Investor-state Dispute Research Articles

The Intra-EU Investment Dispute Settlement After Achmea: Towards an Integrated Model of Justice

The Achmea judgment marks the culmination of the systemic conflict between international legal system and EU legal system on international investment arbitration. The Court referred to the fundamental principles of autonomy, effectiveness, prevalence and direct effect of EU law, as well as the principle of fair cooperation between Member States and ruled that arbitration clause laid down in intra-EU BITs is incompatible with EU law. As a result, the primaute of European law seems to reserve to the CJEU the role of last authoritative institution for the interpretation and application of all EU law and totally exclude the potestas iudicandi of arbitral tribunals in investment disputes. The paper discusses Achmea’s consequences on the relationship between international and European legal order in intra-EU investment dispute settlement. After a general overview of the substantial and procedural framework of investors’ protection, the paper deals with jurisdictional issues in ISDS system before and after Achmea. It reviews all possible scenarios on arbitration proceedings by analyzing the past and the future of arbitrators’ jurisdiction in the European legal order. It considers the most recent developments in EU legal order, specifically the agreement between Member States on a plurilateral treaty for the termination of all intra-EU BITs. The focus is on the ubi consistam of EU law in international legal order and on how courts could cooperate for an integrated model of justice. The analysis of the current status quo of the ISDS will show that the lack of judicial communication between international courts affects the efficiency of investment arbitration, and specifically, about intra-EU issues, the absence of a mechanism which would allow to settle investment dispute in accordance with EU judicial order. The final part of the paper explores the attempts to reconcile the dispute resolution mechanism provided by investment treaties with the European jurisdictional framework, despite it was defined by the ECJ as “a complete system of legal remedies and procedures designed to ensure review of the legality of acts of the institutions”. Proposals for reforms of investor-State dispute settlement system could follow three different approaches (systemic, based on cross-fertilization communication techniques and integralist) in order to restate the relationship between private and public justice: which future for investment dispute settlement system after Achmea?

The Return of the Home State to Investor–State Disputes. Bringing Back Diplomatic Protection?, by Rodrigo Polanco

<i>The Return of the Home State to Investor–State Disputes. Bringing Back Diplomatic Protection?</i>, by Rodrigo Polanco

Arbitrator-Made (Jurisdictional) Law in Investment Treaty Arbitration: Application, Creation and Control

The law-making function of international courts and tribunals is well-known in both theory and practice, including such function of arbitral tribunals in the field of investment treaty arbitration. However, no clear guidance exists regarding the conduct of arbitrators in their decision-making and law-making. This chapter offers such guidance in respect of one peculiar law-making activity of arbitral tribunals, namely their regulatory function regarding their own jurisdiction, and to that end discusses the proper application, creation and control of arbitrator-made jurisdictional rules. Such guidance is warranted because arbitral jurisdictional regulation has so far remained unrecognized, usually disguised as varieties in treaty interpretations, due to the consensual foundations of the process of jurisdictional regulation. The chapter argues that the recognition of the arbitral jurisdictional regulation, by employing the discussed methods of application, creation and control of arbitrator-made rules in practice, would provide conditions for a better performance of the system of investor-State dispute settlement, including the advancement of legal certainty regarding the questions of jurisdiction. Such recognition can be implemented within the existing framework of investment arbitration, but the implementation would be particularly fertile in the context of institutionalized adjudicatory mechanisms. While these recommendations are made in the context of arbitral jurisdictional regulation, this can be a starting point for similar considerations in the sphere of substantive law.

Treaty Interpretation in Investor-State Arbitration

This study examines the exercise of discretion by investor-state arbitral tribunals in treaty interpretation. It builds upon the premise that it is an illusion to pursue a single right answer to a given legal problem when the human experience is marked by an incomplete and fragmented perception of reality. Adjudication and legal interpretation, therefore, are not understood in this study as a matter of discovery or illumination, but as a matter of choice and persuasion over choices made. Even still, the exercise of hermeneutical discretion does not amount to a license for arbitrary behavior. There may not be one single correct reading of a treaty, but certainly not all interpretations of a treaty are possible. Notably, the semantic horizon of treaty interpreters is a finite one, as the methodology established by the Vienna Convention on the Law of Treaties (“VCLT”) constrains the hermeneutical choices open to interpreters. Article 31 lays out a general rule of treaty interpretation, while Article 32 provides supplementary means of interpretation that can be used either to validate an outcome reached through Article 31 or, in exceptional circumstances, to autonomously determine the meaning of a treaty. Within this framework, this study examines interpretative practices of investment-treaty arbitral tribunals in light of the interpretive regime established by the VCLT, exploring their conformity or non-conformity to that regime. Investment Arbitration; Investor-State Dispute Settlement; Treaty interpretation; Discretion; Vienna Convention on the Law of Treaties; VCLT; Article 31, VCLT; Article 32, VCLT.

The Search for Order within Chaos in the Evolution of ISDS

<i>The Search for Order within Chaos in the Evolution of ISDS</i>

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.

Guarding the Great Wall?—jurisprudential review of treaty interpretative tools in Chinese BIT-based arbitration cases

Abstract Inconsistency has been said to be one of the most severe shortcomings the existing investor–State dispute settlement (the ISDS) system possesses. Inconsistency, if not cured, is likely to affect the legitimacy of the ISDS. Partly in response to the claims of inconsistency and illegitimacy of the ISDS, the EU has proposed to have a permanent investment court to replace the ISDS while the US proposed to have an appellate body for the current ISDS along with a large camp of undecided states having no firm position on the ISDS reform. China, on the other hand, has not issued an official response to the concept of a permanent investment court, partially because of its less active role in the use of the existing ISDS. More recent years have witnessed China’s increasing involvement in ISDS cases. The purpose of this article is to review these China BIT-related ISDS cases, in particular, the awards on jurisdiction, and the tribunals’ varying techniques in interpreting the ISDS clauses in China’s BITs with a focus on the jurisprudential analyses of these cases and the tribunals’ treaty interpretive techniques. Not surprisingly, the interpretative tendency has been quite uniform. In brief, the tribunals have tended to be more expansive when they were called upon to determine the jurisdictional issues. Although this article is largely jurisprudential, a sense of the tribunals’ arbitral techniques may help shape some foundational underpinnings for China’s policy response to the proposals to reform the ISDS system made by the EU, the US, and others.

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.

Domestic arbitral institutions and foreign direct investment

AbstractExisting literature focuses on how domestic and international institutions address investor–state disputes and attract foreign direct investment (FDI). However, contractual disputes between foreign and domestic firms are largely neglected. For foreign investors, dispute resolution mechanisms that can effectively resolve contractual disputes are very important as well. In this article, I examine the effect of institutions that conduct arbitrations for disputes between foreign and domestic firms on FDI inflows. Focusing on the within-country variation of China, I find that provinces with CIETAC (China International Economic and Trade Arbitration Commission) agencies receive a higher level of FDI. These agencies attract FDI because they can credibly signal that local governments are truly willing to treat foreign investors fairly when they have disputes with local firms. In sum, this article highlights an institutional variable that has received little attention in the literature on the politics of FDI.

Sobre la independencia de los tribunales arbitrales CIADI

El Centro Internacional de Arreglo de Diferencias Relativas a Inversiones (CIADI) es una institución dedicada a la solución de controversias entre inversionistas y Estados (SCIE). A partir de la década de los noventa, el número de casos sometidos al CIADI se ha venido incrementando. Sin embargo, se ha cuestionado la independencia de sus árbitros en la toma de decisiones, afirmando que los laudos emitidos por estos tribunales favorecen a los países desarrollados, de los cuales suelen provenir los inversores extranjeros demandantes. El objeto de este trabajo es determinar, a través de un estudio estadístico de los laudos, si efectivamente los árbitros se han parcializado hacia los inversores demandantes en los laudos del CIADI, para ello se determinará el número de casos en los cuales los tribunales arbitrales favorecen a los inversores y los que favorecen a los Estados demandados. Además, se investigará si las decisiones de los tribunales arbitrales CIADI son independientes de la integración de estos, en cuanto a la nacionalidad de sus árbitros.

Application of Most-Favoured-Nation Clauses by Investor-State Arbitral Tribunals, Implications for the Developing Countries: A Collection of Chapter Abstracts of the Book

This paper compiles the draft chapter abstracts of my book entitled, 'Application of Most-Favoured-Nation Clauses by Investor-State Arbitral Tribunals. International Law and the Global South (Perspectives from the Rest of the World). Springer, Singapore, 2020. This book comprehensively examines various issues regarding the scope of Most-Favoured Nation (MFN) Clauses in International Investment Agreements (IIAs), and addresses the reform, interpretation, and enforcement of IIAs with a specific focus on the MFN clause. The book begins with a study of the history and evolution of the MFN. It then presents a substantive analysis focusing on the drafting style and how it affects the scope of the MFN; rules of interpretation and arbitral case law on the scope of the MFN, procedural prerequisites to arbitration and jurisdiction of arbitral tribunals, and the implications of adopting an expansive approach to the MFN clause. The book’s argument centres on the need for arbitral tribunals to interpret the MFN in a manner that reflects the expressed intent of the parties. This requires taking into consideration the text of the MFN, its purpose, and the overall context of the IIA, rather than relying on values and assumptions that have nothing to do with the original intent of the parties. In making this argument, the book draws on Articles 31 and 32 of the Vienna Convention on the Law of Treaties and other interpretative rules. What sets the book apart is its comprehensive coverage of issues concerning the interpretation and application of the MFN in IIAs. At the same time, it addresses issues in connection with an expansive interpretation of MFN clauses, as well as concerns regarding the legitimacy crisis in investor-state arbitration. Accordingly, it contributes to future Investor-State Dispute Settlement (ISDS) reform, while also offering a wealth of theoretical and practical insights for future treaty drafters, arbitrators, and policymakers.

Disputes in International Investment and Trade

International investment agreements employ dispute settlement procedures that differ markedly from their counterparts in trade agreements along three key dimensions: standing (i.e., the right to file grievances), the nature of the remedy, and the remedial period. In the state-to-state dispute settlement procedures of a typical trade agreement, only governments have standing, while private investors also have standing in the investor-state dispute settlement procedures employed by investment agreements. Trade agreements typically employ tariff retaliation as the remedy for violation of the agreement, while the award of cash damages is the norm in investment disputes. And trade agreements typically provide for only prospective remedies covering harm done subsequent to a ruling, while the damages awarded in investment disputes routinely cover past as well as future harms. We develop parallel models of trade agreements and investment agreements and employ them to study these differences. We argue that the differences can be understood as arising from the fundamentally different problems that trade and investment agreements are designed to solve.

Problems of Investor-State Dispute Settlement (ISDS)

The research deals with Problems of Investor-State Dispute Settlement (ISDS) focused on Investment Arbitration. The author especially focuses on the problems under BIT (Bilateral Investment Treaties) and FTA (Free Trade Agreements. Mentioned in this article, International investment disputes are generated due to host countries and foreign investors. ISDS is Dispute settlements between investors and countries. This is not suit proceedings but arbitration proceedings. That is, ‘activities of the third party to arbitrate and settle disputes by intervening between parties in dispute. ’However, Dispute Settlement through this way, is it really reasonable and fair system? If it is indeed fair and reasonable system, advanced countries like the United States and Australia would not have abandoned it. Therefore, the investment arbitration system is never a dispute settlement proceeding that has been verified and stabilized internationally.&#x0D;

‘Authority Shifts’ in Global Governance: Intersecting Politicizations and the Reform of Investor–State Arbitration

&lt;p&gt;The global investment regime is a prime example of the so-called ‘politicization beyond the state.’ Investment agreements with an Investor–State Dispute Settlement (ISDS) mechanism have become contested in several corners of the globe, triggering a widespread reform process encompassing national, regional and multilateral levels. This article examines the consequences of this confluence of politicization processes, focusing on the European Union (EU) and two key venues of ISDS reform: the United Nations Commission on International Trade Law (UNCITRAL) and the Energy Charter Treaty (ECT). Combining different strands of politicization literature in International Relations and Political Science, the article advances a nuanced conceptualisation of the institutional consequences of politicization that goes beyond a deepening/decline dichotomy. Instead, the article examines whether and how politicization generates ‘authority shifts,’ either through a vertical move between international and national levels; and/or through a horizontal recalibration between public and private forms of governance. The article argues that although the EU’s initiative for global ISDS reform intended to rebalance public and private authority while strengthening its international character, the on-going reform processes at the UNCITRAL and the ECT may eventually lead to a (partial) dismantling of international authority.&lt;/p&gt;

EU-캐나다 포괄적경제무역협정(CETA)상의 투자법원제도(ICS)에 관한 분석, 평가 및 국제적 전망

EU-캐나다 CETA상의 ICS의 설립과 운영은 향후 국제사회에서의 ISDS에 있어서 새로운 동향으로 작용할 수 있다. 특히 기존 ISDS에 비해 독창적이고 진보적인 내용으로는 미국이 중심이 되어 적용되고 있는 ICSID를 통한 기존 투자협정상의 분쟁해결절차와는 다른 중개절차의 도입, 상설적인 투자법원 및 재심이 가능한 상소법원의 설립과 운영, 심리공개를 통한 절차적 투명성 제고 및 보장, 소규모 사건의 경우 단독심리의 허용, 국제사회에서의 다자간 투자법원제도 설립에의 기여 등을 들 수 있다. 이러한 기존 ISDS에 대한 개선을 통한 새로이 도입되는 ICS는 국제사회에서 ISDS절차에 대한 제도개선의 논의를 활성화할 것이며, 또한 국제적으로 투자 관련 협상에서 일종의 가이드라인으로 작용할 가능성이 있다. 무엇보다도 EU가 주축이 되어 기존 ISDS에 대한 개선을 시도하는 ICS의 도입은 향후 국제사회에서의 도입을 희망하는 소위 국제투자법원을 지향하고 있기 때문에 그 귀추가 주목되고 있다.<BR> 그러나 이러한 국제투자법원제도의 도입이나 설립은 미국을 중심으로 한 투자분쟁해결에 대한 현재의 국제적 상황에 비추어 볼 때 더 많은 추가적인 논의가 필요해 보인다. 따라서 우리나라는 이러한 최근의 국제적 동향에 주목하여 국익의 관점에서 국제적인 논의 동향에 뒤처지지 않도록 해야 한다. ISDS와 관련한 ‘새로운 제도적 도입내용’과 관련해서는 우리나라의 개별 입장을 준비해 국제사회에 우리나라의 사정에 맞는 적절한 대안이 반영되도록 함과 아울러 우리나라에 불리한 사항에 대해서는 이를 적절히 방어하도록 해야 할 것이다. 이와 관련해서는 투자 및 투자자의 보호에 우선할 것인지, 아니면 투자유치국의 이해를 보다 우선적으로 고려할 것인지에 대한 충분한 검토가 필요할 것이다. 그런데 기존의 ISDS에 대한 비판에도 불구하고 이것의 종료가 임박해 보이지는 않아, 새로운 ICS의 주류화에는 상당한 시간이 소요될 가능성이 있다. 그럼에도 불구하고 기 타결된 EU-캐나다 CETA, 2020년 여름 발효될 것으로 보이는 EU-베트남 투자보호협정상의 투자법원제도를 면밀히 분석하여 향후 국제적 추세에 대비하는 것은 중요한 의미가 있을 것이다.

A Study on Denial of Justice and Lawsuit Pattern of Investor in Investor-State Dispute Settlement

A Study on Denial of Justice and Lawsuit Pattern of Investor in Investor-State Dispute Settlement

Not all Rights are Created Equal: A Loss-Gain Frame of Investor Rights and Human Rights

International investment tribunals often use the language of ‘rights’ to characterize foreign investors’ claims against host states, evoking the language of human rights and, in some cases, appearing to conflate the two concepts. We investigate the cognitive framing of the relationship between investor rights and human rights in investor-state dispute settlement (ISDS), as characterized by investment tribunals. We first establish that arbitrators (and scholars and counsel) tend to characterize investor claims as rights claims in general and property rights in particular, even if this normative basis is far from precise. Second, building on behavioral economics and cognitive psychology, we argue that this characterization places human rights considerations at a structural disadvantage in ISDS. Investor rights are perceived by arbitrators as endowments that are possessed and that risk being lost, while the human rights of host state populations are viewed as aspirational demands that might only be fully realized in the future. Thus, governmental actions interfering with investments are perceived by arbitrators as actual losses, while competing human rights claims are perceived as potential gains, or demands. Following prospect theory, the former (certain losses) will usually be weighed more heavily in a decision-making calculus than the latter (possible gains). This loss-gain frame provides a cognitive explanation for the prevalence of arbitral decisions that prefer investor claims over human rights, a phenomenon that is highly problematic in times in which the legitimacy of the ISDS system rests on its ability to consider the rights of non-investors.

The Incompatibility of Intra-EU Investment Treaty Arbitration With European Union Law – Assessing the Scope of the ECJ’S Achmea Judgment

In March 2018, the European Court of Justice rendered its Achmea judgment, by which the Court considered the investor-State dispute settlement (ISDS) clause contained in the Dutch-Slovakian investment treaty to be incompatible with EU law. Even though the judgement is considered to be a landmark decision, its potentially far-reaching consequences remain, due to a rather obscure legal reasoning, difficult to assess. The aim of the present contribution is to assess the scope of the Achmea judgment in order to shed light on its relevance for pending and future intra-EU investment arbitrations. In view of the ECJ’s Opinion 1/17 rendered in April 2019 and in consideration of recent arbitral practice it is concluded that the scope of the Achmea judgement concerns the incompatibility of intra-EU investment treaty arbitration with EU law. This means on the one hand that the reasoning in Achmea is transferable not only to ISDS clauses in other intra-EU BITs, but also to Art. 26 of the Energy Charter Treaty. On the other hand, the analysis shows that contract-based investment arbitrations are not concerned by the ECJ’s findings. Finally and in view of its clarified scope of application, the relevant factors for analyzing the consequences of the Achmea judgement are identified.

Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS Policy: The CPTPP, Hong Kong, Indonesia and Mauritius Transparency Treaties

Investment treaties, and especially investor-state dispute settlement (ISDS) provisions, became a political hot potato from around 2011 when Philip Morris brought the first-ever ISDS claim against Australia under an old bilateral investment treaty (BIT) with Hong Kong. A Labor-Greens Government declared that it would no longer agree to ISDS provisions in future treaties, but when a centre-right Coalition Government regained power from 2013 it reverted to concluding treaties containing ISDS clauses on a case-by-case assessment. Australia therefore agreed to ISDS in FTAs with Korea and China, but not bilaterally with Japan. However ISDS-backed provisions apply between Australia and Japan since the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can into force between them (and five other Asia-Pacific nations so far) from January 2019. Yet the Australian parliament engaged in robust debate about ratification of the CPTPP, with Labor Opposition (and Greens) parliamentarians continuing to voice concerns over ISDS provisions, despite the Philip Morris claim against Australia’s tobacco plain packaging having been rejected on jurisdictional grounds in 2015. This paper examines how (US-style) CPTPP drafting compares with two important recent investment agreements subsequently signed by Australia over 2019, namely with Indonesia as part of a wider free trade agreement (IA-CEPA), and with Hong Kong (AHKIA, alongside a bilateral FTA covering non-investment matters). AHKIA came into force from 17 January 2020, while IA-CEPA has been ratified by Australia but not yet by Indonesia. IA-CEPA adds a provision unique in the universe of over 3000 investment agreements world-wide, probably proposed by the Indonesian side: a compulsory mediation step prior to arbitration, if the host state requests mediation after the foreign investor initiates ISDS. The paper also highlights other features of both treaties that may help reduce delays and hence costs in ISDS. The paper summarises empirical data about delays and costs, as well as transparency around ISDS as another growing public concern, including some of our own empirical data provided as evidence to an Australian parliamentary inquiry into ratifying the CPTPP. We also examine the 2019 parliamentary inquiry that agreed with the submission that Australia should ratify the Mauritius (“UN ISDS”) Convention, thereby retrofitting extensive transparency provisions on pre-2014 treaties between Australia and other states that might also accede to that framework Convention. Even if Mauritius Convention ratifications proliferate, however, it will not retrofit extra transparency provisions to treaties concluded even after 1 April 2014 even among those states (say between Australia and Indonesia, where the investor chooses the ICSID Rules rather than UNCITRAL Rules option for arbitration). Accordingly, states ratifying the Mauritius Convention will still need to agree bilaterally to expand any still-limited transparency provisions in such post-2014 treaties, which is quite inefficient compared to a multilateral solution. Nonetheless, we conclude from these new developments that Australia is now better placed to play a more active role in guiding the future path of international investment treaty-making multilaterally and especially in the Asia-Pacific region.

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.