Investor-state Dispute Settlement Mechanism Research Articles

THE EVOLVING LANDSCAPE OF INVESTOR PROTECTION: BALANCING STATE SOVEREIGNTY AND INVESTOR RIGHTS IN THE 21ST CENTURY

The evolving landscape of investor protection in the 21st century requires a delicate balance between safeguarding investor rights and preserving state sovereignty. As global investments expand, investors seek legal assurances to protect their assets, while states must retain the ability to regulate in the public interest, addressing economic, social, and environmental challenges. This tension has sparked debates about the role of investor-state dispute settlement (ISDS) mechanisms and the need for reform. By modernizing investment treaties and dispute resolution processes, the international community can create a more equitable system that fosters both investment and sustainable development, ensuring mutual benefits for investors and states alike.

Beyond Diplomatic Protection: The Evolution of Investor Rights in International Law

The effectiveness and utility of diplomatic protection as a core mechanism for the traditional protection of investors’ interests has been challenged with the rise of bilateral investment treaties (BITs) and investor-state dispute settlement (ISDS) mechanisms. While diplomatic protection remains advantageous in some cases, particularly in investment treaties without arbitration clauses, this essay analyses its limitations in terms of politicisation, high costs, inefficiency and lack of investor control. In contrast, the investment treaty arbitration mechanism offers a more rapid, independent and predictable means of dispute resolution. This essay concludes that diplomatic protection, while not completely obsolete, is no longer the most attractive instrument in modern international investment protection and is gradually being transformed into a complementary tool.

Approaches to the Investor-State Dispute Settlement Mechanism Under the Regional Comprehensive Economic Partnership

Approaches to the Investor-State Dispute Settlement Mechanism Under the Regional Comprehensive Economic Partnership

The (Political) Economics of Bilateral Investment Treaties—The Unique Trajectory of Brazil

Brazil, after signing several traditional Bilateral Investment Treaties without ratifying them, recently shifted towards a different type of bilateral investment agreement, i.e., Investment Cooperation and Facilitation Agreements. Two claims have been made in the literature regarding the transition from traditional Bilateral Investment Treaties to Investment Cooperation and Facilitation Agreements—Claim #1: The non-ratification of the traditional BITs has not harmed Foreign Direct Investment into Brazil, a claim which puts into question the purpose of Bilateral Investment Treaties. Claim #2: While Investment Cooperation and Facilitation Agreements avoid some of the problems of traditional Bilateral Investment Treaties, on balance they are less effective than traditional Bilateral Investment Treaties would have been. We examine the two claims from an empirical economic point of view. We build on the literature about Brazil’s position vis-à-vis Bilateral Investment Treaties, which must be viewed by an amalgamation of (i) a historical legacy; (ii) domestic initiatives, and (iii) a particular U-turn in the political debate. Using empirical evidence on Foreign Direct Investment effects of Bilateral Investment Treaties, the following conclusions emerge: With regard to claim #1, empirical evidence in general as well as specific to Brazil suggests that Brazil has forgone Foreign Direct Investment by not ratifying traditional Bilateral Investment Treaties. Concerning claim #2, while Investment Cooperation and Facilitation Agreements include alternative dispute settlement mechanisms, which aim at a better compliance of states with the Investment Cooperation and Facilitation Agreements’ rules, rather than the compensation of foreign investors, the lower stringency of the State–State dispute settlement mechanism compared to Investor–State dispute settlement mechanism makes Investment Cooperation and Facilitation Agreements less effective. Yet, this weakening effect must be weighed against the effects on Foreign Direct Investment from innovative clauses in Investment Cooperation and Facilitation Agreements, which are absent in many traditional Bilateral Investment Treaties.

Assessing public health implications of free trade agreements: The comprehensive and progressive Trans‐Pacific Partnership Agreement

AbstractIn 2016, the United Kingdom voted to exit the European Union, which was surrounded by political and social uncertainty. The United Kingdom now negotiates its own trade agreements, and in March 2023, it agreed to join the Comprehensive and Progressive Trans‐Pacific Partnership Agreement (CPTPP). A health impact assessment (HIA) was undertaken in 2022–23 to predict the potential impact of the CPTPP on the health and well‐being of the Welsh Population. This paper explores the HIA findings and highlights the value of the approach in engaging with stakeholders and informing policymakers. This HIA followed a standard five‐step approach which involved a literature review to identify potential health impacts, qualitative interviews with cross‐sectoral stakeholders and the development of a community health profile. The HIA identified potential impacts across the wider determinants of health and specific vulnerable population groups. Investor state dispute settlement mechanisms, economic uncertainty and loss of regulatory policy space were identified as key pathways for health impacts. The findings have been beneficial in informing decision‐makers to prepare for the CPTPP in Wales using an evidence‐informed approach. This work has demonstrated the value of a HIA approach that uses a transparent process to mobilise a wide range of evidence, resulting in transferrable learning.

Why is there no investor-state dispute settlement in RCEP? bargaining and contestation in the investment regime

Abstract The Regional Comprehensive Economic Partnership (RCEP) is one of the most important mega-regional trade agreements signed to date. Yet, it failed to include an Investor-State Dispute Settlement (ISDS) mechanism in its investment chapter. What explains this omission? To unpack this, we examine international negotiations as a two-step process. In the first stage, we theorize that initial preferences towards ISDS are based on countries’ orientation toward foreign direct investment (FDI), experience with ISDS, and past treaty practice. Second, we theorize that during protracted negotiations, adverse regime developments and domestic politics can have a profound impact on treaty design. To test our framework, we examine the RCEP negotiations. Our analysis shows that mounting cases as well as the eroding norm of ISDS in other treaties lowered support for ISDS as the negotiations progressed. Then, a change of government in Malaysia shifted that country’s position dramatically, which tipped the balance against ISDS in the final round of negotiations. Our findings have important implications for the international investment regime. They highlight the factors that determine countries’ initial preferences while also demonstrating the importance of developments during the negotiations, which can lead to the abandonment of the institutional status quo.

Chinese Perspectives on the Rule of Law in International Economic Law

Abstract In the currently volatile global economic environment, China’s perspectives on the rule of law in international economic law are of significance. In principle, China shares developing countries’ attitudes towards international economic law. China also seeks to play a constructive role in the development of international economic law, endorsing a flexible and pragmatic approach. China has concluded international trade and investment treaties designed to constrain its policy space and is an active supporter of the World Trade Organization’s dispute settlement and investor-state dispute settlement mechanisms, with a good record of compliance. Recent trade tensions demonstrate challenges for the international rule of law but also emphasise the role of law in overcoming political challenges.

IMPROVING THE MECHANISMS FOR ENSURING THE RIGHTS AND OBLIGATIONS OF INVESTORS IN PUBLIC INTERNATIONAL LAW

International investment law plays a crucial role in facilitating cross-border investment flows and promoting economic development. However, the current mechanisms for ensuring the rights and obligations of investors in public international law face a number of challenges, including fragmentation of the legal landscape, limitations of investor-state dispute settlement (ISDS) mechanisms, and the tension between protecting investor rights and safeguarding states' regulatory space.This article proposes a series of reforms to improve the mechanisms for ensuring the rights and obligations of investors in public international law. These reforms include harmonization and consolidation of investment treaties, modernization of ISDS mechanisms, clarification of investor obligations, and promotion of sustainable investment practices.

Improvements to the system of host country regulatory authority in the Investor-State Dispute Settlement (ISDS) Mechanism

As the ISDS mechanism has been widely applied, its shortcomings have been gradually magnified, and the host country's right to regulate has been constantly challenged by foreign investors in international investment dispute settlement, and the sovereignty and public interests of the host country have been undermined as a result. This paper examines the existing problems of the host country's right to regulate, and analyses in depth the motivation for strengthening the host country's right to regulate in the context of the reform of the ISDS mechanism, taking into account past cases and practical experience. At the same time, by comparing and analysing the relevant theories of domestic and foreign scholars on the ISDS mechanism, the paper highlights the necessity of strengthening the host country's right to regulate in order to maintain a balance between the interests of both the host country and the investors, and proposes a feasible and practicable reform plan in this regard.

Contemporary Dilemmas of International Investment Law: From the Perspective of Settlement of International Investment Disputes

The current state of international investment law consists of thousands of International Investment Agreements (IIAs) and Investor-State Dispute Settlement (ISDS) mechanisms that create safeguards in international investment law and provide foreign investors with the means to mitigate the political risks they face in host countries. However, the number of effective international investment treaties is generally decreasing, and new investment treaties also exclude investor-state dispute settlement mechanisms. Based on past litigation, it is easy to see that the majority of investors who have successfully initiated litigation against host States have come from developed countries. Litigation against the host State by investors from the global South has been relatively few and far between, and has mostly been dismissed, and even when it has been successfully filed, it has not been successful. As a result, the dispute settlement mechanism is not inherently fair. It can be said that this mechanism is a symbol of protectionism in the post-colonial era, which is no longer suitable for the current time. This paper addresses these issues by providing a comprehensive analysis of the current state of development of international investment treaties and the current state of investor-state dispute settlement mechanisms.

Modernization and Reform of the ICSID Mechanism: Based on New ICSID Rules for 2022

The Investor-State Dispute Settlement (ISDS) mechanism plays a significant role in international investment governance. Recent years, this mechanism has faced increasing criticism and reform pressures. In order to establish procedures that are more transparent, efficient, cost-effective, and environmentally friendly, the International Centre for Settlement of Investment Disputes (ICSID) initiated a modernization reform of its rules in 2016, and the new rules came into effect on July 1, 2022. This reform marks an important milestone. This article primarily employs methods of literature review, inductive analysis, and case study analysis. This reform improves procedural efficiency, reduces costs, and enhances the transparency of arbitration proceedings. This reform has also driven the modernization of ICSID rules, furthered the deepening of ISDS mechanism reform, and had a significant impact on the practices of relevant countries and stakeholders.

The ICS vs. the ICSID system: a possible compromise in the light of the sustainable development

The current inclination to direct investment efforts towards sustainable development, coupled with the 2030 Agenda for Sustainable Development, unveiled in 2015, which included the 16th goal of granting equal access to justice and reinforcing the rule of law on a universal level, has brought investor-state dispute settlement (ISDS) mechanisms to the forefront of global investment discussions. The ICSID has carried out a crucial role in overseeing the ISDS system, offering arbitration facilities for disputes between investors and states for over six decades. However, the ISDS system has faced criticism in recent years. In response, a new Investment Court System (ICS) implemented by the EU that aims to address these concerns by establishing a permanent court formed with judges who have been appointed by member states in advance and are distributed to disputes in a rotating and random manner. It also limits the parties’ freedom to opt the applicable law and considers that the substantive provisions in investment agreements are the applicable law to the raised disputes and inserts an appellate mechanism review for law and fact matters as well. The paper discusses the relationship between the ICS and the ICSID system in the light of sustainable development and examines a possible compromise between both systems by considering the ICS as inter se modification of the ICSID convention based on investigation of its compatibility with requirements of the VCLT. Ultimately, the paper finds that recognizing the ICS as an amendment between some parties to the ICSID convention does not conflict with the VCLT.

Investor-State Dispute Settlement Mechanism in Vietnam’s New Generation Free Trade Agreements: Challenges and Recommendations

In the recent years, Vietnam's attraction to foreign investment capital has increased rapidly. As a result, the disputes in the field of foreign investment have emerged more frequently. The fact that a dispute occurs between the government of the host country and a foreign investors, regardless of its cause, will bring adverse consequences to both parties. Amicable settlement of such disputes is an important factor to improve the efficiency of foreign investment, maintaining the trust between the host country and foreign investors. Therefore, stipulating commitments on the dispute settlement mechanism for international investment in multilateral free trade agreements such as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam - EU Investment Protection Agreement (EVIPA), and Regional Comprehensive Economic Partnership (RCEP) are indispensable. Therefore, in this context, the paper studies the investor-state dispute settlement (ISDS) mechanism in new-generation free trade agreements to which Vietnam is a member, namely EVIPA, CPTPP, RCEP; accordingly, the paper proposes some recommendations to Vietnam.

Aktualisasi Mekanisme Investor State Dispute Settlement (ISDS) Dalam Sengketa Joint Venture Investor Asing Dengan Pemerintah Di Indonesia

Foreign investment and business cooperation through joint ventures have emerged as key drivers of Indonesia's economic growth. The increasing influx of foreign investment into Indonesia has, in turn, given rise to disputes between foreign investors and the Indonesian government. Consequently, Indonesia has sought to introduce legal instruments for the resolution of foreign investment disputes. Based on this premise, the author aims to delve deeper into the actualization of the Investor-State Dispute Settlement (ISDS) mechanism in disputes involving foreign investors and the Indonesian government within joint ventures. The examination of the role of the ISDS mechanism in this context is crucial to ensure the protection of investor rights and the provision of legal certainty. The research methodology employed is normative-juridical, utilizing literature review as an approach. The results of this study reveal that investment disputes persist between foreign investors and the Indonesian government due to diverging interests, violations of joint venture agreements, particularly changes in legislation that tend to restrict or disadvantage foreign investors. Consequently, foreign investors often find themselves adversely affected by government policies.

Problematika Investor State Dispute Settlement dalam Bilateral Investment Treaty Indonesia-Singapura 2018

The signing of the 2018 Indonesia-Singapore BIT is a new chapter for Indonesia in establishing international relations in the field of investment after in 2013 Indonesia stopped the 2005 Indonesia-Singapore BIT because it was more in favor of foreign investors. This alignment is contained in the Investor State Dispute Settlement (ISDS) mechanism where the dispute resolution mechanism is also regulated in the 2018 Indonesia-Singapore BIT even though it is known that the ISDS mechanism has many shortcomings and provides protection for foreign investors. Therefore, there is a need for a new alternative to perfect the ISDS mechanism. Normative juridical methods are used in this writing by qualitatively analyzing the data. The results of the study concluded that the ISDS mechanism in the Indonesia-Singapore BIT 2018 has not been able to protect Indonesia's interests in international investment cooperation and requires an Investment Court System (ICS) mechanism to perfect the ISDS mechanism.

Harmonizing Dispute Resolution Mechanisms: Enhancing Efficiency and Synergy between WTO and ISDS System

This research article explores aligning and optimizing dispute resolution mechanisms in international law, particularly within the World Trade Organization (WTO) and Investor-State Dispute Settlement (ISDS) contexts. Addressing challenges arising from the "spaghetti bowl effect" of multiple treaty regimes, it examines the interplay between WTO and ISDS systems, aiming for harmonization and reduced jurisdictional inconsistencies. Traditional coordination methods are evaluated, revealing limitations in adapting to this evolving paradigm. Instead, an "articulation clause" and the "principle of comity" are proposed as innovative approaches for rationalizing dispute resolution. These strategies aim to transcend rivalry between WTO and ISDS mechanisms, expediting impasse resolution in the WTO Appellate Body. The study promotes a strategic shift, encouraging stakeholders to view dual mechanisms as mutually advantageous. This pragmatic outlook empowers informed decision-making, enhancing the global rule of law's predictability, efficiency, and integrity. The ultimate goal is strengthening the WTO's dispute resolution framework and ISDS mechanism, contributing to a more streamlined and cohesive international dispute resolution landscape. The qualitative research methodology has been applied to the following article.

Counterclaims in Investment Arbitration: Towards an Integrated Approach

Abstract It is widely accepted that counterclaims may not be used as a means to exceed the limits of a tribunal’s jurisdiction, while they must at the same time be closely connected to the other party’s claim. However, in the particular context of investment arbitration, these two propositions create a tension that has led to a problematic and unfair construction of the investor-State dispute settlement mechanism. This article explores the foundations for a better, more integrated approach. It argues that jurisdiction over counterclaims should be seen as incidental to the one already established over the original claim, allowing tribunals to hear a wider range of counterclaims. This is inherent to the exercise of a tribunal’s adjudicative function, and rests on a foundation not only of implied consent, but also on one of principle. The approach presented here has the potential to protect counterclaims as a matter of procedural fairness and to address some of the reasons for the backlash against international investment arbitration law.

Addressing (In)Equality in Redress: Human Rights-Led Reform of the Investor-State Dispute Settlement Mechanism

Abstract In the context of ongoing debates concerning the reform of the investor-State dispute settlement (ISDS) mechanism, this article critiques the widely-accepted approach that seeks to fit international human rights law (IHRL) into the existing structure of ISDS and argues that IHRL should at least be treated as ‘primus inter pares’ vis-à-vis international investment law. Testing ISDS on the touchstone of the human rights to equality, non-discrimination, and an effective remedy, the authors demonstrate that ISDS is incompatible with IHRL. Considering various structural and systemic problems, abolishing ISDS is perhaps the only normatively sound solution to address this incompatibility with IHRL. However, as this may not be politically feasible in the near future, this article articulates eight principles for a human-rights compatible international dispute settlement mechanism. We argue that these principles should inform the current efforts to reform the ISDS mechanism to avoid the risk of making only cosmetic changes.

Absence of and Options for Investor-State Dispute Settlement Mechanisms in Regional Comprehensive Economic Partnership Agreements

Absence of and Options for Investor-State Dispute Settlement Mechanisms in Regional Comprehensive Economic Partnership Agreements

THE URGENCY OF COOLING-OFF PERIOD CLAUSE IN INVESTOR-STATE DISPUTE SETTLEMENT : GOOD FAITH NEGOTIATION

With the development of foreign direct investors, international investment treaties also becoming more popular, causing more cases are occurring from said treaties. To deal with disputes, international investment treaties have dispute settlement mechanisms. Investor-State dispute settlement mechanisms in international investment treaties often include cooling-off clauses. In each case, the arbitral tribunal made different decisions regarding the compliance of this clause, provoking much controversy. Often, the cooling-off period is waived by the claimant since there is no clear motive regarding the urgency. The aim of this article is to determine the urgency of the cooling-off period clauses in bilateral investment treaties as a precondition for arbitration.
 The method for research used in this study is descriptive analysis. The authors also use primary legal material, such as international arbitration, bilateral investment treaties, and arbitration rules. In addition, the authors use secondary legal sources such as related literature and journals.
 Based on the findings of this study, the existence of a cooling-off period clause plays a role in enabling parties to discuss their disputes in good faith before submitting them to international arbitration.