St Petersburg University experts at the St Petersburg International Legal Forum outline steps to resolve the investment dispute crisis

The discussion was attended by: Sergei Belov, Dean of the Faculty of Law, St Petersburg University; Alexander Grebelsky, a representative of the Russian Union of Industrialists and Entrepreneurs, Associate Professor at MGIMO University of the Ministry of Foreign Affairs of the Russian Federation; Julia Dragunova, Acting Head of the Section for Representation of the Russian Federation in International Trade Law Organisations, the Legal Department of the Ministry of Economic Development of the Russian Federation; Yuriy Korsun, Deputy Chairman of VEB.RF; Kumar Prashant, President of the Bar Association of India; and Ivan Zykin, Acting Chairman of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation.

The BRICS comprise Russia, India, Brazil, China, and South Africa. This international organisation is unique in that it comprises almost all legal systems and legal traditions.

Sergei Belov, Dean of the Faculty of Law, St Petersburg University

The BRICS countries now account for 25% of the world economy and 18% of global trade. The panellists stressed that economic and trade relations between the BRICS countries are expanding every year, and the volume of mutual investments is growing. From 2010 to 2020, the absolute values of investment increased fivefold. The current flow within the alliance is $167 billion.

This trend has recently been reinforced against the backdrop of the geopolitical environment and economic measures imposed by Western countries. The participants agreed that it is now more important than ever to unify the legal regulations on investment in the BRICS and propose new mechanisms to resolve investment disputes.

The experts noted that international investment arbitration is now in crisis. It has ceased to be an effective tool for resolving disputes between investors and states. The issue of a ’pro-investor’ approach, and an imbalance between public and social interests has long been debated. There is also the issue of arbitration being influenced by the national jurisdiction of the place of arbitration.

As one of the possible steps to overcome the crisis of confidence in the investment dispute resolution system, St Petersburg University proposed the BRICS Arbitration Institute project. It will allow disputes between representatives of different countries (and therefore different jurisdictions) to be resolved at the supranational level.

According to Sergei Belov, the principal difference of the new BRICS investment arbitration is that it will not depend on the procedural laws of the country where the dispute is being considered. The authors of the draft also propose to make mediation compulsory before each dispute is considered and to provide for an internal appeal.

Additionally, the authors of the initiative propose to move the procedure online. This will reduce the time needed to resolve disputes, which today can take up to several years, and significantly reduce costs. This will also enable the new arbitration to operate under constraints, such as closed borders, which, as the lessons of the coronavirus pandemic have shown, is of vital importance.

‘I hope that the investment arbitration institution project will be further developed and implemented. The new dispute resolution mechanism can become a brick in the mechanism for the development of mutual investments between the BRICS,’ said Sergei Belov.

The project was supported by the President of the Russian Federation and the Russian Ministry of Justice and is under consideration by the BRICS countries.