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

La Marea | 19-Feb-2016
Ecologistas en Acción alerta en un informe de que el mecanismo ICS es tan dañino para las decisiones democráticas de los Estado como el ISDS.
Tercera Información | 19-Feb-2016
A comienzos del 2013 comenzó su singladura el llamado TTIP con el objetivo de “relanzar el intercambio de bienes, servicios e inversiones entre EEUU y la Unión Europea” y que podría atracar en puerto en el 2017 tras culminar recientemente la UE y EE.UU. la última ronda de conversaciones.
Ecologistas en Acción | 18-Feb-2016
Ecologistas en Acción, junto con otras 14 organizaciones europeas, publica un informe que muestra que las propuestas de la Comisión Europea para el capítulo de protección de las inversiones en el tratado comercial entre la UE y EE UU (TTIP por sus siglas en inglés), sigue siendo una amenaza para la democracia.
Friends of the Earth Europe | 18-Feb-2016
The European Commission has proposed a new ’Investment Court System’ to replace the current investor to state dispute settlement mechanism (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP) and other future investment deals.
Les Amis de la Terre | 18-Feb-2016
La Commission européenne a soumis une nouvelle proposition de « système juridictionnel des investissements ». Nous avons identifié 10 problèmes majeurs qui illustrent combien les droits des investisseurs étrangers continuent d’être privilégiés.
Embassy | 17-Feb-2016
Canada’s government has officially re-opened negotiations with India over a bilateral investment treaty the two sides nearly agreed upon almost a decade ago.
S2B | 15-Feb-2016
Rebranded as ICS, rights for corporations to sue states refuse to die.
IISD | 15-Feb-2016
Bolivia’s experience has shown that attracting foreign investment does not by itself generate the expected development for host states and that, rather, it consists in a mechanism for financing and transferring resources from the South to the North.
IISD | 15-Feb-2016
The UNGPs set out a three-pillar framework: the state duty to protect human rights, the corporate responsibility to respect human rights, and access to remedy for victims of business-related abuses.
Business Today | 11-Feb-2016
The revised model text for bilateral investment treaties has addressed many concerns, but to avoid litigations, India must renegotiate existing treaties on the basis of the new norms.

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