investor-state disputes | ISDS
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. Many BITs and investment chapters of FTAs allow for this if the investor’s expectation of a profit has been negatively affected by some action that the host government took, such as changing a policy. The dispute is normally handled not in a public court but through a private abritration panel. The usual venues where these proceedings take place are the International Centre for Settlement of Investment Disputes (World Bank), the International Chamber of Commerce, the United Nations Commission on International Trade Law or the International Court of Justice.
ISDS is a hot topic right now because it is being challenged very strongly by concerned citizens in the context of the EU-US TTIP negotiations, the TransPacific Partnership talks and the CETA deal between Canada and the EU.
Six banks have agreed not to take legal action against Croatia over its conversion of Swiss franc loans into euros in 2015 at the lenders’ expense.
The EU and Canada adopted four decisions putting in place the Investment Court System provisions agreed in the EU-Canada Comprehensive Economic and Trade Agreement (CETA).
For a government struggling to find revenue to boost a COVID-19 battered economy, options of appeal against the arbitration award are limited and it may not have the financial bandwidth for such a payout.
ISDS tribunals have ordered governments to pay corporations more than $989 million in compensation after ISDS attacks launched just under U.S. agreements.
Last year saw a wave of cases against Latin American states, driven in particular, but not exclusively, by a large number of claims filed against Peru, Colombia and Mexico. This wave is likely to continue in 2021.
A Virgin Islands court has frozen shares in two hotels belonging to Pakistan’s national airline to enforce a $6 billion award levied through the World Bank’s ICSID.
UK-based Cairn Energy Plc has threatened that it may be forced to begin attaching Indian assets including bank accounts in different world capitals, unless the government resolves the issue.
The owner of Keystone XL — TC Energy (previously TransCanada) — used NAFTA to launch a US$15 billion lawsuit in 2016 after President Barack Obama cancelled the project.
One of the most noticeable facts in recent ISDS is the spectacular inflation of compensation awarded to investors. The most important factor is probably the widespread use by tribunals of the DCF (discounted cash flows) valuation method.
Investors have written to the Indian government as well as the governments of the US and UK seeking adherence to the award of a tribunal at the Permanent Court of Arbitration in The Hague
Nuevo Pudahuel had asked the Ministry of Public Works to extend the term of the concession contract as a result of the pandemic, but the MOP was closed to changes in the contract.
The battle between ConocoPhillips and Vietnam result could mark a significant shift in the way huge multinationals fight off the threat of taxes from desperate revenue authorities in developing countries.
Alberta believes there was a “very solid” legal basis to seek damages under international free trade agreements if the pipeline is effectively killed, said Alberta Premier
AsiaPhos has been in discussion with the Chinese Government (since November 2017) for a settlement in relation to the cessation of the mining activities because of the Panda Park.
Corporate globalisation and Covid-19 should also have taught developing countries that they must reject FTAs strengthening IPRs, ISDS and TNCs in order to secure policy space to ’build back better’.
The EU-UK agreement contains limited protections for investors and no investor-state enforcement mechanism. Its dispute resolution mechanism is limited to a “WTO-like” state-to-state arbitration.
The Investor-State Dispute Settlement process has gone against developing countries for far too long.
Draft text shows Beijing looked to withhold telecoms sector benefits to firms from countries with restrictions on Chinese telecoms companies.
Law firms have been drawing investors’ attention to how they could pass their Covid-19-related losses onto states.