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

The Globe and Mail | 7-Mar-2016
This is one of the problems with this regime of investor rights. It confers enormous discretion on an elite corps of lawyers.
Público | 4-Mar-2016
La Comisión presentó este lunes el nuevo mecanismo de resolución de disputas entre inversores y estados en el CETA, una suerte de blindaje para las multinacionales que les permite demandar a los países en los que inviertan si consideran truncadas sus "expectativas de ganancias" por cambios normativos o legales efectuados por los estados.
Tercera Información | 4-Mar-2016
Ante la duodécima ronda de negociaciones del TTIP, 280 organizaciones han reclamado a la Comisión Europea la eliminación del Mecanismo de Resolución de Disputas entre Inversores Extranjeros y Estados.
Huffington Post | 4-Mar-2016
Corporations can still sue governments over public policy decisions they don’t like but the real lesson from the ISDS reforms, in fact, is that public opposition and political mobilization can change things.
EU Observer | 1-Mar-2016
Despite all the talk of reform from commissioner Malmstroem, the threat to democratic decision-making is as alive and dangerous as ever.
European Commission | 29-Feb-2016
The European Commission and the Canadian Government have agreed to include a new approach on investment protection and investment dispute settlement in CETA.
Commission européenne | 29-Feb-2016
La Commission européenne et le gouvernement canadien sont convenus d’inscrire une nouvelle approche concernant la protection des investissements et le règlement des différends en matière d’investissements dans le CETA.
Amigos de la Tierra | 25-Feb-2016
La demanda de la empresa TransCanada por 15.000 millones de dólares demuestra la amenaza del TTIP a la democracia y el medio ambiente
ARAINFO | 24-Feb-2016
La portavoz de Izquierda Unida en el Parlamento Europeo, Marina Albiol, ha acusado a la Comisión Europea de "dejar atados de pies y manos a los Estados de la UE" con la propuesta sobre los tribunales de arbitraje que presentará a EEUU.
EFE | 22-Feb-2016
Los negociadores de la Unión Europea (UE) y Estados Unidos iniciaron hoy la duodécima ronda de trabajos para alcanzar un acuerdo de libre comercio, conocido como TTIP, en la que los protagonistas serán diferentes sectores industriales y los mecanismos para proteger las inversiones.

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