Reformed ISDS

The investor-state dispute settlement (ISDS) mechanism has come under fire in the past few years. As a result of many controversial cases, civil society groups, international organisations, academics, lawyers and state officials have argued that the arbitration process has had a negative impact on public interest and is need of reform or should be scrapped altogether.

Therefore tweaked versions of the system have been proposed to avoid the most undesired “side effects” of standard ISDS rules. At least 45 countries and four regional blocs are revising or have recently revised their investment model agreements.

In 2012, South Africa, the government started to withdraw from its bilateral investment treaties and amended domestic legislation to make it compatible with BIT-like investor protections while incorporating exceptions where warranted by public interest considerations.

In 2014, Indonesia decided to terminate 67 bilateral investment treaties and has also been developing a new model BIT that supposedly reflects a more balanced approach between the country’s right to regulate and foreigner investor protection.

In 2015, the European Commission established a new ’Investment Court System’ to replace the current ISDS mechanism in its trade deals. The ICS has been incorporated in the EU deals with Canada (CETA) and Vietnam. It has also been proposed for the ongoing negotiations with Mexico, the Philippines and the US (TTIP). However many critics claim that this new system is largely window-dressing.

In December 2015, India released a revised model BIT which, for instance, requires investors to exhaust domestic remedies (Indian courts) before turning to international arbitration and leaves out “fair and equitable treatment” provisions.

In 2016, members of the Southern African Development Community (SADC) (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland) amended the SADC Finance and Investment Protocol that included ISDS provisions. The amendments eliminate the ISDS mechanism (only state-to-state arbitration remains) and narrow the scope of investors’ rights, including exclusion of “fair and equitable treatment”, limitations to “national treatment” to allow for local preferences, obligation for investors to follow host state domestic law and exception from investment rules for policies enacted to comply with international treaties.

In South America, experts from the Union of South American Nations (UNASUR) have been developing an investment settlement centre, as an alternative to the World Bank’s ICSID.

February 2017

EU Observer | 30-Apr-2019
But legality should not be our main concern here. There are much better approaches to international investment and we should be considering them.
IISD | 26-Apr-2019
Si el régimen pretende apoyar el desarrollo, y superar la crisis de legitimidad que enfrenta el régimen internacional de inversiones, se requiere algo más que una reforma procesal de la ISDS.
IISD | 26-Apr-2019
Si l’on souhaite que le régime international des investissements soutienne plus efficacement le développement, et surmonte la crise de légitimité à laquelle il fait face, il faudra plus que de simples réformes procédurales du RDIE
IISD | 26-Apr-2019
If the investment regime is to be made supportive of development and overcome its legitimacy crisis confronting, something more is required than procedural reforms to ISDS.
IISD | 12-Apr-2019
The proposed amendments signal an effort to improve the procedural rules governing ICSID arbitration, but fail to appropriately address many concerns expressed and fall short of promoting meaningful reform of investor–state dispute settlement (ISDS).
Le Monde | 10-Apr-2019
Seuls les Etats du pays dont dépend l’investisseur étranger devraient pouvoir saisir une justice spécialisée sur le sujet des investissements, si la loi nationale ou la décision des autorités publiques s’avère contraire à un accord international signé.
Stop ISDS | 9-Apr-2019
A permanent Multilateral Investment Court pushed by the European Union could make ISDS worse by scaling it up.
TNI | 8-Apr-2019
ISDS lawyers appear to hold administrative positions within the working group and are represented in large numbers in the advisory bodies that have been established for the working group.
AFTINET | 8-Apr-2019
Advocates of ISDS (industrialised countries and lawyers from the ‘arbitration industry’) dominate the running of the Working Group and its advisory bodies. Civil society is underrepresented.
The American Prospect | 5-Apr-2019
USMCA bears many resemblances to NAFTA, which has been cited as a driver of low-wage corporate outsourcing.

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