what is investor state dispute settlement pdf

Investor-State Dispute Settlement (ISDS

) is a legal instrument in Bilateral Investment Treaties (BITs), or BIT-like bilateral and international agreements such as the Energy Char- ter Treaty, that grants investors the right to call for arbitration in the event they believe that a government has violated such an agreement.

Full Answer

What is ISDS in investment?

Investor-State Dispute Settlement (ISDS) is a legal mechanism allowing an investor from another country to bring a claim against a state in which it has made an investment, because relying on the national courts of the host country to enforce obligations in an investment agreement is not always easy or may even be impossible. ISDS was created to reduce the political risks related to rapidly increasing foreign investment, and make the commitments made by host states in investment treaties more easily enforceable. Its opponents say it is a "toxic mechanism" or even a "Trojan horse", enabling foreign companies to challenge public health, environmental and social protection laws that harm their profits.

Do arbitration fora have a public register?

Since the majority of arbitration fora do not have a public register of cases, the statistical data below are based on "known cases", as set out in reports of the United Nations Conference on Trade and Development (UNCTAD).

Can arbitration tribunals change the law?

Although arbitration tribunals have no authority to force a government to change the law put into question by the investor, it has been argued by some commentators that some governments actually step back to avoid having to pay compensation.15 The larger question raised by some is whether three individuals appointed on an ad hoc basis have enough legitimacy to assess the validity of sovereign state law, and de facto restrict the policy choices made by democratically elected legislators.16

What is investor state dispute settlement?

- Investor-State Dispute Settlement, a legal provision in Bilateral Investment Treaties (BITs) or other International Investment Agreements that gives investors a right to call for arbitra-tion with a state , has recently become the centre of controversy in a debate over the Transat-lantic Trade and Investment Partnership (TTIP). Critics argue that such a provision is either illegitimate, unnecessary, and/or does not have any positive influence on flows of Foreign Direct Investment (FDI). More radical critics argue that ISDS is a provision that allows big companies to sue governments when they have made democratic choices with negative con-sequences for companies.

How many ISDS cases were filed between 2003 and 2013?

According to UNCTAD estimates 90 ISDS cases were concluded between 2003 and 2013. In most of those cases, it is impossible to learn the exact legal substance of the dispute: what sections of a BIT that is referenced in the complaint. In some cases, however, it is possible to get an understanding of what violations an investor argued that a state had made. The typical BIT includes four distinct categories or principles. First, a typical BIT contains pro-visions on expropriation, direct as well as indirect expropriation. Second, most BITs have provisions on national treatment. Third, a typical BIT provides for treatment on the basis of Most-Favoured Nations (MFN), meaning that a protection granted to one third country also should be unconditionally granted to other third countries. Lastly, there are provisions on fair and equitable treatment.

What is ISDS arbitration?

Investor-State Dispute Settlement (ISDS) is a legal instrument in Bilateral Investment Treaties (BITs), or BIT-like bilateral and international agreements such as the Energy Char-ter Treaty, that grants investors the right to call for arbitration in the event they believe that a government has violated such an agreement. In contrast to a mechanism to resolve disputes between states, like the World Trade Organisation’s dispute-settlement mechanism, it is not an instrument that “puts on trial” laws and regulations in a host country, with the con-sequence that a government has to change a law or a regulation in the event they lose a case. Nor do investment-protection agreements demand that a country fully transpose the general principles of such an agreement into national laws and regulations.

What is the second option for foreign investors?

The second option is to withdraw from the system of investment protection and follow the principle that foreign investors have to use the local court system to defend their rights when they believe they have been violated.

Abstract

One of the critical issues arising from the intersection of international investment law and human rights is the question of whether investor-state dispute settlement (ISDS) holds any potency for access to justice for local and indigenous communities.

References (9)

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