ASEAN and The Reform of Investor-State Dispute Settlement: Global Challenges and Regional Options

Abstract

As a 10-country bloc, the Association of Southeast Asian Nations (ASEAN) is poised to ascend to the fourth largest economy in the world by 2030.2 The ASEAN-centered framework premised on the ASEAN Economic Community and ‘ASEAN Plus Six’ free trade agreements (FTAs) has led to new Asian regionalism, which has galvanized paradigm shifts in the international order.3 This framework also culminated in the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade pact by economic scale. Given ASEAN’s pivotal role in regional trade and security, recent Indo-Pacific strategies of major powers reinforce the importance of ASEAN centrality and ASEAN-led mechanisms.4 The legalization of ASEAN’s internal and external trade and investment pacts has transformed the ASEAN way, which conventionally denotes the code of conduct and the decision-making process based on consultations and consensus. Distinct from the European Union (EU), ASEAN has developed the approach of pragmatic incrementalism to enable structural flexibilities for binding rules, thus balancing soft and hard law obligations. Along with trade law, investment law forms an integral part of ASEAN’s legal architecture and is paramount to the sustainable growth of ASEAN developing countries. One of the most challenging issues in investment law is investor-State dispute settlement (ISDS), which has encountered massive backlash.5 At the multilateral stage, the United Nations Commission on International Trade Law (UNCITRAL) entrusted Working Group III to discuss procedural reforms for ISDS under investment agreements.6 Asian States have yet to form a unified stance on reform proposals. However, in light of ongoing ISDS debates, ASEAN’s experience will provide valuable lessons for the Global South and enrich discussions about reforming investment legislation and treaties.