Analysis

An interview with Wolfgang Alschner on Investment Arbitration and State-Driven Reform: New Treaties, Old Outcomes

This interview with Wolfgang Alschner, Associate Professor at the University of Ottawa, explores his new book on investment arbitration and state-driven reform. Alschner argues that new international investment agreements are not solving the problems of their predecessors because they are being interpreted in the same way as old agreements, thereby reproducing old outcomes. His book calls for a change in course for the investment regime, where new treaties inform the reading of old treaties rather than the other way around.

Three key principles for fairer and more effective private sector involvement in international governance processes

This article examines some of the main issues related to business group participation in three major investment policy reform processes. It identifies three general principles that can help ensure private sector stakeholders can participate in international governance processes more fairly and effectively.

The loss compensation clause and the protection and security clause: Two risky provisions neglected by investment treaty reform?

This article examines two key provisions that pose costly arbitration risks for states but are often neglected in investment treaty reform processes. It aims to provide investment treaty negotiators with recommendations on how to better phrase these clauses to minimize the chances of misinterpretation in arbitral tribunals.

On the importance of defining “frivolous” claims in ISDS

This article explores the meaning of the term “frivolous” as understood by the governments participating in the UNCITRAL WGIII ISDS reform process. It argues that participating states have focused on the procedural aspects of the problem by identifying ways to limit frivolous claims without undertaking the important substantive task of defining such claims.

The efforts to modernize the ECT and the hidden cost of non-derogation clauses

This article argues that the success of efforts to modernize the ECT and prevent the treaty from impeding efforts to transition to clean energy sources will fail unless states participating in the process widen their focus to other IIAs to which they are part.

The conflict between traditional miners in Marmato and Canadian transnational mining companies: Another ISDS dispute over natural resources in Colombia

This article provides historical context for the shift in the transnational legal order that governs mining in Colombia and has provoked an increasing number of socio-political conflicts, leading to ISDS claims.

The human rights case for robust “in accordance with domestic law” provisions in Africa’s international investment law

This article argues that African states should proactively and intentionally use accordance provisions to launch counterclaims against investors that violate domestic legislation enacted to protect human rights. Stand-alone accordance provisions can allow states to set their own standard for corporate liability even where international human rights law—and the arbitrators interpreting it—lags behind.

How the Energy Charter Treaty risks undermining the outcomes of COP 26

This article provides an initial assessment of the ECT-based arbitration risk flowing from the COP 26 pledges due to their impact on fossil fuel investments in ECT contracting parties. It further estimates how these impacts could translate into investor–state arbitration claims based on past and ongoing cases in the energy sector.

ICSID tribunals fail to address the imbalance between sustainable development principles and investment protections

The importance of linking sustainable development and FDI has garnered increasing attention in recent years, and IIAs increasingly include sustainable development provisions. However, the architecture and functioning of the investment regime make application of these standards difficult.

Eco Oro and the twilight of policy exceptionalism

The recently rendered decision in Eco Oro v. Colombia highlights many of the problems with policy exceptionalism. Most importantly, it suggests that states cannot, by larding their investment treaties with exceptions and carve-outs, simply avoid reckoning with the fundamental challenges facing the investment treaty system.

Breakthrough in business and human rights binding treaty negotiation but be prepared for a bumpy road ahead

The Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises With Respect to Human Rights recently held its seventh session to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises with respect to human rights. While progress has been made, significant challenges still cast dark clouds over the future of this important process.

A comparative approach to compensation in international property law claims: what lessons for international investment law? An interview with lead author, Esmé Shirlow.

The increasing size of awards of compensation made under IIAs is drawing greater scrutiny over the approaches that investment tribunals use to arrive at these—at times staggering—amounts. One question being asked is: How are things being done elsewhere? By contrasting these approaches with approaches used by international investment tribunals, this article seeks to draw out some key policy considerations for the reform of compensation principles.

They concern you more than you know: On the perils and potential of international investment agreements for the Agreement on TRIPS and COVID-19 discussions at the WTO

Talks on a possible COVID-19-related Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) decision aimed at scaling up vaccine and therapeutics production and equitable distribution continue, despite the postponement of the 12th WTO Ministerial Conference. Without coordination between a TRIPS decision and WTO members’ IIA obligations, these obligations could significantly reduce any decision’s effectiveness.

The UNCITRAL Code of Conduct: Breakthrough or diversion?

UNCITRAL’s Working Group III—charged with global ISDS reform—has circulated its third draft Code of Conduct for investment adjudicators and suggested means for its implementation and enforcement. This article aims to give negotiators an overview of the Code’s provisions, clarify what they mean in practice, and identify specific key issues.

Reform or withdrawal from the ECT: What does it mean for coal?

Of all fossil fuels, coal has the greatest climate impact. However, sovereign decisions to phase out coal inevitably affect the investment of coal power plant operators, frequently leading to disputes concerning compensation for lost profits. 

Despite consensus on the ECT’s incompatibility with the global climate agenda, claims that it is well-suited for the clean energy transition persist

This article assesses the degree to which the Energy Charter Treaty can be thought of as a tool to protect renewable energy, and thus aid in energy transition, by analyzing data on ECT-based ISDS cases related to renewable energy investments. The article concludes that proponents of the ECT overstate its potential to have a positive role in the transition to renewable energy.

The end of tax incentives: How will a global minimum tax affect tax incentives regimes in developing countries?

This article investigates the impact of a global minimum tax on the use of tax incentives in developing countries and what transitional arrangements are needed to protect countries from a transfer of tax revenue.

An Interview With Esmé Shirlow on Judging at the Interface: Deference to state decision-making authority in international adjudication

An interview with Esmé Shirlow about her new book, Judging at the Interface: Deference to State Decision-Making Authority in International Adjudication.

The “‘trade-related” conundrum of the EU–Korea FTA Expert Panel: Are FTAs a novel forum to enforce sustainable development goals?

This article discusses the decision of a Panel of Experts, established under the EU–South Korea Free Trade Agreement, which found that South Korea was in breach of the FTA’s sustainable development chapter.

From transparency to prohibition: UNCITRAL WGIII considers options to regulate third-party funding

This article takes stock of UNCITRAL WGIII on ISDS reform discussions on the regulation of third-party funding.

Virtual Negotiations: Lessons from a survey of JSI and UNCITRAL negotiators

The COVID-19 pandemic forced international negotiations, including those related to investment such as the Joint Statement Initiative (JSI) on investment facilitation by a group of WTO member states, and the UNCITRAL WGIII, to move online. Virtual negotiations create new challenges for officials, as well as new opportunities. This article discusses the results of a survey of delegates involved in the JSI and UNCITRAL processes.

An Interview with Nicolás Perrone on Investment Treaties and the Legal Imagination: How Foreign Investors Play By Their Own Rules

This article is an interview with Nicolás Perrone on his new book, Investment Treaties and the Legal Imagination: How Foreign Investors Play by Their Own Rules.

Stabilization Clauses and Implications for Human Rights and Gender Equality

Stabilization clauses in investment contracts may make it more difficult to pass laws aimed at improving gender equality. This article discusses the potential relationship between investment contracts and gender, as well as guidance from international organizations that seeks to help states avoid contracts which constrain their ability to regulate in the public interest.

Energy Charter Treaty Reform: Why withdrawal is an option

The Energy Charter Treaty (ECT) faces criticism for its outdated investment provisions and the threats it poses to the energy transition. This article examines one option for states to solve this problem—withdrawal from the treaty—and what this could mean for the EU and its member states, along with its impact on the energy transition in general.

Rethinking investment law from the ground up: extractivism, human rights, and investment treaties

The ways in which the investment protection regime frames disputes between states and investors misses that these disputes, particularly when they relate to the extractive industry, are embedded in complex social relations. This article calls for a reimagining of these disputes and efforts to resolve them.

Corruption and confidentiality in contract-based ISDS: The case of P&ID v Nigeria

This article examines a contract-based dispute, P&ID v. Nigeria, which highlights issues of corruption and lack of transparency in this type of dispute settlement. It concludes that, given the significant public interests at stake in investor–state arbitration, including the possibility that arbitration may facilitate the corrupt transfer of public funds to private actors, they should not be conducted in private.

On proportionality, again: Domesticating international investment law and managing vulnerability

This article focuses on debunking assumptions surrounding the use of balancing and proportionality in international investment arbitration as a way of successfully reconciling competing interests and conflicting protection obligations vested upon host states.

The uncertain future of the Energy Charter Treaty: Belgium asks the European Court of Justice to rule on the compatibility of the modernized ECT with EU law

The relationship between the ECT and EU law is characterized by complexity and legal uncertainty, especially as far Article 26, the ECT’s dispute settlement mechanism and its application in an intra-EU setting is concerned. This article examines the question of whether the Achmea judgment’s finding on the incompatibility of intra-EU investment arbitration under BITs also affects the dispute settlement mechanism under the ECT

Reconciling the rights of multinational companies under IIAs with the tort liability caused by their subsidiaries

Because of their structure, multinational corporations (MNCs) can resort to IIAs to protect their subsidiaries. At the same time, by virtue of the principles of corporate separation and limited liability, MNCs can take advantage of their structure to avoid liability for the damages caused by their subsidiaries. This paper highlights the need for a more balanced approach with regards to the rights and obligations of MNCs under IIAs.

The return of investment screening as a policy tool

One of the most striking trends in investment policy over the past decade has been the increased use of investment screening as a policy tool, particularly in developed economies, with the issue becoming more salient with the advent of the COVID-19 pandemic. This article provides an overview of these developments.

Are interpretative declarations appropriate instruments to avoid uncertainty? The cases of the Colombia–France BIT and the Colombia–Israel FTA

According to the Colombian Constitution, the Constitutional Court must assess the constitutionality of all international treaties after signature and prior to ratification. In two recent landmark decisions, the court assessed the constitutionality of the BIT signed with France in 2014 and of the FTA signed with Israel in 2013. This article examines these decisions and identifies some areas of concern.

Does the investment treaty regime promote good governance? The case of mining in Santurbán, Colombia

Investment treaties and arbitration are argued, by proponents of the regime, to contribute to “good governance” in host states. This article, based on an empirical study of mining investments in the Colombian páramo, argues that the conception of good governance promoted by investment arbitration is incomplete and does not adequately consider the role of courts in providing checks and balances.

Corporate investors’ nationality and reforming investment treaties: Can older-generation treaties undermine substantive reforms?

The investment treaty regime is undergoing a period of reform, with many states revising or renegotiating their treaties. However, as this article explains, older treaties that remain in force may undermine these reform efforts, allowing behaviour that these reforms are meant to curb—such as forum-shopping—to continue.

The human rights binding treaty negotiation from an international investment law perspective

The sixth negotiation round for the binding treaty on business and human rights recently concluded. This article draws parallels between the issues raised during these negotiations and those that have been the focus of the ongoing conversations on investment arbitration reform.

Incorporating corporate social responsibility within investment treaty law and arbitral practice: Progress or fantasy remedy?

Recently, references to corporate social responsibility (CSR) have been included in investment treaties as a way to address some of the criticisms levelled at the investment protection regime. This article gives an overview of these attempts and the limitations of this approach. It concludes by arguing that the inclusion of CSR in investment treaties primarily serves to legitimate the regime.

ICJ Judge Peter Tomka appointed to investment arbitration tribunals despite ICJ guidelines against “double-hatting”

On November 12, 2020, Peter Tomka was re-elected to the United Nations’ International Court of Justice (ICJ). Tomka has served as a judge on the ICJ since 2003 and will now be serving on the court for another nine-year term. On August 17, 2020, Tomka was appointed by China to serve on an ICSID tribunal […]

Investment Negotiations at the WTO and the IIA Regime: Anticipating unintended interactions

This article highlights three key areas where WTO Members need to be wary about unintended interactions between the proposed Multilateral Framework on Investment Facilitation (MFIF) and IIAs. It also comments on the effectiveness of proposed attempts to separate the MFIF developed by the trade community from the broader IIA regime, whose reform is being coordinated and led within the United Nations through UNCTAD and UNCITRAL.

Explaining Ecuador’s shifting position on FDI, investment treaties, and arbitration

This article provides an overview of Ecuador’s approach to foreign investment policy over the past decade, which has been subject to significant changes. It also reviews recent constitutional
developments that may allow Ecuador to develop a more coherent approach toward
new investment treaties and trade agreements.

The need for “Africa-focused” arbitration and reform of Tanzania’s Arbitration Act

Over the last several years, the government of Tanzania has enacted significant changes to the legislation governing foreign investment in natural resources, and related dispute settlement mechanisms, with the aim of ridding the sector of the vestiges of “colonial” relationships. Before discussing these changes, and in order to understand the rationale for them, this article first provides the relevant historical context of international arbitration in Africa.

Side-stepping national courts would be a big step backwards for Europe: A reaction to the EC’s public consultation on EU cross-border investment.

The European Commission has launched a public consultation initiative on the EU’s current system of investment protection and facilitation, prompted by the recent termination of BITs between the member states. In this piece, the authors caution that new forms of international investment protection are not necessary and could serve to undermine the legitimacy of the EU.

Assessing outcomes in ISDS

This paper presents the results of a larger research project that attempts to establish a baseline for measuring the extent to which countries are “winning” (as home states of successful claimants) and “losing” (as respondent states with adverse awards and settlements) in the ISDS system.

Protecting Against Investor–State Claims Amidst COVID-19: A call to action for governments

In response to the Covid-19 pandemic, governments have taken an array of measures, which, while crucial from a health perspective have hit many businesses hard. According to the authors, Nathalie Bernasconi-Osterwalder, Sarah Brewin, and Nyaguthii Maina, this situation has created an unprecedented risk of investment arbitration arising from the more than 3,000 investment treaties concluded across the globe. They argue for collective action by states to suspend the application of investor–state arbitration with respect to COVID-related measures.

Valuing Fossil Fuel Assets in an Era of Climate Disruption

There have been more than 150 known ISDS cases brought by claimants whose business involves extracting, transporting, refining, selling, or burning fossil fuels for electricity. The authors, Kyla Tienhaara, Lise Johnson, and Michael Burger explore the question of how valuation and damages in fossil-fuel related investment claims should be approached in light of climate change considerations and the contested value of fossil fuel resources.

Why Do States Consent to Arbitration in National Investment Laws?

Scenarios in which states may face an obligation to pay damages as a result of international judicial or arbitral proceedings have proliferated as an increasing number of international courts have received state consent to their jurisdiction, including in international investment arbitration. As the author, Affef Ben Mansour, discusses, among the obstacles that states encounter in the implementation of investment arbitral awards is the unsuitability of internal budgetary procedures for paying the pecuniary obligations decided by an arbitral tribunal. This difficulty is now attenuated in certain states that have adopted budgetary standards aimed at addressing such unexpected budgetary developments, which are discussed in the second part of this article.

The Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation: A model to steer international law toward renewable energy investments and the low-carbon transition

In this piece, the author analyzes the Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation (“TSI”), winner of the Stockholm Treaty Lab prize. First, she presents the TSI as a model that states could adopt to foster international investment in the transition from carbon-intensive to low-carbon energy systems. Second, she comments on some challenges in implementing the TSI model and propose possible improvements in this regard. Third, she analyzes how the TSI could be used to improve current and future bilateral investment treaties (BITs).

Morocco’s New Model BIT: Innovative features and policy considerations

Morocco has recently undertaken a review of its treaty program, establishing a working group 2015 with the mandate to elaborate a new model BIT, which included a consultation process involving various stakeholders. The model BIT was published by Morocco in December 2019. The authors of this piece, Hamed El-Kady and Yvan Rwananga review selected core provisions this new model BIT that will likely serve as a basis for Morocco to (re)negotiate BITs and other regional investment agreements. Notably, the model includes an emphasis on sustainable development in the preamble and several substantive provisions.

Domestic Procedures for the Payment of Damages by States in Investment Arbitration

Scenarios in which states may face an obligation to pay damages as a result of international judicial or arbitral proceedings have proliferated as an increasing number of international courts have received state consent to their jurisdiction, including in international investment arbitration. As the author, Affef Ben Mansour, discusses, among the obstacles that states encounter in the implementation of investment arbitral awards is the unsuitability of internal budgetary procedures for paying the pecuniary obligations decided by an arbitral tribunal. This difficulty is now attenuated in certain states that have adopted budgetary standards aimed at addressing such unexpected budgetary developments, which are discussed in the second part of this article.

The Best of Two Worlds? The Brazil–India Investment Cooperation and Facilitation Treaty

The recent conclusion of the Investment Cooperation and Facilitation Treaty (ICFT) between Brazil and India is an important moment in investment treaty making, with the new deal combining aspects of Brazil’s Cooperation and Facilitation Investment Agreements (CFIAs) and India’s 2015 model BIT. This ITN Insight breaks down the various elements of the ICFT, examining its approach, design and content relative to the Brazilian and Indian models. The author, Martin Dietrich Brauch, does so by undertaking a detailed analysis of the agreement’s preambular language, scope, definitions, investment protection and dispute-related provisions, institutional governance provisions, and exceptions. He also summarizes the new treaty’s key innovations, which could help inform future negotiating efforts.

UNCITRAL Working Group III Debate: Enforceability of awards by an appellate mechanism or an investment court under the ICSID and New York Conventions

The January 2020 deliberations at UNCITRAL’s Working Group III on ISDS reform brought to the fore an important question: how would a new appellate mechanism or investment court, if established, be able to enforce awards? This question has various key components, such as how to enforce arbitral awards that involve states that are not party to this appellate mechanism or court, and whether this new system will be compatible with the current enforcement regimes in place under the ICSID and New York Conventions. In this ITN Insight, N. Jansen Calamita assesses the enforcement mechanisms available under those two conventions, looking at what lessons could be learned and what compatibility questions may emerge as the UNCITRAL discussions on enforcement continue.

Diversity of Adjudicators in a Reformed ISDS Regime: Is the WTO a good model for developing countries to follow?

Many have referred to the WTO’s Appellate Body as an example of how to integrate requirements of diversity—including development diversity in particular—into the appointment of adjudicators in the ISDS context. However, these diversity requirements have shown various failings in practice, with the more recent compositions of the Appellate Body and of first-instance dispute panels showing a poor representation of the WTO’s wide-ranging membership. In this ITN Insight, Jane Kelsey highlights some of the deficiencies in the current WTO dispute settlement mechanism when it comes to diversity questions. She draws on the stalled efforts at reforming the organization’s Dispute Settlement Understanding (DSU)—the legal text that sets the rules for how disputes are treated—and the role of the WTO secretariat in dispute settlement. Kelsey describes lessons that can be learned from this history, particularly as the UNCITRAL Working Group III process considers possible ISDS reforms involving the appointment and selection of adjudicators.