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

CADTM | 30-Dec-2015
Les accords internationaux d’investissement sont un puissant instrument de domination et de spoliation de la richesse des États.
IPS | 30-Dec-2015
American mining corporation Newmont escaped the domestic processing requirement from Indonesia’s 2009 Mining Law. It achieved this by using a clause in a Dutch investment treaty.
EurActiv | 19-Oct-2015
EU Parliament adopts robust mechanism needed for Paris climate talks. Are European national leaders ready to act?
S2B | 7-Oct-2015
Why the Commission’s proposal for an “Investment Court System” still fails to address the key problems of foreign investors’ privileges
Indonesia for Global Justice | 9-Sep-2015
The Government plan to reassess the 64 Bilateral Investment Treaties (BITs) that have been signed by Indonesia immediately.
South Centre | 9-Aug-2015
The brief describes the widening debate on the implications of international investment agreements for sustainable development and outlines the broad features of alternative policy approaches to foreign direct investment
EurAsia Review | 6-May-2015
From an international policy point of view, South Africa’s denunciation of BITs is reasonable. It may even be seen as a refreshing retreat from a legal quagmire. But the domestic reality requires wider consideration.
InfoJustice.org | 26-Apr-2015
There is an increasingly urgent need revise the EU and US ISDS templates to protect IP policy decisions from the ISDS chapters of trade agreements.
Dawn | 13-Mar-2015
The Board of Investment is working on Pakistan’s own template of a bilateral investment treaty, which will replace the existing treaties with different countries. And all the future ones will be negotiated on the new template.
| 25-Jun-2013
Latin American states are the only ones in the world that have decided to withdraw from the ICSID Convention. It is also the only region in the world considering the necessity to find an alternative to ICSID mechanism.

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