Implementing the Reform Idea: Taking stock of states’ efforts to manage their investment treaties

The discussions at UNCITRAL Working Group III (WGIII) have been ongoing for 6 years. And although they are set to conclude in 2026, it remains uncertain how much time will pass before any reforms take effect and are adopted widely enough to impact the actual experiences of states currently party to investment treaties.

In the meantime, states continue to face ISDS claims, exposing them to the risk of significant legal expenses and liabilities, which are a drain on limited state budgets and, as extensively discussed, can unduly and undesirably frustrate (or shift the costs of) legal and policy actions in the public interest. Indeed, since 2017, the year the UNCITRAL WGIII negotiations began and governments started devoting significant reform-related resources and attention to the process, investors have initiated 442 known treaty-based ISDS cases against states.[1] This represents more than one-third of all known (treaty-based) ISDS cases to date. At least 29 of those claims are demanding more than USD 1 billion.[2]

This underscores the importance of ongoing discussions regarding other steps that states can take to navigate their ISDS-related risks while the WGIII negotiations are still in progress. That was the topic of a lunchtime panel discussion held on October 10, 2023, during the 46th Session of WGIII. The panel, moderated by Simon Batifort and with input from Lise Johnson, Jaroslav Kudrna, Ladan Mehranvar, Josef Ostřanský, and Daniel Uribe, examined the various measures that some states have taken to manage their investment treaties, including termination, amendments, joint and unilateral interpretive statements, and the development of model treaties. It also addressed the drivers behind such actions and the hurdles that states may encounter when seeking to manage their investment treaties.

An Overview of the Landscape—Evolution in developed states’ approaches toward ISDS

The panel began by examining the actions taken by developed states to manage their investment treaties. As Lise noted, the run-up to the start of UNCITRAL WGIII was marked by a time when it appeared that developed states were on the verge of broadening their own IIA commitments and exposure to ISDS claims significantly.[3] But that expansion of ISDS to what would have genuinely become a global investment dispute settlement system did not happen due, at least in part, to public concerns regarding ISDS in the United States and Europe.

Instead of developed capital-exporting states expanding their own exposure to ISDS, what has transpired since 2017 are various bilateral and plurilateral efforts by these countries to narrow or, at the very least, avoid expanding, how much of their own inward FDI is covered by investment treaties and the ability to access ISDS. The renegotiation of NAFTA excluded ISDS between Canada and the United States. When the United Kingdom acceded to the Trans-Pacific Partnership (TPP), it excluded ISDS between the United Kingdom and Australia and New Zealand. There has also been a termination agreement by the EU, leading EU member states to exit their intra-EU BITs (in addition to arguing in disputes that consent to ISDS under those treaties is invalid). Additionally, as part of the agreement to modernize the ECT, ISDS would have ceased under that treaty among all of the EU member states.[4]

Thus, while the WGIII negotiations have unfolded, numerous developed states have been addressing their “defensive” concerns about ISDS through parallel efforts to remove or limit the role of this mechanism. This development carries two key implications for the reform efforts of other states. Firstly, it provides additional examples of agreed-upon reform strategies that either eliminate or reduce the role of ISDS in international investment law and policy. Secondly, the fact that developed states may have already achieved their “defensive” objectives might reshape their perspectives on and expectations from the UNCITRAL process, potentially influencing what other states, often on the receiving end of claims, can attain through that same process.

Actions at the National Level by Other States

The panellists then examined efforts undertaken by other states in the last roughly 15 years to address their concerns regarding investment treaties. They looked at the motivating factors behind these actions, the type of actions taken by states, and the means through which they have been implemented.

Daniel described how the staggering sums involved in ISDS claims and awards, coupled with claimants leveraging the ISDS mechanism to challenge government regulations over sensitive sectors and policy domains, have prompted reform efforts in several countries, discussing examples from Bolivia, Chile, Colombia, Ecuador, and Peru. Jaroslav also identified a trigger for—and object of—reform: the significant and enduring uncertainty regarding how tribunals interpret core substantive obligations. To illustrate the problem, he cited the decision from a recent case against the Czech Republic in which the tribunal characterized the FET standard as “a rule of laconic brevity and Delphic obscurity: it simply obliges the Contracting States to ensure ‘fair and equitable treatment’ to investments of protected investors” (para 288).

The reform initiatives discussed by Daniel included states’ creation of institutional mechanisms or bodies to scrutinize IIAs and provide guidance on whether and to what extent the state should adopt or maintain those treaties, along with associated ISDS provisions. The experiences of Ecuador, which established an audit committee that evaluated its investment treaties from 2013 to 2015, demonstrate how such reviews can lead to decisions to terminate existing BITs. Additionally, states have formed in-house teams or interministerial groups to centralize control over and manage the defence of ISDS claims. Strategies highlighted by Jaroslav, Daniel, and Lise underscore the usefulness of such approaches in reducing the cost of defending disputes, ensuring control over treaty interpretations presented to tribunals, and enhancing intra-governmental understanding of how treaty provisions are interpreted and applied. This, in turn, can help in better informing development of future investment treaty models and agreements.

Daniel also described how, in some states, reforms have both been informed by and implemented as a result of domestic constitutional provisions, legislative enactments, and court decisions. Examples shared by him include the Ecuadorian Constitutional Court’s decision deeming ISDS inconsistent with Article 422 of the country’s Constitution; the Bolivian New Political Constitution granting the legislature authority to enact legislation limiting the role of international arbitration in claims against the state;[5] and decisions by Colombia’s Constitutional Court conditioning the ratification of two Colombian BITs on compliance with domestic constitutional norms.[6] The developments have parallels in the EU, where, particularly through several notable court decisions interpreting the Treaty on the Functioning of the EU, EU law and policy have placed constraints on the permissible types of substantive provisions and dispute settlement mechanisms in existing or future agreements.[7]

Whether initiated by the executive branch, courts, legislatures, or a combination thereof, these reform measures typically involve a mix of unilateral and bilateral actions. Unilateral actions include treaty terminations, the development of new treaty models, the establishment of in-house structures for treaty and claims management, and the development and publication of statements clarifying the state’s views on issues of interpretation, whether through input to the tribunal as an amicus curiae or non-disputing treaty party, or through stand-alone interpretive declarations. Bilateral options include the adoption of joint interpretive statements, agreements to terminate existing treaties with neutralization or avoidance of the survival clause’s application, and agreements to conclude new treaties that replace older ones. There are also plurilateral or regional developments, exemplified by Daniel’s illustration of the Investment Protocol to the African Continental Free Trade Agreement.[8] This protocol consolidates and builds upon some of the innovative and sustainable development-oriented features present in model BITs of African regional bodies.[9] It serves as a mechanism to replace and update existing investment treaties among parties to that new protocol.

Yet, as Ladan clarified, unilateral actions have limitations in terms of effectiveness when compared to bilateral, plurilateral, or multilateral approaches. Unilateral termination, for instance, leaves the survival clause intact, making unilateral amendments impossible; unilateral interpretive statements lack the status of “authentic interpretations” that agreed interpretations enjoy under international law; and the effectiveness of one state’s model remains limited unless and until agreed to by others.

Moreover, some reform paths can pose significant political challenges for states when pursued unilaterally. It was noted by Daniel that a key driver for reform is political will. However, a persistent obstacle to this political will is the belief that investment treaties and ISDS play a critical role in influencing investors’ decisions on whether and where to invest. There is concern that government efforts to narrow or eliminate treaty protections and recourse to ISDS might negatively impact investment flows into the country. States fear that unilateral termination of treaties could attract unfavourable attention from potential investors, putting them at a disadvantage compared to their peers and competitors for investment.

However, as Ladan elaborated, many states on the receiving end of claims, dissatisfied with how their treaties are being interpreted and applied, view unilateral action as the only viable option for states to manage their existing treaties. Capital-exporting home states, having largely addressed or facing minimal “defensive” exposure, appear, for various reasons, unlikely to partner with their host state treaty counterparts to develop and implement more effective joint reforms, making unilateral paths a necessary course.[10]

Ways Forward

The panellists presented diverse views on how states—particularly capital-importing states that find themselves predominantly in the “respondent” role in the treaties they have concluded—can overcome barriers to effective reform.

Josef highlighted that a key part of the solution is to ensure the narrative around investment treaties and ISDS is updated and based on evidence. Decades of experience and research on investment treaties now indicate that the benefits supposedly justifying their conclusion had been overstated and the costs underestimated. Thus, he explained, as knowledge has evolved, so should approaches to investment treaties, with one consequence being that states should no longer be, or feel, stigmatized as anti-investment or anti-international law when making reasoned decisions to terminate treaties or avoid ISDS.

Jaroslav stated that investment agreements might play a role as one of the factors in attracting foreign direct investment. He added that if a state wanted to use investment treaties as a “signalling” device sending a message to potential investors about the quality of the investment climate, it should nevertheless ensure that the state’s obligations are carefully calibrated to prevent unnecessary exposure to investment claims.

Comments from Josef, Jaroslav, and Ladan also underscored the important role of multilateral fora, such as UNCITRAL, in facilitating meaningful reform based on this broader evidence base and updated narrative. Ladan emphasized that multilateral negotiations offer an important opportunity for respondent states to collaborate in order to address power imbalances and diverging interests between capital-exporting states (often without defensive interests) and capital-importing states (focused largely on reforms that better protect defensive interests).[11] This collaboration is essential for overcoming hurdles in reforming investment treaties at the bilateral level. Josef pointed out that, beyond balancing bargaining power among states, international negotiations should also address the balance of power among different stakeholder groups. Given the broad range of interests and issues affected by investment treaties and ISDS, he emphasized the need for a holistic approach in UNCITRAL discussions. This involves viewing the problems and potential solutions from various perspectives, steering away from the narrowly technical lens typically employed by experts.

Yet, circling back to the panel’s introduction, it was reiterated that, given their extended duration and uncertain outcomes, multilateral negotiations at UNCITRAL WGIII should not be the sole reform path. For many states, unilateral actions, while not devoid of drawbacks and challenges, offered the only feasible near-term way forward. These included efforts, as described by Daniel, to take stock of existing treaties; initiatives, as described by Jaroslav in the context of the Czech Republic’s experiences, aimed at clearly defining the content of substantive obligations in investment treaties, avoiding domestic commitments that could give lead to treaty claims, and actively managing disputes. They also included multi-pronged efforts, such as those adopted by India, as highlighted by Lise. India’s strategy included terminating eligible investment treaties, drafting joint interpretive statements (JISs) to publicly clarify the meaning of contested provisions, engaging with treaty counterparts to conclude JISs for specific treaties, formulating and publishing a new model investment treaty (indicating that termination did not signify a dismissal or rejection of international law), establishing an interministerial body to oversee ISDS cases, and pursuing various efforts to promote and benefit from inward and outward investment.

As noted in the discussion that accompanied the question and answer session, additional challenges to reform abound. For instance, as happened in Eco Oro v. Colombia (para 212 & 836; Sands’s dissenting opinion, para 5-6) and Infinito Gold v. Costa Rica (paras 338-9), there is a very real concern that, even if a capital-exporting state without defensive exposure under the relevant treaty cooperates with its capital-importing treaty counterpart to issue a joint interpretation countering an ISDS claimant’s broad interpretation of a given treaty provision, the tribunal hearing the ISDS case will nevertheless fail to give the joint interpretation its due weight. Thus, considerations relating to tribunal decision making need to be integrated into reform discussions. Moreover, as another commentator noted, even if a capital-exporting state is open to cooperating with its treaty counterpart on preventing or addressing incorrect interpretations, other challenges, such as an enduring lack of transparency preventing the “home state” from knowing when claims are brought and what they assert, impede such engagement. These comments, in turn, helped crystallize the broader theme evoked by the panel that although WGIII is an important forum and has much potential that needs to be fostered, its role as a change-maker cannot be taken for granted, and it does not displace or reduce the need for action elsewhere.


Lise Johnson is Counsel at Curtis, Mallet-Prevost, Colt & Mosle LLP.


[1] Based on UNCTAD’s Investment Dispute Settlement Navigator, available at

[2] Id.

[3] In 2016, for instance, the United States was participating in negotiations for the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) with Europe (which at that time also included the United Kingdom, one of the major sources and destinations of FDI flows to/from the United States) and the Trans-Pacific Partnership Agreement (TPP)  with 11 other countries, including Japan, also one of the major sources of FDI into the United States and destinations for U.S. FDI.  If the United States was party to those two agreements, the amount of FDI covered at the time by ISDS provisions would have grown from roughly USD 280 billion to nearly USD 3 trillion, an increase of roughly 1,000%.  (See U.S. Congressional Research Service. (2016). The Trans-Pacific Partnership: Key provisions and issues for Congress., p. 10). In Europe, estimates were that 8% of U.S. firms’ investing in Europe were already covered by BITs with EU member states absent the TTIP, but the TTIP would have covered the other 92%, providing an additional group of roughly 47,000 US-owned subsidiaries and an unknown number of additional “assets” treaty protections actionable through ISDS. (See tens of thousands of US firms would obtain new powers to launch investor-state attacks against European policies via CETA and TTIP. (n.d.). Public Citizen., pp. 1-2).

[4] The fate of the ECT’s modernization is uncertain, but there have also been announcements by EU member states of unilateral withdrawals and efforts toward coordinated withdrawals from the ECT.

[5] See Article 320 of the country’s New Political Constitution adopted in 2005; see also Plurinational State of Bolivia. (2015). Law Nº 708, of June 25, 2015. Available at:; see also Menacho Diedrich, P. (2015). Conciliation and arbitration law: Times of change in investment protection in Bolivia, Investment Treaty News.

[6] See, e.g., discussion of the cases in Olarte-Bacares, C., Prieto-Rios, E., & Ponton-Serra, J. P. (2020). Are interpretative declarations appropriate instruments to avoid uncertainty? The cases of the Colombia–France BIT and the Colombia–Israel FTA. Investment Treaty News.

[7] See, e.g., vis-Dunbar, D. (2009). European Court of Justice rules that certain Swedish and Austrian BITs are incompatible with the EC Treaty. Investment Treaty News.; Slovak Republic v. Achmea, Case C-284/16, 27 March 2018 (finding that intra-EU ISDS is incompatible with EU law); Opinion 1-17, 30 April 2019 (finding that the CETA is compatible with EU law due, in part, to the Court’s view of how the treaty’s substantive and procedural provisions would operate).

[8] For discussion of this text see, e.g., Danish, El-Kady, H., Mbengue, M. M., Nikiema, S. H., & Uribe, D. (2023). Protocol on Investment to the Agreement Establishing the African Continental Free Trade Area: What’s in it and what’s next for the Continent. Investment Treaty News.

[9] See, e.g., COMESA Investment Agreement (2007); SADC Model BIT (2012).

[10] See Mehranvar, L., & Johnson, L. (2022). Missing masters: Causes, consequences and corrections for home states’ disengagement from the investment treaty system, Journal of International Dispute Settlement, 13(2) 264–308.

[11] It was also noted in the Q&A that whether a state is capital importing or capital exporting may be treaty-specific. A given state may be both capital importing and capital exporting under one treaty, the dominant capital exporter under another, and primarily a capital importer under yet another.