Analysis

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. Sustainable development as a global paradigm has been endorsed by international bodies and stamped onto global political initiatives; organizations such as the OECD have developed action plans to leverage public funding tools for infrastructure projects in developing countries in support […]

Eco Oro and the twilight of policy exceptionalism

This past September, a tribunal in Eco Oro v. Republic of Colombia issued its Decision on Jurisdiction, Liability, and Directions on Quantum, a sprawling 400-plus-page decision that produced two dissents and has already triggered a series of debates on the impact of investment law on efforts to protect the environment.[1] Among many difficult issues raised […]

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

From October 25 to 29, the Open-Ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises With Respect to Human Rights held its seventh session per the mandate of the UN Human Rights Council Resolution 26/9 to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational […]

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 international investment treaties is drawing greater scrutiny over the approaches that international investment tribunals use to arrive at these—at times staggering—amounts. One question being asked is: How are things being done elsewhere? A forthcoming IISD paper seeks to answer this question by comparing approaches to the […]

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)[1] decision aimed at scaling up vaccine and therapeutics production and equitable distribution continue, despite the postponement of the 12th World Trade Organization (WTO) Ministerial Conference. Against this backdrop, it is worth drawing attention to a blind spot in the current discussion, […]

The UNCITRAL Code of Conduct: Breakthrough or diversion?

Of the various concerns raised by the current system of ISDS, some relate to the conduct of arbitrators. Specifically, certain types of conduct (such as conflicting appointments) give rise to doubts about the impartiality, independence, availability, and professional capability of arbitrators. To address these concerns, UNCITRAL’s Working Group III (Working Group)—charged with global ISDS reform—has […]

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

With negotiators preparing for the seventh round of ECT modernization talks, and no signs of tangible progress, the continued emergence of new investor-state disputes under the controversial agreement has highlighted the risks the treaty poses for states as they phase out fossil fuels. Of all fossil fuels, coal has the greatest climate impact, and UN […]

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

There is scientific consensus that in order to limit global warming as defined in the Paris Agreement states must swiftly phase out fossil fuels and transition to low-carbon energy systems.[1] However, given the continued dependency of economies on fossil fuels, such phase-outs and the pursuit of a clean energy transition at a global scale are […]

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

Introduction In early June, the G7 reached a deal to make multinational companies pay more tax.[1] They agreed in principle to introduce an overall global minimum corporate tax rate of at least 15% with the aim of preventing tax competition. Some G7 countries view this rate as too low, with the United States advocating for 21%. […]

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

What prompted you to write this book? What gap in our understanding of deference does the book fill? This project grew out of my work in international adjudication, including my work as a government lawyer in the Australian Government’s Office of International Law. Through this work, I realized that many different approaches to assessing the […]

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

On January 20, 2021, a Panel of Experts established under the EU–South Korea Free Trade Agreement (FTA) found that South Korea was in breach of the FTA’s sustainable development chapter. Under Article 13.4.3 of the agreement, the EU and South Korea “commit to respecting, promoting and realising” fundamental labour rights, including the freedom of association, […]

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

In June 2021, the tribunal in Infinito Gold v. Costa Rica found Costa Rica liable for a breach of fair and equitable treatment but rejected the investor’s request for roughly USD 100 million and awarded no damages.[1] This case, which also involved allegations of corruption by the investor, may have been successful on liability but […]

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

Introduction In July 2021, world leaders reached a deal to make multinational companies pay more tax, after several years of negotiation. They agreed to introduce an overall global minimum corporate tax rate of at least 15% with the aim of preventing tax competition. The political agreement was reached among the 130 of the 139 countries […]

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

After the COVID-19 pandemic was declared in early 2020, large global negotiations moved online. While virtual negotiations and discussions were an immediate necessity given the circumstances, they may endure long past the pandemic given the climate emergency and longer-term trends toward more virtual meetings and heavier reliance on digital technologies. Virtual negotiations create new challenges […]

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

Investment Treaties and the Legal Imagination: How Foreign Investors Play By Their Own Rules, Professor Nicolás Perrone’s newly published book on the international investment regime, was published by Oxford University Press in April 2021. The book pushes us to think about the ways in which the origins of the regime—the people who imagined it and […]

Stabilization Clauses and Implications for Human Rights and Gender Equality

FDI projects, particularly in the extractive sector, are often governed by concession contracts between states and investors. These contracts may include stabilization clauses, under which states agree to refrain from using their legislative or administrative prerogatives in a manner that adversely affects the investor. Investor–state case law suggests that these clauses are typically respected and […]

Energy Charter Treaty Reform: Why withdrawal is an option

Introduction[1] The Energy Charter Treaty (ECT) faces criticism for its outdated investment provisions and the threats it poses to the energy transition. ISDS claims brought pursuant to the ECT by fossil fuel investors demonstrate that these threats are imminent and real. Moreover, they are likely to increase as governments take more ambitious climate action. Most […]

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

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.

Fighting Bribery and Corruption in Africa: From AU and OECD conventions to a general principle of international investment law

Over the past 15 years, there has been a growing effort to adopt measures to tackle bribery and corruption, ranging from international legal instruments such as the OECD Anti-Bribery Convention and the AU Anti-Corruption Convention to soft-law initiatives and measures from multinational companies themselves. This ITN Insight by Guy Marcel Nono summarizes some of the key attributes of the AU and OECD conventions, along with these other initiatives. The author then catalogues a series of ISDS cases that involved bribery between OECD investors and African states, looking at the lessons that can be learned as African states examine possible next steps in addressing corruption. These cases, adjudicated by ICSID tribunals, provide useful indications of how IIAs could be reimagined so that they are better suited to tackling such challenges. The author also highlights the role that civil society organizations could play in this context.

UNCTAD’s 2019 High-level IIA Conference: A new momentum for Phase 2 reform

There are several efforts underway at multiple levels—national, bilateral, regional and multilateral—aimed at reforming the IIA regime. These reform efforts are operating in parallel to developments in other areas of international investment governance, some of which have advanced quickly over the past year, including the structured discussions on investment facilitation at the WTO, as well as efforts in the UN context to craft a binding treaty on business and human rights. This year’s UNCTAD High-Level IIA Conference assessed the progress made to date since launching UNCTAD’s 10 Options for Phase 2 of IIA Reform, looking at trends across multiple areas of international investment governance, as well as across world regions. This ITN Insight summarizes the key takeaways from the 2019 event and considerations for Phase 2 going forward.

Business and Human Rights Treaty Negotiation Sees a Light at the End of the Tunnel

The 2016 decision on Argentina’s counterclaim in the Urbaser case provided a frustrating reminder that the international legal regime as it stands is insufficient in holding businesses accountable for human rights violations. Efforts are underway within the UN context to help address this challenge, though how effective the legally binding treaty on business and human rights will be in reconciling the human rights and investment law regimes will depend significantly on its design. It will also depend on how adjudicators treat it relative to other treaties, among other factors. This ITN Insight provides an update on the negotiating state of play for this binding treaty, based on the October 2019 talks in Geneva. It highlights important considerations for negotiators, drawing from lessons learned in international investment law and related areas.

What to Expect in the January 2020 Session of UNCITRAL Working Group III on ISDS Reform

The upcoming meeting of Working Group III of UNCITRAL in January 2020 will be a valuable opportunity to intensify the push for real reform of ISDS. This ITN Insight provides an update from the October 2019 discussions in Vienna, where countries set out a workplan for their upcoming talks on reform solutions, outlining when to discuss which options. The authors review lessons learned to date and look ahead to the topics slated for discussion in January 2020: a stand-alone review or appellate mechanism; a standing MIC; and the selection and appointment of arbitrators and adjudicators. Taking a deep dive into each, they highlight key issues for negotiators to consider.

Modernizing the Energy Charter Treaty: What about termination?

Negotiations for modernizing the Energy Charter Treaty, a 1994 agreement covering trade, investment and other aspects of the energy sector among its contracting parties, are expected to begin before 2019 draws to a close. Yet given the need identified in myriad other forums to reform ISDS and to ensure trade and investment agreements can support ambitious climate action, why aren’t more officials and commentators discussing the possibility of terminating the ECT entirely, or of reconsidering its survival clause for those parties which choose to withdraw? Tania Voon explores the issue and outlines options going forward.

UNCITRAL Working Group III: Promoting alternatives to investor–state arbitration as ISDS reform

From October 14 to 18, 2019, negotiators will gather in Vienna for the next session of the UNCITRAL Working Group III on ISDS reform, where they will move from considering concerns with the current system to assessing possible solutions. In this ITN Insight, Jane Kelsey discusses various examples of how some countries have tested out alternatives to ISDS, such as state–state arbitration, alternative dispute resolution, domestic legislation and enforcement, and the exhaustion of domestic remedies. For each ISDS alternative, she examines what benefits and challenges arose, and how the lessons learned can help inform the next phase of UNCITRAL deliberations.

The Revised Draft of a Treaty on Business and Human Rights: Ground-breaking improvements and brighter prospects

This past July, the chairperson of a working group tasked with negotiating an international treaty on business and human rights circulated an updated draft text for consideration in the fifth round of negotiations, to be held October 14–18, 2019 in Geneva. This document features a series of innovations, including extending the scope of the treaty beyond transnational organizations to include all business enterprises, along with bringing much needed clarity on how this treaty might interact with the wide range of trade and investment agreements already in place. Carlos Lopez describes these innovations in detail, showing their changes relative to the “zero draft” and outlining how they may affect upcoming negotiations.

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