IIA Issues Note: Latest Developments in Investor-State Dispute Settlement Over the past years at least 89 governments have responded to one or more investment treaty arbitration: 55 developing countries, 18 developed countries and 16 countries with economies in transition.
How many investor–state dispute settlement cases were initiated in 2020?
• In 2020, at least 68 known treaty-based investor–State dispute settlement (ISDS) cases were initiated (figure 1). Most investment arbitrations were brought under international investment agreements (IIAs) signed in the 1990s or earlier. • The total ISDS case count had reached over 1,100 by the end of 2020.
What is investor state dispute settlement (ISDS)?
Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which investors can sue countries for perceived discriminatory practices. ISDS is an instrument of public international law, contained in a number of bilateral investment treaties, in certain international trade treaties, such as the USMCA.
How many international investor-state treaties are there?
These treaties grant foreign investors certain protections and benefits, including recourse to Investor-State Dispute Settlement (ISDS) to resolve disputes with host states. Over 3,300 agreements have been concluded worldwide. Why do countries sign IITs?
What happened to investor-state dispute settlement in Australia?
In 2011, the Australian government announced that it would discontinue the practice of seeking inclusion of investor-state dispute settlement provisions in trade agreements with developing countries. It stated that it: "...supports the principle of national treatment — that foreign and domestic businesses are treated equally under the law.
How many members are there in international Centre for Settlement of investment Disputes?
ICSID's 163 member states which have signed the centre's convention include 162 United Nations member states plus Kosovo.
When was ISDS introduced?
Through the end of 2018, at least 1104 cases had been filed. [12] There has been a rapid proliferation of these cases in recent years; while the first ISDS case was initiated in 1987, over half of all cases to date were filed between 2013 and 2021.
What are the investor-state dispute settlement mechanisms?
ISDS, or investor-state dispute settlement, is a mechanism that enables foreign investors to resolve disputes with the government of the country where their investment was made (host state) in a neutral forum through binding international arbitration.
How many bilateral investment treaties are there?
Yet many of the multinational enterprises making those investments may not be aware of key legal protections afforded by a web of more than 2800 international agreements known as bilateral investment treaties, or BITs. Over 150 countries have entered into one or more investment treaties.
What are the main criticisms of investor state arbitration?
The most common criticisms levelled at ISDS in recent years include: the risk of foreign investors challenging legitimate domestic regulation; a lack of transparency in ISDS proceedings; a lack of consistency in arbitral decision-making; a lack of appellate authority to correct substantive errors and ensure consistency ...
What does ISDS stand for?
ISDS, or Information Systems and Decision Sciences, a STEM-designated program, is the study of technology, business processes, people and organizations, and the relationships among them.
Which international instrument applies to investors state disputes?
Investment arbitration is a procedure to resolve disputes between foreign investors and host States (also called Investor-State Dispute Settlement or ISDS).
What role does the ICSID play in settling international disputes?
ICSID provides for settlement of disputes by conciliation, arbitration or fact-finding. The ICSID process is designed to take account of the special characteristics of international investment disputes and the parties involved, maintaining a careful balance between the interests of investors and host States.
What is state state dispute settlement?
Scope and Definition 3.1 OVERVIEW. Most state–state dispute settlement clauses in investment treaties provide that any dispute between the state parties “concerning the interpretation or application” of the treaty be brought to arbitration.
How many investment treaties are there in the world?
2500 suchInvestment treaties are an important component of the framework governing the conditions for foreign investment in many countries. About 2500 such treaties are in force today, including investment provisions of trade agreements.
What are the 3 types of foreign direct investment?
Three components of FDI are usually identified: equity capital, reinvested earnings, and intracompany loans. Other than having an equity stake in an enterprise, foreign investors may acquire a substantial influence in many other ways.
Who does the US have bilateral treaties with?
Treaty signed on October 22, 1991, with the Czech and Slovak Federal Republic and has been in force for the Czech Republic and Slovakia as separate states since January 1, 1993....United States Bilateral Investment Treaties.CountryDate of SignatureDate Entered Into ForceSlovakia 3October 22, 1991December 19, 1992Sri LankaSeptember 20, 1991May 1, 199345 more rows
What is an ISDS clause?
ISDS clauses in trade deals typically allow foreign investors to bring arbitration proceedings against national governments for a breach of obligations under the agreement, such as expropriation of the investor's assets or discriminatory treatment (IS arbitration).
How do bilateral investment treaties work?
Bilateral investment treaties (or, BITs) are international agreements establishing the terms and conditions for private investment by nationals and companies of one country to another country.
Which international instrument applies to investors state disputes?
Investment arbitration is a procedure to resolve disputes between foreign investors and host States (also called Investor-State Dispute Settlement or ISDS).
What role does the Icsid play in settling international disputes?
ICSID provides for settlement of disputes by conciliation, arbitration or fact-finding. The ICSID process is designed to take account of the special characteristics of international investment disputes and the parties involved, maintaining a careful balance between the interests of investors and host States.
How many times has the US been sued?
State and local governments have likewise defended many such claims. By contrast, the United States has only been sued 17 times under any U.S. investment agreement and has never once lost a case. In some instances, we have even received compensation for having had to defend against a case in the first place.
Who assumes the cost of defending the United States?
In any disputes arising under our trade agreements, the federal government assumes the cost of defending the United States, even if they relate to state and local issues. Provide no legal basis to challenge laws just because they hurt a company’s profits.
What is ISDS in investment?
We also seek to ensure that Americans investing abroad are provided the same kinds of basic legal protections that we provide in the United States to both Americans and foreigners doing business within our borders. One element we use to achieve that goal is investor-state dispute settlement (ISDS). ISDS creates a fair and transparent process, grounded in established legal principles, for resolving individual investment disputes between investors and states.
What is the role of the United States in trade agreements?
The United States promotes provisions in our trade agreements that protect our right to regulate in the public interest while promoting higher standards in many partner countries in areas ranging from labor and environment to transparency to anti-corruption.
Why are investment rules important?
Our investment rules preserve the right to regulate to protect public health and safety, the financial sector, the environment, and any other area where governments seek to regulate. U.S. trade agreements do not require countries to lower their levels of regulation.
What is investment protection?
Investment protections are intended to prevent discrimination, repudiation of contracts, and expropriation of property without due process of law and appropriate compensation.
Has the US lost an ISDS case?
As a country that plays by the rules and respects the rule of law, the United States has never lost an ISDS case. In our current negotiations, we are working to expand upon this approach to ISDS, in ways spelled out in the Model BIT that the Obama Administration released in 2012 following an extensive period of public comment and consultation.
How many civil society organizations say Leave the ECT by COP26?
More than 400 civil society organisations say: Leave the ECT by COP26. More than 400 are calling on political leaders across all European countries to prioritise climate policies, to stick to their climate commitments, and therefore to initiate withdrawal from the Energy Charter Treaty by COP26.
What is ISDS in investment?
Investor-state dispute settlement (ISDS) refers to a way of handling conflicts under international investment agreements whereby companies from one party are allowed to sue the government of another party. This means they can file a complaint and seek compensation for damages.
How much did America Movil pay Colombia?
America Movil said the World Bank’s ICSID tribunal has ruled against the company in its dispute with Colombia and ordered it to pay $2.2 million to cover the costs of the case.
Who paid Sierra Leone $20 million?
US commodity trader Gerald Group will pay Sierra Leone $20 million and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production.
Did Nigerian government assent to the Energy Charter Treaty?
Nigerian govt asked not to ascent to Energy Charter Treaty. Nigerian labour unions and civil society organizations have urged the government not to assent to the ECT, explaining that the Treaty contains provisions for an Investor-State Dispute System (ISDS), which accords investors obscene privileges.
What happens when investors win ISDS cases?
What happens when investors win cases? ISDS tribunals do not generally purport to overturn or require reversal of state conduct; instead they typically award monetary damages to investors (often in cases where monetary damages would not be the remedy under comparable domestic law, where remand or other equitable remedies may apply). But the line between those categories of relief has become increasingly blurred. Tribunals have, for instance, ordered injunctive relief against states (e.g., telling the executive to halt tax collection efforts, cease criminal proceedings, and preclude enforcement of domestic court judgments) and have then found states monetarily liable for government decisions not to comply with those tribunal orders. Awards against states regularly climb into the hundreds of millions of dollars, and have reached billions of dollars. [12] The average claim against states (removing outliers) is at nearly US$300 million, and in cases won by investors, the average award is just over US$120 million. [13] Low and middle income countries are often subject to awards that consume large portions of their annual budgets (i.e., resources that could otherwise be spent on health, education, and other national priorities). Awards are highly enforceable and cannot be “appealed” as such, even if there was a mistake of law or fact. If states don’t pay the awards, and the investors face trouble enforcing awards through, e.g., seizure of government assets, investors may try to get their “home” states to place diplomatic pressure on the host government.
How are the rights of third parties impacted by ISDS disputes?
How are the rights of third-parties impacted by ISDS disputes? ISDS proceedings are relatively opaque, secretive, and exclusive compared to the US and other domestic legal systems , with the latter providing for transparency and mechanisms to take into account the rights and interests of non-parties. Tribunals often have discretion to accept, or not, third-party amicus briefs, which are frequently rejected even when the rights or interests of the non-parties/amici are directly at stake in the ISDS claim. Unlike common legal protections that allow affected non-parties to participate in cases (e.g. as impleaders or interpleaders), and/or require cases to be dismissed if third-parties will be affected but cannot join the proceedings, affected third parties in ISDS have no clear ability to effectively intervene in an ISDS proceeding, and there are no rules ensuring that ISDS cases will be dismissed when they threaten third-parties’ rights. Governments recently affirmed that international reform efforts should address concerns that the rights or interests of third parties can be affected by ISDS disputes.
What is ISDS arbitration?
What is Investor-State Dispute Settlement (ISDS)? IIAs allow foreign investors (individuals and companies) to allege treaty violations by suing states through ad hoc arbitration. Arbitration tribunals are composed of party-appointed (and party-paid) private lawyers. Tribunals are not bound by precedent, and can order remedies (usually in the form of monetary awards) to investors if they find that states have breached treaty obligations. Notably, in most cases investors are not required to attempt to resolve disputes through available domestic remedies before filing ISDS claims. This is extraordinary and unusual: by contrast, the WTO only permits states to raise claims against other states, and international human rights courts require claimants to attempt to exhaust domestic remedies before raising disputes at the supranational level.
What do arbitrators consider in deciding cases?
What do arbitrators consider in deciding cases? Arbitral tribunals look first and foremost at the provisions of the relevant investment treaty in deciding cases. Whether or not a challenged governmental action (or inaction) is consistent with domestic law (or even other areas of international law (e.g. UNFCCC, human rights frameworks, etc.) is generally not considered to be a defense to claims or liability under the IIA (but a breach of domestic law may be deemed to violate the IIA). Conversely, because treaties almost universally place enforceable obligations only on states, not investors, meaning that states can generally not initiate claims nor bring counterclaims in ISDS, an investor may win a case even if it has violated domestic law or other international human rights or environmental norms in relation to its operation of the investment. To influence interpretation, the state defending itself, as well the other state party or parties to the treaty (including the investor’s home state) can offer joint (and unilateral) interpretations to clarify what treaty provisions mean. But what a defendant state says about the meaning of the treaty is generally not binding (nor necessarily persuasive) for the tribunal interpreting the agreement. Tribunals may draw from prior ISDS decisions but are not bound by precedent.
How does ISDS affect states' ability to govern?
How does ISDS affect states’ ability to govern? One way of thinking about the treaties is that they provide internationally enforceable substantive protections for covered investors’ economic rights and interests that are akin to the “ Lochnerism” of the US Supreme Court until the 1930s. This approach privileges the economic rights and interests of international investors/ multinational enterprises (MNEs) over competing economic and non-economic interests of other entities and individuals. (Distinct from Lochnerism, however, where the US Supreme Court was able to shift course, it is particularly difficult to cause course corrections in international investment law when concerns arise that interpretations or applications of the law are misguided). The deferential treatment afforded to economic interests increases the cost of regulating, and as USTR recently acknowledged may even chill good faith action in the public interest.
How long does it take to create a multilateral court?
Even assuming that the multilateral court is a desirable way forward (which is a premise open to question), it will likely take at least a decade to negotiate creation of such a court and actually establish it. It is also unclear whether it will ever attract enough signatories, or the right signatories, to make a difference for countries defending claims. In the interim, investors will continue to bring, and states will continue to defend, claims in an ISDS system now widely recognized as suffering from perceived and actual concerns going to its very legitimacy. Therefore CCSI is exploring shorter-term ways for states to exit or mitigate the recognized adverse effects of the more than 3,300 treaties that have been concluded to date. Chief among these options, we’ve advocated for termination (or withdrawal of consent to ISDS arbitration) of these treaties, as a near-term solution, alongside any longer-term project.
Why do countries sign IIAs?
Why do countries sign IIAs? States often ground support for IIAs in their perceived ability to: (1) promote investment flows, (2) depoliticize disputes between investors and states, (3) promote the rule of law, and (4) provide compensation for various harms done to investors. However, some state and other stakeholders have begun to question whether IIAs are in fact strategically tailored to deliver on these objectives effectively and efficiently, and worry about the costs that IIAs may impose on states and stakeholders within them. Empirical evidence is, for instance, indeterminate as to whether IIAs actually stimulate new investments, let alone whether those investments in fact benefit host (or home) countries, or whether the benefit of any new investment outweighs the costs that may be associated with investment treaties (e.g., in the form of lost regulatory space, costs of defending disputes, and costs of paying adverse awards).
