Appellate mechanisms
in international dispute settlement are undergoing significant scrutiny as
United Nations Commission on International Trade Law (UNCITRAL) considers
introducing its first appeal system for Investor-state arbitration. While the
WTO Appellate Body (AB) once improved consistency in trade law, its collapse
due to perceived judicial overreach illustrates the risks of developing
precedent without clear limits. This paper addresses a critical gap in current
reform discourse: how precedent should be managed to avoid excessive rigidity
and incoherent fragmentation. The objective is to evaluate how UNCITRAL can
design a balanced appellate framework by learning from the WTO’s experience.
Using a comparative legal analysis, the paper examines the WTO’s informal
precedent system and UNCITRAL’s current decentralized arbitration model.
Findings highlight the WTO’s struggle with judicial overreach and legal
inflexibility, while UNCITRAL faces unpredictability and legitimacy concerns
due to inconsistent rulings. The analysis shows that precedent must be guided –
not binding nor absent – to maintain coherence without undermining flexibility
or state sovereignty. The paper concludes with policy recommendations for
UNCITRAL, including treating precedent as persuasive authority, establishing
guidelines for its use, and implementing a review mechanism to ensure
adaptability. These proposals aim to build an appellate system that enhances
legitimacy, predictability, and trust in international investment law.