Treaty Reform Research Articles

Rebalancing Investment Protection Standards

Abstract Treaty reform has largely focused on refining the various investment protection standards under IIAs to achieve a more appropriate balance between investment protection and preserving the state’s right to regulate. This article takes stock of the treaty language used to recalibrate investment protection standards and evaluates their effectiveness in preserving policy space. The article ultimately concludes that greater precision in the various investment protection standards has been effective in preserving regulatory space in some cases, notably in the case of indirect expropriation. By contrast, reform of the fair and equitable treatment may be of limited effectiveness, whereas the reforms of national treatment clauses and most favoured nation clauses have yet to be tested by arbitral treatment. While in principle the latter reforms appear to directly address the concerns raised by previous arbitral authority, it remains to be seen whether they will prove to be effective.

Fairness as Balance: Investor Obligations and Investment Treaty Reform

The normative asymmetry between the rights and obligations of investors and host states under investment treaties has been a key reason for the treaties’ common characterization as “unbalanced”. While initially a description of a justified treaty design, imbalance has since become a central component of the legitimacy challenges to the investment treaty regime: a normative demand of the treaties’ realignment. Identifying the imbalance critiques of investment treaties as fairness-based critiques concerning the distributive implications of investment treaties, the article considers to what extent including provisions on investor conduct in investment treaties may address the concerns about potential unfairness in the allocation of rights and obligations under these treaties. In particular, the article argues that understanding the imbalance critiques as concerns of distributive justice enables the assessment ofinvestment treaty design innovations and the alternative ways in which these instruments could be structured to produce different distributive outcomes.

Investment treaty reforms to prevent developing country regulatory chill from causing global warming

Developing countries have more than 1300 investment treaties with developed countries. Investment treaties are often alleged to constrain developing countries' climate policies. This paper examines four treaty reforms that are often suggested as remedies to such regulatory chill. It considers an investment treaty that protects a stranded developed country investment in a developing country. The reforms are compared with regard to whether they can induce the developing country to regulate the investment, and their political attractiveness. The reforms are shown to have features that seem to have gone unnoticed in the debate. Exclusion of investor-state dispute settlement (ISDS) may be ineffective due to a hold-up problem, and if effective requires unlawful regulation by the host country. A shortening of a sunset period applicable to unilateral withdrawal can postpone regulation. A reduction in the amount of stipulated compensation can induce the developing country to phase out the stranded investment, but will require a compensation payment from the developing country to the developed country investor. The reform with best potential to address stranded investment problems appears to be an increase in a carve-out from the compensation requirement for measures with sufficiently positive climate effect.

The Evolution of the Principle of Shared Responsibility in the Area of European Integrated Border Management

The article includes a legal analysis of the principle of shared responsibility, which is the current basis for implementing European Integrated Border Management (EUIBM). In particular, the article analyzes the main instruments strengthening the institutional position of the European Union in border management, that is, the Frontex standing service and its powers to apply coercive measures and the obligation of Member States to cooperate with the agency. There are three stages in the evolution of the principle of shared responsibility. The first stage begins with the reform of the EUIBM system resulting from the then migration pressure, initiated by the European Commission’s communication of December 2015 and the European Border and Coast Guard (ESGiP) Regulation of 2016, replacing the original Frontex Regulation. The reform allowed for the adoption of the first binding definition of European integrated border management and introduced the principle of shared responsibility. The second stage is marked by the ESGiP reform of 2019, which significantly expanded Frontex’s competences by establishing the agency’s force corps. The third stage, carried out during the period of intensifying geopolitical changes in Europe and the world, begins with the adoption in 2023 of the first multi-annual program implementing and aimed at the effective implementation of EUIBM, the so-called “strategic policy.” The article puts forward the thesis that geopolitical conditions favoring the tendency to tighten operational cooperation have enabled the Union to build an EUIBM based on the principle of shared responsibility and a significant evolution of the principle itself. It seems that EUIBM in its current formula has exhausted the treaty possibilities and further expansion of the system should be preceded by a treaty reform.

Explaining the politicization of EU trade agreement negotiations over the past 30 years

AbstractAlthough the Transatlantic Trade and Investment Partnership with the USA and the Comprehensive Economic and Trade Agreement with Canada have elicited considerable domestic contestation in Europe, several other agreements have been negotiated into public and media indifference. What explains this difference? In this article, I put forward a number of arguments on the structural causes of the politicization of European Union (EU) trade policy over the past 30 years and test them against a newly collected dataset covering 19 preferential trade agreements. The qualitative comparative analysis suggests that the politicization of EU trade negotiations is determined by the co-occurrence of several, well-defined conditions. More specifically, it tells us that: (1) the Lisbon Treaty's reform of EU trade policymaking is the main driver of politicization, (2) the level of public support for the EU is of particular relevance when it comes to ‘deep and comprehensive’ agreements that touch on sensitive domestic issues, and that (3) high adjustment costs expected from trade liberalization can lead to the politicization of trade negotiations.

From US Slavery Defence to Article 19 TFEU: Treaty Reform in the Scales of History

From US Slavery Defence to Article 19 TFEU: Treaty Reform in the Scales of History

Investor Obligations: Transformative and Regressive Impacts of the Business and Human Rights Framework

Abstract The business and human rights (BHR) framework has regularly been considered the superior legal regime of corporate accountability for business-related human rights abuses, which must be both protected from and incorporated into investment treaties. However, investment treaties have surpassed the BHR framework in an important respect: certain investment treaties impose strict international legal obligations, including human rights-related obligations, directly on investors, thereby going beyond the normatively ambiguous corporate responsibility to respect. Investment treaty reform initiatives, including those seeking to align investment treaties with the BHR agenda, should, therefore, take care to avoid inadvertently undoing this advance towards investors’ legal accountability.

Article: The FET Standard between Treaty Reform and ISDS Practice: An Analysis of the Modernized ECT

The Modernization of the Energy Charter Treaty (ECT) counts as a prominent attempt to better incorporate climate change considerations into an investment treaty that is highly impactful from a climate change perspective. Among other initiatives, reform efforts in the ECT Modernization have led to amendments of key standards of treatment providing the substantive legal basis for claims by foreign investors. Focusing on the Fair and Equitable Treatment (FET) standard, this article contrasts the new treaty provision under Article 10 of the ‘modernized’ ECT with consolidated interpretations of the FET standard in previous arbitral practice. Building on such a jurisprudential analysis, this article evaluates the extent to which reformed standards of investment protection in the Modernized ECT can lead to an increased likelihood of climate-aligned outcomes in investor-State disputes, thereby providing an analytical assessment as to the potential of the newly introduced ECT provisions on FET – which may also serve as benchmark for further reforms of international investment agreements (IIAs) – to expand regulatory space for host States and support the adoption of more stringent climate policies. Fair and Equitable Treatment, Energy Charter Treaty, Modernization, Investor-State Dispute Settlement, Climate Change, Regulatory Space, Investment Arbitration, Fossil Fuels, Legitimate Expectations, Treaty Reform

Ideational robustness of economic ideas in action: the case of European Union economic governance through a decade of crisis

Abstract Is it possible to develop a robust crisis management response in a system where governance is characterized by coercive power and adversarial bargaining rather than the diversity, inclusion, and openness highlighted by extant scholarship as conducive factors for robustness? Using two instances of crisis in the European Union—the Eurozone crisis (2010‒2015) and COVID-19 pandemic (2020‒2022)—the paper argues that how actors reinterpret existing rules and institutions offers an important source of robustness in crisis management. Based on the employment of a disaggregation of robustness into degrees of robustness, as well as the concepts of ideational and institutional power, we show how actors can counter the coercive power of dominant coalitions and open up for rule adaptation through reinterpretations of existing rules that, at least in the short term, can solidify the functioning of existing institutions faced by turbulence. In the context of the Eurozone crisis, ideational and institutional power thus enabled a moderately robust response without treaty reform. In the case of the pandemic, it was possible to convince (particularly German) policymakers of the need to employ new ideas about common debt. This meant less need to employ ideational and institutional power by other actors, leading to significantly more effective crisis management than in the Eurozone crisis, what the paper terms maximal robustness.

Tested by the Polycrisis: Reforming or Transforming the EU?

This thematic issue addresses the question: To what extent have the latest crises—the pandemic crisis and Russia’s war in Ukraine—triggered institutional and policy change in the EU? It contributes to the literature on the impact of crises on integration and the EU political system, presenting new research based on fresh theoretical insights, empirical data, or a combination of both. Theoretically, the contributions collected in the thematic issue explore whether the crises represent a critical juncture for the EU, leading to institutional and/or policy innovations or, rather, set in motion more incremental processes of adaptation. Empirically, all articles—some of which are qualitative, while others are quantitative—are based on original or new data. The first group of contributions deals with institutional change, focusing both on formal (i.e., treaty reform) and informal (i.e., codes of conduct) institutions. A second group moves the focus to policy change, looking at the impact of the Covid-19 pandemic on several policy areas and the energy crisis. Overall, the key lesson is that the EU can now manage and absorb new shocks quite effectively. At the same time, however, it does not promote ambitious and coherent political models or policy paradigms. Instead, it provides room for experimentation through patchwork-like strategies where old and new instruments and settings mix.

Farewell to constituent power? The Conference on the Future of Europe, citizens’ assemblies and the democratic minimum

Abstract In this article, I ask about the extent to which the Conference on the Future of Europe (CoFoE) has advanced democracy in the European Union. I critically engage with the claim that the CoFoE’s success should not be measured by whether it enabled constituent power, or ultimately results in treaty reforms, but by the fact that, by introducing citizens’ assemblies to EU politics, it has laid the foundation for participatory democracy in the European Union. Drawing on established theories of participatory democracy, I argue that this interpretation misses the point. To put forward an alternative view, I revisit James Bohman’s concept of a democratic minimum. The best democratic defence of permanent EU citizens’ assemblies is that they could provide citizens with the capacity to initiate deliberation about common concerns – and thus function as a nucleus for constituent power in the European Union. Nevertheless, the idea should be viewed with caution, as permanent citizens’ assemblies could just as well become a democratic fig-leaf allowing EU institutions to reject calls for fundamental reforms. Much therefore depends on their institutional design.

Models of EU Constitutional Reform: What do we learn from the Conference on the Future of Europe?

Abstract Constitutional reform in the European Union suffers from a post-functionalist dilemma: the options that are politically viable are not democratically legitimate and the options that are democratically legitimate are not politically viable. Against the background of the recent Conference on the Future of Europe and the involvement of transnational European Citizens’ Panels, this article asks whether there is any prospect of overcoming this dilemma and organizing fundamental reform of EU institutions that is both normatively legitimate and politically viable. For this, it examines four models of EU treaty reform and the way these have figured in actual EU reform processes: Intergovernmental Conference, European Convention, informal intergovernmentalism and a Citizens Convention. The article concludes that, as long as the European Union is best characterized as a ‘demoi-cracy’ in which political deliberation takes place primarily in national public spheres, the Intergovernmental Conference remains its main and inevitable forum for constitutional reform. Hence, alternative models of EU constitutional reform should be evaluated not so much on the basis of their potential to substitute the IGC but rather on their ability to catalyse the process and to pre-commit the member state governments.

Use of Corruption Defense by Host States in Investor-state Arbitration

Concerns about corruption have significantly grown in international investment law. Although foreign investment may boost the social and economic development of the host country, investment tainted by corruption has adverse effects, such as rising transaction costs and declining confidence in the business climate. As a result, there is a contentious argument over whether an investor who used bribery during their investment can file a claim against the host State in international investment arbitration. When investors are involved in corruption to facilitate their investment, the question of how to use corruption defense is crucial for respondent States, particularly those engaged in a ferocious fight against corruption like Vietnam. Therefore, this paper seeks to answer this question. It reveals that in investment arbitration, host States can use corruption defense in diverse ways: as an objection to jurisdiction, a challenge to the admissibility of the claims, or a substantive defense. Further, this paper evaluates the viability of these options by examining how arbitral tribunals have dealt with host States' corruption claims in the past and how the current treaty reforms may affect tribunals' decisions in future disputes. Based on this analysis, the author provides recommendations for respondent States to effectively use corruption defense in investment disputes.

Survival Clause under the International Investment Treaty Reform: Challenge and Response

Survival Clause under the International Investment Treaty Reform: Challenge and Response

Against Imperial Arbitrators: The Brilliance of Canada's New Model Investment Treaty

Investment treaty arbitration has become politically “toxic” even in states that pioneered the development of investment treaties. There is consensus on the need for reform. But there is a dearth of historical research on what went wrong with investment treaties, when it happened, or how to find the way forward in light of the past. As a result, reform efforts have a stumbling quality. One can see this in multilateral fora, such as the United Nations Commission on International Trade Law (UNCITRAL), where over four years of study and negotiations have produced little consensus. One can also see it in the investment treaty practice of individual states, such as Canada, which has recently lurched across the spectrum from investment treaty arbitration to a permanent international investment court, to the abandonment of investor-state dispute settlement (ISDS), and back to investment treaty arbitration. This article fills the gap in understanding by explaining what went wrong with investment treaty arbitration and when it happened. It demonstrates that the customary international law on state responsibility for injuries to aliens evolved during the 19th century to protect foreign investors against exceptional failures of the nightwatchman and rule-of-law states. As the consensus regarding customary international law standards of treatment unraveled during the 20th century due to the spread of communism, decolonization, and economic nationalism, capital-exporting states turned in bilateral investment treaties (BITs) to uphold traditional principles regarding the protection of foreign investment. Starting in the late 1990s, however, an unexpected surge of claims brought under NAFTA’s investment chapter fortuitously opened the door to the central problem of modern investment treaty practice: the rise of “imperial arbitrators” who do not merely police exceptional failures of the nightwatchman and rule-of-law states, but who choose to second-guess the normal operations of modern regulatory states without any meaningful checks or balances. Although the NAFTA Parties nipped that development in the bud, the rise of imperial arbitrators leapt to the broader universe of investment treaty arbitration, where it flourished until claims against developed states for measures such as the phaseout of nuclear power brought investment treaty arbitration to a crisis point. Seeking a way forward in light of the past, the article examines Canada’s recent experimentation with investment treaty reforms, including the development of a permanent international investment court in relations with the EU, the complete elimination of ISDS in relations with the United States, and a return to traditional investment

Bottom-Up Dilemma


 
 
 Global environmental governance reflects a bottom-up trend of polycentric, adaptive, and participatory decision-making processes. The legal regime for international investment, by contrast, has a top- down structure that requires consistent, stable, and predictable governance of foreign investment in host states. This difference in structure results in an emerging “bottom-up” dilemma where states face conflicting obligations regarding the distribution of governing authorities, the frequency of norm evolution, and the inclusiveness of decision-making. This paper analyzes three aspects of the bottom-up dilemma—governing actors, scales of governance, and modes of governance—as reflected in the investment arbitration case law. It then conducts an analysis of investment treaties to assess their effectiveness in solving the dilemma and makes proposals for future treaty reform and arbitration practice. In conclusion, the paper proposes to strike a balance between, on the one hand, the protection of foreign investors’ interests in a dynamic and complex governing process, and, on the other hand, the preservation of host states’ policy space to adopt a polycentric and bottom-up governance structure.
 
 

Beyond Multilateral Treaty Reforms

International trade law is primarily concerned with facilitating the flow of goods and services across national borders by minimizing tariff and non-tariff barriers to trade. However, there is a nexus between international trade and the environment. First, international trade is reckoned to have destructive environmental effects. The liberalization of global trade results in increased economic activity, including industrial processes, manufacturing, innovation of new technology, and extraction of natural resources from the earth and the sea, which inevitably results in environmental externalities such as biodiversity loss, pollution, and climate change. Second, international trade law intersects environmental law whenever trade restrictive measures such as import bans, export control and border taxes are adopted by states as a means of achieving environmental goals.[1] Such measures condition market access on the fulfilment of environmental norms related to the characteristic of the product or the process of its production. The World Trade Organization (WTO) currently oversees the largest multilateral regime for international trade. WTO covered agreements expressly recognises some exceptions to trade liberalization commitments for environmental objectives, this policy space is subjected to a system of strict limitations and review procedures designed to protect the global trading system from arbitrariness and disguised restrictions on trade. This scrutinized policy space accounts for the contention that the multilateral trading system constrains environmental regulation and requires treaty reforms for the purpose of adapting to contemporary environmental concerns. Others have focused on a change of approach in the reasoning of WTO adjudicators in their review of trade-restrictive environmental measures. However, the process of multilateral negotiations for new agreements needed to effect rule change is notably complex and has been fraught with deadlocks in the last couple of decades. The stalemate over appointment of members of the Appellate Body has hampered the effective functioning of third-party adjudication in the WTO and the prospect of ‘pro-environmental’ approaches in the interpretation of WTO law on environmental measures. Meanwhile, numerous environment-related measures continue to be notified within the WTO. I argue that notwithstanding the absence of treaty reforms, international trade law continuously evolves through various formal and informal norm-generating practices by member states and trade stakeholders. Viewed through the lens of legal pluralism, these practices contest, modify and transform normative meaning in the multilateral trading system thereby creating a permissive setting for trade-restrictive environmental measures within the framework of extant international trade law.

The Energy Charter Treaty reform: Why and how to reach a consensus on fair and equitable treatment?

A sharp rise in the number of energy disputes under the fair and equitable treatment standard (FET) has caused concerns and confusion for the Contracting Parties to the Energy Charter Treaty (ECT). The indeterminate FET wording of Article 10 (1) of the ECT has opened the door for disputes and a lack of coherence in the application of the FET has led to a blurring of boundaries between the legitimate right to regulate and a breach of the FET. The current FET scope has failed to address the emerging political and economic challenges of the new era. In the light of the modernisation process of the ECT, this paper examines the present FET wording and makes a contribution to the ongoing modernisation process by outlining the framework, as well as the procedural and institutional proposals. The paper proposes a revision of the FET scope rather than exclusion. The aim of the proposals is to revise the wording to establish a fairer balance between the right to regulate and investment protection.

Алексей Доманов Скорость законодательного процесса в Европейском Союзе

This article investigates the impact of various institutional factors on the duration of legislative process negotiations in the European Union. The empirical data consists of EU secondary law directives adopted in 1990-2019 (1124 directives). We use the methodology of survival analysis (Cox model). We detected that after 2004 the rules of voting in the Council (unanimity or qualified majority) do not affect the duration of the legislative process; this conclusion changes the traditional vision of the functioning of the Council. We prove that of all the EU enlargements, only that of 1995 has influenced the legislative process and slowed it down. Other EU enlargements, including one in 2004 when 10 CEE countries joined the EU, did not show a significant impact. We demonstrate that of all basic treaty reforms that have taken place since 1990 only the Amsterdam Treaty has accelerated the decision-making process. In addition, we conclude that the Interinstitutional Agreement of 2007 between the Council and the European Parliament had a stronger impact on the legislative process than most treaty reforms. It favoured the acceleration of decision-making by consolidating cooperative practices between EU institutions based on trilogues. Besides, the study confirms some previous conclusions tested on the new dataset: more active involvement of the European Parliament in the legislative process (ordinary legislative procedure), the novelty and complexity of the act slow down the decision-making process.

The 2019 Dutch Model Bilateral Investment Treaty: Navigating the Turbulent Ocean of Investment Treaty Reform

The 2019 Dutch Model Bilateral Investment Treaty: Navigating the Turbulent Ocean of Investment Treaty Reform