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

RT | 30-Mar-2017
En los últimos 20 años se han puesto de manifiesto los graves peligros que plantean los amplios privilegios concedidos a los inversores extranjeros en la mayoría de tratados de libre comercio o en los tratados bilaterales de inversiones.
International Law and Litigation | 24-Mar-2017
Investor-state dispute settlement (ISDS) has become the most controversial form of international litigation.
Kluwer Arbitration Blog | 24-Mar-2017
The place of arbitration matters because the law at the place of arbitration determines the procedural frame for the arbitration and therefore may have important consequences.
IISD | 21-Mar-2017
Settlements raise threats to principles of good governance, including government accountability, respect for the rule of law, transparency, and respect for citizens’ rights and interests.
IISD | 21-Mar-2017
Les accords de règlement menacent les principes de bonne gouvernance, notamment la redevabilité des gouvernements, le respect de l’état de droit, la transparence et le respect des droits et intérêts des citoyens.
IISD | 18-Mar-2017
The consultation was a missed opportunity for the Commission to obtain valuable inputs toward multilateral reform of investment dispute resolution in the best interest of Europeans and the international community.
No al TTIP | 15-Mar-2017
Petición a la Comisión Europea y a los Ministros de Comercio Exterior de la UE.
No al TTIP | 11-Mar-2017
Este webinar presentará la propuesta de la Comisión Europea así como varias perspectivas críticas sobre el tema.
Lexology | 7-Mar-2017
Since 2012, South Africa, dissatisfied with its bilateral investment treaties (BITs), has either been terminating or non-renewing several of these.
S2B | 6-Mar-2017
Position du réseau S2B sur la proposition de la Commission d’un mécanisme multilatéral de règlement des différends investisseurs-Etats (RDIE ou ISDS en anglais).

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