Analysis

Investment Negotiations at the WTO and the IIA Regime: Anticipating unintended interactions

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.

Explaining Ecuador’s shifting position on FDI, investment treaties, and arbitration

This article provides an overview of Ecuador’s approach to foreign investment policy over the past decade, which has been subject to significant changes. It also reviews recent constitutional
developments that may allow Ecuador to develop a more coherent approach toward
new investment treaties and trade agreements.

The need for “Africa-focused” arbitration and reform of Tanzania’s Arbitration Act

Over the last several years, the government of Tanzania has enacted significant changes to the legislation governing foreign investment in natural resources, and related dispute settlement mechanisms, with the aim of ridding the sector of the vestiges of “colonial” relationships. Before discussing these changes, and in order to understand the rationale for them, this article first provides the relevant historical context of international arbitration in Africa.

Side-stepping national courts would be a big step backwards for Europe: A reaction to the EC’s public consultation on EU cross-border investment.

The European Commission has launched a public consultation initiative on the EU’s current system of investment protection and facilitation, prompted by the recent termination of BITs between the member states. In this piece, the authors caution that new forms of international investment protection are not necessary and could serve to undermine the legitimacy of the EU.

Assessing outcomes in ISDS

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.

Protecting Against Investor–State Claims Amidst COVID-19: A call to action for governments

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.

Valuing Fossil Fuel Assets in an Era of Climate Disruption

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.

Why Do States Consent to Arbitration in National Investment Laws?

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.

The Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation: A model to steer international law toward renewable energy investments and the low-carbon transition

In this piece, the author analyzes the Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation (“TSI”), winner of the Stockholm Treaty Lab prize. First, she presents the TSI as a model that states could adopt to foster international investment in the transition from carbon-intensive to low-carbon energy systems. Second, she comments on some challenges in implementing the TSI model and propose possible improvements in this regard. Third, she analyzes how the TSI could be used to improve current and future bilateral investment treaties (BITs).

Morocco’s New Model BIT: Innovative features and policy considerations

Morocco has recently undertaken a review of its treaty program, establishing a working group 2015 with the mandate to elaborate a new model BIT, which included a consultation process involving various stakeholders. The model BIT was published by Morocco in December 2019. The authors of this piece, Hamed El-Kady and Yvan Rwananga review selected core provisions this new model BIT that will likely serve as a basis for Morocco to (re)negotiate BITs and other regional investment agreements. Notably, the model includes an emphasis on sustainable development in the preamble and several substantive provisions.

Domestic Procedures for the Payment of Damages by States in Investment Arbitration

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.

The Best of Two Worlds? The Brazil–India Investment Cooperation and Facilitation Treaty

The recent conclusion of the Investment Cooperation and Facilitation Treaty (ICFT) between Brazil and India is an important moment in investment treaty making, with the new deal combining aspects of Brazil’s Cooperation and Facilitation Investment Agreements (CFIAs) and India’s 2015 model BIT. This ITN Insight breaks down the various elements of the ICFT, examining its approach, design and content relative to the Brazilian and Indian models. The author, Martin Dietrich Brauch, does so by undertaking a detailed analysis of the agreement’s preambular language, scope, definitions, investment protection and dispute-related provisions, institutional governance provisions, and exceptions. He also summarizes the new treaty’s key innovations, which could help inform future negotiating efforts.

UNCITRAL Working Group III Debate: Enforceability of awards by an appellate mechanism or an investment court under the ICSID and New York Conventions

The January 2020 deliberations at UNCITRAL’s Working Group III on ISDS reform brought to the fore an important question: how would a new appellate mechanism or investment court, if established, be able to enforce awards? This question has various key components, such as how to enforce arbitral awards that involve states that are not party to this appellate mechanism or court, and whether this new system will be compatible with the current enforcement regimes in place under the ICSID and New York Conventions. In this ITN Insight, N. Jansen Calamita assesses the enforcement mechanisms available under those two conventions, looking at what lessons could be learned and what compatibility questions may emerge as the UNCITRAL discussions on enforcement continue.

Diversity of Adjudicators in a Reformed ISDS Regime: Is the WTO a good model for developing countries to follow?

Many have referred to the WTO’s Appellate Body as an example of how to integrate requirements of diversity—including development diversity in particular—into the appointment of adjudicators in the ISDS context. However, these diversity requirements have shown various failings in practice, with the more recent compositions of the Appellate Body and of first-instance dispute panels showing a poor representation of the WTO’s wide-ranging membership. In this ITN Insight, Jane Kelsey highlights some of the deficiencies in the current WTO dispute settlement mechanism when it comes to diversity questions. She draws on the stalled efforts at reforming the organization’s Dispute Settlement Understanding (DSU)—the legal text that sets the rules for how disputes are treated—and the role of the WTO secretariat in dispute settlement. Kelsey describes lessons that can be learned from this history, particularly as the UNCITRAL Working Group III process considers possible ISDS reforms involving the appointment and selection of adjudicators.

Fighting Bribery and Corruption in Africa: From AU and OECD conventions to a general principle of international investment law

Over the past 15 years, there has been a growing effort to adopt measures to tackle bribery and corruption, ranging from international legal instruments such as the OECD Anti-Bribery Convention and the AU Anti-Corruption Convention to soft-law initiatives and measures from multinational companies themselves. This ITN Insight by Guy Marcel Nono summarizes some of the key attributes of the AU and OECD conventions, along with these other initiatives. The author then catalogues a series of ISDS cases that involved bribery between OECD investors and African states, looking at the lessons that can be learned as African states examine possible next steps in addressing corruption. These cases, adjudicated by ICSID tribunals, provide useful indications of how IIAs could be reimagined so that they are better suited to tackling such challenges. The author also highlights the role that civil society organizations could play in this context.

UNCTAD’s 2019 High-level IIA Conference: A new momentum for Phase 2 reform

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.

Business and Human Rights Treaty Negotiation Sees a Light at the End of the Tunnel

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.

What to Expect in the January 2020 Session of UNCITRAL Working Group III on ISDS Reform

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.

Modernizing the Energy Charter Treaty: What about termination?

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.

UNCITRAL Working Group III: Promoting alternatives to investor–state arbitration as ISDS reform

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 Revised Draft of a Treaty on Business and Human Rights: Ground-breaking improvements and brighter prospects

This past July, the chairperson of a working group tasked with negotiating an international treaty on business and human rights circulated an updated draft text for consideration in the fifth round of negotiations, to be held October 14–18, 2019 in Geneva. This document features a series of innovations, including extending the scope of the treaty beyond transnational organizations to include all business enterprises, along with bringing much needed clarity on how this treaty might interact with the wide range of trade and investment agreements already in place. Carlos Lopez describes these innovations in detail, showing their changes relative to the “zero draft” and outlining how they may affect upcoming negotiations.

ICSID Rule Amendment: An attempt to remedy some of the concerns regarding ISDS identified by UNCITRAL WG III

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.

Judgment C-252 of 2019 of the Constitutional Court of Colombia: Change of precedent on the control of BITs

Judgment C-252 of the Constitutional Court of Colombia,[1] on the constitutionality of the Colombia–France BIT,[2] has aroused interest[3] for being the response of the constitutional judge to the way in which foreign investment protection clauses are incorporated into domestic law.

Ivory Coast’s New Investment Code: Focus on issues related to sustainable development and dispute settlement

Ivory Coast adopted a new investment code on August 1, 2018.[1] This new law[2] features a variety of innovations ranging from the revitalization of the institutional framework to the reconfiguration of tax rules to new obligations on investors.

Toward a Code of Conduct for Investment Adjudicators: Can ethical standards salvage ISDS?

The idea of entrusting party-appointed arbitrators with powers to decide investor–state disputes through final and binding awards, inherited from commercial arbitration and traditionally accepted as appropriate, now causes discomfort among critics.

Third-Party Funding and the Objectives of Investment Treaties: Friends or foes?

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.

A Bit of Anti-Bribery: How a corruption prohibition in FIPAs can bring a minimum standard of conduct for Canadian investors abroad

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’s Renewable Energy Saga: Lessons for international investment law and sustainable development

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.

Investment Facilitation at the WTO: An attempt to bring a controversial issue into an organization in crisis

The structured discussions on investment facilitation (IF) among 70 WTO members are now 18 months old. Participants are wrapping up their latest phase of work: considering examples of different issues and elements that could form the basis of a multilateral IF framework. The authors examine the history of investment discussions at the WTO and review how international investment governance in other forums has evolved in recent years. They examine what challenges can emerge in crafting IF disciplines, especially if these are binding, and the importance of considering which forums are most appropriate for IF-related discussions.

The Kenyan Parliament and Investment Treaty Making

The Kenyan government has made parliamentary oversight and public participation a constitutionally mandated part of any BIT approval. While that same parliamentary involvement has fallen short of its desired potential, it could still play a valuable role in ensuring that BIT negotiations are open and transparent, and that the public is both aware of and engaged with the treaty-making process and what it means. This piece examines the lessons learned from Kenya’s BIT and ISDS experience to date. The author argues that the Kenyan High Court’s ruling that double taxation treaties do not require oversight and approval from the legislative branch should not set an example for the government as it considers how to revise its investment treaty-making processes.

Investor Due Diligence and the Energy Charter Treaty

The Energy Charter Treaty modernization negotiations are due to begin later this year and a set of topics for parties to consider has already been announced. This piece examines the prospects for updating the ECT’s existing formulation of FET and analyzes how this standard has been interpreted in past arbitrations involving renewable energy disputes. The author argues in favour of including a requirement of investor due diligence as an attempt to help ensure that investors anticipate possible risks that may emerge from changes to a state’s regulatory framework.

Politically Motivated Conduct in Investment Treaty Arbitration

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.

Phase 2 of the UNCITRAL ISDS Review: Why “other matters” really matter

The April 2019 deliberations on multilateral ISDS reform at UNCITRAL Working Group III were due to tackle a series of questions that emerged in Phase 2 of the process. This piece breaks down why the scope of these discussions should be expanded to include important concerns raised by developing countries, and describes three core issues that must not be ignored. These involve the right to participation by affected parties; the rule of law and domestic courts’ jurisdiction; and the chilling of sovereign states’ authority and responsibility to govern.

Enhancing Environmental Protection in International Investment Law Through the Integration of International Civil Liability Principles

Investor–state arbitration has repeatedly proven ineffective in addressing environmental damages that host states suffer as a result of investment activities. This piece examines what lessons can be learned from international civil liability conventions, which are specifically designed to ensure victims’ compensation in cases of environmental harm. The author then explores which principles from these conventions could be adapted for use in investment treaties.

Protecting Social Rights Using the Amicus Curiae Procedure in Investment Arbitration: A smokescreen against third parties?

Arguments submitted by an amicus curiae (a “friend of the court”) have become increasingly common in investment arbitration. Many of these arguments deal with internationally recognized social rights, such as the right to water or food. This piece considers the restrictive conditions on amici curiae admission, the frequent reference to social rights issues in amici briefs, and the challenges in presenting these social rights arguments. The author advances possible actions that amici and states can take to make their social rights arguments more effective in an investment law context.

Phase 2 of the UNCITRAL ISDS Review: Why “other matters” really matter

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.

Multilateral ISDS Reform Is Desirable: What happened at the UNCITRAL meeting in Vienna and how to prepare for April 2019 in New York

UNCITRAL Working Group III has decided that multilateral reform is desirable to address various concerns regarding ISDS. Its next session will identify other concerns that may have been missed and prepare a work plan to develop solutions. This article reviews the UNCITRAL process so far and helps governments prepare for the upcoming session.

Do Developing Countries Really Benefit from Investment Treaties? The impact of international investment law on national governance

Some academics and arbitral tribunals argue that investment treaties and ISDS benefit not only foreign investors but also a broader range of stakeholders, from businesses to ordinary citizens. Their narrative is that the remedy of damages improve governance at a national level. But is this claim supported with empirical evidence?

Corporate Social Responsibility Clauses in Investment Treaties

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?

A Critical Review of the Debate on Investment Facilitation

Investment facilitation is a vague and broad term encompassing administrative simplification for investors. Certain proposals submitted to global forums also include mechanisms giving foreign investors an opportunity to participate in the design process of new regulations. Would multilateral rules on investment facilitation pose risks to domestic regulatory processes?

Reforming Investment Treaties: Does treaty design matter?

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.

New Egyptian Investment Law: Eyes on sustainability and facilitation

The world is witnessing critical changes in a new generation of investment treaties, laws, policies and regulations. Egypt contributed to this process through revamping its national and international legal frameworks regulating investment. The new Egyptian Investment Law No. 72 of 2017 is at the core of this contribution.

Toward an International Convention on Business and Human Rights

In July 2018, Ecuador’s Ambassador released the zero draft of one of the most important international human rights treaties in recent years. How does this draft measure up to the high expectations and needs expressed by the international community and especially those in need of justice and reparation?

International Investment Law and Sustainable Development: Key cases from the 2010s

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.

The 2018 Draft Dutch Model BIT: A critical assessment

In May 2018, the Dutch Ministry of Foreign Affairs published its new draft model bilateral investment treaty (BIT), in hopes to foster rethinking of existing and future Dutch BITs. Will this revised model achieve this goal, or does it fall short of the promised policy reset?

The Case Against Third-Party Funding in Investment Arbitration

Third-party litigation funding (TPF) is a rapidly expanding industry composed of speculative investors who invest in a legal claim for control of the case and a contingency in the recovery. In the wake of the global financial crisis and the demand by speculative finance for new investment vehicles, TPF has discovered the regime of bilateral investment treaties (BITs) with investor–state dispute settlement (ISDS) mechanisms.

Making the Right to Regulate in Investment Law and Policy Work for Development: Reflections from the South African and Brazilian experiences

The right to regulate can be defined as states’ sovereign right to regulate in the public interest—their policy space. Because international investment agreements (IIAs) were created to limit certain aspects of countries’ right to regulate, the first wave of IIAs inhibited host countries’ regulatory experimentation that could be harmful to foreign investors’ rights.

Conflicts between Latin American Countries and Transnational Corporations: The challenges of the region in the face of asymmetrical investment treaties

Political positions and laws on foreign investment have been polarized into two opposing perspectives. On the one hand, there is the assumption that foreign direct investment (FDI) is essential for the economies of peripheral countries to take a leap toward development, prompting FDI promotion and even generating competition among countries to attract more investment.

Achmea: The Beginning of the End for ISDS in and with Europe?

Current and future investment treaties and chapters involving EU member states or the Union itself may be profoundly impacted by a landmark ruling of the European Court of Justice (ECJ). In this piece, the author explores the judgement from an EU constitutional point of view and analyzes potential consequences. Did the Achmea ruling come as a surprise to EU law insiders?

Withdrawal of Consent to Investor–State Arbitration and Termination of Investment Treaties

It will take time for dialogues on ISDS reform to produce results. In the interim, rather than continue to assume the unjustified risks associated with the flawed ISDS system, states could consider two near-term options. This piece looks at the advantages and disadvantages of each.