ISDS is unsuited to meet today’s global challenges

Financial Times (letter) | 8 May 2017

ISDS is unsuited to meet today’s global challenges

by Kavaljit Singh

Sir, Alan Beattie, in “Fear of the supranational” (The Big Read, May 3) has described how the investor-state dispute settlement (ISDS) system is losing legitimacy in the current political climate. Indeed, the growing number of investor claims against sovereign host states has fuelled a backlash against bilateral investment treaties and free-trade agreements across the world. In India, for instance, the policy pendulum is swinging away from the wholehearted embrace of investment treaties towards a more balanced and cautious approach.

Within a span of four years (2013-16), India has radically restructured its BIT policy and practice to protect itself from costly investor to state arbitration. Not only did India terminated 57 of its existing BITs, it also recently negotiated a new BIT with Brazil which does not contain ISDS and other controversial provisions. Such initiatives, coupled with institutional reforms, have the potential to radically transform the international investment treaty landscape in the next 10 to 20 years.

The outdated ISDS system, having its roots back in the mid-1960s, is not suited to address the present-day global policy challenges such as climate change, capital flight, financial instability, economic inequality, corporate crimes and tax evasion by transnational companies. The answer lies in building a new international treaty framework that could ensure a fair balance between investors’ rights and the host government’s right to regulate in the public interest. Such a framework should also protect the rights of the communities directly affected by the operations of TNCs and other business enterprises in the host country.

Unlike the 1990s when the corporate-led economic globalisation reached its peak and the architecture of global trade and investment regimes was developed, the present times also calls for a new international binding treaty on TNCs with strong enforcement mechanisms.

Kavaljit Singh



New Delhi, India

source: Financial Times