Investor-state Dispute Settlement System Research Articles

The Danger of the Interpretation of Facts: Legal Uncertainty in the Spanish Saga Cases

Enhancing legal certainty is one of the main values that are sought in the investor–state dispute settlement system. The importance of legal certainty is strengthened in the case of renewable energy investments, which are in the global public interest, long-term and capital-intensive up-front. The first part of the paper presents the importance of legal certainty in investment arbitration in general, its limits and its importance in the context of the green energy transition. In addition, it addresses the special features of renewable energy investments. The second part of the paper analyses from the perspective of legal certainty the Spanish renewable energy cases initiated under the Energy Charter Treaty (ECT), which deal with similar factual and legal issues. In this respect, the paper presents the varying weight tribunals gave to the important facts that led them further to conclude whether Spain breached the fair and equitable treatment standard, and if so, whether the investor was entitled to full compensation or a reasonable rate of return. In addition, it presents different approaches to perceiving the stability provision of Article 10 (1) of the ECT. The paper concludes that it remains uncertain to what extent RE investors will be protected under the ECT’s stability condition in the case of fundamental or small-scale changes. Although one group of arbitrators may argue that the fundamental change triggers per se a breach of a stability condition, others may argue that for the breach to be established, the host state’s measures must be arbitrary, unreasonable or discriminatory. Moreover, the threat to legal certainty might not only be the vague provisions of the ECT but also the significant discretion tribunals have towards the interpretation of facts, leading to different outcomes. Indeed, it is at the discretion of arbitrators to consider whether the timing of investment, presence of evidence indicating possible regulatory changes, and the reasonable rate of return prescribed in Spain’s domestic law will be relevant or irrelevant.

Inclusivity in the Settlement of Investment Disputes: Making a Case for Local Communities

This contribution examines the extent to which the Investor-State Dispute Settlement (ISDS) system takes into consideration the rights and interests of local African communities affected by investment disputes but are not parties to them. It argues that these communities receive unsatisfactory treatment, which often leads to their exclusion (or non-inclusion) from ISDS. The contribution goes further by exploring reforms likely to better protect these communities, increase their inclusion in ISDS as well as the legitimacy of the investment regime. The first part examines the raison d’être for inclusivity in investment arbitration and why it is important to talk about the inclusion of communities in investment adjudication. Zooming in on the case of African communities, the second part analyses the current participation of these communities in the settlement of investment disputes and attempts to demonstrate that this participation is limited and could lead to a partial or total denial of justice for affected communities, in other words, exclusion. The final part looks at some of the reforms and ideas that are currently being considered for better protection and inclusion of these communities.

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.

The possibility of creating an ICSID protocol for the establishment of a multilateral investment tribunal: A flexible or complex process.

The 2030 Agenda for Sustainable Development was introduced in 2015 with its 16th goal which has targeted enhancing the concepts of the rule of law and universal access to justice. This goal, along with the current trend of directing investment projects towards sustainable development, has brought the mechanisms for investor-state dispute settlement (ISDS) into the spotlight in the realm of global investment.Recently, based on a different vision that was supported, especially by the European Union, a new approach to ISDS emerged that is characterized by fundamental differences from the well-known approach represented in the ICSID system. Whereas providing facilities to settle and arbitrate the investment disputes between a state member and investors belonging to another state member over several decades by the ICSID system made it a key player in the administration of the ISDS system. The fundamental differences adopted by the new EU’s model represent a serious challenge to the ICSID system. Especially if this new system proves to be effective and widely used and inserted in future international investment agreements (IIAs), the ICSID will be required to make adjustments that are compatible with this new system.Due to the complexity of the process of amendment to the ICSID convention, as it requires unanimous consent by all member states, the present paper, by analysing some historical stations of the functional and administrative context of the ICSID, examines the flexibility of the ICSID convention to establish a protocol that includes the features of the new system without resorting to amending the convention. The paper concludes that the ICSID enjoys the flexibility necessary to establish this protocol. Finally, the paper presents the motives and benefits envisioned for the establishment of this protocol.

Carbon Credits and Carbon Markets: Future Challenges for ISDS

The fight to avoid global warming of 1.5ºC above pre-industrial levels intensifies every day. The tension between organizations fighting to make this goal as real as possible and industries that still rely on fossil-based fuels and other greenhouse gas (GHG) emission systems is also growing. Since the inception of the Kyoto Protocol, many systems were put in place to attempt to save the Earth from the catastrophic consequences of global warming. One of them was the creation of carbon credits, and since they first appeared, their popularity has only increased. Together with investment in carbon credits, disputes may arise and therefore, the investor-state dispute settlement (ISDS) system may come into play. But it will not come without challenges. Carbon, Credits, Market, ISDS, Investment, Arbitration, Salini, ICSID, BIT, Kyoto

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.

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.

Assessing Recent Proposals to Reform the Investment Treaty Arbitration System

Supervisory Committee Supervisor Dr. A. Claire Cutler (Department of Political Science) Outside Member Andrew Newcombe (Faculty of Law) Economic globalization, the liberalization of markets, and the opening of once closed societies have all heralded the remarkable emergence of the current system of investment treaty arbitration. The current system, however, has attracted significant criticism and calls for reform. This thesis reviews the historical employment of arbitration in international society and the circumstances that lead to the emergence of the current system of investor-state dispute settlement. Following this, two recent proposals for reform of the current system are outlined: the creation of an international court of investment and the implementation of appellate mechanisms for investment treaty arbitration. The thesis concludes by offering an assessment of these proposals and argues for the rejection of the proposal to replace the current system with an international investment court, but offers a cautious endorsement of appellate mechanisms.

The Singapore Convention in the framework of the investor-state dispute settlement system

This contribution is aimed at analysing the extension of the scope of the Singapore Convention on Mediation to include settlement agreements arising out of investor-State mediation. To this end, the paper firstly approaches the ISDS crisis jointly with the UNCITRAL Working Group III reform proposals. Secondly, analyses the use of mediation in the scope of investor-State disputes and the rise of the Singapore Convention on mediation. Finally, argues for the applicability of the Convention to the context of ISDS. In addition, this work comprises the hypothetical-deductive methodology, through the analysis of normative texts, cases and international instruments.

A Tale of Two Systems: The Public and Private Faces of Investor-State Dispute Settlement

Abstract It seems fair to say that the system of investor-state dispute settlement (ISDS) now faces something of a ‘legitimacy crisis’. States complain of what they perceive to be an unjustified encroachment into their regulatory space. Investors bemoan the fragmentation of investment law. And the public resents the fact that an anonymous panel of lawyers sitting behind closed doors are making decisions with significant implications for their well-being and livelihoods through a process in which they are neither seen nor heard. These criticisms of ISDS raise serious questions as to the adequacy of the procedural design of the ISDS system and how this might be affecting perceptions of ISDS’s legitimacy as a means of dispute resolution. It is suggested that ISDS’s legitimacy crisis can be traced, at least in part, to its failure to uphold certain core values and principles of the Rule of Law – in particular, transparency, accountability and consistency – which are of especial importance in the ISDS context. It is argued that the reason why investment arbitration struggles to uphold these values lies in the dissonance between the public face of ISDS – meaning the public nature and significance of investment disputes – and its private face – meaning the private arbitral process by which investment disputes are resolved. Efforts at reform should be directed at resolving that dissonance, and whilst there is much to commend an incremental reform of the system of arbitration, it seems clear that that can only be an interim step on the path to deeper process reform.

The Singapore Convention in the Framework of the Investor-State Dispute Settlement System

The aim of the present contribution is to analyse the plausibility of the extension of the scope of the Singapore Convention on Mediation to include settlement agreements arising out of investor-State mediation. To this end, the paper firstly approaches the ISDS crisis jointly with the UNCITRAL Working Group III reform proposals. Secondly, analyses the use of mediation in the scope of investor-State disputes and the rise of the Singapore Convention on mediation. Finally, argues for the applicability of the Convention to the context of ISDS. In addition, this work comprises the hypothetical-deductive methodology through the analysis of normative texts, cases and international instruments

Investor-state Dispute under International Investment Law

Since the last century international investment law has been developing along with the increasing number of international investment agreements such as bilateral investment treaties aiming at efficient protection for foreign direct investment. The idea to introduce comprehensive protection for foreign direct investment appeared with the States started to perceive that foreign direct investment is a must for the prosperity of economic development of the countries. Since the international investment regime has emerged it started to become universal and uniform in the international economy. The establishment of the International Centre for Settlement of Investment Disputes was a crucial step for the protection of foreign direct investment in the international investment regime. The investor-state dispute settlement system has been developing through innovations introduced by parties of the international investment regime. However, Investor-State arbitration has remained as one of the most efficient mechanisms in the investor-state dispute settlement system throughout the years.

Reforming Investor-state Dispute Settlement: The EU Multilateral Investment Court Perspective

Rapid changes to the global socio-political dynamics have led the emergence of new challenges to the investor-state dispute settlement (ISDS) mechanism. The imperfections of the existing ISDS system have shown a clear need for reforming this institution. Moreover, this is evidenced by the desire of a number of countries to create a multilateral investment court as proposed by the European Union. Will the new EU Multilateral Investment Court System be better than the current ISDS mechanisms? The Multilateral Investment Court System is the latest proposed measure in the context of multilateralism and the institutionalization of a decentralized international investment law regime. The success of the proposal will declare a new era for international investment law around the world. Still, the proposed reform of ISDS has both benefits and disadvantages. The main goal of this paper is to examine investor-state dispute settlement (ISDS) reform in the context of the EU Multilateral Investment Court by pointing out the shortcomings and rooms for improvement. In addition, this paper indicates that the MIC project has the greatest chance of support by majority of countries, as compared to other possible options for the proposed ISDS reform but at the same time, it has difficulties in achieving the goals of ISDS and fully realizing potential. The results of this research should help to proceed with smooth transition of the MIC to ISDS system and review issues for further discussion.

Investor-State dispute settlement (ISDS) cases and India: affronting regulatory autonomy or indicting capricious state behaviour?

PurposeThe dominant narrative in the investor-State dispute settlement (ISDS) system is that it enables powerful corporations to encroach upon the regulatory power of developing countries aimed at pursuing compelling public interest objectives. The example of Phillip Morris, the tobacco giant, suing Uruguay’s public health measures is cited as the most significant example to prove this thesis. The other side of the story that States abuse their public power to undermine the protected rights of foreign investors does not get much attention.Design/methodology/approachThis paper reviews all the ISDS cases that India has lost to ascertain the reason why these claims were brought against India in the first place. The approach of the paper is to study these ISDS cases to find out whether these cases arose due to abuse of the State’s public power or affronted India’s regulatory autonomy.FindingsAgainst this global context, this paper studies the ISDS claims brought against India, one of the highest respondent-State in ISDS, to show that they arose due to India’s capricious behaviour. Analysis of these cases reveals that India acted in bad faith and abused its public power by either amending laws retroactively or by scrapping licences without following due process or going back on specific and written assurances that induced investors to invest. In none of these cases, the foreign investors challenged India’s regulatory measures aimed at advancing the genuine public interest. The absence of a “Phillip Morris moment” in India’s ISDS story is a stark reminder that one should give due weight to the equally compelling narrative that ISDS claims are also a result of abuse of public power by States.Originality/valueThe originality value of this paper arises from the fact that this is the first comprehensive study of ISDS cases brought against India and provides full documentation within the larger global context of rising ISDS cases. The paper contributes to the debate on international investment law by showing that in the case of India most of the ISDS cases brought were due to India abusing its public power and was not an affront on India’s regulatory autonomy.

China’s Engagement in ISDS Reform: Text, Practice, and Political Economy

The investor-state dispute settlement (ISDS) system is such a means to an end of further economic development and wider social political goals. With major protective provisions of expropriation against compensation, fair and equitable treatment, national treatment, most-favored-nation treatment, full protection and security and umbrella clause, it helps establish a predictable, transparent, and enforceable legal regime to protect foreign investors’ legitimate expectations and lawful investment. As China intends to attract foreign investments by offering a stable business operation environment, its signing a large number of BITs and FTAs may help reduce political and socio-economic risks, which give states, businesses, and individuals the confidence to work in a coordinated manner. The economic development goal, rule of law strategy, tense US-China relations, ideology of multilateralism and community of common destiny, all add up to China’s inclination to incremental but effective ISDS reform.

Sistema de solución de controversias inversionista-estado (ISDS) en crisis: Estados Unidos y la Unión Europea

This article analyses the main positions on the investor-state dispute settlement system (ISDS) in the United States and the European Union. First, reference is made to the discussion of the TPP-11 in Chile, reviewing the main characteristics of ISDS and the criticisms that have been outlined in recent years. It then proceeds to study the aforementioned spatial spheres, identifying in each of them their traditional position with respect to the system, the new proposals and finally the new generation treaties they have signed

The Principle of Clean Hands in International Investment Arbitration: What is the Extent of Investment Protection in Investor-State Disputes?

In the last decade, the investor-state dispute settlement system has been subject to criticism. It is mainly due to the fact that the standard of protection under investment treaties significantly tips the scales in investors’ favor. Such a tilted protection mechanism has been referred to as “asymmetric treaties.” It creates an unbalanced investment law regime under which two-thirds of the cases are settled or lost by states. However, despite the vast protection of investors, it is not unlimited. One of the bars to having a dispute resolved by an arbitral tribunal in investor-state arbitration proceedings is the illegality of the investment. It is understood as the non-conformity of the investment with the laws and regulations of the host state. There is a prevailing view that the illegality of the investment would deprive the investor of a treaty protection to a certain extent. The illegality can influence the jurisdiction of the tribunal and the admissibility of the claim, as well as have negative consequences with regard to the merits of the case, such as resulting in a reduced compensation. The more contentious issue, which is a subject of this article, present in both legal writing as well as case law refers to the presence of the so-called principle of clean hands in the international investment law regime. As explained further, the clean hands principle concerns one of the prerequisites the party seeking relief has to comply with. Therefore, if a party has “unclean hands,” i.e. if the party has engaged in a certain type of a wrongdoing (including but not limited to fraud, misrepresentation, violation of state’s laws and regulations) related to its own claim, the clean hands doctrine will prevent that party from benefiting from its own unlawful behavior.

Counterclaims in Investment Arbitration: Saluka v The Czech Republic

This paper considers the availability of host state counterclaims in investment arbitration using as a case study Saluka v. The Czech Republic, the first decision under the 1976 UNCITRAL Rules and considered “the most comprehensive consideration of arbitral jurisdiction over counterclaims in investor-state dispute settlement.” Section II provides the historical background to Saluka, with specific reference to the Czech transitional economy following the fall of the Iron Curtain, banking sector privatization efforts, use of a mass voucher system, and an overview of the arbitral proceedings. Section III considers the unique “arbitration without privity” nature of investor-state proceedings and the Tribunal’s search for consent over counterclaims in (i) the treaty text of the Netherlands-Czech BIT, (ii) the underlying contract at issue containing a separate mandatory arbitration clause, (iii) the 1976 UNCITRAL Rules, and (iv) the procedural problems presented by privity of contract and the determination of proper parties to the dispute. Section IV weighs the Tribunal’s restrictive test, requiring sufficient juridicial connexity between counterclaims and primary claims, against criticism. Section V concludes that enduring problems presented by Saluka (e.g. protection of vulnerable transitional economies against predatory foreign investment), which echo across an investor-state dispute settlement system in the throes of a legitimacy crisis, may be better resolved through robust creation of substantive obligations, such as an International Convention on Foreign Investment, rather than a reimagining of an already imperfect procedural framework for counterclaims.

An essential reading on IP and international investment law

Intellectual Property and International Dispute Resolution, Christopher Heath and Anselm Kamperman Sanders (Eds), Wolters Kluwer, 2019. ISBN : 978-90-411-9097-0, pp. 266 Price: € 132 The relationship between intellectual property (IP) and international investment law is a relatively new and emerging area of research. Increasing international investment agreements (IIAs) consisting of IP chapters with dispute settlement provisions are likely to invite IP disputes in investor–state dispute settlement (ISDS). Christopher Heath and Anselm Kamperman Sanders’ (eds) Intellectual Property and International Dispute Resolution consists of 11 chapters and aims to explore the interaction between IP and investment law and arbitration. The edited collection features contributions by leading scholars and academics working in the areas of IP and investment law. The introductory chapter, authored by the two editors, sets the stage by succinctly providing an overview of IP issues in ISDS. The editors challenge the legitimacy of the ISDS system and take the...

Amicus Curiae Intervention in China-ASEAN Investment Disputes: Rationale, Dilemmas and Reform Path

One main criticism levelled against the investor-state dispute settlement system (ISDS) is the existence of limited opportunities for amicus intervention. Against this backdrop, this article firstly studies what reforms regarding amicus intervention in ISDS proceedings have been put forward by China and ASEAN countries and the relevant dilemmas. Subsequently, to ensure that maximum benefits can be realised from amicus participation in ISDS proceedings in China-ASEAN Free Trade Area (CAFTA), this article proposes procedures for when and how an amicus may participate in arbitral proceedings under the upcoming investment agreements, particularly the Regional Comprehensive Economic Partnership (RCEP). Additionally, given the fact that the level of amicus participation in ISDS proceedings is still limited, the article suggests that China and ASEAN need to establish safeguards to provide amici with access to key arbitral documents and oral hearings. However, achieving the above objectives should not come at the expense of undermining the confidential and protected information of both disputing parties.