permanent environmental court.
The PCA has also supported special international mechanisms for the sustainable management of fisheries. In particular, on two occasions, review panels under the auspices of the PCA were mandated to resolve disputes arising under the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean. The review proceeded in accordance with tailor-made rules of procedure, which provided for an accelerated multi-State process including hearings conducted in several languages. Each of the disputes was resolved within only six weeks.
The public power par excellence is the power of taxation. Issues related to taxation have frequently arisen in PCA-administered investor-State arbitrations. In addition, arbitration has the potential of resolving disputes relating to double taxation.
As cross-border transactions and mobility have grown, so has the potential that one and the same tax payer or transaction is subject to taxation in multiple jurisdictions. A network of over 3,000 treaties is intended to avoid unjust double taxation; yet tax authorities may disagree as to the interpretation or application of such treaties. The modern versions of the treaty models published by the Organization for Economic Co-operation and Development (OECD) and the United Nations (UN) thus provide that, should disagreements not be resolved by discussion between tax authorities, disputes may be submitted to arbitration at the request of either the taxpayer concerned (OECD) (who, while not a party to the arbitration, has a direct role in instituting it) or a competent authority (UN).
Moreover, the European Union (EU), in a 2017 Council Directive, created a special “advisory commission” mechanism, which can result in a binding opinion (unless tax authorities agree to another outcome). In addition, Member States may set up an “alternative dispute resolution commission,” which may apply arbitration procedure.