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

EJIL: Talk! | 12-Dec-2017
The investment treaty system is likely to be marked by the co-existence of investor-state arbitration and an international investment court, leading to pluralism rather than a dichotomous either/or choice or a clear before-and-after moment.
EJIL: Talk! | 12-Dec-2017
This Working Group was not “business as usual” because it was much more government-led than is typical of UNCITRAL Working Groups and it started out with a vote instead of conforming to UNCITRAL’s typical approach of working by consensus.
UNIS | 11-Dec-2017
Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) began its deliberation on possible reform of investor-State dispute settlement (ISDS).
CIEL | 5-Dec-2017
A new report released today warns that the European Commission’s proposed Multilateral Investment Court threatens to lock in an undemocratic investor-state dispute settlement scheme that undermines national democratic authority.
No al TTIP | 4-Dec-2017
Un Tribunal Mundial para las Corporaciones: los planes de la Unión Europea para expandir e institucionalizar las disputas entre inversores y Estados.
No al TTIP | 1-Dec-2017
La Comisión Europea está presionando para la creación de un Tribunal Multilateral de Inversiones (MIC, por sus siglas en inglés) incluso mediante la tergiversación de los resultados de la consulta que llevó a cabo a principios de año.
El Salto Diario | 1-Dec-2017
El Parlamento Europeo discutió ayer sobre la creación de una nueva corte para el arbitraje con inversores que avanza en la línea de los polémicos ISDS: más capacidad de las multinacionales para intervenir y sortear políticas públicas.
Friends of the Earth Europe | 28-Nov-2017
Ten reasons why the EU’s proposal for a Multilateral Investment Court doesn’t fix a fundamentally flawed system.
Tech Dirt | 21-Nov-2017
The MIC would be able to create what amount to global laws, without any democratic input or scrutiny.
Friends of the Earth Europe | 16-Nov-2017
English translation of the German Association of Judges opinion on the proposal for the Multilateral Investment Court system (MIC).

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