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

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).
IELP Blog | 13-Nov-2017
New Zealand’s new Prime Minister, Jacinda Ardern, is on the record as stating that investor-state dispute settlement (ISDS) must not be a part of any future trade agreements signed by New Zealand.
Kluwer Arbitration Blog | 7-Nov-2017
2018 seems a crucial year for both opponents and proponents of investor-state arbitration to make their respective cases to maintain, reform, or abandon today’s ISDS system.
Newsroom | 3-Nov-2017
The Government is enlisting its ambassadors in a last-minute bid to win changes to the TPP’s controversial investment clauses, Trade and Export Growth Minister David Parker says.
The Hindu | 30-Oct-2017
Hit by disputes with Vodafone and Cairn Energy, India welcomes plan for a World Court but flags legal, practical challenges.
Gauchebdo | 27-Oct-2017
Le système de règlement des différends investisseurs-Etats, qui permet aux entreprises d’attaquer les Etats étrangers lorsque ceux-ci prennent des décisions contraires à leurs intérêts, est de plus en plus sollicité. Il est aussi fortement contesté, en particulier au Sud.
CNCD 11.11.11 | 24-Oct-2017
Notre principale préoccupation est d’éviter que le Tribunal multilatéral des investissements ne renforce un système international déjà déséquilibré en faveur des firmes transnationales.
Politics Web | 23-Oct-2017
The Protection of Investment Act affords foreign investors no protections beyond domestic law, and pointedly disavows investor-state international arbitration. The SADC Protocol was also amended by the SADC Summit of heads of state and government.
IIED | 23-Oct-2017
How international investment treaties could promote more responsible investment and argues that, while some innovative practices are emerging, there is still much to do.

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