Reformed ISDS

The investor-state dispute settlement (ISDS) mechanism has come under fire in the past few years. As a result of many controversial cases, civil society groups, international organisations, academics, lawyers and state officials have argued that the arbitration process has had a negative impact on public interest and is need of reform or should be scrapped altogether.

Therefore tweaked versions of the system have been proposed to avoid the most undesired “side effects” of standard ISDS rules. At least 45 countries and four regional blocs are revising or have recently revised their investment model agreements.

In 2012, South Africa, the government started to withdraw from its bilateral investment treaties and amended domestic legislation to make it compatible with BIT-like investor protections while incorporating exceptions where warranted by public interest considerations.

In 2014, Indonesia decided to terminate 67 bilateral investment treaties and has also been developing a new model BIT that supposedly reflects a more balanced approach between the country’s right to regulate and foreigner investor protection.

In 2015, the European Commission established a new ’Investment Court System’ to replace the current ISDS mechanism in its trade deals. The ICS has been incorporated in the EU deals with Canada (CETA) and Vietnam. It has also been proposed for the ongoing negotiations with Mexico, the Philippines and the US (TTIP). However many critics claim that this new system is largely window-dressing.

In December 2015, India released a revised model BIT which, for instance, requires investors to exhaust domestic remedies (Indian courts) before turning to international arbitration and leaves out “fair and equitable treatment” provisions.

In 2016, members of the Southern African Development Community (SADC) (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland) amended the SADC Finance and Investment Protocol that included ISDS provisions. The amendments eliminate the ISDS mechanism (only state-to-state arbitration remains) and narrow the scope of investors’ rights, including exclusion of “fair and equitable treatment”, limitations to “national treatment” to allow for local preferences, obligation for investors to follow host state domestic law and exception from investment rules for policies enacted to comply with international treaties.

In South America, experts from the Union of South American Nations (UNASUR) have been developing an investment settlement centre, as an alternative to the World Bank’s ICSID.

In 2017 states from around the world began to debate at UNCITRAL (United Nations Commission on International Trade Law) about the possible reform of the ISDS system in a way that would address legitimacy concerns and rebalance the system. As part of these discussions, the EU proposed the creation of a Multilateral Investment Court (MIC), which was slammed by civil society groups, as the MIC would “enshrine, expand, and entrench the current system of corporate privilege in future trade deals.”

Photo: Attac / CC BY-SA 2.0

March 2021

CES | 20-Apr-2016
Le Comité exécutif et le Congrès de la CES ont clairement refusé l’inclusion dans le PTCI (et l’AECG) de mécanismes étendant aux investisseurs étrangers l’accès à un arbitrage.
Diagonal | 19-Apr-2016
El informe ’La amenaza global asalta lo local: el TTIP en municipios y comunidades autónomas”, realizado por Ecologistas en Acción, analiza el impacto de los tratados de libre comercio en las políticas muncipales
El Salmón Contracorriente | 4-Apr-2016
Durante los últimos días, la Comisión Europea viene enviando comunicados en defensa del TTIP a los ayuntamientos europeos intentando calmar los ánimos frente a un tratado al que ya se han opuesto formalmente gran cantidad de municipios y regiones a lo largo y ancho de la geografía europea.
Público | 30-Mar-2016
Un organismo dependiente de la ONU documenta que sólo el pasado año España fue demandada por multinacionales inversoras hasta en 15 ocasiones, el doble que Rusia.
La Verdad | 28-Mar-2016
Probablemente nunca hayan oído hablar del TTIP, el tratado comercial más importante de nuestra historia que actualmente se está negociando entre EEUU y la Unión Europea.
The Conversation | 25-Mar-2016
Bilateral investment treaties have been a source of political controversy in recent years. This is clear from the alarming increase in the number of disputes between investors and governments.
IISD | 17-Mar-2016
Does the agreement reflect 21st century needs and standards?
IISD | 15-Mar-2016
The legality of investor­­–state dispute settlement (ISDS), including in the form of an Investment Court System (ICS), in EU trade agreements under EU law is a contentious issue among academics and legal experts.
La Croix | 11-Mar-2016
Même amendé, le mécanisme qui permettrait aux entreprises étrangères de porter plainte contre un État quand elles estiment qu’il a failli aux engagements pris dans un traité d’investissement est illégitime.
El Diario | 7-Mar-2016
El CETA, que lleva negociándose seis años confidencialmente, se votará en otoño tras una modificación in extremis de los tribunales para dirimir disputas entre empresas y estados.

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