This piece examines recent trends in the use of third-party funding (TPF) in treaty-based ISDS and the implications of TPF for investor conduct, developments in investment law and host state conduct. TPF has been raised in two multilateral processes currently underway: the talks to amend ICSID arbitration rules and to consider multilateral reform of ISDS at UNCITRAL. Given the narrow nature of the TPF discussions in ICSID, the authors make the case for policy-makers to consider full or partial bans of TPF at UNCITRAL.
A Bit of Anti-Bribery: How a corruption prohibition in FIPAs can bring a minimum standard of conduct for Canadian investors abroad
Tackling corruption is a crucial step in meeting the objectives set out in SDG 16 on “Peace, Justice, and Strong Institutions” and for achieving the SDGs overall. Canada’s investment treaties could play a valuable role in addressing corruption. The piece draws from examples such as Canada’s Foreign Investment Promotion and Protection Agreement (FIPA) program and examines some of the asymmetries inherent in the current IIA regime. The author analyzes some of the language used in Canada’s more recent treaties, such as CETA and the FIPAs with Moldova and Kosovo, and what lessons can be drawn from these and other agreements.
Spain has faced approximately 40 arbitrations since it made the decision in 2010 to rescind or revise various regulatory measures aimed at drawing in greater investments into renewable energy projects. This article examines the awards issued in four of those cases, looking in particular at how the tribunals interpreted and applied the FET standard. The author looks at the potential problems that can emerge when states are unsure of how any given tribunal may interpret FET or other key standards and presents some potential solutions.
Investment Facilitation at the WTO: An attempt to bring a controversial issue into an organization in crisis
The structured discussions on investment facilitation (IF) among 70 WTO members are now 18 months old. Participants are wrapping up their latest phase of work: considering examples of different issues and elements that could form the basis of a multilateral IF framework. The authors examine the history of investment discussions at the WTO and review how international investment governance in other forums has evolved in recent years. They examine what challenges can emerge in crafting IF disciplines, especially if these are binding, and the importance of considering which forums are most appropriate for IF-related discussions.
The Kenyan government has made parliamentary oversight and public participation a constitutionally mandated part of any BIT approval. While that same parliamentary involvement has fallen short of its desired potential, it could still play a valuable role in ensuring that BIT negotiations are open and transparent, and that the public is both aware of and engaged with the treaty-making process and what it means. This piece examines the lessons learned from Kenya’s BIT and ISDS experience to date. The author argues that the Kenyan High Court’s ruling that double taxation treaties do not require oversight and approval from the legislative branch should not set an example for the government as it considers how to revise its investment treaty-making processes.
The Energy Charter Treaty modernization negotiations are due to begin later this year and a set of topics for parties to consider has already been announced. This piece examines the prospects for updating the ECT’s existing formulation of FET and analyzes how this standard has been interpreted in past arbitrations involving renewable energy disputes. The author argues in favour of including a requirement of investor due diligence as an attempt to help ensure that investors anticipate possible risks that may emerge from changes to a state’s regulatory framework.
Investment treaty arbitration is often expected to focus on technical issues. In practice, however, domestic political discussions and processes can have a major impact on investment disputes. The authors map out the variety of state conduct characterized by tribunals as politically motivated or influenced. They also examine the different ways in which arbitral tribunals have responded to host state conduct resulting from domestic political considerations.
The April 2019 deliberations on multilateral ISDS reform at UNCITRAL Working Group III were due to tackle a series of questions that emerged in Phase 2 of the process. This piece breaks down why the scope of these discussions should be expanded to include important concerns raised by developing countries, and describes three core issues that must not be ignored. These involve the right to participation by affected parties; the rule of law and domestic courts’ jurisdiction; and the chilling of sovereign states’ authority and responsibility to govern.
Enhancing Environmental Protection in International Investment Law Through the Integration of International Civil Liability Principles
Investor–state arbitration has repeatedly proven ineffective in addressing environmental damages that host states suffer as a result of investment activities. This piece examines what lessons can be learned from international civil liability conventions, which are specifically designed to ensure victims’ compensation in cases of environmental harm. The author then explores which principles from these conventions could be adapted for use in investment treaties.
Protecting Social Rights Using the Amicus Curiae Procedure in Investment Arbitration: A smokescreen against third parties?
Arguments submitted by an amicus curiae (a “friend of the court”) have become increasingly common in investment arbitration. Many of these arguments deal with internationally recognized social rights, such as the right to water or food. This piece considers the restrictive conditions on amici curiae admission, the frequent reference to social rights issues in amici briefs, and the challenges in presenting these social rights arguments. The author advances possible actions that amici and states can take to make their social rights arguments more effective in an investment law context.
UNCITRAL conferred a broad mandate on Working Group III to consider possible reform of ISDS. In Phase 1 governments identified and considered concerns about ISDS. Phase 2, where they consider whether reform is desirable in light of those concerns, is well advanced. The next meeting in New York in April 2019 is expected to conclude this phase and decide how to pursue the final phase, in which governments will develop any relevant solutions to recommend to the Commission. This note addresses three issues at the heart of the legitimacy crisis confronting the international investment regime that should inform the remainder of Phase 2.
Multilateral ISDS Reform Is Desirable: What happened at the UNCITRAL meeting in Vienna and how to prepare for April 2019 in New York
UNCITRAL Working Group III has decided that multilateral reform is desirable to address various concerns regarding ISDS. Its next session will identify other concerns that may have been missed and prepare a work plan to develop solutions. This article reviews the UNCITRAL process so far and helps governments prepare for the upcoming session.
Do Developing Countries Really Benefit from Investment Treaties? The impact of international investment law on national governance
Some academics and arbitral tribunals argue that investment treaties and ISDS benefit not only foreign investors but also a broader range of stakeholders, from businesses to ordinary citizens. Their narrative is that the remedy of damages improve governance at a national level. But is this claim supported with empirical evidence?
CSR refers to rules and practices companies follow voluntarily to limit the negative social, environmental and other externalities caused by their activities. There is a trend to incorporate CSR standards in investment treaties. Could CSR clauses be useful in consolidating enforceable investor obligations and serving as a basis for state counterclaims?
Investment facilitation is a vague and broad term encompassing administrative simplification for investors. Certain proposals submitted to global forums also include mechanisms giving foreign investors an opportunity to participate in the design process of new regulations. Would multilateral rules on investment facilitation pose risks to domestic regulatory processes?
The backlash against investment arbitration has led to a wave of investment law reform. Approaches include creating obligations relating to investor conduct, clarifying existing disciplines, safeguarding policy space and revising ISDS mechanisms. This piece investigates the link between investment treaty design and the risk of arbitration claims.
The world is witnessing critical changes in a new generation of investment treaties, laws, policies and regulations. Egypt contributed to this process through revamping its national and international legal frameworks regulating investment. The new Egyptian Investment Law No. 72 of 2017 is at the core of this contribution.
In July 2018, Ecuador’s Ambassador released the zero draft of one of the most important international human rights treaties in recent years. How does this draft measure up to the high expectations and needs expressed by the international community and especially those in need of justice and reparation?
IISD is releasing an e-book summarizing and analyzing 10 treaty-based investor–state arbitration cases decided in the 2010s. The cases are relevant to a range of issues relating to sustainable development, including environmental protection, socio-environmental impact assessment, renewable energy, taxation, corruption and human rights.
In May 2018, the Dutch Ministry of Foreign Affairs published its new draft model bilateral investment treaty (BIT), in hopes to foster rethinking of existing and future Dutch BITs. Will this revised model achieve this goal, or does it fall short of the promised policy reset?
Third-party litigation funding (TPF) is a rapidly expanding industry composed of speculative investors who invest in a legal claim for control of the case and a contingency in the recovery. In the wake of the global financial crisis and the demand by speculative finance for new investment vehicles, TPF has discovered the regime of bilateral investment treaties (BITs) with investor–state dispute settlement (ISDS) mechanisms.
Making the Right to Regulate in Investment Law and Policy Work for Development: Reflections from the South African and Brazilian experiences
The right to regulate can be defined as states’ sovereign right to regulate in the public interest—their policy space. Because international investment agreements (IIAs) were created to limit certain aspects of countries’ right to regulate, the first wave of IIAs inhibited host countries’ regulatory experimentation that could be harmful to foreign investors’ rights.
Conflicts between Latin American Countries and Transnational Corporations: The challenges of the region in the face of asymmetrical investment treaties
Political positions and laws on foreign investment have been polarized into two opposing perspectives. On the one hand, there is the assumption that foreign direct investment (FDI) is essential for the economies of peripheral countries to take a leap toward development, prompting FDI promotion and even generating competition among countries to attract more investment.
Current and future investment treaties and chapters involving EU member states or the Union itself may be profoundly impacted by a landmark ruling of the European Court of Justice (ECJ). In this piece, the author explores the judgement from an EU constitutional point of view and analyzes potential consequences. Did the Achmea ruling come as a surprise to EU law insiders?
It will take time for dialogues on ISDS reform to produce results. In the interim, rather than continue to assume the unjustified risks associated with the flawed ISDS system, states could consider two near-term options. This piece looks at the advantages and disadvantages of each.
An Interview with Luis Guillermo Vélez – Director-General of Colombia’s National Agency for the Legal Defense of the State
On the heels of our 11th Annual Forum of Developing Country Investment Negotiators, we interviewed Luis Guillermo Vélez, Director-General of Colombia’s National Agency for the Legal Defense of the State (ANDJE), to capture his experiences on investment negotiations and disputes, his expectations for investment reform processes and views on the value of the Forum.
Meaningful and effective remedies need to be provided to those injured by business-related human rights abuses. An intergovernmental working group at the United Nations is working to bridge gaps among stakeholders and negotiate a binding instrument on transnational corporations and other businesses with respect to human rights.
Government Regulatory Space in the Shadow of BITs: The Case of Tanzania’s Natural Resource Regulatory Reform
Tanzania passed three new laws in July 2017 that significantly change the regulatory landscape governing natural resources. The reforms are aimed at ensuring that foreign investment benefits Tanzanian citizens.From an African perspective, this article argues that it is time to rethink investment treaty regimes to ensure that they do not hinder much-needed reforms.
UNCTAD’s 2017 High-level IIA Conference: Moving Forward on Addressing Older-Generation International Investment Agreements
Over 300 experts gathered in Geneva to take stock of the sustainable development-oriented reform of the investment treaty regime and discuss policy options for modernizing the existing stock of older-generation treaties. Participants recognized that multilateral collaboration would be key to addressing the complex IIA regime.
In their new book, Jonathan Bonnitcha, LaugePoulsen and Michael Waibel develop a coherent structure for policy analysis of investment treaties that should attract interest as governments review their treaty policies. It argues that investment treaties as currently applied often appear poorly tailored to address identifiable economic concerns.
Two African developing countries respond to criticisms against the investment regime. The innovative treaty offers protection to foreign investors without compromising on the host state’s capacity to regulate in the public interest.
China has sustained robust inbound and outbound flows of foreign direct investment and expanded its web of investment treaties. This note sheds light on the country’s appearance in investment treaty cases in the past decade, either as home or host state.
Does the prospect of foreign investor claims against countries in investor–state arbitration lead to regulatory chill? The authors asked officials whether ISDS contributed to changes in the internal vetting of government decisions on environmental protection.
Can Foreign Investors Be Held Liable for Human Rights Violations? International Human Rights Law and Beyond
Host states have had the challenge to protect their citizens from human rights violations caused by multinationals. This paper explains the bases of states’ obligations under international human rights law and how foreign investors may be held responsible.
The Energy Charter Secretariat is in expansion mode, wanting to gain access to energy resources in Africa and Asia for its members—and extending a far-reaching and outdated investment protection system to investments in resource-rich countries.
The Base Erosion and Profit Shifting (BEPS) reform project led by the OECD tackles corporate measures aimed at shifting profits to no- or low-tax destinations. But investment law can hinder the implementation of much-needed reform in international taxation.
The problems of traditional BITs and the growing number of ISDS cases were among factors that led Brazil to develop the CIFA model, aimed at promoting and facilitating high-quality and productive foreign investment.
In theory, the common European market works based on principles that protect intra-EU cross-border investments. In practice, can these principles be reconciled with dozens of intra-EU BIT still in place?
Argentina has come back to the BIT negotiation arena after a 15-year halt, concluding a treaty with Qatar and engaging in ongoing negotiations with Japan. The new treaty includes traditional along with innovative provisions.
Sustainability Toolkit for Trade Negotiators: Tapping the Potential of Trade and Investment Agreements for Achieving Environmental Goals
Developed by IISD and the United Nations Environment Program (UNEP), this toolkit is designed to help trade and investment negotiators by showing how specific provisions can better support sustainable development objectives.
Can the European Union act alone in concluding agreements such as CETA and the EU–Singapore FTA? Or must EU member states also ratify them? ECJ Advocate General Sharpston discusses the allocation of powers in the field of investment under EU law.
Can Bolivian State-Owned Companies Submit to International Arbitration? Analyzing Bolivia’s Intricate Legal Framework on Foreign Investment
The Bolivian government has enacted three laws—on investment, arbitration and state-owned companies—that reflect the country’s public policy on domestic and foreign investment. Investing in Bolivia requires a careful reading of the three new laws.
The Settlement of Investment Disputes: A Discussion of Democratic Accountability and the Public Interest
In the context of disputes involving governments, settlement agreements threaten accountability, respect for the rule of law, transparency and respect for citizens’ rights and interests. Any reform agenda must cover settlements and the policy issues they raise.
Over 125,000 complainants requested a temporary injunction against Germany’s approval of the Canada–European Union Comprehensive Economic and Trade Agreement (CETA). While rejecting the request, what concerns did the German Federal Constitutional Court raise with respect to CETA?
The Government of India has proposed a Joint Interpretative Statement to its bilateral investment treaty (BIT) partners. The statement clarifies key substantive and procedural provisions, bringing them more in line with India’s new foreign investment policy.
Special and Differential Treatment (S&D), originally forged in the trade regime, has evolved in trade negotiations and gained momentum in investment agreements, to provide greater flexibility for developing countries based on their needs and capabilities.
As part of the World Investment Forum (WIF) 2016, negotiators of international investment agreements (IIAs) and various stakeholders convened at the High-Level IIA Conference on July 19, 2016 in Nairobi, Kenya. Some 50 country delegates, parliamentarians, officials of international organizations and civil society representatives discussed the first phase of IIA reform and how to move […]
UNASUR Centre for the Settlement of Investment Disputes: Comments on the Draft Constitutive Agreement
The future operation of the investment dispute settlement facility of the Union of South American Nations is likely to generate scepticism, as it could undermine international standards in favour of regional parameters and lead to increased instability in the region. Alternatively, it could enhance the legitimacy and popularity of ISDS mechanisms in UNASUR member states. What are the procedural and substantive novelties contained in the Draft Constitutive Agreement?
Foreign direct investment became part of the sphere of exclusive competence of the European Union in 2009. Since then, the European Commission has been negotiating investment treaties with a number of countries—as well as authorized several individual EU member states to negotiate BITs.
Recasting Rules and Exceptions? On the Relationship Between Regulatory Sovereignty and International Investment Law
States’ regulatory powers are the rule, and investors’ rights under international investment law are the exception. Or is it the other way around? Book review of Public Purpose in International Law.