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

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Ayer se celebró en Madrid un debate con representación de los 4 partidos políticos mayoritarios para hablar sobre la posición de sus partidos frente a los tratados de libre comercio, como el TTIP, CETA y TISA, que Europa está negociando con Estados Unidos y Canadá
Ministry of Finance of Republic of Indonesia | 22-Jun-2016
This regulation aims to enhance legal certainty in terms of ease of doing business and investment in Indonesia.
ICTSD | 22-Jun-2016
How to encourage the flow of sustainable FDI for sustainable development? This article examines the state of the international investment law and policy regime and presents potential options for its reform.
Tercera Información | 21-Jun-2016
Con el fin de incidir en la campaña electoral y a una semana del Consejo Europeo que afrontará la polémica negociación del TTIP, se presenta el informe ’Justicia privatizada. El Estado español y los mecanismos de resolución de controversias inversor-Estado’
Friends of the Earth Europe | 21-Jun-2016
Friends of the Earth Europe welcomes a reference to the UN process to establish binding rules that would force multinational corporations to respect human rights laws, but calls on the EU to start actively supporting this UN process.
Vieuws | 20-Jun-2016
High-level South Korean diplomats have expressed their preference for the old investor-state dispute settlement (ISDS) system over the Investment Court System (ICS) in the framework of a future investment chapter in the EU-South Korea FTA.
Business Day | 17-Jun-2016
Legal practitioners have been saying for some time now that SA’s Protection of Investment Act is not in sync with the country’s commitments under the Southern African Development Community Protocol on Finance and Investment.
MEDEL | 9-Jun-2016
MEDEL’s opinion on the construction of a international investment court for TTIP – proposal of the European Commission.
International Mediation Institute | 6-Jun-2016
Mediation presents a credible and compelling option for both investors and states to settle disputes, disagreements and other conflicts arising from investment activities.
Iagua | 2-Jun-2016
El tratado de libre comercio entre la Unión Europea y los Estados Unidos de América, más conocido como TTIP, dificultará la remunicipalización de los servicios y el conseguir una gestión del agua con fines sociales y no económicos.

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