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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.
This article highlights three key areas where WTO Members need to be wary about unintended interactions between the proposed Multilateral Framework on Investment Facilitation (MFIF) and IIAs. It also comments on the effectiveness of proposed attempts to separate the MFIF developed by the trade community from the broader IIA regime, whose reform is being coordinated and led within the United Nations through UNCTAD and UNCITRAL.
This paper presents the results of a larger research project that attempts to establish a baseline for measuring the extent to which countries are “winning” (as home states of successful claimants) and “losing” (as respondent states with adverse awards and settlements) in the ISDS system.
The U.S. and Kenya formally launched negotiations on the US–Kenya FTA on July 8, 2020. If concluded, the agreement would be the first bilateral trade agreement between the U.S. and a sub-Saharan African state.
In response to the Covid-19 pandemic, governments have taken an array of measures, which, while crucial from a health perspective have hit many businesses hard. According to the authors, Nathalie Bernasconi-Osterwalder, Sarah Brewin, and Nyaguthii Maina, this situation has created an unprecedented risk of investment arbitration arising from the more than 3,000 investment treaties concluded across the globe. They argue for collective action by states to suspend the application of investor–state arbitration with respect to COVID-related measures.
There have been more than 150 known ISDS cases brought by claimants whose business involves extracting, transporting, refining, selling, or burning fossil fuels for electricity. The authors, Kyla Tienhaara, Lise Johnson, and Michael Burger explore the question of how valuation and damages in fossil-fuel related investment claims should be approached in light of climate change considerations and the contested value of fossil fuel resources.
Scenarios in which states may face an obligation to pay damages as a result of international judicial or arbitral proceedings have proliferated as an increasing number of international courts have received state consent to their jurisdiction, including in international investment arbitration. As the author, Affef Ben Mansour, discusses, among the obstacles that states encounter in the implementation of investment arbitral awards is the unsuitability of internal budgetary procedures for paying the pecuniary obligations decided by an arbitral tribunal. This difficulty is now attenuated in certain states that have adopted budgetary standards aimed at addressing such unexpected budgetary developments, which are discussed in the second part of this article.
Scenarios in which states may face an obligation to pay damages as a result of international judicial or arbitral proceedings have proliferated as an increasing number of international courts have received state consent to their jurisdiction, including in international investment arbitration. As the author, Affef Ben Mansour, discusses, among the obstacles that states encounter in the implementation of investment arbitral awards is the unsuitability of internal budgetary procedures for paying the pecuniary obligations decided by an arbitral tribunal. This difficulty is now attenuated in certain states that have adopted budgetary standards aimed at addressing such unexpected budgetary developments, which are discussed in the second part of this article.
Negotiators working on multilateral reform solutions to ISDS reconvened in Vienna in January 2020 to resume their 38th session, holding talks around the possibility of an appellate mechanism, the benefits and challenges of setting up a permanent court on investment issues, and the process around choosing arbitrators and adjudicators.
A group of 20 civil society organizations and trade unions from the African continent have circulated a letter questioning the EU’s multilateral investment court (MIC) proposal in the context of the UNCITRAL Working Group III talks on multilateral ISDS reform and urging for a set of alternative proposals to advance instead.
There are several efforts underway at multiple levels—national, bilateral, regional and multilateral—aimed at reforming the IIA regime. These reform efforts are operating in parallel to developments in other areas of international investment governance, some of which have advanced quickly over the past year, including the structured discussions on investment facilitation at the WTO, as well as efforts in the UN context to craft a binding treaty on business and human rights. This year’s UNCTAD High-Level IIA Conference assessed the progress made to date since launching UNCTAD’s 10 Options for Phase 2 of IIA Reform, looking at trends across multiple areas of international investment governance, as well as across world regions. This ITN Insight summarizes the key takeaways from the 2019 event and considerations for Phase 2 going forward.
The 2016 decision on Argentina’s counterclaim in the Urbaser case provided a frustrating reminder that the international legal regime as it stands is insufficient in holding businesses accountable for human rights violations. Efforts are underway within the UN context to help address this challenge, though how effective the legally binding treaty on business and human rights will be in reconciling the human rights and investment law regimes will depend significantly on its design. It will also depend on how adjudicators treat it relative to other treaties, among other factors. This ITN Insight provides an update on the negotiating state of play for this binding treaty, based on the October 2019 talks in Geneva. It highlights important considerations for negotiators, drawing from lessons learned in international investment law and related areas.
The upcoming meeting of Working Group III of UNCITRAL in January 2020 will be a valuable opportunity to intensify the push for real reform of ISDS. This ITN Insight provides an update from the October 2019 discussions in Vienna, where countries set out a workplan for their upcoming talks on reform solutions, outlining when to discuss which options. The authors review lessons learned to date and look ahead to the topics slated for discussion in January 2020: a stand-alone review or appellate mechanism; a standing MIC; and the selection and appointment of arbitrators and adjudicators. Taking a deep dive into each, they highlight key issues for negotiators to consider.
A long-simmering row over plans for two new pipelines that would carry natural gas from Russia into Germany has advanced quickly in recent months, after gas company Nord Stream 2 submitted a notice of arbitration against the EU under the ECT on September 26, 2019.
A set of documents purporting to capture the discussions of the United States–United Kingdom Trade and Investment Working Group from 2018 has recently been released into the public domain.
Perenco Ecuador Limited v. Republic of Ecuador, ICSID Case No. ARB/08/6
Michael Ballantine and Lisa Ballantine v. The Dominican Republic, PCA Case No. 2016-17
Belenergia S.A. v. Italian Republic, ICSID Case No. ARB/15/40
Glencore International A.G. and C.I. Prodeco S.A. v. Republic of Colombia, ICSID Case No. ARB/16/6
Professor Christian Doutremepuich and Antoine Doutremepuich v. Republic of Mauritius, PCA Case No. 2018-37
Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/12/6, and Sanum Investments Limited v. Lao People’s Democratic Republic, UNCITRAL, PCA Case No. 2013-13
Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1
Cube Infrastructure Fund SICAV and Others v. The Kingdom of Spain, ICSID Case No. ARB/15/20
United Utilities (Tallinn) BV and Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/14/24
Negotiations for modernizing the Energy Charter Treaty, a 1994 agreement covering trade, investment and other aspects of the energy sector among its contracting parties, are expected to begin before 2019 draws to a close. Yet given the need identified in myriad other forums to reform ISDS and to ensure trade and investment agreements can support ambitious climate action, why aren’t more officials and commentators discussing the possibility of terminating the ECT entirely, or of reconsidering its survival clause for those parties which choose to withdraw? Tania Voon explores the issue and outlines options going forward.
From October 14 to 18, 2019, negotiators will gather in Vienna for the next session of the UNCITRAL Working Group III on ISDS reform, where they will move from considering concerns with the current system to assessing possible solutions. In this ITN Insight, Jane Kelsey discusses various examples of how some countries have tested out alternatives to ISDS, such as state–state arbitration, alternative dispute resolution, domestic legislation and enforcement, and the exhaustion of domestic remedies. For each ISDS alternative, she examines what benefits and challenges arose, and how the lessons learned can help inform the next phase of UNCITRAL deliberations.
The process for updating ICSID’s rules has been taking place in parallel to the UNCITRAL Working Group III deliberations on ISDS reform, prompting an important conversation of how these efforts may complement each other. In this new Insight, Rafael Ramos Codeço and Henrique Martins Sachetim examine the ICSID rule amendment process, taking a close look at a few key amendments under consideration and examining the extent to which these might help address some of the ISDS-related concerns that have been identified at UNCITRAL.
This piece examines recent trends in the use of third-party funding (TPF) in treaty-based ISDS and the implications of TPF for investor conduct, developments in investment law and host state conduct. TPF has been raised in two multilateral processes currently underway: the talks to amend ICSID arbitration rules and to consider multilateral reform of ISDS at UNCITRAL. Given the narrow nature of the TPF discussions in ICSID, the authors make the case for policy-makers to consider full or partial bans of TPF at UNCITRAL.
Tackling corruption is a crucial step in meeting the objectives set out in SDG 16 on “Peace, Justice, and Strong Institutions” and for achieving the SDGs overall. Canada’s investment treaties could play a valuable role in addressing corruption. The piece draws from examples such as Canada’s Foreign Investment Promotion and Protection Agreement (FIPA) program and examines some of the asymmetries inherent in the current IIA regime. The author analyzes some of the language used in Canada’s more recent treaties, such as CETA and the FIPAs with Moldova and Kosovo, and what lessons can be drawn from these and other agreements.
Spain has faced approximately 40 arbitrations since it made the decision in 2010 to rescind or revise various regulatory measures aimed at drawing in greater investments into renewable energy projects. This article examines the awards issued in four of those cases, looking in particular at how the tribunals interpreted and applied the FET standard. The author looks at the potential problems that can emerge when states are unsure of how any given tribunal may interpret FET or other key standards and presents some potential solutions.
Delegates involved in the UNCITRAL Working Group III process on multilateral ISDS reform have until July 15, 2019 to submit to the UNCITRAL Secretariat their reform proposals and the timing for when such items may be considered in an overarching project schedule. That schedule would help guide the working group under Phase 3 of its mandate, which is devoted to crafting solutions to ISDS-related concerns.
The CJEU has deemed that the ICS included in the Canada–EU CETA is consistent with EU law, issuing its final opinion on April 30, 2019.
The Mexican Senate approved the implementing legislation for the United States–Mexico–Canada Agreement (USMCA) on June 19, 2019, by an overwhelming majority of 114 votes in favour, with less than a dozen against or abstaining.
ANGLO-ADRIATIC GROUP LIMITED V. REPUBLIC OF ALBANIA, ICSID CASE NO. ARB/17/6
RREEF INFRASTRUCTURE (G.P.) LIMITED AND RREEF PAN-EUROPEAN INFRASTRUCTURE TWO LUX S.A R.L. V. KINGDOM OF SPAIN, ICSID CASE NO. ARB/13/30
ÁLVAREZ Y MARÍN CORPORACIÓN S.A., BARTUS VAN NOORDENNE, CORNELIS WILLEM VAN NOORDENNE, ESTUDIOS TRIBUTARIOS AP S.A. AND STICHTING ADMINISTRATIEKANTOOR ANBADI V. REPUBLIC OF PANAMA, ICSID CASE NO. ARB/15/14
DEUTSCHE TELEKOM AG V. THE REPUBLIC OF INDIA, PCA CASE NO. 2014-10
PL HOLDINGS S.À.R.L. V. REPUBLIC OF POLAND (SCC CASE NO. V2014/163)
BLUSUN S.A., JEAN-PIERRE LECORCIER AND MICHAEL STEIN V. ITALIAN REPUBLIC, ICSID CASE NO. ARB/14/3
Investment treaty arbitration is often expected to focus on technical issues. In practice, however, domestic political discussions and processes can have a major impact on investment disputes. The authors map out the variety of state conduct characterized by tribunals as politically motivated or influenced. They also examine the different ways in which arbitral tribunals have responded to host state conduct resulting from domestic political considerations.
Australia and Indonesia have now signed their Comprehensive Economic Partnership Agreement (IA-CEPA), bringing to a close a negotiating process that began in November 2010. The two countries signed the agreement on March 4, 2019. The IA-CEPA also includes an investment chapter and four related annexes, which cover an arbitrators’ code of conduct; expropriation and compensation; foreign investment policy; and public debt.
UNCITRAL conferred a broad mandate on Working Group III to consider possible reform of ISDS. In Phase 1 governments identified and considered concerns about ISDS. Phase 2, where they consider whether reform is desirable in light of those concerns, is well advanced. The next meeting in New York in April 2019 is expected to conclude this phase and decide how to pursue the final phase, in which governments will develop any relevant solutions to recommend to the Commission. This note addresses three issues at the heart of the legitimacy crisis confronting the international investment regime that should inform the remainder of Phase 2.
CSR refers to rules and practices companies follow voluntarily to limit the negative social, environmental and other externalities caused by their activities. There is a trend to incorporate CSR standards in investment treaties. Could CSR clauses be useful in consolidating enforceable investor obligations and serving as a basis for state counterclaims?
In a speech to the United Nations General Assembly on October 25, 2018, Judge Abdulqawi Yusuf, President of the International Court of Justice (ICJ), mentioned that the court has decided to restrict the practice of allowing members to serve in arbitral tribunals.
Investment arbitration is heavily relied upon around the globe and has to cope with the demands of increasingly complex proceedings. At the same time, it has come under close public scrutiny in the midst of heated political debate.
Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5 (Published in 2018 in International Investment Law and Sustainable Development: Key cases from the 2010s and on this website on […]
The backlash against investment arbitration has led to a wave of investment law reform. Approaches include creating obligations relating to investor conduct, clarifying existing disciplines, safeguarding policy space and revising ISDS mechanisms. This piece investigates the link between investment treaty design and the risk of arbitration claims.
IISD is releasing an e-book summarizing and analyzing 10 treaty-based investor–state arbitration cases decided in the 2010s. The cases are relevant to a range of issues relating to sustainable development, including environmental protection, socio-environmental impact assessment, renewable energy, taxation, corruption and human rights.
On September 30, 2018, U.S. Trade Representative (USTR) Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland announced that the two countries had reached an agreement, alongside Mexico, on a modernized trade deal.
In a September 12, 2018 letter, 312 legislators—including Democrats as well as Republicans—from all 50 U.S. states wrote that they “strongly support” U.S. Trade Representative (USTR) Robert Lighthizer’s efforts to remove ISDS from NAFTA.
