Investor-state Dispute Resolution Research Articles

Enhancing Investor-State Dispute Resolution: Suggestions to Optimize the Effectiveness of Cooling-Off Clauses in International Investment Agreement Negotiations

Abstract The cooling-off clause in international investment agreements, intended to foster amicable dispute resolution before arbitration, often causes varied tribunal interpretations and jurisdictional disputes due to its unclear drafting. This article aims to comprehensively explore the cooling-off clause, covering its definition, the beginning and ending points of the cooling-off period, function, and enforceability in investor-state dispute settlement practice. It also delves into two different approaches adopted by investment tribunals in case of non-compliance with the cooling-off clause. Drawing from this analysis, the article provides recommendations for Vietnam as a host state to ensure the effective application of this clause.

Another ‘Bleak House’—the decision of the German Federal Supreme Court on the inadmissibility of intra-EU ICSID arbitrations

Abstract The decision of the German Federal Supreme Court of 27 July 2023 has sparked intense discussions. Unexpectedly, the Court granted a declaration of inadmissibility of intra-EU ICSID proceedings under section 1032(2) of the German Code of Civil Procedure. The decision is of significant practical relevance and yet another push against intra-EU Investor–State Dispute Resolution. After a short introduction (i), we will describe the legal and factual background of the decision (ii) and summarize the Court’s reasoning (iii). Thereafter, we will comment on the decision (iv) and conclude by pointing out possible implications for future intra-EU ICSID proceedings (v).

Modernization of the Investor-State Dispute Settlement System: reform or revolution?

INTRODUCTION. The UN Commission on International Trade Law established Working Group III in 2017. Within the framework of this Working Group, States’ delegations and representatives of international governmental and non-governmental organizations seek to work out solutions to the identified problems of the investor-State dispute settlement system. Such problems include: lack of consistency and predictability of arbitral awards, lack of independence and impartiality of arbitrators, cost and duration of proceedings. Part of the ways suggested by the UNCITRAL Secretariat and States to remedy problems could be estimated as reform of the system, but several proposals seem to be a revolution.MATERIALS AND METHODS. The authors researched the provisions of bilateral investment treaties, case law of tribunals demonstrating the problems of the ISDS system, as well as the works of Russian and foreign scholars. The methodological basis of the research contains general scientific and special methods.RESEARCH RESULTS. The authors have analyzed several ways of the ISDS system reform overviewed by the Working Group III. Firstly, the authors have considered the draft code of conduct for arbitrators, provisions on third-party funding and an advisory center in the ISDS system. It has been stated that each of these initiatives is able to solve certain problems of the system. Secondly, the authors have analyzed the documents on the creation of an appellate mechanism and a standing multilateral mechanism for the settlement of investment disputes. The authors have concluded that initiatives may bring the fundamental changes to the system.DISCUSSION AND CONCLUSIONS. The authors have concluded that the identified shortcomings of the ISDS system can be remedied only by its reform. Every problem of the system can and should be rectified through consistent work, and not by radical changes. The revolutionary ways considered, such as the appellate instance and the court, not only will not solve existing problems, but rather will add new ones. For example, such a “revolution” of the system may result in establishment of the two parallel regimes of investorstate dispute resolution.

The arbitrator Epitácio Pessoa and the Brazilian approach to arbitration: an analysis of the settlement of disputes between public entities and foreign investors

Reiterated since the 1960s by consecutive yet ideologically different federal administrations, Brazilian resistance to international investor-State dispute resolution has been taken for granted in many arbitral circles, especially due to a perception that the Latin American country has adhered to Calvo and Drago Doctrines. This paper questions those assumptions as it analyzes neglected arbitral awards issued in 1916 and 1918 by famous internationalist Epitácio Pessoa, renowned jurist at the time and President of Brazil from 1919 to 1922, who settled disputes between public entities – the Municipality of Rio de Janeiro and the Brazilian Federal government, on the one side – and foreign investors, on the other side, on questions derived of tramway and railway concessions. This article unprecedentedly considers the awards as it investigates the legal bases over which Brazil has always had a different instance on arbitration than the other Latin American countries, aiming at contributing to understanding contemporary resistances to investor-State dispute settlement.

The Role of ICSID in International Economic Law

ABSTRACT The International Centre for Settlement of Investment Disputes was established in 1966 as a facility for the resolution of international investment disputes. Today, it has 158 member states and has administered roughly 70% of all known investor-state cases. International Centre for Settlement of Investment Disputes has taken a leadership role in modernizing the procedures for investor-state dispute resolution, especially in the 2006 and 2022 amendments to those rules.

Standard of Review in Indirect Expropriation: Reconciling the Effect Rule with the Doctrine of Intent

Abstract The standard of review that underpins investor-state dispute resolution particularly in the energy and natural resources sectors remains mired in a conundrum of legitimacy. While the jurisprudence of arbitral tribunals illustrates that the effect doctrine constitutes the central standard of review, and the intent behind the measure is largely jettisoned, questions remain as to whether the exclusive reliance on the effect doctrine reflects the interest of both parties and actually balances such interests in such strategic sectors as oil and gas where a trade-off is critical in view of massive State reliance on accrued revenue. In essence, it is contended that the doctrine of intent be deployed to complement the effect doctrine. Such an approach will not only enhance the substantive legitimacy of the dispute settlement process but equally reflect the balanced interest emblematic of the proportionate commitment of both parties.

ISDS and Intellectual Property in 2020 - Protecting Public Health in the Age of Pandemics

Many countries have responded (or have considered responding) to the COVID pandemic by modifying their intellectual property laws to ensure the availability of vaccines, medicines, diagnostics, and related information. Some have asked the World Trade Organization (WTO) for a waiver to excuse any steps they might take that are inconsistent with obligations under the TRIPS Agreement. Although a waiver would protect WTO members from challenges in the WTO’s Dispute Settlement Body, a state that is a party to an international investment agreement (IIA) that includes investor-state dispute resolution has something else to worry about. Investors could claim that its actions amount to an indirect expropriation or a denial fair and equitable treatment in violation of the obligations in the IIA. In this piece, I conduct a thought experiment on how such suits might unfold. The first part describes how states sought or may seek to exercise control over the knowledge and products needed to protect public health during the global pandemic. The second part considers the challenges that investors might lodge and how they might be resolved. I identify the places where safeguards in IIAs that are intended to protect sovereign authority over healthcare may fall short.

Preventing the Regulatory Chill of International Investment Law and Arbitration

International investment law has increasingly come under attack because it does not put host states on par with foreign investors. Foreign investors can evoke broad investment rights and pursue investment arbitration. The threat of substantial arbitral awards can result in host states not enacting policies, regulations, laws or reaching decisions, despite them being needed in order to protect a variety of important public interests. The concern is, therefore, that international investment law, including the investor-state dispute resolution system, causes a regulatory chill. The paper examines how the asymmetric relationship between foreign investors and host states can be remedied, so that trust in international investment law is strengthened and its legitimacy crisis is overcome. One core issue with international investment law is that the customary international minimum standard and its therein subsumed full protection and security, and fair and equitable treatment and compensation principles are inherently vague, thereby contributing to the overprotection of foreign investors. Arbitral cases further highlight how regulatory changes can result in host states incurring liability and thus enable foreign corporations to shift potential costs and risks. International, and national solutions to prevent the regulatory chill of international investment agreements are spelled out.

Amicable Settlements in Investor-State Disputes: Empirical Analysis of Patterns and Perceived Problems

Abstract This article empirically analyses investor-State arbitration cases that settle amicably after the arbitration has commenced but before the final award is rendered. The study investigates whether, and to what extent, some common criticisms of amicable settlements are evident in practice. It examines four questions that correspond to the major critiques of amicable settlements in investor-State dispute resolution: (1) Are certain types of investor-State disputes unsuitable to be settled amicably? (2) Do amicable settlements impede transparency? (3) Do amicable settlements pay less compared to when investors win? (4) Is the non-enforceability of settlement agreements a problem in practice? The findings suggest that in practice, not all of these purported problematic aspects of dispute resolution mechanisms that result in amicable settlements are as evident as is commonly believed.

The Mauritius Convention on Transparency: Comments on the Treaty and its Role in Increasing Transparency in Investor-State Arbitration

Since 2008, the United Nations Commission on International Trade Law (UNCITRAL) has officially recognized the “importance of ensuring transparency in investor-State dispute resolution.” In July 2013, it reached an important milestone in turning that principle into law. Recognizing “the need for provisions on transparency in the settlement of treaty-based investor-State disputes to take account of the public interest involved in such arbitrations,” UNCITRAL adopted the Rules on Transparency in Treaty-Based Investor-State Arbitration (“Transparency Rules” or “Rules”). Those Rules, which require disclosure of a wide range of information submitted to and issued by tribunals, and facilitate participation by amicus curiae and nondisputing State parties, will do much to transform – and open up –investor-State disputes, when the rules apply.Notably, however, Article 1(2) of the Transparency Rules requires certain conditions to be satisfiedbefore the Transparency Rules can apply to any arbitration arising under any of the approximately 3000 treaties that were concluded before the Rules entered into force on April 1, 2014. Namely, for the Rules to apply under those “existing treaties,” either (1) the investor’s home State and the respondent have to expressly agree, after April 1, 2014, to apply the Rules to their treaty (and all disputes arising under it); or (2) the investor and respondent State must agree to apply the Rules in the context of a particulardispute.This provision requires States and/or investors to expressly “opt in” to the Transparency Rules fordisputes arising under existing treaties. Given that it is this vast mass of existing treaties that is likely to give rise to the bulk of investment arbitrations for the foreseeable future, the hurdle imposed by Article 1(2) risks undermining UNCITRAL’s overarching goal of ensuring transparency in investor-State arbitration. To address that issue, UNCITRAL decided to create another instrument that States could use to require application of the Transparency Rules to any investment arbitration arising under their existing treaties.In July 2014, UNCITRAL finalized and adopted the “Mauritius Convention on Transparency”(“Transparency Convention”). This treaty establishes a mechanism through which all parties to existing investment treaties can efficiently and effectively update the procedural rules governing investor-State arbitrations under those treaties so as to effectively implement the Transparency Rules and better take into account the public interest nature of these disputes.In order to promote greater awareness and understanding of the Convention, this paper reproduces its text and, after each article, provides additional comments on the provisions. The commentary is based on attendance at UNCITRAL’s sessions, as well as written public records of the negotiations.

EU Reform Agenda in Defence of the Judicialization of International Economic Law

A widely-recognized ‘backlash against globalization’ has taken many forms in recent years, particularly in the resurgence of nationalism and protectionism. Following the rise of a legitimacy crisis in the international regime for the protection of investments, the Trumpanian attack on the World Trade Organization (WTO) Appellate Body undermines a crucial function of this organization. In this context, the European Union has traditionally been seen as an advocate of the rule of law at an international level. Currently, it leads the way to maintain rules-based global economic governance by submitting detailed proposals to reform international trade and investment adjudication bodies and galvanizing broad support for them amongst other countries. Specifically, the European Union (EU) proposes the establishment of a multilateral investment court (MIC), which it considers to be the best option to address the concerns with the existing system of investor-State dispute resolution (ISDS). At the WTO, the EU has tabled two sets of proposals to answer concerns from the US and modify the relevant parts of the Dispute Settlement Understanding (DSU). After the collapse of the WTO Appellate Body, the EU led an initiative to create an interim appeal arbitration arrangement. This article argues that, in the absence of leadership by the US, the EU plays an essential role in maintaining trade and investment governance built on international law. This article identifies two different EU approaches in its attempt to (1) modernize an existing adjudication body at the WTO and (2) promote establishment of a new judicial institution for the resolution of investment disputes. In both ways, the EU acts as an innovator in terms of international governance. European Union, reform, judicialization, WTO, Appellate Body, UNCITRAL, investor-state dispute settlement (ISDS), multilateral investment court

Risks and Countermeasures of Chinese Enterprises Investment in Africa Under the Background of Belt and Road Initiative

This article makes an important contribution to the development of the Belt and Road by highlighting China's existing investment network along the Belt and Road. Most of these agreements cover most of the countries visited. These similarities have so far been carried out using three generations of static analysis, which does not reflect reality. There is an important body that supports the use of the most favorable state rules for Chinese investors in modernizing the Belt and Road investment agreement network. This article shows that the Belt and Road Initiative investment agreement already exists with the most favorable National Clause available in Chinese bilateral investment agreements. In addition, the article explains that China's network of contracts is unique (so extensive) and assesses the potential of investment requirements, taking into account the sanctions based on the initiative of belt and highways that were previously involved in investor-state dispute resolution, which coordinates the expected use of Chinese investors. Keywords: Risks and Countermeasures, Belt and Road Initiative DOI: 10.7176/JESD/11-16-04 Publication date: August 31 st 2020

The setting aside and enforcement of intra-EU investment arbitration awards after Achmea

Abstract By rendering its preliminary ruling in Achmea v Slovakia, the European Court of Justice (ECJ) declared intra-EU investment treaty arbitration to be incompatible with fundamental principles of the European legal order. This decision does not only illustrate the challenge of regime interaction in international economic law but is also of highest practical relevance. Diverse and critical reactions from arbitral practice and legal scholarship suggest that it will ultimately be up to the courts within and outside of the EU to clarify how the ECJ’s findings in Achmea relate to the legal fate of arbitral awards. Against this background, the aim of the present contribution is to shed light on the judgment’s legal consequences on the post-award phase. As a starting point, an analysis of the judgment finds that the ECJ’s reasoning in Achmea is applicable to investor–State dispute resolution (ISDS) clauses contained in all intra-EU investment treaties, including the Energy Charter Treaty (ECT) when applied in an intra-EU context (Section 2). Based on these findings, we evaluate how the incompatibility of intra-EU investment treaty arbitration with the law of the European Union (EU law) affects setting aside proceedings (Section 3) and applications for recognition and enforcement of awards (Section 4) within and outside of the EU. We show that possible solutions may range from fully enforcing intra-EU investment awards to completely disregarding any legal effect. Evaluating the complex legal landscape applicable to both types of proceedings clearly illustrates that there is no simple ‘yes-or-no’ rule. Instead, factors such as the applicability of the ICSID Convention, the seat of the arbitral tribunal or the jurisdiction in which enforcement is sought are relevant but should not be considered in isolation. Instead, it is concluded that these factors must be considered as inter-related aspects of an analytical framework which may lead to a coherent understanding of the relationship between the European legal order and the settlement of intra-EU investment disputes (Section 5).

Multilateral Reform of Investor–State Dispute Resolution Mechanism: A Balance between Public Legitimacy Management and Private Efficiency Refinement

Multilateral Reform of Investor–State Dispute Resolution Mechanism: A Balance between Public Legitimacy Management and Private Efficiency Refinement

A Research on International Commercial Arbitration with reference to the Brexit

International commercial arbitration is an alternative method of dispute resolution. It is regarding disputes arising out of commercial transactions conducted across national boundaries and it allows the parties to bypass litigation in their national courts. The aim of the researcher is to understand how the position of London as the favoured seat of Arbitration will change after Brexit. Secondly, the paper also focuses on the use of international arbitration as a tool to solve investor-state disputes. The present paper was analysed through the non-doctrinal research methodology and empirical and descriptive method of research was used. The present analysis was made through random sampling method where the survey was taken from common public, professionals, etc through a structured questionnaire. The sample size in the present analysis is 1669 samples. The research tools used in the present paper are cross tabulation, chi-square and frequency. It can be concluded that the position of London as the popular seat of arbitration will not be affected as the English Law is generally considered as the immediate choice of law for around most of the commercial contracts. Secondly, as far as investorstate dispute resolution is considered, arbitration can become a popular choice in future after the amendments were made in 2017 to make it more transparent and cost efficient.

Latest developments in conciliation and mediation in investor-state disputes

Over the last decades, investor-State disputes have drastically increased in number. Most of these disputes are resolved through arbitration. The increase of the arbitration proceedings in investor- State matters is due to the high number of bilateral investment treaties and free trade agreements (“IIAs”) containing an arbitration clause which the dispute is based on. IIAs do not include only arbitration clauses: they also offer the parties other ways to settle their disputes through negotiation, conciliation and mediation. Research today suggests that conciliation and mediation have been rarely used in investor-State dispute resolution. The purpose of this article is to investigate the reasons why ADRs are still underused in the settlement of investor-State disputes, by analysing its pros and cons. The author will look into the current international legal instruments dealing with conciliation and meditation in investor-State disputes and will analyse the latest developments in the field. The article does not conclude that alternative dispute resolution methods should replace arbitration in investor-State matters: it rather suggests that, depending on the circumstances of the case, conciliation and mediation might be efficient mechanisms to settle disputes, alone or alongside arbitration procedures.

Protección de los derechos humanos en la solución de controversias inversor-Estado: ¿confluencia o bifurcación de caminos?

The purpose of this article is to determine the correspondence of the princSixty years after the signing of the first bilateral investment treaty, investor-State dispute resolution regime is under a process of change and strong criticism, particularly the disputes in which investors question State measures that protect human rights (access to drinking water, public health, and environment among others). In this context, this paper aims to analyse if there is a confluence or bifurcation of roads in investor-State disputes involving human rights. The answer to that question will be given through the selection and analysis of the two cases, Eco Oro versus Colombia and Bear Creek versus Peru, clear examples of fragmentation of International Law.

Why Europe Should Reconsider its Anti-Arbitration Policy in Investment Disputes

This paper addresses the current challenges to investor-state arbitration in Europe. Two parallel developments are outlined: the current change in the EU policy towards arbitration provisions in multilateral and bilateral investment treaties, and the consequences of the Achmea case decided by the Court of Justice of the European Union in March 2018. The author analyses the critical arguments behind the current European anti-arbitration stance and concludes that while some of them (but not all) may have some foundation, a sufficient number of reasons speak against the radical dismantling of the system of international investment arbitration. An analysis of the proposed alternatives shows that they fail to deliver viable solutions for diagnosed problems. In particular, the replacement of ad hoc tribunals by a multilateral investment court (MIC) seems to be a step in the wrong direction. The ISDS has played an important role in the global fostering of international investment by securing a basically fair system of dispute resolution in a very specific field. Its deficiencies are not beyond repair; on the other hand, the alternatives offered suffer from flaws that are the same or much more troubling. The author concludes that the consequences of the ‘change of tide’ in the approach to investor-state dispute resolution are likely to be detrimental to the very goals of those who advocate the abandoning of investment arbitration.

Bilateral Investment Treaties of Uzbekistan: Investor-State Dispute Resolution

The main purpose of this paper is to familiarise the reader with how foreign investors are protected in Uzbekistan under its BITs. Thus, the paper will analyse BIT clauses of Uzbekistan and investor-state dispute resolution mechanisms available under Uzbek BITs. Throughout the following paper, the reader will notice that although Uzbek BITs contain some provisions inherent in modern BITs in terms of investor-state dispute settlement there is still room for improvement. Therefore, recommendations for improvement will be provided at the end of this article.

The Path of Investor-State Disputes: From Compensation Commissions to Arbitral Institutions

The protection of aliens under international law has progressed from the alien being a ‘clanless’ individual or outlaw completely at the mercy of the local lord, with no entitlement to the peace and protection of the locality in the earliest times to the modern, sophisticated investor–State dispute settlement mechanisms. It was only after the end of the Cold War, when foreign investments grew dramatically and hundreds of major investor–State disputes emerged, that interest in investor–State disputes sharpened. This essay demonstrates that several fundamental changes in the legal landscape have occurred since the constitution of the early compensation commissions of the eighteenth century leading to the modern system of resolution of investor-State disputes. First, a growing number of multinational enterprises operating globally have become major actors on the international public law plain, in areas that in the past were reserved only for States. Second, international organizations and other non-State actors have dramatically strengthened their influence with efficient international arbitration institutions dominating the system of investor-State dispute resolution after the end of the Cold War. The methods for resolving investor-State disputes have evolved primarily along the lines of creating specialised institutionalised forms. While early commissioners relied on their subjective understanding of justice and fairness, today the expectation is applying agreed set of rules (‘‘precept imposed from outside’’ using Hersch Lauterpacht’s language), so that failure to do so may result in annulment of the award. The evolution of various methods of international dispute settlement and the emergence of new methods, such as international investment courts, does not necessarily mean that the older forms of dispute resolution will die like the dinosaurs. They will continue to function, albeit with modifications and will inform the future models of international dispute settlement. Two recently published books represent the most sophisticated attempts to address the complex questions of the evolution of investor–State arbitration from a historical perspective. In The Evolution of International Arbitration: Judicialization, Governance, Legitimacy, Alec Sweet and Florian Grisel (hereinafter Sweet & Grisel) argue that a consolidation of arbitration power has occurred over the past century, and although the structure of authority in international arbitration remains nonhierarchical and pluralist, the regime has gradually acquired the properties of stable legal system. International Investment Law and History is a volume edited by University of Glasgow professor Christian Tams, University of Amsterdam professor Stephan Schill and University of Frankfurt professor Rainer Hofmann that includes contributions from academics discussing a broad variety of issues. Part II of this essay examines the evolution of investor–State dispute settlement mechanisms from compensation commissions dominated by sovereigns to current legal institutions. Part III traces the evolution of approaches to those who resolve the disputes and appointment mechanisms, which changed from political appointees to legal experts. Part IV shows that when it comes to the applicable law, it has evolved from almost unlimited discretion of adjudicators based on fairness and equity to formal external sources of law. Each part of this review essay starts with an overview of the relevant sections of both volumes and ends with my analysis of a large number of historical documents to give a more comprehensive understanding of the historical evolution of international investment law.