Investor-state Dispute Settlement Mechanism Research Articles

International Investment Agreements, Human Rights, and Environmental Justice: The Texaco/Chevron Case From the Ecuadorian Amazon

Abstract The Texaco/Chevron lawsuit, which started in November 1993 and is still being litigated in 2020, is a prominent example of the process of judicialization of environmental conflict. The Ecuadorian plaintiffs claim that the oil company’s operations generated ruinous impacts on the environment and on the development prospects and health of nearby individuals and communities. The tortuous and lengthy judiciary process was further hindered by an arbitration process, an Investor–State Dispute Settlement mechanism nested in the Ecuador—United States Bilateral Investment Treaty. The significance of the case goes beyond the specifics of Ecuador and provides further arguments fuelling the protracted legitimacy crisis experienced by International Investment Agreements. The current praxis of Investor–State Dispute Settlement mechanisms is generating an asymmetrical system, protecting the interest of investors, and intruding into the space of human and environmental rights. These issues are resonating with social movements, activist scholars and policy makers who are reacting to the vulnerabilities engendered by International Investment Agreements through multipronged strategies. These asymmetries provide ammunition to resist the signing of new International Investment Agreements, support the inclusion of human and environmental rights safeguards in International Investment Agreements, and contribute to the rationale of pre-empting extractive projects that are likely to produce severe environmental liabilities. Some of the potential ways in which a somewhat more level playing field can be created include, in addition to denouncing investment agreements, transforming Investor–State Dispute Settlement mechanisms towards a format that can also accommodate the complaints of affected communities or enacting moratoria on extraction projects that are prone to adverse socioenvironmental impacts. Both strategies could prove to be productive avenues towards the achievement of justice.

Reforming the investor-state dispute settlement mechanism and the host state’s right to regulate: a critical assessment

This paper aims at understanding the relationship between the investor-state dispute settlement (ISDS) mechanism and the host states’ right to regulate. Fragmented into over 3300 bilateral investment treaties (BITs), international investment law is being increasingly challenged by states who believe that the regime is imbalanced. This can be seen from the decision of various states to either opt out of bilateral investment treaties or to reform the existing treaties. This paper would analyze the several connotations that the term right to regulate possesses and then attempt to see whether the present ISDS mechanism poses threat to host state’s regulatory power. Right to regulate for the purpose of this paper means the right of states to deviate from their investment commitments for public purposes such as health, environment, sustainable development, corporate social responsibility, without incurring the duty to compensate. It is stated by various authors that the investment regime has led to a situation of regulatory chill. Regulatory chill is understood to be a situation where governments do not enact or enforce legitimate regulatory measures due to concern about ISDS. The paper argues that though the present system imposes limitations on the host state’s right to regulate, it cannot be said to have created a chilling effect. It is further discussed that the ambiguity of the ISDS procedure leads to a situation where both states and investors are unclear about the outcome of a dispute. This lack of clarity creates uncertainty whenever a dispute is brought before an arbitral tribunal. It is argued that procedural reforms to the ISDS mechanism could be one way to remedy this situation. Making the system more transparent, forming a clear standard of review, and establishing a permanent arbitration forum or creating an appellate mechanism are some of the ways which could help in striking a balance between investment protection and protecting the host states’ right to regulate.

INDONESIAN PERSPECTIVE ON THE INVESTOR–STATE DISPUTE SETTLEMENT MECHANISM FOR FOREIGN INVESTMENT DISPUTE SETTLEMENT IN THE FIELD OF INTELLECTUAL PROPERTY RIGHTS

Investment includes tangible and intangible assets. Intangible assets are often connected with intellectual property which leads to intangible results. The lack of “visibility” in intangible assets makes them difficult to measure. Current international regulations have not also explicitly provided room for enforcement regarding intellectual property rights in terms of foreign investment. Therefore, an emergence of cases is observed in investment disputes within the field of intellectual property rights through the Investor–State Dispute Settlement (ISDS) mechanism. In this research, we discuss cases of foreign investment disputes in such a field. From these cases, we find the factors that determine the occurrence of foreign investment disputes in the field of intellectual property rights. The ISDS mechanism can be used to resolve foreign investment disputes in the field of intellectual property. Furthermore, this research discusses the perspective of Indonesian law regarding foreign investment disputes in the mentioned field by using the ISDS mechanism. Qualitative methods and secondary data analysis are also used. The research aims to discover and identify foreign investment disputes in the field of intellectual property rights.

Legitimacy challenges of trade and investment agreements from a developing country’s perspective

The article is devoted to the problems of government regulation and supremacy of law as well as situation of international investment regime in developing countries. The author explores problems of investment treaties and compares existing ways to protect investments on regional level in different countries. There is detailed overview of investor-state dispute settlement mechanisms. The issues are presented from the perspective of developing countries, in particular the African continent. The general conclusion is that for efficiency development of infrastructure by enhancing industries investments it is necessary to increase regional regulation as well as regionalization of regulatory bodies and agencies.

CETA and the External Autonomy of the EU Legal Order: Risk Regulation as a Test

This article endeavours to assess whether the Investor-State Dispute Settlement (‘ISDS’) mechanism established under the Comprehensive Economic and Trade Agreement (‘CETA’) may in fact undermine the external autonomy of the EU legal order, arguing that in Opinion 1/17 the Court of Justice of the European Union (‘CJEU’) has lowered the bar in its analysis of compatibility with this principle. After a brief overview of the notion of external autonomy the article turns to an analysis of the CETA Opinion, arguing that the CJEU confined itself to a formal scrutiny of the relevant textual provisions and failed to thoroughly explore the impact that CETA’s ISDS mechanism is liable to have in practice. The article then deploys two hypothetical scenarios, both involving the field of EU risk regulation. These will show how CETA Tribunals might indirectly interpret EU law as a matter of law and how, when assessing whether an EU measure breaches CETA, they might encroach on the EU determination of the adequate level of protection of public interests. Against this backdrop, the article argues that CETA’s ISDS system is liable to undermine the uniform and consistent interpretation and application of EU law. Further, CETA Tribunals might de facto bind the CJEU in its interpretation of EU law and influence other EU institutions in the exercise of their powers. CETA, ISDS, External Autonomy, Achmea, Risk Regulation, GMOs, Health and Environmental Protection.

The Rise of NAFTA 2.0: A Case Study in Effective ISDS Reform

From 1994 to 2020, the North American Free Trade Agreement (NAFTA) enabled a free trade zone in the region. Its early days were undoubtedly successful. NAFTA was credited with stimulating trade, economic growth, and cooperation among Canada, Mexico, and the US. Yet, NAFTA was not without controversy. Its Chapter 11 offered an Investor-State Dispute Settlement (ISDS) mechanism that American and Canadian trade negotiators anticipated would protect their investors from risks posed by Mexico’s legal system. They did not expect ISDS claims against their own governments, which they perceived as a threat to their sovereignty. NAFTA’s successor, the US–Mexico–Canada Agreement (USMCA) entered into force on 1 July 2020 and adopts a new approach to ISDS within its Chapter 14. As the existing ISDS system faces increasing criticism and scrutiny, much of the debate centres on whether the ISDS system remains fit for its purpose. This chapter examines the social, political, and experiential circumstances which led to the rise of USMCA. It concludes that USMCA is a practical example of effective ISDS reform. In sum, the story of USMCA demonstrates that evolution, and not death, is the answer to the modern ISDS debate.

Recent Investment Cases Against EU Member States: Europe’s Green Energy Policies Under Threat?

As a consequence of rising environmental concerns, a substantial number of EU member states undertook various programs aimed at subsidizing the renewable energy sector and promoting related foreign (and domestic) investment. During the 2010s, several renewable energy programs were replaced by less favourable legal regimes. These changes led to foreign investors suing the relevant countries, through the controversial investor-state dispute settlement (ISDS) mechanism reserved solely for foreign investors. The costly nature of ISDS proceedings (such as legal fees and large arbitral awards) could cause a discouraging effect among member states considering similar renewable energy programs. This research thus aimed to examine whether such concerns have potential merit, whether the cases result in a downturn for renewable promotion in the EU. The method for doing so was through investigating two ISDS cases, followed by an analysis of the two affected countries' stance towards renewable energy before, during and after the ISDS process, and briefly discussing what lessons for other states could be found in the rulings. The research's finding was that a clear discouraging effect could not be established in either cases, and that it is unlikely that ISDS will negatively affect renewable energy promotion.

The EU-Vietnam Investment Protection Agreement Investor-State Dispute Settlement Mechanism in Perspective

The EU-Vietnam Investment Protection Agreement (EVIPA) represented the culmination of three years of negotiations between the EU and Vietnam. Although it remainsto be ratified, it promises to have an impact on the international investment treaty landscape. The treaty contains innovations ranging from its definition of the substantive protections afforded to foreign investors to its definition of ‘investments’ and ‘investors’ that may qualify for those protections, as well as the procedural modalities for the treatment of possible disputes. Its most distinctive trait, however, is its establishment of a semi-permanent adjudicatory body akin to an investment court in replacement of the arbitration model envisaged by the vast majority of investment treaties over the past several decades. Rather than attempt to reform, the evipa drafters have done tabula rasa and opted for revolution instead. The EVIPA’S envisaged method to select, appoint, and remunerate the members of that body – both at the first instance level and at the appellate level – represents an abrupt and profound abandonment of the traditional arbitration model so frequently and presently used in international disputes around the world. The evipa may thus present an opportunity to test an alternative dispute resolution system and thus to aid in determining the most effective and appropriate method to resolve the international investor-State disputes of the future.

Russia’s International Investment Treaties: Recent Development.

The past 15 years have seen dramatic changes in Russia's investment treaty and arbitration practice. As a major player in international investment activities and a prominent constituent of the group of 5 BRICS countries which is considered to be a new power hub in international relations in the twenty first century, Russia's divergent approaches to investment treaties and arbitration practice have attracted wide attention and debates. What adds to that curiosity is that Russia is a significant participant in the United Nations Commission on International Trade Law (UNCITRAL) discussions to reform the investor-state dispute settlement (ISDS) mechanism, and the world has been watching any slight shifts in its approach closely. Hence, it is necessary to gain insight into the underlying consideration of Russia's legal practice.

Intellectual Property and Investment Law: An Introduction

This short contribution constitutes the introductory chapter of the Research Handbook on Intellectual Property and Investment Law edited by Christophe Geiger and forthcoming in the Research Handbook series of Edward Elgar Publishing. The volume explores the complex and controversial interaction between intellectual property and investment law in the light of recent developments at international, European and national level. Indeed, international investment agreements often include specific references to IP rights in the list of ‘investments’ protected, thus allowing private parties to challenge States’ measures through investor-state dispute settlement (ISDS) mechanisms. Furthermore, the Handbook critically examines the legitimacy of current practices with regard to the social function of IP rights and the regulatory autonomy of States to take measures of public interest, as well as the likely avenues for future developments in the field. All the high profile cases are discussed not only in their investor-state context but also in the framework of other fora where they have been adjudicated such as the World Trade Organization. The interaction with fundamental rights and ethics is also explored, as well as some specific implications for the EU, in particular in the context of proposed reforms for the controversial ISDS mechanisms in recently adopted bilateral agreements such as CETA.

El arbitraje de inversiones entre la Unión Europea y Singapur: ¿Del arbitraje de diferencias Estado-Inversor a un sistema de Tribunales de Inversiones?

El régimen de arbitraje de inversiones entre la Unión Europea (UE) y Singapur ha pasado del arbitraje de diferencias Estado-inversor propuesto por el borrador del Acuerdo de Libre Comercio entre la UE y Singapur del 2015 a un Sistema de Tribunales de Inversiones en el borrador del Acuerdo de Protección de las Inversiones entre la UE y Singapur (APIUES) del 2018. Esta evolución se fundamenta en: a) los cambios de forma y fondo introducidos por el APIUES; y, b) un análisis comparativo de los sistemas de tribunales de inversiones previstos en el APIUES, la Asociación Transatlántica para el Comercio y la Inversión entre la UE y los Estados Unidos, y el Acuerdo Económico y Comercial Global entre la UE y Canadá.Recibido: 10 febrero 2019Aceptado: 21 junio 2019Publicación en línea: 31 julio 2019

Arbitral interpretation of investment treaties : problems and remedies for the debate on "legitimacy"

The last couple of decades have seen a considerable increase in the submittal of investment claims to Arbitral Tribunals – a process which has often been linked to the “proliferation” of investment treaties. Alongside, a debate on the so-called “legitimacy” of the Investor-State dispute settlement mechanism not only emerged (and prompted calls for reform) but also refuses to go away. Treaty interpretation has not been in the forefront of discussion. Authorized (“authoritative”) interpretation – as performed by Arbitral Tribunals – is perhaps one of the issues of least (if any) concern. This Article explores the distinction between authentic and authorized interpretation vis-a-vis the multiple issues arising from vesting excessive significance in authorized interpretations of Investor-State Arbitral Tribunals, in the events in which States Parties to the relevant investment treaty do not have opposing views on the construction of a conventional clause. Drawing on the referral to the notable cases in which this issue has arisen, this Article will present a few recommendations.

Old Agreements Must Be Terminated to Bring Life to Investment

Australia and Indonesia have signed a Comprehensive Economic Partnership Agreement that includes an investment chapter as well as an investor-State dispute settlement mechanism. Yet the concluded treaty affirms rights and obligations under all existing treaties including an older-style bilateral investment treaty (BIT). With elections just completed in both countries, an opportunity arises to rethink this approach to overlapping treaties. The two countries should agree to terminate their older BIT upon entry into force of the new agreement. Failure to do so risks complicating the existing relationship and heightening uncertainties with respect to regulatory sovereignty in both countries. Australia and Indonesia should look to their own existing practices to terminate the older agreement. Termination in such circumstances provides an important means of reforming international investment law.

Biologics Under a New NAFTA

Scientific developments, such as biologics and personalized medicine, have created an entirely new category of pharmaceutical drugs that were not considered when the North American Free Trade Agreement (“NAFTA”) was adopted in 1994. However, the rise of biologics has increased demand for a reconfigured NAFTA, particularly with respect to Chapter 17, which outlines NAFTA’s robust intellectual property standards, as well as Chapter 11, which both lays out the framework for foreign investment under NAFTA and introduces a controversial mechanism referred to as the investor-state dispute settlement mechanism (“ISDS”). The intellectual property provisions of the original NAFTA should be revised to mirror the similar provisions of the Trans-Pacific Partnership (“TPP”) Agreement, which better accommodates new medical advances. However, despite criticism of their lack of transparency, the investment provisions of the original NAFTA are likely sufficient to grant medical patent-rights holders the investment protection that they seek because they strengthen transparency, which is ultimately good for business.

Assessing the Rules of Appointing Arbitrators under the EU’s Investment Court System

In recent years investor–state arbitration has faced a number of criticisms, such as the pro-investor allegation, the lack of transparency and the regulatory chilling effect. In 2015, the EU proposed an Investment Court System (ICS) in the investment chapter of the Transatlantic Trade and Investment Partnership negotiated between the EU and the US. This new mechanism is designed to improve the investor–state dispute settlement mechanisms, in particular the investor–state arbitration. A unique feature of the ICS is that it deprives the right of the disputing parties to appoint arbitrators. This is an apparent departure from the common practice of conventional investor–state arbitration, such as that conducted under the rules of the International Centre for Settlement of Investment Disputes. This new approach seems to formulate itself on the pro-investor hypothesis that asserts that the appointment of an arbitrator by an investor will lead to the appointee’s bias in favour of the investor. This paper assesses whether such methodology is justifiable and necessary by discussing the pro-investor allegation and rebutting it with empirical evidence. This paper considers the challenge procedure as the more appropriate and practical safeguard against an arbitrator’s bias.

Investment Promotion and Protection in the Canada-UK Trade Relationship

A new investment agreement between Canada and the UK constitutes a crucial opportunity to include innovative provisions from recent international agreements and to explore new possibilities to construct a more legitimate regime. In order to support evidence-based decision-making in the negotiation of such an agreement, a comprehensive review of the range of opportunities must be provided. What are the provisions that can be included in an investment agreement between the two states to address controversial issues and support the reform of the international investment regime? The objectives underlying the final report are to allow policy-makers to undertake the negotiation process with a clear sense of the various provisions that are available to address the most controversial issues of international investment law and their legal implications. The report demonstrates that an investment agreement can respond to legitimacy concerns raised by a variety of stakeholders. More specifically, it provides a side-by-side comparison of provisions that have already been included in IIAs and model agreements for three specific themes: 1) dispute settlement possibilities; 2) the breadth of investment protection; and 3) obligations imposed on foreign investors. For each theme of the knowledge synthesis, the material that has been collected and analyzed is synthesized through a side-by-side comparison of provisions and their legal implications. 1. Dispute settlement possibilities: The mechanism allowing private investors to submit investment claims to international arbitration has come under increasing public scrutiny, with several actors criticizing its lack of legitimacy. Some policy-makers and negotiators have responded to these criticisms through various means. The report focuses particularly on six approaches that have been included in IIAs and model agreements. These approaches range from a reformed investor-state dispute settlement mechanism through the inclusion of new provisions, a return to diplomatic protection and state-to-state arbitration, reliance on domestic courts, alternative dispute resolution mechanisms, hybrid approaches, and an investment court system. 2. Breadth of investment protection: Addressing concerns raised by stakeholders can also be achieved by further clarifying the content of standards of protection that are traditionally included in IIAs. An enhanced level of precision is especially visible with respect to fair and equitable treatment (FET) and expropriation. Various options have been used by states to qualify FET provisions and to list the elements included in this standard of protection. Other provisions include a limiting definition of indirect expropriation or various forms of carve-outs, including for general regulatory measures. 3. Obligations imposed on foreign investors: With a view to countering the generally asymmetric nature of IIAs, some states have chosen to address foreign investors’ responsibilities in various ways. Some examples refer to these responsibilities in the preamble of an IIA or in provisions referring to the concept of corporate social responsibility. More constraining provisions impose direct obligations on foreign investors, call for an explicit consideration of the investment’s negative impact or deny substantive protection for investment made through corruption or other fraudulent means.

The Canadian Policy on the Protection of Foreign Investment and the Canada-China Bilateral Investment Treaty

For a trading nation such as Canada, access to foreign markets has long been a key concern. In 2012, the Canadian government concluded a bilateral investment treaty (BIT) with China, so as to better protect Canada’s investments in this big expanding market. China’s communist regime, coupled with the importance of the country, has seemingly caused the Canada-China BIT to differ from the Canadian BIT model, both in terms of substantive provisions and the investor-state dispute settlement mechanism. Drawing on a legal-political analytical approach, the article: 1) looks at some key provisions on investment protection in the Canada-China BIT and 2) discusses the ways in which this BIT marks a departure in Canadian foreign investment policy. It also considers disagreements among legal scholars and commentators as to the implications of these differences, particularly with respect to the non-reciprocal character of the BIT to China’s advantage.

The EU-Vietnam Investment Protection Agreement Investor-State Dispute Settlement Mechanism in Perspective

The EU-Vietnam Investment Protection Agreement (EVIPA) represented the culmination of three years of negotiations between the EU and Vietnam. Although it remains to be ratified, it promises to have an impact on the international investment treaty landscape. The treaty contains innovations ranging from its definition of the substantive protections afforded to foreign investors to its definition of ‘investments’ and ‘investors’ that may qualify for those protections, as well as the procedural modalities for the treatment of possible disputes. Its most distinctive trait, however, is its establishment of a semi-permanent adjudicatory body akin to an investment court in replacement of the arbitration model envisaged by the vast majority of investment treaties over the past several decades. Rather than attempt to reform, the EVIPA drafters have done tabula rasa and opted for revolution instead. The EVIPA’S envisaged method to select, appoint, and remunerate the members of that body – both at the first instance level and at the appellate level – represents an abrupt and profound abandonment of the traditional arbitration model so frequently and presently used in international disputes around the world. The EVIPA may thus present an opportunity to test an alternative dispute resolution system and thus to aid in determining the most effective and appropriate method to resolve the international investor-State disputes of the future.

Eksistensi Pemberantasan Korupsi dalam Perjanjian investasi Internasional di Indonesia

The International Investment Agreements can actually weaken the existence of law enforcement in Indonesia over the eradication of corruption. Surely, an International Investment Agreementa in Indonesia should include a prohibition of corruption in pre, post and International Investment Agreements as India did in their model Bilateral Investment Treaties (BIT). In addition, Investors can sue the State for corruption law enforcement against him, through legal gap in fair n Equitable Treatment (FET) content on the grounds of "denial of justice." Futhermore, Investor-State Dispute Settlement (ISDS) mechanism content further strengthens Investor positions in International Arbitration, because only Investors can sue countries with compensation of up to billions of dollars. As a result, the State losses become 2 (two) times, the losses incurred by the act of corruption committed by the defendant and the cost of the case in International Arbitration. Similarly, Indonesia should also immediately adopt the FET concept in the Indonesia-New Model BIT where this content limits Investors to sue the State even in criminal law enforcement.

The Protection of Chinese’s Investments in Africa: a Brief Overview of Investor-State Dispute Settlement Mechanisms

The Protection of Chinese’s Investments in Africa: a Brief Overview of Investor-State Dispute Settlement Mechanisms