Investment Protection Standards Research Articles

Protection Against Arbitrary or Discriminatory Measures in International Investment Law

Protection against arbitrary or discriminatory measures is a clause for the protection of foreign investments that is included in international investment agreements. The clause imposes an obligation on the state where the investment is made not to harm foreign investments by arbitrary or discriminatory measures. Although it is sometimes overshadowed by other investment protection standards in international investment arbitration, it is actually an independent standard that is frequently regulated in investment agreements. In this article, firstly, the drafting of the protection against arbitrary or discriminatory measures in international investment agreements, its elements and its historical development are discussed. After that, the meaning and scope of the concepts of "arbitrariness" and "discrimination", which are two elements, were examined.

Investment protection standards: Can EU law fill the shoes of investment treaties?

Investment protection standards: Can EU law fill the shoes of investment treaties<scp>?</scp>

Rebalancing Investment Protection Standards

Abstract Treaty reform has largely focused on refining the various investment protection standards under IIAs to achieve a more appropriate balance between investment protection and preserving the state’s right to regulate. This article takes stock of the treaty language used to recalibrate investment protection standards and evaluates their effectiveness in preserving policy space. The article ultimately concludes that greater precision in the various investment protection standards has been effective in preserving regulatory space in some cases, notably in the case of indirect expropriation. By contrast, reform of the fair and equitable treatment may be of limited effectiveness, whereas the reforms of national treatment clauses and most favoured nation clauses have yet to be tested by arbitral treatment. While in principle the latter reforms appear to directly address the concerns raised by previous arbitral authority, it remains to be seen whether they will prove to be effective.

Reasonableness: a guiding light—A probe into the World Court’s landmark judgment on substantive standards of investment protection and its takeaways for investment treaty tribunals

Abstract In its recent Judgement on Certain Iranian Assets, the International Court of Justice (ICJ) extensively addressed various international investment law issues that arose from the interpretation and application of an FCN (Friendship, Commerce, and Navigation). This represents a rare instance of the World Court addressing such matters to such a great extent. Chief amongst the Court’s holdings was the test put forward by the ICJ for assessing the ‘reasonableness’ of state measures for the purpose of evaluating their compliance with international standards of investment protection such as ‘fair and equitable treatment’ and ‘non-expropriation’. Acknowledging a trend in investment treaty jurisprudence, the Court went on to introduce more concrete yardsticks for examining the ‘reasonableness’ of state measures. The ICJ’s holdings on this matter could contribute to the enhanced ‘certainty’ and ‘predictability’ in decisions concerning ‘fair and equitable treatment’ standard and ‘non-expropriation’ obligation. The application of the tests of ‘reasonableness’ formulated by the ICJ in the field of investment treaty law could provide states with a greater margin of appreciation when exercising their ‘right to regulate’. In practical terms, as opposed to a stringent ‘proportionality’ analysis, the ICJ’s formulation of ‘reasonableness’ would mean an alleviated burden of proof for states to justify the propriety of their measures towards foreign investors.

Article: The FET Standard between Treaty Reform and ISDS Practice: An Analysis of the Modernized ECT

The Modernization of the Energy Charter Treaty (ECT) counts as a prominent attempt to better incorporate climate change considerations into an investment treaty that is highly impactful from a climate change perspective. Among other initiatives, reform efforts in the ECT Modernization have led to amendments of key standards of treatment providing the substantive legal basis for claims by foreign investors. Focusing on the Fair and Equitable Treatment (FET) standard, this article contrasts the new treaty provision under Article 10 of the ‘modernized’ ECT with consolidated interpretations of the FET standard in previous arbitral practice. Building on such a jurisprudential analysis, this article evaluates the extent to which reformed standards of investment protection in the Modernized ECT can lead to an increased likelihood of climate-aligned outcomes in investor-State disputes, thereby providing an analytical assessment as to the potential of the newly introduced ECT provisions on FET – which may also serve as benchmark for further reforms of international investment agreements (IIAs) – to expand regulatory space for host States and support the adoption of more stringent climate policies. Fair and Equitable Treatment, Energy Charter Treaty, Modernization, Investor-State Dispute Settlement, Climate Change, Regulatory Space, Investment Arbitration, Fossil Fuels, Legitimate Expectations, Treaty Reform

The Compatibility of the Substance over Form Doctrine with Tax and Investment Treaties: A Case Study of Lone Star v the Republic of Korea

Abstract In late August 2022, the Lone Star tribunal concluded one of the latest awards in tax-related investment treaty disputes (the tax-related claims account for almost USD 1.5 billion of the total of almost USD 4.7 billion claimed in compensation). It also is the first award in which the tribunal dealt with the application of the substance over form doctrine (SOFD) by tax authorities and courts of the host state to prevent the abuse of a double tax treaty (DTT), and the impact of the refusal to accord the claimants the benefits under the DTT via a domestic (Korean) SOFD on the investment protection standards under the bilateral investment treaty (BIT). The Lone Star tribunal implicitly considered the Korean SOFD to be a suitable rule to prevent abuses of the Korea-Belgium DTT and thus compatible with the BLEU-Korea BIT. This article critically analyses the tribunal’s methodology and reasoning in reaching that conclusion. Notably, the article highlights the need to consider the principle of an abuse of rights while examining the compatibility of a SOFD with a BIT and a DTT. Such an approach could enhance the rule of law in the interpretation of tax and investment treaties in other similar cases. It is also in accordance with the principle of systemic integration. The article argues that it is increasingly more important to properly understand the concept of economic substance insofar as denial of benefits (DoB) clauses in investment treaties and principal purposes test (PPT) in tax treaties appear to specifically prevent abuses of those treaties by arrangements with no or insufficient economic substance. Global and regional tax developments, including the implementation of anti-base erosion and profit shifting (BEPS) rules, as well as Pillar Two rules (global minimum tax of 15%), strengthen the need for a comparative research on economic substance under tax and investment treaties. Such research may reveal that a convergence in denying benefits under DTTs and BITs will enhance the rule of law and increase legal certainty in tax and investment domains.

Constitutional Acquisition and Regulation of Property, Investment Treaties and Expropriation in Africa

Abstract The reforms of investment treaties include the incorporation of flexibilities into standards of investment protection such as indirect expropriation to accommodate public interest regulatory autonomy. In this article, I assess the efficacy of these reforms by analysing the intersection of constitutional provisions on compulsory acquisition and regulation of property in selected African constitutions and expropriation provisions in investment treaties. I argue that indirect expropriation provisions in investment treaties are unconstitutional. I also argue that the new generation investment treaties which incorporate these exceptions do not preserve African States’ authority to acquire and regulate private property. The exceptions do not resolve the incompatibility between the constitutional authority to take and regulate property without paying compensation and African States’ investment treaty obligations on indirect expropriation. By providing for precatory and inefficacious exceptions to indirect expropriation while leaving intact substantive standards of investment protection, the reforms of investment treaties preserve an investment treaty law and arbitration regime that remains skewed towards investors and covered investments.

International investment law and data, copyrights and performance requirements: a closer look at Einarsson v Canada

... The interface between international investment law and IP law is continuing to develop.1 After high profile investor–state dispute settlement (ISDS) cases, in which investment tribunals decided disputes involving trade marks and patents,2 copyrights and data are next. In Einarsson v Canada, the Claimants argue that Canada—through legislation and government action—confiscatedtheir IP rights (IPRs) in seismic data in breach of investment protection standards provided for in NAFTA.3 This is the first known case in which copyright and data4 issues arise in investment arbitration, so the tribunal’s decision will have broad implications for the development of this area of law. With more than US$2.5 billion claimed, the financial stakes are extremely high as well. Against this backdrop and on the basis of existing case law, this article aims to analyse the many questions relating to IP protection under investment law that are still unresolved. The legal issues range from the question, whether and under what circumstances copyrights and data constitute a covered investment under international investment law, to the extent and contours of the level of protection offered to those investments under international law (specifically under the fair and equitable treatment (FET) standard and the prohibition against uncompensated expropriations) and its relationship with domestic law and international and multilateral IP treaties. In a first, the prohibition against performance requirements is also at issue. The case also showcases the continuing propertization and expansion of IP protection through investment arbitration from patents and trademarks to copyrights and data. The article thus also offers a case study for the general critique offered by some commentators in this regard.

Regulating Artificial Intelligence in International Investment Law

Abstract The interaction between artificial intelligence (AI) and international investment treaties is an uncharted territory of international law. Concerns over the national security, safety, and privacy implications of AI are spurring regulators into action around the world. States have imposed restrictions on data transfer, utilised automated decision-making, mandated algorithmic transparency, and limited market access. This article explores the interaction between AI regulation and standards of investment protection. It is argued that the current framework provides an unpredictable legal environment in which to adjudicate the contested norms and ethics of AI. Treaties should be recalibrated to reinforce their anti-protectionist origins, embed human-centric AI principles, and embrace expert witnesses and amicus briefs.

Conceptual Overlaps between Investment Protection Standards: Analysis of a Yet Unexplored Systemic Problem of ISDS

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The International Investment Regime and Climate Change Goals: Clash of the Existing Systems and Available Balancing Tools

International commitments of states require them to adopt regulatory measures aimed at reducing CO2 emissions to combat climate change. This is likely to trigger a wave of investor-state claims by affected foreign investors, mostly from the fossil fuel industry. As no precedent currently exists, this article seeks to analyse how investment tribunals might approach such claims and balance substantive protections under international investment agreements with host states’ obligations under the international climate change regime. After a brief overview of international climate change law, the article considers whether investor-state dispute settlement may serve as an enforcement mechanism for states’ international climate change commitments, or rather investors’ claims cause a regulatory chill. The article further analyses how international climate change law might be applied in investment treaty disputes and concludes that it is likely to be invoked to interpret standards of investment protection. Finally, the view is adopted that the police powers doctrine defence and invocation of general public policy exceptions, contained in new generation investment treaties, might excuse host states from compensation for regulatory measures adopted in furtherance of climate goals.

The Impact of Investment Protection Standards on the Rule of Law: Strengthening or Weakening the Domestic Rule of Law?

The Impact of Investment Protection Standards on the Rule of Law: Strengthening or Weakening the Domestic Rule of Law?

A modernised ECT reflecting EU values and objectives: a multilateral framework promoting energy investment in a sustainable way?

In recent years, the Energy Charter Treaty has come under immense scrutiny and criticism for allegedly protecting the fossil fuel industry and undercutting sovereignty. As a key stakeholder in the modernisation process, the EU has been determined to reform the investment protection standards and the investor–state dispute settlement mechanism to include new provisions on sustainable development and climate change. However, after three years of protracted negotiations, the proposed reform of the Energy Charter Treaty needs to appropriately address the escalating global challenges regarding climate action and sustainable development. With member states such as Poland, Spain and the Netherlands announcing their intention to withdraw, the future of the Charter is hanging in the balance. This article focuses on the modernisation of the Energy Charter Treaty and whether the reformed Charter is fit for purpose, from an EU perspective, to address the impacts of climate change. In the absence of meeting core EU objectives and alignment with the Paris Agreement, this article questions whether the EU can deviate from the only multilateral framework in the energy sector to address the EU’s climate policy goals. The extent to which the Charter is capable of a new lease of life, moving from the ashes of the Cold War as an instrument facilitating investment protection to a green treaty promoting sustainable development and climate change, remains to be seen.

Non-Precluded Measures (NPM) in Bilateral investment Treaty (BIT) (An appraisal study)

Non-precluded measures (hereinafter NPM) clauses have become a problematic in the modern international investment regime. As an integral aspect of attempts to recalibrate the publicprivate balance in investment treaties, these clauses are intended as a corrective to the proinvestor interpretations of early arbitral tribunals. They provide for the primacy of public policy over investment protection standards under certain conditions. This paper attempts to identify the proper way in the drafting of NPM clauses and identify their common elements. It will examine the terms that must be met in order that host states can have resort to them, as well as the role that is provided&nbsp; or denied&nbsp; to arbitrators in circumscribing the suitability of an impugned measure in relation to the objective being pursued. Furthermore, recent investment arbitrations have pointed out the latent interpretive ambiguities that can be in NPM clauses. In fact, it will be argued that while NPM clauses do raise some difficulties with respect to extending the policy space of contracting parties, they are slightly &nbsp;effective in ensuring that public policy is a permanent feature of arbitrators’ matrix of decisionmaking.

The 2019 Morocco Model BIT: Moving Forwards, Backwards or Roundabout in Circles?

Abstract The Moroccan Model Bilateral Investment Treaty (BIT) (2019) adds to a growing body of ‘new-generation’ model BITs that have fuelled the conversation on reforming the investment arbitration system. Broadly speaking, such agreements have attempted to rethink means of dispute resolution and traditional investment protection standards while adding detailed investor obligations and standards of conduct. In that context, this article discusses the provisions of the Moroccan Model BIT (2019), highlighting not only progressive developments but also areas of concern. Upon comparing the provisions of the BIT with those of other ‘new-generation’ investment agreements, as well as existing treaty practice, the authors offer the following findings.

IS THERE ANY CONTRAST BETWEEN FAIR AND EQUITABLE TREATMENT AND PUBLIC INTERESTS UNDER INTERNATIONAL INVESTMENT AGREEMENTS AND INVESTOR-STATE ARBITRATIONS?

Today, more than 3,200 international investment agreements (IIAs) have been concluded, and most of them address substantive and procedural protection mechanisms. One of the essential substantive standards is the standard of fair and equitable treatment and one of the procedural mechanisms is Investor-state Arbitration. Usually, when an investor investing in the host state, there can be no denying that there may be a conflict between the public interest and the investor protection mechanisms. The mechanism of fair and equitable treatment is one of the essential standards that may be harmed by the public interests, especially the protection of the environment. On the one hand, in accordance with this standard, the host states are obliged to create stable, fair, favorable and transparent conditions for investors. On the other hand, the states have a duty to the public interests of their countries and at a larger level the international community. Purpose: In this paper, we want to show whether there is a discrepancy between the substantive standard of fair and equitable treatment and public interest in the text of the IIAs or in the arbitration procedure? Methods: general scientific methods of theoretical knowledge, as well as general logical methods and research techniques are used in analyzing existing investment agreements and Arbitration awards. Results: Examining the text of many of the IIAs, we came to the conclusion that there is no difference in the text of the agreements, in other words, the agreement encourages governments to strike a balance between investor protection standards and the protection of the public interest. However, in the implementation of agreements by the states, there is a difference between the two areas of protection of public interest and the standard of fair and equitable treatment, and here the arbitral tribunals must resolve the differences.

Accountability in EU sustainable finance: linking the client’s sustainability preferences and the MiFID II suitability obligation

Doubts remain in EU sustainable finance policy as to the role that the MiFID II suitability obligation will play in making sure that advisors and portfolio managers adequately service their client’s sustainability preferences. This article tackles this problem by examining the link between ‘sustainability preferences’ and the suitability requirements set forth in article 25(2) MiFID II. To this end, four versions of draft delegated act (DDA)—issued by the Commission over the 2018-21 period and aimed at modifying the MiFID II Delegated Regulation (EU) 2017/565—are analysed and discussed. After introducing the MiFID II rules on suitability, the notion of sustainability preferences is defined. Subsequently, a critical analysis is offered as to whether a client’s sustainability preferences should be subsumed into the definition of a client’s ‘investment objectives’ in article 25(2) MiFID II. Two policies are identified: a policy of ‘alignment’ by which the client’s sustainability preferences constitute investment objectives, and a policy of ‘decoupling’ whereby the definitions of preferences and of investment objectives are bifurcated and deemed to be independent concepts. Although the Commission’s stance has oscillated between these two distinct policies over time, it seems to be the case that the Commission has tilted to the side of alignment in its latest DDA (2021). In the last section of the article, the accountability effects of alignment and decoupling are identified and discussed. The policy of decoupling is found to be suboptimal owing to weaker liability incentives by investment firms to adequately treat their clients’ sustainability preferences. Decoupling connotes a more fragile model of investor protection. Conversely, a policy of alignment promotes a more effective enforcement of the MiFID II suitability requirements for the benefit of investors. The discussion presented in this article helps us delineate the MiFID II investor protection standards in sustainable finance policy.

The Legal Criteria for Suitability in MiFID II: Integrating the Client's Sustainability Preferences in the Provision of Investment Services

Doubts remain in EU sustainable finance policy as to the role that the MiFID II suitability obligation will play in making sure that advisors and portfolio managers adequately service their client’s sustainability preferences. This article tackles this problem by examining the link between ‘sustainability preferences’ and the suitability requirements set forth in article 25(2) MiFID II. To this end, four versions of draft delegated act (DDA)—issued by the Commission over the 2018-21 period and aimed at modifying the MiFID II Delegated Regulation (EU) 2017/565—are analysed and discussed. After introducing the MiFID II rules on suitability, the notion of sustainability preferences is defined. Subsequently, a critical analysis is offered as to whether a client’s sustainability preferences should be subsumed into the definition of a client’s ‘investment objectives’ in article 25(2) MiFID II. Two policies are identified: a policy of ‘alignment’ by which the client’s sustainability preferences constitute investment objectives, and a policy of ‘decoupling’ whereby the definitions of preferences and of investment objectives are bifurcated and deemed to be independent concepts. Although the Commission’s stance has oscillated between these two distinct policies over time, it seems to be the case that the Commission has tilted to the side of alignment in its latest DDA (2021). In the last section of the article, the accountability effects of alignment and decoupling are identified and discussed. The policy of decoupling is found to be suboptimal owing to weaker liability incentives by investment firms to adequately treat their clients’ sustainability preferences. Decoupling connotes a more fragile model of investor protection. Conversely, a policy of alignment promotes a more effective enforcement of the MiFID II suitability requirements for the benefit of investors. The discussion presented in this article helps us delineate the MiFID II investor protection standards in sustainable finance policy.

The Covid-19 pandemic and the potential for investor-state claims: a Caribbean perspective

ABSTRACT The Covid-19 pandemic has wreaked havoc on Caribbean countries. These countries have lost billions of dollars in foreign capital. Although the region's peoples are currently being vaccinated, the damage already caused by Covid-19 remains immeasurable and will likely continue for many years. Irrespective of whether vaccination results in herd immunity, Caribbean countries not only face the unenviable challenge of recalibrating their economies post-Covid-19, but also the prospect of being hauled before arbitral tribunals in respect of claims brought by investors alleging breaches of investor protection standards as a result of measures taken in response to the pandemic. To the extent that there is a real risk of claims of this nature arising in future, this article contends that Covid-19, as an unprecedented event, exposes the asymmetrical nature of the international investment regime, and its inability to fully countenance the domestic realities of developing countries that are confronted with existential threats.

The proportionality of provisional measures in ICSID arbitration

International Centre for the Settlement of Investment Disputes (ICSID) tribunals increasingly regard proportionality as a requirement for the indication of provisional measures. While proportionality's relevance to the application of substantive investment protection standards has received significant scholarly attention, less discussed is proportionality's potential impact in the provisional measures context. In light of proposals raised in the ongoing ICSID Rules Amendment Project to codify a requirement of proportionality for provisional measures, this article analyses how proportionality might be used to address State concerns regarding the effect of provisional measures on their sovereign prerogatives. It argues that the proportionality requirement's codification could meaningfully alter the approach of ICSID tribunals to provisional measures in a way which is valuable to States, but which remains fair to investors. To do so, this article outlines specifically what is meant by the ‘proportionality requirement’ in the context of the ICSID provisional measures framework, as well as the concerns which have animated State comments regarding its proposed codification in the ICSID Rules (Section 2). This article then contends that the proposed codification has the potential to meet State concerns at little cost to investors (Section 3). In order to illustrate the point, ICSID tribunals’ treatment of requests for the suspension of domestic tax enforcement is contrasted against their treatment of requests for the suspension of criminal investigations or proceedings.