The Function of Dispute settlement Systems under Bilateral or Regional Agreements to Complement the WTO’s Dispute Settlement System and the Reform of the Dispute Settlement System -Focusing on Disputes Related to Environmental Matters, Including Renewable Energy-

In recent years, there have been arguments hoping for dispute settlement systems under regional agreements to complement the WTO’s dispute settlement system. In particular, at a time when there are vacancies on the WTO Appellate Body, which undermines the functions of the organization’s dispute settlement system and prevents the WTO Dispute Settlement Body from functioning properly, some people are hoping that dispute settlement processes under bilateral or regional agreements will substitute for the WTO’s dispute settlement process. Indeed, in some previous cases, the same dispute was referred to the WTO Dispute Settlement Body while being in the process of resolution through a dispute settlement process under a regional agreement or a bilateral investment treaty (e.g., the Mexico Soft Drinks case and the Philip Morris v. Australia government case). In many cases where there was an investment agreement between an investing country and an investee country, investors and the host country resolved their dispute through the dispute settlement process under that agreement. In particular, since the investor-state dispute settlement (ISDS) provision has come to be included in regional agreements, hopes have grown further for international investment arbitration. In Japan as well, when discussions were held on the inclusion of the ISDS provision in the Trans-Pacific Partnership (TPP) agreement and the Japan-Europe economic partnership agreement (EPA), there was a growing mood to prepare for the provision because of the possibility that both the government and companies would become parties to international investment mediation cases. However, the author feels that there is something strange with this course of events and is inclined to think that we should appreciate the fact that the Japanese government and companies have rarely become parties to international investment arbitration cases and should maintain this situation. On this point, even if a dispute arises between investors and the host country, it is of primary importance to resolve it based on the interpretation of the contracts between investors and the host country and through negotiation, rather than using the investment arbitration system. It would be desirable for investors and the host country for the use of the investment arbitration system to be avoided and bereserved as a last-resort option. This paper considers this point by focusing on cases related to renewable energy. If a dispute cannot be resolved through the interpretation of changed circumstances or other means under a contract, the process of the WTO Dispute Settlement Body, which uses government-to-government negotiations, is still considered to be more desirable than investment arbitration between investors and the host country in some cases. Therefore, even though the dispute settlement system under a bilateral or regional agreement may have complemented the WTO’s dispute settlement system in some cases, it cannot serve as a substitute. Rather, the WTO’s dispute settlement system has a raison d’etre of its own, so we should make efforts to maintain it with a view to a future reform. The time may have arrived when parties to disputes should devote more efforts to resolving the disputes through negotiation or compromise before resorting to a dispute settlement system while using the presence of the system as leverage. Furthermore, it is desirable to use an arbitration or dispute settlement process not only as a means to achieve its original purpose, which is to have a third party make the final judgment, but also as a system whereby a third party offers cooperation toward reconciliation. At the same time, the paper examines alternative options, including the use of arbitration under Article 25 of the Dispute Settlement Understanding (DSU) as a means to prevent a freeze on the use of the WTO’s dispute settlement system.