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

European Council | 20-Mar-2018
The Council adopted the negotiating directives authorising the Commission to negotiate, on behalf of the EU, a convention establishing a multilateral court for the settlement of investment disputes.
Consejo Europeo | 20-Mar-2018
El Consejo ha adoptado las directrices de negociación por las que se autoriza a la Comisión a negociar, en nombre de la UE, un convenio constitutivo de un tribunal multilateral para la solución de diferencias en materia de inversiones.
Conseil européen | 20-Mar-2018
Le Conseil a adopté les directives de négociation autorisant la Commission à négocier, au nom de l’UE, une convention instituant un tribunal multilatéral chargé du règlement des différends en matière d’investissements.
Kluwer Arbitration Blog | 19-Mar-2018
Now that the CJEU decided that investment treaty arbitration based on intra-EU BITs is not compatible with EU law, the focus of attention must shift towards the domestic courts of the Member States as the guardians of protecting the rights of European investors.
Ctxt | 19-Mar-2018
Una sentencia abre la vía al fin de los tratados bilaterales de inversión entre los Estados miembros pero no aclara si puede usarlos la Unión.
Le Vif | 19-Mar-2018
La Cour européenne de justice incarne souvent le pire du néolibéralisme européen. Cette orientation très pro-marché est inscrite dans de nombreux arrêts de la Cour.
No al TTIP | 9-Mar-2018
El Tribunal de Justicia de la UE rechaza el ISDS incluido en los tratados intra europeos Por No al TTIP | 6-3-18 El Tribunal de Justicia de la Unión Europea (TJUE) emitió hoy la sentencia que dictamina que la cláusula arbitral incluida en el Tratado celebrado entre los Países Bajos y Eslovaquia sobre la protección de las inversiones no es compatible con el Derecho de la Unión. El dictamen afecta a otros 195 tratados bilaterales de protección de las inversiones firmados entre los Estados miembro (...)
Kluwer Arbitration Blog | 19-Feb-2018
A multilateral state–state dispute settlement mechanism, coupled with other mechanisms to guarantee participation and access to justice to all stakeholders affected by foreign investment, could help rebalance public and private interests in the investment regime.
S2B | 16-Feb-2018
The undersigned organisations take the position that it is advisable to break away from the fundamentally flawed and increasingly controversial ISDS system.
African Law Business | 14-Feb-2018
South Africa’s new arbitration law came into force at the end of 2017. Now lawyers and clients alike will have to see if it lives up to its promises.

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