Investor-state Dispute Settlement Mechanism Research Articles

BALANCING INVESTOR PROTECTION WITH A STATE’S REGULATORY AUTONOMY IN THE AMENDED SADC FIP

This article focuses on the 2016 Amended Annex 1 to the Southern African Development Community (SADC) Finance and Investment Protocol (FIP) (the Amended Annex), which entered into force on 22 August 2017. It aims at a comprehensive assessment of the adequacy of the Amended Annex in balancing investor protection with SADC member states’ quest for domestic policy space in the content of the treaty provisions. Prior to the amendment, the 2006 SADC FIP contained clauses that were considered challenging in the old international investment agreements (IIAs) – such as broad definitions of “investor” and “investment”, provision for international arbitration as a recourse, and according foreign investors fair and equitable treatment (FET) and most favoured nation (MFN) treatment. The challenges associated with bilateral investment treaties (BITs) (especially investor-state dispute settlement (ISDS) mechanisms, restrictions on sovereign policy space and regulatory autonomy) necessitated a review by the SADC member states of the 2006 SADC FIP. The purpose of this article is to reflect on the implications of the 2016 Amended Annex 1 to the SADC FIP with a view to finding a balance between protection enjoyed by investors and the host states’ right to regulate. The article adopts a comparative international law approach, which is useful in order better to understand a SADC member country’s approach to foreign investment protection.

Damages and ISDS Reform: Between Procedure and Substance

Abstract Monetary damages is the ordinary remedy in investor-state dispute settlement (ISDS). As such, arbitral practice relating to damages has direct, practical relevance for states and investors. The size of damages awards is also amongst the core critiques of ISDS. It is somewhat surprising, then, that the issue of damages has not figured prominently in discussions on reform of investment treaties and the ISDS mechanism, including those currently underway in Working Group III of the United Nations Commission on International Trade Law (UNCITRAL). In this context, this article makes three contributions. First, it provides an overview of empirical trends in damages in ISDS. Secondly, it considers the extent to which tribunals’ approaches to damages raise the sorts of concerns with ISDS identified by UNCITRAL Working Group III, focusing specifically on concerns of correctness, consistency, legal and expert costs, and independence and impartiality. Thirdly, it identifies a range of possible procedural and substantive reform options that might alleviate these concerns.

Human Rights and the Investor-State Dispute Settlement Mechanisms

국제투자법과 국제인권법은 국제공법의 2개의 독립된 영역이다. 양자는 밀접하게 연결되어 있어서 외국 투자자와 투자유치 국가 사이에 외국투자 업무가 진행되는 동안에 적지 않은 인권문제가 발생할 수 있다. 본 연구는 외국투자회사에서 근무하는 직원의 마약 중독 혐의로 인하여 부당해고를 당한 경우 해당 직원의 인권 문제를 투자자 국가 분쟁해결제도의 틀 안에서 해결할 수 있는 가에 대해 살펴보고자 한다. 기업의 사회적 책임과 인권에 관련된 이슈들이 투자자의 권리를 주장하고 실현하는 과정에서, 또는 투자협약 위반에 대한 보상 판결을 집행하는 과정에서 점진적으로 그 중요성이 부각되어 왔다. 투자 관련 분쟁이 발생하게 되면 투자자는 분쟁 해결을 위하여 여러 조치들을 취할 수 있다. 투자자는 먼저 투자 유치 국가의 법원에서 법적 구제 조치를 취할 수 있다. 한편으로는 투자 유치국가의 사법제도가 투자 유치 국가의 편을 들 수 있는 편파성의 우려 때문에 만약 투자자와 투자유치 국가사이에 양자투자조약(BIT) 또는 국제투자조약(IIA)이 존재한다면 외국 투자자는 국제 투자 중재 절차를 활용할 수 있다. 투자 중재는 투자자와 투자유치 국가 간의 분쟁을 해결하는 가장 효과적인 수단으로 부상하였으며, 그 결과 800건이 넘는 투자분쟁이 투자 중재 절차를 통해 해결되고 있다. 하지만, 이렇듯 급격히 증가한 투자분쟁사건들 가운데에는 인권 분쟁처럼 비투자적 의무 불이행의 문제들이 심각하게 대두되고 있다. 인권문제는 투자자, 투자 유치국가, 그리고 투자계약과 관계없는 비당사자가 제기할 수 있다. 특정의 양자투자조약이나 국제투자조약의 관할 조항이 투자와 직접적인 관련이 있는 분쟁이외에도 넓은 범위의 분쟁도 포함하도록 되어 있으면 해당 분쟁애결과정에서 인권 위반문제도 포함되어 심리할 수 있다. 설령, 관할조항 문구가 넓게 되어 있지 않다하더라도 투자자가 투자유치국가에 설립한 회사의 ‘기업의 사회적 책임’ 법리를 통해 인권문제도 다루어 질 수 있다.

Multilateral Investment Court – a Cure for Investor-State Disputes Under Extra-EU International Investment Agreements?

Both branches of international economic law – international investment and trade law are currently in crisis. Many reforms have been proposed to cure the shortcomings of their dispute resolution mechanisms. Distinctive though they are, it seems that the newest EU’s proposal to establish the Multilateral Investment Court is heavily inspired by the dispute settlement system which exists in the World Trade Organization. The new system has been introduced to replace the investor-State dispute settlement mechanism existing in most investment treaties. In this article, the author assesses the objectives of the reform through the prism of successes and failures of the WTO dispute settlement system.

International Protection of Foreign Investments in Offshore Energy Production and Marine Environmental Protection: Birds of a Feather or Frenemies Forever?

Initially, international investment law and international law on the protection of the marine environment were two branches that developed separately. As these international regimes mature, they often speak to the same facts, bringing about their ever-increasing normative interaction, way before any disputes arise. The regulation of investments in offshore energy production is chosen as a case study because it exemplifies how these two bodies of international law can interact. The article does not conceptualize these two international regimes as inherently antagonistic but instead highlights their potential complementarity. Yet, it is primarily the issue of normative conflicts between those two regimes which has generated heated scholarly debates. Against the backdrop of sweeping critiques about the potential ‘regulatory chill’ of international investment agreements and their investor-State dispute settlement mechanism, this contribution examines whether arbitral tribunals have interpreted and applied investment rules in a fashion that can unduly restrict the discretion of host States to honour their marine environmental obligations. First, it explores why and how international investment law and marine environmental law interact and influence each other’s implementation. In a second step, the article investigates the impact (if any) of investment obligations on the discretion of host States to comply with their marine environmental protection obligations. Adopting a forward-looking perspective, it finally enquires into the potential impact of the reformed provisions under new generation IIAs on the right and duty of States to take all necessary measures to protect the marine environment against pollution from offshore energy production activities.

International Investment Arbitration in the European Union

The author analyses the regulation of institutional arbitration under investor–state dispute settlement mechanisms, with an emphasis on such arrangements to which the European Union is a party. The functioning of the EU’s Investment Court System is presented in detail as a major reform to the status quo, along with some questions raised when qualifying this system as a means of arbitration, especially for the purposes of recognition and enforcement of decisions rendered, both in jurisdictions party to the Comprehensive Economic and Trade Agreement between Canada and the European Union and third countries. The latter problem is identified as a significant aspect of international investment arbitration.

International Investment and Indigenous Peoples' Environment: A Survey of ISDS Cases from 2000 to 2020.

Indigenous peoples’ environments can be easily disrupted by foreign investments, and disputes have occasionally occurred over the past few years. The objective of this research article is to examine if current international investment law, especially its investor-state dispute settlement (ISDS) mechanism, could provide necessary protection to Indigenous rights. We searched all publicly available ISDS cases from 2000 to 2020, and selected 10 typical ones for comprehensive case study by using various research methods such as doctrinal legal research and comparative analysis. Our research revealed that Indigenous peoples’ participation in the ISDS proceedings is legally restrained, time-consuming, and rarely favorably decided by the arbitral tribunals. Responsibility for such undesirable outcomes rests with all stakeholders involved in the process, while the consequences of post-arbitration tend to be “triple losing”. These findings highlight the quest for a more sustainable international investment regime that promotes Indigenous peoples’ wellbeing and environment protection. We argue that future reform could be promoted not only over ISDS procedural matters, but also by upgrading substantive rules in international investment agreements (IIAs), emphasizing free, prior, and informed consent (FPIC), and strengthening foreign investors’ corporate social responsibilities (CSR).

The unsustainable political economy of investor–state dispute settlement mechanisms1

Investor–state dispute settlement mechanisms were intended to protect companies from the Global North against expropriation by Global South countries. Since 2000, investor–state dispute settlement mechanisms have increasingly been used against Northern countries to obtain compensation for and constrain policy decisions around nationalisation and remunicipalisation, as well as around the environmental or social regulation of service provision that threatens commercial interests. Social movements and governments alike resisted investor–state dispute settlement mechanisms, and despite the power wielded by multinational companies, the global trend is now to exclude investor–state dispute settlement mechanisms from new investment treaties. The purpose of this article is to provide a political-economy analysis of the processes of supporting and contesting the role of investor–state dispute settlement mechanisms in international treaties, processes that include activity at national, sub-national and international levels. The ensuing conflicts are analysed in terms of post-colonial contradictions over sovereignty under globalisation, continued contestation over the role of the public sector and climate change policies.Points for practitionersThe probability of investor success with investor–state dispute settlement mechanism claims should not be overestimated, and investor assessments of the basis and prospects for such cases should be subject to critical scrutiny. Governments should be aware of widespread popular antagonism towards investor–state dispute settlement mechanisms and global trends to remove such clauses from agreements. They should also review all bilateral investment treaties, free trade agreements and the Energy Charter Treaty that the country has ratified to assess the potential relative advantages of retention or leaving.

INVESTOR-STATE DISPUTE SETTLEMENT, ACCESS TO JUSTICE AND LOCAL AND INDIGENOUS COMMUNITIES: BALANCING THE REALITIES IN THE MIX

One of the critical issues arising from the intersection of international investment law and human rights is the question of whether investor-state dispute settlement (ISDS) holds any potency for access to justice for local and indigenous communities. It is a given that ISDS offers an aggrieved foreign investor the avenue to approach an international arbitral tribunal to seek compensation from the host state, in furtherance of a claim of breach of a Bilateral Investment Treaty (BIT) provision by the latter. With this, a foreign investor can rest assured of one thing: there is always a forum out there to intervene without thinking of suffering any victimization before the local courts or system of the host state. Howbeit, the same cannot be said of the local and indigenous communities, taking into consideration the normative character of the ISDS, which does not permit indigenous communities to institute claims directly save through the host states. As a result, it is left to be ascertained, the extent to which indigenous communities access justice under the ISDS mechanism – an issue which this research work is focused on addressing. As is indicated later in the conclusion herein, despite the introduction of certain mechanisms like amicus curiae and contributory fault into ISDS, indigenous communities are still limited in their ability to access justice, and there is no certainty that things will get better in the coming future if the needed changes are not introduced into the system.

Does regulatory chill still concern states?

Public health measures taken by States have been subject to mounting arbitration legal challenges. These challenges resulted in an argument that investment agreements in general and the prevalence of the Investor-State Dispute Settlement (ISDS) mechanism, in particular, may force governments to refrain from introducing new legislative or policy measures due to a fear that the measures could be contested by investors. This situation, a fear to adopt legislative and similar other measures, is often referred to as “regulatory chill.” Recent arbitration cases show, however, that some of the cases involving pharmaceutical and similar other companies have been decided in favor of State Parties to the ISDS. In this regard, the legal claims initiated by Eli Lilly against the Government of Canada or the arbitration claims brought by Philip Morris against the Government of Australia and Uruguay can be cases in point. Due to these recent cases, some scholars have argued that the ISDS decisions (such as Eli Lilly and Government of Canada) demonstrate that regulatory chill may not be States’ concern anymore. This paper examines the obligations of State Parties to the International Covenant on Economic, Social and Cultural Rights (ICESCR or Covenant) to ensure access to affordable health technologies (medicines, vaccines, etc.) and the likelihood of investment agreements to result in a “regulatory chill” that hinders the realization of the obligations. In order to do so, the paper takes the TPP’s (now CPTPP) investment chapter as a case in point.

Africa and investor-state dispute settlement: Mixed reactions, uncertainties and the way forward

ABSTRACT Investor-state dispute settlement (ISDS) is a legal mechanism that allows foreign investors access to a supposedly neutral dispute resolution forum other than the court system of the host country in which the dispute arose. Globally, ISDS resolution mechanisms are currently confronted with unprecedented levels of scrutiny, and the system’s legitimacy is being questioned by both developed and developing countries alike. In Africa, criticisms of ISDS and the actual benefits of investment agreements for developing country host nations have informed recent collective efforts to shape dispute resolution mechanisms provided for in continental, regional and bilateral investment agreements. In light of these developments, this paper examines the contemporary international law regime in Africa and the ISDS mechanisms that are put in place by such an investment framework from the global, continental, regional and bilateral perspectives. It argues that African countries should not abandon ISDS, and provides recommendations on the way forward.

A Submission to the Joint Standing Committee on Treaties on the Regional Comprehensive Economic Partnership (RCEP)

This submission provides a critical analysis of the proposed Regional Comprehensive Economic Partnership (RCEP) – focusing in particular upon intellectual property and innovation policy.Recommendation 1 RCEP has a broad membership – even with the departure of India from the negotiations. Nonetheless, there remain outstanding tensions between participating nations – most notably, Australia and China. The re-emergence of United States into trade diplomacy will also complicate the geopolitics of the Asia-Pacific.Recommendation 2 The closed, secretive negotiations behind RCEP highlight the need for a reform of the treaty-making process in Australia, as well as the need for a greater supervisory role of the Australian Parliament.Recommendation 3 In terms of intellectual property principles and objectives, RCEP promotes foreign investment and trade, and intellectual property protection and enforcement. The agreement needs a stronger emphasis on public policy objectives – such as access to knowledge; the protection of public health; technology transfer; and sustainable development.Recommendation 4 RCEP establishes TRIPS-norms in respect of economic rights under copyright law.Recommendation 5 The agreement does not though enhance copyright flexibilities and defences – particularly in terms of boosting access to knowledge, education, innovation, and sustainable development.Recommendation 6 RCEP provides for a wide range of remedies for intellectual property enforcement – which include civil remedies, criminal offences and procedures, border measures, technological protection measures, and electronic rights management information. Such measures could be characterised as TRIPS+ obligations.Recommendation 7 The electronic commerce chapter of RCEP is outmoded and anachronistic. Its laissez-faire model for dealing with digital trade and electronic commerce is at odds with domestic pressures in Australia and elsewhere for stronger regulation of digital platforms.Recommendation 8 RCEP provides for protection in respect of trade mark law, unfair competition, designs protection, Internet Domain names, and country names.Recommendation 9 As well as providing safeguards against trade and investment action by tobacco companies and tobacco-friendly states, RCEP should do more to address the tobacco epidemic in the Asia-Pacific.Recommendation 10 RCEP has a limited array text on geographical indications, taking a rather neutral position in the larger geopolitical debate on the topic between the European Union and the United States.Recommendation 11 RCEP has provisions on plant breeders’ rights and agricultural intellectual property. There is a debate over the impact of such measures upon farmers’ rights in the Asia-Pacific.Recommendation 12 RCEP does not adequately respond to the issues in respect of patent law and access to essential medicines during the COVID-19 crisis. Likewise, RCEP is not well prepared for future epidemics, pandemics, and public health emergencies.Recommendation 13 RCEP provides limited protection of confidential information and trade secrets – even though there has been much litigation in this field in the Asia-Pacific.Recommendation 14 RCEP is defective because it fails to consider the inter-relationship between trade, labor rights, and human rights.Recommendation 15 RCEP fails to provide substantive protection of the environment, biodiversity, or climate in the Asia-Pacific.Recommendation 16 RCEP does little to reform intellectual property in line with the sustainable development goals.Recommendation 17 RCEP does not adequately consider Indigenous rights – including those in the Asia-Pacific.Recommendation 18 RCEP does not contain an investor-state dispute settlement mechanism. However, the Investment Chapter does have a number of items, which are problematic.

The Prospects for Tobacco Plain Packaging in Asia: No Longer Smoke up in the Air?

The finalization of negotiations over the Trans-Pacific Partnership (“TPP”) in October 2015 saw an exemption for tobacco products in the investor-state dispute settlement mechanism. This carve out for tobacco products paved the way for governments to consider introducing plain packaging without the concern that tobacco companies would take legal action against them. Most prominent, however, has been the World Trade Organization’s (“WTO’s”) 2018 ruling affirming a country’s right to impose tobacco plain-packaging rules because WTO agreements contain exemptions that permit countries to implement regulations which deemed it necessary to protect the health of their citizens. This article discusses the impact of this decision on initial proponents of tobacco plain packaging including Australia who have introduced statutory limitations on tobacco plain packaging, and the impact that these negotiations will have on opponents of plain packaging, particularly for countries in Asia with establishing trademark regimes. This article presents fresh insight into the legality or otherwise of this tobacco control measure under the Agreement on Trade-Related Aspects of Intellectual Property Rights, relevant international health instruments, and negotiations over the TPP. In particular, it makes pertinent policy recommendations to pave the way forward for legislatures and policy-makers after an analysis of whether plain packaging comes within the scope of the international system for trademark protection as implemented in Thailand, the People’s Republic of China and Australia.

Trade-Related Aspects of Intellectual Property Rights Waiver at the World Trade Organization: A BIT of a Challenge

To augment the global production and distribution of Covid-19 medical products such as vaccines, drugs and other therapeutics, countries are negotiating for temporarily waiving certain provisions of the TRIPS agreement at the WTO. Depending on the conditions that would govern the waiver, countries would amend their domestic intellectual property (IP) laws to effectively implement the waiver. While the waiver would provide immunity to IP-related regulatory measures from legal claims at the WTO, multinational pharmaceutical companies can use the investor-State dispute settlement (ISDS) mechanism under bilateral investment treaties (BITs) to challenge such IP-related regulatory measures. In case of such a challenge to IP-related regulatory measures, will the host State be able to defend these measures? The paper answers this question by dividing the investment treaty practice into those BITs that contain carve-out for IP and those that don’t. The former set of treaties provides greater regulatory autonomy to implement the TRIPS waiver. However, given the fragmented and incoherent nature of the ISDS mechanism, the final outcome would depend on arbitral discretion.

Investment Protection Under the EU–UK Trade and Cooperation Agreement: Limited but Predictable?

After ten months of intense negotiations, the EU-UK Trade and Cooperation Agreement (TCA) was concluded on 24 December 2020. The TCA runs to 1,246 pages and covers what may be the broadest range of issues ever to be addressed within an international trade agreement. However, the TCA’s limited investment protection provisions have been met with perplexity and expressions of disappointment among commentators. In particular, the limited set of substantive investment protections and the absence of an investor-State dispute settlement (ISDS) mechanism have been viewed as something of a missed opportunity, particularly as the EU and the UK have agreed to more expansive investment chapters in recent trade agreements with third parties. Why did the UK and the EU ultimately limit the scope of investment protection and exclude ISDS under the TCA? This article examines this question by analysing the key features of the TCA’s investment chapter and tracing the underlying investment policy dynamics, including the UK’s and the EU’s respective negotiating positions that led to the TCA’s circumscribed investment chapter. This article also considers the significance and potential implications of the TCA for the UK’s and the EU’s respective investment policies going forward.

The exhaustion of local judicial remedies in investor-state dispute settlement: a proposal for the African Continental Free Trade Agreement on Investment Protocol

ABSTRACT Over the past few years, the international Investor-State Dispute Settlement (ISDS) mechanisms have been confronted with an unprecedented level of scrutiny, and the system's legitimacy is being questioned by both developed and developing countries alike. This article presents a proposal for the adoption of the old customary international law rule of exhaustion of local remedies in the upcoming Investment Protocol of the African Contin en tal Free Trade Agreement (AfCFTA). It observes that the ISDS mechanism that will be developed under the AfCFTA framework is likely to be shaped by the legitimacy crisis in investment treaty arbitration and ongoing global debates about the reform of the ISDS mechanisms. In particular, the ISDS debate in the African region will continue to characterise and potentially derail the negotiations of the AfCFTA Protocol on Investment. The main contention is that adopting the exhaustion of local remedies under the AfCFTA Protocol on Investment before recourse is had to the ISDS is arguably the single reform with the greatest potential to foster a balanced investment dispute resolution mechanism and reduce political opposition to ISDS while still providing investors with access to ISDS when domestic remedies are inadequate. The article finally proposes a drafting suggestion for the adoption of the exhaustion of local remedies rule into the ISDS provision of the AfCFTA Protocol on Investment. Keywords: Exhaustion of local remedies; African Continental Free Trade Area; Investment Protocol; ISDS; African courts.

China\u2019s Stance on Investor-State Dispute Settlement: Evolution, Challenges, and Reform Options

China is one of the most active states in concluding bilateral investment treaties (BITs) globally. Its BITs can be categorized into three generations based on the homogeneity of the investor-state dispute settlement (ISDS) provisions within each generation. The China–EU Comprehensive Agreement on Investment and the China–US BIT under negotiation are expected to inaugurate a fourth generation, although China’s stance on ISDS in both treaties remains indeterminate. This article elaborates on the distinctive characteristics of ISDS provisions by mapping three generations of Chinese BITs, presenting the challenges that these ISDS provisions have brought to light in investor-state adjudication as well as in the context of the Belt and Road Initiative, and expounding on China’s policy options in ISDS reform. The on-going intense debate on ISDS reform presents China with an opportunity to shift from its traditional role of a rule-taker to a rule-maker in redesigning the ISDS mechanism. However, China’s current policy and practice do not demonstrate an ambition for such a transformation. Looking forward, it may well be in China’s long-term interest to endorse a Multilateral Investment Court as vigorously advocated by the EU.

Balancing on a tightrope: Opinion 1/17 and the ECJ’s narrow and tortuous path for compatibility of the EU’s investment court system (ICS)

Like a tightrope walker, the Court is engaging in a delicate balancing act in its Opinion 1/17, seeking a path of compatibility of the ICS with the treaties that will allow it not to compromise its requirement of compliance with the Constitutional Charter of the European Union.With a benevolent interpretation of the provisions of the CETA and the acts accompanying its development, it stipulates the obligations that the EU institutions will have to fulfil to ensure the implementation of Chapter 8 Section F of the CETA, and its long-term compatibility with EU law. In doing so, it validates the European model of the investor-State dispute settlement mechanism, enabling it to be applied in other bilateral agreements and, eventually, on a multilateral basis.

The CETA ICS and the Autonomy of the EU Legal Order in Opinion 1/17 – A Compass for the Future

AbstractIn April 2019, the Court of Justice of the EU (‘CJEU’) handed down its Opinion (C-1/17) on the compatibility of the Investment Court System (‘ICS’), that is the Investor-State Dispute Settlement (‘ISDS’) mechanism under the EU-Canada Comprehensive and Economic Trade Agreement (‘CETA’), with EU law. This article puts Opinion 1/17 in its broader (policy and legal) context, focusing on the salient issue of compatibility with the principle of autonomy of the EU legal order. It argues that the Court's openness to this judicial competitor was an acknowledgment of the need to maintain the powers of the Union in international relations. However, Opinion 1/17 should not be perceived as an automatic green light for any future investment court (such as the Multilateral Investment Court) as the autonomy test it introduces is a rather difficult one to pass.

Trade agreement depth, foreign direct investment, and the moderating role of property rights

In this study, we theorize that preferential trade agreements (PTAs) send two distinct signals to foreign direct investors. At the first tier, a PTA signals that member states will maintain stable and peaceful relations with one another, making overt host-state hostility toward investors headquartered in member countries unlikely. At the second tier, a PTA can signal that investments will be safe from subtler meddling that infringes on property rights. While any PTA sends the first-tier signal, only deep PTAs with provisions such as investor-state dispute settlement mechanisms and property rights protections provide this second-tier signal. The second-tier signal is especially important to investors in countries where property rights are weak, as the extra protections provided by a deeper agreement can substitute for those that are missing at the domestic level. We find empirical support for our argument: PTA depth is positively associated with FDI between member countries, but the association weakens as property rights laws in host countries increase in strength. These findings suggest that governments can attract higher levels of FDI through comprehensive trade agreements, as opposed to shallow PTAs, when domestic policies are not sufficient. However, shallow agreements suffice where domestic policy already protects property rights.