Investor-state Dispute Research Articles

Assessment of Damages and Compensation in the Context of ISDS Reform Proposals

This article discusses the possible reforms in the assessment of damages and compensation in international investment arbitration. The article highlights the challenges of the valuation leading to the need for reforms, such as the inflation of awards issued in investment arbitration cases, the major gap between the damages claimed and damages awarded, and the difficulties posed by the large damages awards for the developing states. Other reasons for reforms include arbitral tribunals’ inconsistency in the valuation, the incorrectness of awards and potential conflicts of interests between arbitrators and damages experts. The author further discusses whether the issues of damages and compensation in investor- state disputes fall within the mandate of the UNCITRAL Working Group III, which is argued to be limited to solely procedural issues. The author concludes that the reforms could and should be developed by the Working Group III. The assessment of damages and compensation in investor-state disputes requires a comprehensive reform process based on procedural solutions as well as substantive suggestions, which the Working Group III can devise. Based on the law and economics theories, the author analyzes the appropriate approach of tackling the quantum issues, concluding that the reforms should be implemented through soft law instruments. The article dwells on viable procedural reforms on the quantification of damages and compensation in investment arbitration. The analysis focuses on the reforms prospecting to address the damages experts’ possible conflict of interest, the divergence in the parties’ experts damages amounts and the anchoring effect of the claimants’ requested amounts on arbitrators, as well as on the option of conducting early damages conferences, drawing on the insights from behavioral economics. Lastly, the article discusses substantive reforms options for the valuation that help promote the consistency and correctness of awards. The author considers the options of clarifying the use of the discounted cash flow method and setting standards that require damages to reflect a balance between the competing interests, providing guidance on the investor’s contributory fault, capping compensation to the actually invested amount and the assessment of contextual factors relevant for the calculation of damages.

Arbitration Involving Dual Nationals Under Investment Treaties: A New Area of Conflicting Rulings in International Law

Objective: The paramount purpose of the study is to put forth conflicting decisions in International Law while arbitrating dual nationals under investment treaties.
 
 Method: The majority of investment treaties are predicated on clauses that are somewhat wide and define qualified standards.
 
 Result: According to the findings of a number of studies, the increased participation of dual nationals in investments in host countries will likely result in future issues for international investment law (IIL), particularly the ISA system. Because of this, it is essential to conduct an in-depth investigation on the level of protection that dual nationals receive from investment deals, especially from Investor-State Dispute Settlement’s point of view.
 
 Conclusion: In investor-state arbitration (ISA) context, one's nationality is an extremely vital factor. Most investment treaties provide that in order to be eligible for the protections afforded by the treaty, an investor needs to hold citizenship in the home state. However, determining a person's nationality for the reason of an investment treaty can be an especially challenging endeavour, as it brings up a number of unanswered problems that are of significant relevance in practical terms.

Challenging Orthodoxy: State Immunity from Court Supervisory Jurisdiction in Investor-State Disputes?

This article considers the role of national courts in investment treaty arbitrations between an investor and a host-State. While the ICSID arbitration regime provides for an a-national approach, the choice of alternative arbitral institutions or rules in an investment treaty could bring into issue the role of the courts of the place of arbitration. It is suggested that the involvement of a sovereign State as a party to such arbitration proceedings raises issues of state immunity not encountered in international commercial arbitrations. While an agreement in an investment treaty to arbitrate an investor-state dispute confers jurisdiction on an arbitral tribunal to determine the dispute, there is presently no global consensus that such an agreement alone amounts to a waiver of immunity of the host-State from the jurisdiction of other national Courts. Absent such waiver of jurisdiction, the court of the place of arbitration would lack legitimacy to exercise any ‘supervisory’ jurisdiction over the host-State party to ensure compliance under its domestic legislation. The authors suggest that national legislatures should consider this when reviewing applicable domestic laws on international arbitration and state immunity. Treaty negotiators should be aware as well of such limitations. State immunity, waiver of immunity, investment arbitration agreement, investor-State dispute, international arbitration, immunity from jurisdiction, court of the seat, supervisory jurisdiction

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.

The Negotiation, Diffusion, and Legacy of NAFTA Chapter 11: An Empirical Eulogy

AbstractFollowing a three-year post-termination transition period to bring investor-state arbitration disputes, the investment protections afforded by Chapter 11 of the North American Free Trade Agreement (NAFTA) finally expired in June 2023. Chapter 11 was one of the most litigated, cited, commented, and copied investment treaties. An important, but largely ignored, part of its legacy is how the making of NAFTA Chapter 11 shaped its subsequent successful diffusion. Combining traditional legal assessment with computational text-as-data analysis, this article shows how the give and take during the negotiations generated buy-in on the part of Mexico and Canada and emulation by Latin American countries who helped to spread NAFTA Chapter 11 language globally. The link between the making and diffusion of NAFTA Chapter 11 highlights the power of negotiated compromise: sharing the pen with others may sometimes be the most effective way to write the rules that come to shape the world.

Investor state dispute settlement (ISDS) and the social licence to operate of international business: An analysis of controversial cases

This paper analyses how the challenging of regulation by multinational enterprises through the investor state dispute settlement (ISDS) process impacts the social licence to operate (SLO) of international business (IB). Drawing on the analyses of controversial ISDS cases, it makes four key contributions. First, it proposes a framework for better understanding SLO and presents strong evidence that the use of ISDS has undermined SLO, not only of the involved companies, but also of IB more widely. Second, it extends the literature on corporate political activity (CPA) by drawing attention to the importance of litigation strategies, largely ignored in prior research. Third, it contributes to the literature on the externalities of CPA by exploring how certain tactics can undermine public trust and SLO. Last, it expands our understanding of the ‘dark side’ of CPA beyond illegal activities and government capture, to ethically questionable strategies.

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.

Benign and Radical Africanization in International Investment Law and Investor-State Dispute Settlement in Africa

Abstract The current Africanization approaches mask some nuances present in current reform efforts of international investment law (IIL) and investor-State dispute settlement (ISDS) in Africa. I adopt the categorization of international law scholarship in Africa developed elsewhere into two trends: contributionist (weak) and critical (strong) scholarship. For reforms in African IIL and ISDS, I relabel this trends benign Africanization representing the contributionist (weak) strand and radical Africanization representing the critical (strong) strand. I argue that African states must focus on wider economic justice engendered in the radical Africanization approach. I propose three lines of action that will implement radical Africanization: first African States, in their reforms, must focus on both extra and intra-African investment; second, the reforms must engage deeply seated substantive issues in addition to the current procedural reforms; and finally, African States must have a real reckoning and engagement with the imperial history of IIL generally and ISDS specifically.

Fine Balance: Empire, Neoliberalism, and the Fair and Equitable Treatment Standard in International Investment Law

Abstract In this article, I show how the framework of empire remains central for analyzing contemporary international investment law. Moving beyond criticisms about the domination of global South polities by the West, or by a transnational capitalist class, I suggest instead that ‘empire’ can help us analyze the protocols of reasoning in investor-State arbitrations. Through a close reading of scholarship on the fair and equitable (FET) clause, and a recent arbitral award arising out an FET claim, I show that the field is characterized by an imperial mode of legal reasoning. This mode was reason was produced by a foundational distrust of postcolonial developmental States. It involves judging concrete State action against a fictional universal baseline that represents the ordoliberal utopia of an austere rule of law bound State. Crucially, in investor-State dispute settlement, this form of reasoning remains discernible even when foreign investors do not succeed.

Indigenous Peoples in International Investment Law: Time for a New Dispute Resolution Procedure

Abstract This article examines the role of indigenous communities in international investment law. It concludes that indigenous communities have only limited agency in the context of investment law-making and adjudication. Such limitations continue the colonial legacy of international law. If international investment law aspires to achieve legitimacy, the departure from the exclusionary practices is necessary. In this context, the article recommends carving out the investment disputes that involve indigenous peoples and/or impact their livelihoods from the traditional model of investor-State dispute settlement. It further argues for reframing investment rules to account for indigenous laws and practices.

Equitable representation on international benches and the appointment of tribunal members in investor–State dispute settlement: a historical perspective

Abstract The lack of diversity in the appointment of tribunal members in investment arbitration has long been subject to criticism. This article analyses the design of adjudicator appointment mechanisms and challenges the mainstream view that investment arbitration is modelled after the structures and procedures of commercial arbitration. Instead, drafters of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention) largely drew inspiration from the Permanent Court of Arbitration and the International Court of Justice. Following this institutional pedigree, the development of the equitable representation requirement is linked to the growing appreciation of the public aspects of the international judicial function. Nevertheless, drafters adopted Article 14(2) of the ICSID Convention mainly to facilitate the performance of the private function of dispute resolution. Through the historical lens, controversies surrounding different approaches for addressing diversity concerns in the ongoing investor–State dispute settlement reform are essentially surface products of deeper disagreements on the private and public aspects of the judicial function.

Optimizing Legal Frameworks for Protecting Investor Rights in Sustainable International Road Projects

This paper provides a comprehensive analysis of existing legal frameworks and dispute settlement mechanisms for protecting investor rights in complex cross-border road construction projects while balancing wider public welfare concerns. It examines limitations in current investor-state dispute settlement (ISDS) models and arbitral practices prevalent in bilateral investment treaties and contracts. Through extensive review of regulations, case law, data and expert perspectives, tailored recommendations are developed to advance substantive and procedural reforms for optimizing investor protections equitably within a sustainable development paradigm. The study aims to inform policymaking on designing synergistic international legal systems that enable global road infrastructure development aligning private investment incentives with public goals of connectivity, sustainability and resilience.

국제투자규범에서 유효수단 조항의 고찰

The International Investment Agreement (IIA) provides to investment and investor protection of contracting party’s obligations. It stipulates that if an investment and investor are damaged in violation of IIA’s protection clause, they will be subject to Investor-State Dispute Settlement (ISDS). Among the IIA's contracting party’s obligations, it does not provide for direct regulation of the conduct in judicial court of host countries.
 Regulations on the conduct of judicial courts are generally included in the category of ‘denial of justice’ in customary international law under the IIA’s ‘Minimum Standard of Treatment’ clause. It is established in the ISDS precedent. Recently, this is included in IIA's illegal indirect expropriation. The ISDS arbitral tribunal formed the legal principle of judicial expropriation. Judicial expropriation deals with deprivation of investment asset, indirect expropriation, and judicial procedures and substantive judgments.
 Regarding the conducts of the judicial authorities, it is regulated by the US model BIT and the Energy Charter Treaty (ECT) of the effective means clause of Article 12(10).
 The effective means clause provision be limited to the IIA. It was introduced as a US Model BIT policy in the 1980’s, and is regulated in a number of US BIT’s concluded by this model BIT. And, like the US model BIT, ECT also includes provisions on the receiving country's effective means clause for investor’s claims and rights enforcement.
 First, this paper examines the background of the introduction of the effective means clause in the IIA. Examining the legislative background can look into the criteria for interpreting provisions.
 Second, the specific types of violations of the provisions of effective means in ISDS arbitration cases were reviewed.
 Third, the relationship between the effective means clause of the IIA and judicial refusal was reviewed.
 In the case of the ISDS arbitration award, the violation of the ‘denial justice’ of the minimum standard treatment clause and the effective means clause was raised at the same time. The effective means clause is more flexible in interpretation and application than a denial justice. The effective means clause does not require the ‘Exhaustion of Local Remedies’ Rule. In the ISDS case of White vs. India, there is a case in which the MFN clause was invoked and an effective means clause was application. The effective means clause can be a useful guide for interpreting the access to justice clause in the Korea-Japan BIT and the Korea-China-Japan BIT.

INVESTMENT COURT SYSTEM SEBAGAI ALTERNATIF PENYELESAIAN SENGKETA PENANAMAN MODAL ASING

Investment Court System (ICS) proposed by the European Union (EU) has been ratified through Bilateral Investment Treaty (BIT) between the EU and several partner countries such as Canada, Vietnam and Singapore. A study is needed to get an idea on the ICS mechanism. This is a normative research. The result shows that although there is a mechanism that is not in accordance with the concept of arbitration, the ICS decision is enforced as an arbitration award and is subject to the 1958 New York Convention. Indonesia as one of the countries currently still negotiating with the EU in the formation of an FTA is also still reviewing the adoption of ICS into the text agreement. In addition, although the background and objectives of the ICS are positive, there are still some points of weakness in the provisions of the ICS that will result in obstacles in their implementation which can be seen from the legal, political and technical side.

Analysis of the Construction of Investor-state Investment Dispute Settlement under RCEP

On January 1, 2022, the Regional Comprehensive Economic Partnership Agreement (RCEP) officially entered into force, marking the official landing of the world's most populous, largest economic and trade scale and most promising free trade area, which fully reflects the confidence and determination of all parties to jointly uphold multilateralism and free trade and promote regional economic integration, which will contribute to regional and global trade and investment growth, economic recovery and prosperity It will make an essential contribution to regional and international trade and investment growth, economic recovery and prosperity. Under RCEP, investment activities between China and ASEAN (Association of Southeast Asian Nations) countries will be further opened up and developed more deeply, which will inevitably lead to some disputes between investors and host countries will inevitably arise. However, RCEP puts aside the discussion on the investment dispute settlement mechanism between investors and governments. Although the RCEP currently proposes an alternative way for investors to seek redress in the dispute settlement chapter of Chapter 19, its implementation still needs to be improved in terms of protection. The existing dispute settlement mechanism still needs to efficiently and comprehensively protect and balance the reasonable rights and interests of investors and host countries. The RCEP parties shall jointly explore the construction of dispute prevention, consultation, mediation, arbitration, litigation, etc. A dispute settlement mechanism between the investor and the host country that integrates dispute prevention, negotiation, mediation, arbitration, and litigation is excellent.

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

Investor-State Dispute Settlement and the Application of the Rule of Law Under the ICSID Convention

Investor-State Dispute Settlement and the Application of the Rule of Law Under the ICSID Convention

Non-state actors, extractive industries, and the investment regime: What can be learned from six Amazonian investor-state disputes?

The international investment regime was designed to reduce political risks—risks created by government action or inaction—faced by enterprises venturing abroad. It assumes that political risks are due to unitary host states, who, guided by national interests, would confiscate profitable foreign enterprises when opportune. This article argues, however, that political risks can have a different origin. In ecologically vulnerable areas, extractive projects can be polarizing, as some groups benefit from their existence while others suffer their consequences. In this setting, non-state actors may fight legally and politically to attract or expel extractive industries, generating policy uncertainties and political risk. To check this argument, the article examines five investor-state disputes coming from extractive projects located in the Amazon and which were caused, in part or completely, by the actions of non-state actors. The cases studied provide insights into the importance of non-state actors in the investment realm as well as the inadequacies of the current investment regime.

Standing in international investment and trade disputes

International investment agreements employ dispute settlement procedures that differ markedly from their counterparts in trade agreements. A prominent and controversial difference arises with respect to the issue of “standing”: Who has the right to complain to adjudicators about a violation of the agreement? While trade agreements limit standing to the member governments (state-to-state dispute settlement), investment agreements routinely extend standing to private investors as well (investor-state dispute settlement). We develop parallel models of trade and investment agreements and employ them to study this difference. We find that the difference in standing between trade and investment agreements can be understood as deriving from the fundamentally different problems that these agreements are designed to solve. Our analysis also identifies some important qualifications to the case for including investor-state dispute settlement provisions in investment agreements, thereby offering a potential explanation for the strong political controversy associated with these provisions.

Race & International Investment Law: On the Possibility of Reform and Non-retrenchment

The international investment regime is in flux. The mainstream practice of investment law and arbitration works on the basis of the regime's foundations in contract and property law. However, critical scholarship in the field has unearthed the coloniality of power that permeates both the practice of international investment law and the current reform exercise led by the United Nations Commission on International Trade Law (UNCITRAL) Working Group III. These critical scholars warn of the imminent reproduction and entrenchment of the systemic inequities, power asymmetries, and investment law's investor-state dispute settlement (ISDS) regime which is skewed against post-colonial host states. The two books1 under review offer a range of thought-provoking approaches for analyzing the past, present, and future of investment law. This Review Essay categorizes these books into two modes of critical scholarship on international investment law: moderate and radical.2 In Part II, I flesh out the conceptual categories of moderate and radical critique. In Part III, I analyze the books under review through the lens of these two conceptual frameworks. In Part IV, I turn to the question of race and investment law. This Review Essay suggests that race should not be neglected in our analysis of the past, present, and, most importantly, the future of investment law—a core theme that both books under review does not engage with. Part V briefly concludes.