Analysis

Large pillars hold up a railway bridge on a grassland landscape at sunrise.

To Transform the International Investment Regime, Look to Political Risk Insurance and Not (Only) to Investment Treaties

The paper argues that political risk insurance (PRI) is a powerful but often overlooked tool for shaping international investment flows and promoting public policy objectives. Unlike investment treaties, which primarily focus on protecting existing investments, PRI incentivizes new investments by mitigating political risks such as expropriation or losses stemming from war. The author highlights how PRI is already being used to support Ukraine’s reconstruction, diversify supply chains, and enable debt-for-nature swaps. However, the author also critiques the current investment regime as inequitable, arguing that it is skewed toward developed countries that benefit from PRI subsidies while developing countries often bear the costs through investor claims and reimbursements. The paper concludes by calling for greater attention to PRI as a mechanism for reforming the international investment regime, particularly in areas like the energy transition, where it can help channel capital toward renewable energy projects.

Rows of solar panels sit are installed along green hills

A Just and Equitable Transition in the Shadow of Investment Treaties

International investment treaties, while intended to protect investors, risk undermining a just and equitable transition to a low-carbon economy. By prioritizing investor rights over the needs of communities affected by climate change, these treaties can hinder states’ ability to enact necessary climate policies and disregard the broader societal impacts of investment projects. The author calls for a reimagining of investment governance that moves beyond investor protection to a system that prioritizes human rights, environmental sustainability, and equitable burden sharing in the transition to a low-carbon economy.

A view of city buildings against a mountainous backdrop.

Understanding the Dynamics of Special Economic Zones and International Investment Law in the Quest for Sustainable Development: A closer look at China and South Africa’s legal frameworks

This paper examines the complex relationship between special economic zones (SEZs), sustainable development, and international investment law. SEZs, geographically defined areas with unique economic regulations, are often promoted as tools for attracting foreign direct investment and fostering economic growth in developing countries. However, the author highlights the potential negative spillovers of SEZs, such as environmental damage and reduced policy space for host states. The paper argues for the importance of integrating environmental, social, and governance standards into SEZ frameworks to mitigate these risks and promote sustainable development.

An oil drilling rig appears at sunrise.

Overview of Recent Fossil Fuel Arbitration Cases Under the Energy Charter Treaty

Despite a wave of withdrawals from the Energy Charter Treaty (ECT) due to its chilling effect on climate action, the treaty continues to generate legal challenges for states aiming to transition away from fossil fuels. This paper highlights this ongoing threat by summarizing recent investor–state dispute settlement (ISDS) cases brought against states under the ECT, primarily by fossil fuel companies. These cases, including those against Germany, Slovenia, Romania, Ireland, Denmark, the Netherlands, and Poland, contest a range of government measures such as coal phase-outs, fracking bans, and windfall taxes. By outlining these specific disputes, the paper demonstrates how the ECT’s ISDS mechanism enables companies to challenge policies aimed at reducing carbon emissions, forcing states into costly legal battles and potentially hindering their energy transition effort.

The Coherence Challenge in Tackling Labour Rights Through International Investment Regulations: A case study of Egypt

The paper examines the coherence challenge between international investment law and labour rights, using Egypt as a case study. It explores how Egypt’s national investment laws and international investment agreements (IIAs) address labour issues. While Egypt’s Investment Law links investment to job creation and employment, it inadequately addresses broader labour rights. Most of Egypt’s older IIAs, particularly bilateral investment treaties, neglect labour rights, potentially leading to regulatory “chill” and labour violation havens. The paper calls for reforms to align these treaties with modern standards, emphasizing state and investor responsibilities to protect labour rights and sustainable development.

Investor–State Dispute Settlement and Fossil Fuels: What role for a carveout?

  Last week, the Organisation for Economic Co-operation and Development (OECD) hosted its 9th annual Investment Treaty Conference on “Supporting the Global Energy Transition: Methods to align investment treaties with […]

Successful Regional Investment Negotiations as a Tool for IIA Reform: A multi-identity perspective

Egypt is considered a prime model of a historically multi-identity country that has always tried to attain balance and consistency in its foreign policy, including its economic pillar, between different […]

How Investment Laws Can Become Powerful tools for Sustainable FDI Governance

A growing number of developing country policy-makers are concerned about their countries’ national investment laws, many of which were rewritten between 1980 and 2010, often in ways that aligned them more closely with outdated IIAs. As a result, such laws pose many of the same legal risks and policy concerns as old-style IIAs. In the past, investment laws were redesigned to meet new challenges and opportunities, and they can once again be redesigned as powerful tools for governments seeking to align their investment policy with sustainable development or other policy goals. This paper makes two recommendations for policy-makers concerned about investment laws who seek to rethink them in order to address their countries’ challenges, drawing on the recent IISD report on national investment laws.

Exploring Investment Treaties’ Role in Advancing Gender Equality

IIAs are often seen as gender-neutral, prompting debates about their suitability in addressing gender inequality. This article advocates for a nuanced perspective, exploring the intricate relationship between IIAs and gender equality within the broader context of sustainable development since they can be interlinked. This paper aims to explore the appropriateness of IIAs as tools for advancing gender equality.

Revisiting Tax Incentives as an Investment Promotion Tool

In January 2024, a new system of international tax rules—the global minimum tax—will come into effect. These rules will impact the continued utility of some tax incentives as investment promotion tools by ensuring that large multinational companies pay a minimum effective tax rate of at least 15% no matter where they operate. It is important for governments to rethink their broader policies surrounding investment promotion and the use of tax incentives, reconciling these with changes in the broader investment landscape, including emerging international taxation rules, changing global value chains, and shifts to more sustainable production processes. This brief highlights the five core questions posed in the recently published IISD Q&A intended to update the investment community on the evolution of tax incentives as an investment promotion tool.

Implementing the Reform Idea: Taking stock of states’ efforts to manage their investment treaties

The discussions at UNCITRAL Working Group III (WGIII) have been ongoing for 6 years. In the meantime, states continue to face ISDS claims, exposing them to the risk of significant legal expenses and liabilities, which are a drain on limited state budgets and, as extensively discussed, can unduly and undesirably frustrate (or shift the costs of) legal and policy actions in the public interest. This underscores the importance of ongoing discussions regarding other steps that states can take to navigate their ISDS-related risks while the WGIII negotiations are still in progress. This report summarizes a lunchtime panel discussion devoted to this topic held on the sidelines of the 46th Session of WGIII. The panel, moderated by Simon Batifort and with input from Lise Johnson, Jaroslav Kudrna, Ladan Mehranvar, Josef Ostřanský, and Daniel Uribe, examined the various measures that some states have taken to manage their investment treaties, including termination, amendments, joint and unilateral interpretive statements, and the development of model treaties. It also addressed the drivers behind such actions and the hurdles that states may encounter when seeking to manage their investment treaties.

Unlocking Sustainable Development in Central Asian Bilateral Investment Treaties?

Recently, governments, international organizations, and investors in Central Asia have sought to take the necessary steps to achieve sustainable development. While Central Asian countries benefit from large domestic markets, relatively inexpensive and abundant labour pools, and a wealth of raw materials, the region is also highly vulnerable to climate change, with food, water, and energy resources particularly susceptible to climate challenges. Additionally, the region has non-harmonized regulatory investment environments that are not yet fully aligned with the sustainable development agenda. Despite their positive attempts, Central Asian countries face different levels and types of sustainable development challenges considering various domestic policy preferences and national contexts. This paper shows that sustainable development gaps in Central Asian BITs are substantial, and significant efforts must be made to ensure that more than preambular declarations are included to meet the region’s sustainable development challenges.

What’s Happening on Investment Facilitation: A survey of recent global developments

Though investment protection and liberalization have been a regular feature of IIAs, these have to be complemented with promotion and facilitation at the local level to ensure that host economies are marketed well enough to attract investments and that regulatory and administrative barriers faced by investors in their day-to-day operations are addressed and minimized. To ensure that their economies are competitive, countries have been autonomously developing and implementing facilitation measures locally for some time. However, there currently is no universally accepted definition of what investment facilitation entails, and no multilateral framework governing investment facilitation has taken shape. Despite these difficulties, investment facilitation is increasingly emerging as an essential area for international cooperation and policy-making. Accordingly, this article surveys recent developments in investment facilitation policy-making at the international level. After giving a brief history of efforts in investment facilitation rulemaking at the bilateral and regional levels, it concludes with a section that recalls efforts by G20 members to create rules on investment facilitation and provides an overview of the recently concluded negotiations among a group of WTO members on an investment facilitation agreement.

Causation and the Broken Chain: An Analysis in light of the Lone Star Award

In August 2022, a tribunal in Lone Star v. Korea issued its decision, reiterating the principle that an investor’s own contributory actions can break the chain of causation and reduce the damages awarded. However, this decision highlights how little attention has been paid under international law to the issue of causation, especially when it comes to formulating the common standards governing causation, including the investors’ contributory conduct. The tribunal‘s approach in this case is also reminiscent of the recurring problem under present international investment law, that is, that tribunals have seldom applied a common set of standards when assessing the causation inquiry. This paper calls for increased attention to be paid to causation analysis at both the primary source level and in academic commentaries.

Innovation and Local Production Under the AfCFTA Protocol on Intellectual Property Rights: A strategic approach to intellectual property rights

The member states of the African Continental Free Trade Area (AfCFTA) adopted the Protocol on Intellectual Property Rights in February 2023 during the 36th African Union Summit in Addis Ababa, Ethiopia. One of the primary objectives, consistent with the aspirations of Agenda 2063, is to promote inclusive growth and sustainable development, underpinned by a continental market that facilitates the free movement of persons, capital, goods, and services. The protocol seeks to promote access to knowledge and technology transfer by emphasizing cooperation and the importance of using the flexibilities provided in existing international intellectual property rights regimes. Promoting local production under the AfCFTA Protocol offers a route toward more self-reliant, sustainable, and resilient health systems. However, measures promoting local production are often limited by trade and investment treaties, which also protect intellectual property rights. This article is meant to introduce policy measures states can take without foregoing their commitments under those treaties.

Bridging the Gap Between Investor Rights and Obligations: How academics can contribute to a fairer international law on foreign investment

The academic discussion on international investment law has been marked by the division of international law on foreign investment into two subfields, where one specializes in investor rights and ISDS […]

Deconstructing India’s Evolving Approach Toward International Investment Agreements

1. Introduction India’s approach toward the negotiation of international investment agreements (IIAs) has recently been subjected to significant scrutiny. Despite signing its first BIT in 1994, with the United Kingdom, […]

International investment law and repressive state power: Rethinking a relationship

In this paper, the authors highlight an unexpected synergy between international investment law and state repression that has generally escaped scrutiny. They discuss the full protection and security (FPS) standard, which is commonplace in bilateral investment treaties. They argue that even though international investment lawyers have defended the regime by arguing that it restricts arbitrary and authoritarian state power, investment tribunals have used FPS to demand that states use repressive violence to protect investments. These demands have been put forward even in conditions of social upheaval and resource scarcity, and when investors have themselves directly or indirectly contributed to violence. For this reason, the authors argue that investment lawyers should rethink the relationship between the field and state violence, and those who are concerned about the role of policing in society should pay closer attention to international investment law.

“Nothing is agreed until everything is agreed”: The Code of Conduct and Reflections on the 44th Session of the UNCITRAL Working Group III

This piece looks at the negotiations at the UNCITRAL Working Group III on Reform of ISDS dealing with the controversial provision on the regulation of double hatting by arbitrators. Through a detailed overview of various countries’ negotiation dynamics, positions, tactics, and the role of the WG Chairman at display during the 44th session, the author evaluates which negotiation tools may or may not bear fruit in the context of complex multiparty negotiations, such as those at the Working Group III.

Looking for Sustainable Development and Sustainable Investment in the WTO Draft Investment Facilitation for Development Agreement

On December 16, 2022, the co-coordinators of the WTO Structured Discussions on Investment Facilitation for Development (IFD) circulated a new negotiating text to WTO members, the Draft IFD Agreement (“Draft IFDA”). WTO members have indicated repeatedly throughout the past 5 years of discussions that the goal of their work is not to promote investment facilitation as such but rather to promote investment for development and, specifically, sustainable development. However, the Draft IFDA establishes a framework of facilitation obligations that apply to all FDI, regardless of whether it tends to promote sustainable development or not. This paper looks at how the Draft IFDA deals with the issue of sustainable development and sustainable investment.

Signalling Virtue: Claimant’s use of sustainable development in ISDS

Introduction The relationship between international investment law and sustainable development is complex. Some authors argue that IIAs do not constitute a structural impediment to sustainable development, while maintaining that more […]

Screening of Chinese investments intensifies[1]*

In recent years, the “screening” of proposals for inward foreign investment has proliferated.[2] More countries around the world have introduced processes for the review of such proposals, often in particular […]

VCLT’s Article 62: A valid basis for withdrawing from the ECT

Introduction In August 2022, rain-induced flooding in Pakistan, which scientists linked to climate change, affected 33 million people and took the lives of 1,500. In July 2022, scorching heat waves […]

IIAs in Singapore and the rule of law promise

IIAs are known to pose various challenges to states, ranging from costly arbitration to delays or abandoning of regulatory action in the shadow of possible litigation. These important costs of IIAs raise the question of whether the treaties offer commensurate advantages to states that enter into them. Central among these claimed positive effects of IIAs is that they improve governance conditions (the rule of law) in host countries. It is on this point that Singapore’s experience with IIAs is particularly instructive. Singapore’s experience, as presented in this essay, highlights the challenges that IIAs can pose in even the best of governance environments and, in turn, raises questions as to the extent to which the treaties are calibrated to the goals that policy-makers and advocates set for them.

UNCITRAL Working Group III and the Assessment of Compensation and Damages: Thinning scope for impactful reform or an opportunity to make a difference?

The paper summarizes the discussions related to the assessment of compensation and damages at UNCITRAL Working Group III on Reform of Investor–State Dispute Settlement (ISDS) and proposes an efficient and straightforward way to reform some of the problematic aspects of ISDS practice. The essay proposes limitations on the use of income-based valuation techniques (discounted cashflow method) in defined circumstances. This reform proposal would align ISDS practice with customary international law, improve the correctness and consistency of arbitral decision making and make the proceedings less costly.

The Hague Rules on Business and Human Rights Arbitration: What role in improving avenues for victims to access justice?

Foreign investment activities of multinational enterprises may, at times, lead to violations of human rights. The existing legal avenues available to populations affected by human rights violations are known to be insufficient. This paper assesses to what extent the Hague Rules on Business and Human Rights Arbitration may offer advantages compared to the traditional means of redress.

An interview with Wolfgang Alschner on Investment Arbitration and State-Driven Reform: New Treaties, Old Outcomes

This interview with Wolfgang Alschner, Associate Professor at the University of Ottawa, explores his new book on investment arbitration and state-driven reform. Alschner argues that new international investment agreements are not solving the problems of their predecessors because they are being interpreted in the same way as old agreements, thereby reproducing old outcomes. His book calls for a change in course for the investment regime, where new treaties inform the reading of old treaties rather than the other way around.

Three key principles for fairer and more effective private sector involvement in international governance processes

This article examines some of the main issues related to business group participation in three major investment policy reform processes. It identifies three general principles that can help ensure private sector stakeholders can participate in international governance processes more fairly and effectively.

The loss compensation clause and the protection and security clause: Two risky provisions neglected by investment treaty reform?

This article examines two key provisions that pose costly arbitration risks for states but are often neglected in investment treaty reform processes. It aims to provide investment treaty negotiators with recommendations on how to better phrase these clauses to minimize the chances of misinterpretation in arbitral tribunals.

On the importance of defining “frivolous” claims in ISDS

This article explores the meaning of the term “frivolous” as understood by the governments participating in the UNCITRAL WGIII ISDS reform process. It argues that participating states have focused on the procedural aspects of the problem by identifying ways to limit frivolous claims without undertaking the important substantive task of defining such claims.

The efforts to modernize the ECT and the hidden cost of non-derogation clauses

This article argues that the success of efforts to modernize the ECT and prevent the treaty from impeding efforts to transition to clean energy sources will fail unless states participating in the process widen their focus to other IIAs to which they are part.

The conflict between traditional miners in Marmato and Canadian transnational mining companies: Another ISDS dispute over natural resources in Colombia

This article provides historical context for the shift in the transnational legal order that governs mining in Colombia and has provoked an increasing number of socio-political conflicts, leading to ISDS claims.

The human rights case for robust “in accordance with domestic law” provisions in Africa’s international investment law

This article argues that African states should proactively and intentionally use accordance provisions to launch counterclaims against investors that violate domestic legislation enacted to protect human rights. Stand-alone accordance provisions can allow states to set their own standard for corporate liability even where international human rights law—and the arbitrators interpreting it—lags behind.

How the Energy Charter Treaty risks undermining the outcomes of COP 26

This article provides an initial assessment of the ECT-based arbitration risk flowing from the COP 26 pledges due to their impact on fossil fuel investments in ECT contracting parties. It further estimates how these impacts could translate into investor–state arbitration claims based on past and ongoing cases in the energy sector.

ICSID tribunals fail to address the imbalance between sustainable development principles and investment protections

The importance of linking sustainable development and FDI has garnered increasing attention in recent years, and IIAs increasingly include sustainable development provisions. However, the architecture and functioning of the investment regime make application of these standards difficult.

Eco Oro and the twilight of policy exceptionalism

The recently rendered decision in Eco Oro v. Colombia highlights many of the problems with policy exceptionalism. Most importantly, it suggests that states cannot, by larding their investment treaties with exceptions and carve-outs, simply avoid reckoning with the fundamental challenges facing the investment treaty system.

Breakthrough in business and human rights binding treaty negotiation but be prepared for a bumpy road ahead

The Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises With Respect to Human Rights recently held its seventh session to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises with respect to human rights. While progress has been made, significant challenges still cast dark clouds over the future of this important process.

A comparative approach to compensation in international property law claims: what lessons for international investment law? An interview with lead author, Esmé Shirlow.

The increasing size of awards of compensation made under IIAs is drawing greater scrutiny over the approaches that investment tribunals use to arrive at these—at times staggering—amounts. One question being asked is: How are things being done elsewhere? By contrasting these approaches with approaches used by international investment tribunals, this article seeks to draw out some key policy considerations for the reform of compensation principles.

They concern you more than you know: On the perils and potential of international investment agreements for the Agreement on TRIPS and COVID-19 discussions at the WTO

Talks on a possible COVID-19-related Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) decision aimed at scaling up vaccine and therapeutics production and equitable distribution continue, despite the postponement of the 12th WTO Ministerial Conference. Without coordination between a TRIPS decision and WTO members’ IIA obligations, these obligations could significantly reduce any decision’s effectiveness.

The UNCITRAL Code of Conduct: Breakthrough or diversion?

UNCITRAL’s Working Group III—charged with global ISDS reform—has circulated its third draft Code of Conduct for investment adjudicators and suggested means for its implementation and enforcement. This article aims to give negotiators an overview of the Code’s provisions, clarify what they mean in practice, and identify specific key issues.

Reform or withdrawal from the ECT: What does it mean for coal?

Of all fossil fuels, coal has the greatest climate impact. However, sovereign decisions to phase out coal inevitably affect the investment of coal power plant operators, frequently leading to disputes concerning compensation for lost profits. 

Despite consensus on the ECT’s incompatibility with the global climate agenda, claims that it is well-suited for the clean energy transition persist

This article assesses the degree to which the Energy Charter Treaty can be thought of as a tool to protect renewable energy, and thus aid in energy transition, by analyzing data on ECT-based ISDS cases related to renewable energy investments. The article concludes that proponents of the ECT overstate its potential to have a positive role in the transition to renewable energy.

The end of tax incentives: How will a global minimum tax affect tax incentives regimes in developing countries?

This article investigates the impact of a global minimum tax on the use of tax incentives in developing countries and what transitional arrangements are needed to protect countries from a transfer of tax revenue.

The “‘trade-related” conundrum of the EU–Korea FTA Expert Panel: Are FTAs a novel forum to enforce sustainable development goals?

This article discusses the decision of a Panel of Experts, established under the EU–South Korea Free Trade Agreement, which found that South Korea was in breach of the FTA’s sustainable development chapter.

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