AFTINET | 6 April 2018
Legal expert slams ISDS as “wild, wild west” of international law
Leading international investment law expert George Kahale has slammed the Investor-State Dispute Settlement tribunal system in a recent lecture at the Brooklyn Law School titled “The wild, wild west of international arbitration law”.
Kahale uses examples from his own experience to argue that the ISDS system based on commercial arbitration principles is not fit to arbitrate cases in which international companies seek compensation from governments for changes in health, environment or other public interest laws.
Kahale says “It’s one thing to have party-appointed arbitrators negotiate a decision to settle a commercial dispute having no particular significance beyond the case at hand ... it is quite another to decide fundamental issues of international law and policy that affect an entire society.”
Adding “there really are no hard and fast rules”, he cites examples of claims of billions of dollars based on false documents, methodologies for calculations of future corporate income which are unacceptable in World Bank accounting practice, and similar claims before different tribunals resulting in inconsistent decisions.
He notes the growth of third-party funding of ISDS cases, in which speculative investors fund cases in return for a share of the claimed compensation, and argues they fuel the growth of “surrealistic” claims, and are "more about making money than obtaining justice."
He also criticises proposals for an investment court that do not address the basic flaws in the existing system, and concludes, “I think it is better to recognize that the system was poorly designed and has been malfunctioning for three decades, and that dismantling it and starting from scratch is the wiser course.”