Reforming investment dispute settlement: A stocktaking

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UNCTAD | March 2019

Reforming investment dispute settlement: A stocktaking

Highlights:

  • Investor-State dispute settlement (ISDS) continues to be controversial, spurring debate in the investment and development community and the public at large. States are responding to challenges and concerns surrounding ISDS through different avenues.
  • In the international investment agreements (IIAs) signed in recent years, countries have implemented a large number of ISDS reform elements as part of broader IIA reform. Nearly all IIAs concluded in 2018 contain at least one, and most contain several, mapped ISDS reform elements (annex table 1). Most of these elements resonate with reform options identified by UNCTAD since 2013.
  • Five principal approaches emerge from IIAs signed in 2018: I. No ISDS, II. Standing ISDS tribunal, III. Limited ISDS, IV. Improved ISDS procedure and V. Unreformed ISDS mechanism (figure 1). Some of the reform approaches have more far-reaching implications than others. The extent of reform engagement within each approach can also vary (significantly) from treaty to treaty.
  • ISDS reform is pursued across various country groupings, by countries at different levels of development and from different geographical regions. At the same time, individual countries and regions have been the driving forces behind certain approaches (e.g. Brazil, India, the European Union (EU)).
  • ISDS reform is making its way into plurilateral and megaregional initiatives, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Unites States–Mexico–Canada Agreement (USMCA) and the EU–Singapore Investment Protection Agreement (IPA). Also, multilateral engagement on ISDS reform is gaining prominence, including through UNCITRAL Working Group III discussions on the possible reform of ISDS and processes at ICSID for the amendment of its rules.
  • Investment dispute settlement must be designed to produce just outcomes that are viewed as reflecting key societal values. Developments outside of the traditional realm of investment policymaking may provide insights for further thinking on the rebalancing of investment dispute settlement (e.g. the Sustainable Development Goals (SDGs), particularly goal 16; the UN Guiding Principles on Business and Human Rights; and the “zero draft” on a legally binding instrument released by the UN Working Group on Business and Human Rights).
  • UNCTAD, as the United Nations’ focal point for international investment and development, backstops ongoing policymaking processes with a view to ensuring that the IIA regime – including the way in which investment disputes are settled – works for sustainable development. UNCTAD supports sustainable development-oriented IIA reform through its three pillars of work: development of policy tools based on research and policy analysis; technical assistance, and intergovernmental consensus building.

source: UNCTAD