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

APWLD | 11-Sep-2018
“We call on our governments to either address the real reasons why ISDS is fundamentally flawed or to abandon its ‘reform’ agenda that is designed to reinforce and re-legitimise a self-serving investment dispute system.”
No al TTIP | 8-Sep-2018
El cambio climático está destrozando millones de vidas y ecosistemas. Los Estados tienen que dejar de proteger los intereses corporativos y asegurar que los combustibles fósiles se queden bajo tierra.
Vietnam Briefing | 28-Aug-2018
Vietnam and the EU have concluded their discussions on an Investment Protection Agreement, which they decided to keep it separate from their free trade agreement.
Ecologistas en Acción | 22-Jun-2018
Ante el anuncio de la Unión Europea de la puesta en marcha de nueve grandes acuerdos nuevos durante 2018, se ha creado la campaña estatal ‘No a los tratados de comercio e inversión’. Su objetivo: ampliar la información a la ciudadanía, trabajar en la incidencia política y continuar con el activismo y la movilización social.
TACD | 22-Jun-2018
TACD’s resolution recommends that rather than pursuing procedural changes through a MIC at the global level, the EU and US should refrain from including investor-state dispute settlement in any form from any agreement.
EJIL: Talk! | 5-Jun-2018
What are states’ concerns about investor-state dispute settlement (ISDS)? To help answer that question, we have put together four posts that compile the most relevant quotes from the first two meetings of the UNCITRAL Working Group sessions.
Truthout | 28-May-2018
The takeaway from the UNCITRAL’s process for its so-called "reform" discussions is that lawyers making millions in ISDS cases are welcomed, while the voices of the millions of people whose lives are harmed by ISDS cases brought by multinational corporations are barely an afterthought.
Lexology | 16-May-2018
The European Commission’s focus on ISDS has been so intense that far-reaching reform has been portrayed by many as inevitable. The Commission’s proposal is for the development of a multilateral investment court system (MIC).
UNCITRAL | 12-May-2018
The working group continued its deliberations on identification of concerns in the field of ISDS, as contemplated in the first part of the mandate.

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