In the past 10 years, the number of cases of foreign investors suing the Government has increased in both quantity and value of disputes. In order to protect the rights of its citizens in international investment activities, the countries of the investor have developed models for settling disputes between investors and the state on the basis of international treaties on Investment investorstate dispute settlement mechanism (ISDS). InvestorState Dispute Settlement (ISDS) mechanisms are found in more than 3 000 international investment treaties, but have been increasingly criticised in recent years.
MỤC LỤC I INTRODUCTION II BODY Overview 2 Two major criticisms against the current investor-state dispute settlement mechanism (ISDS) 2.1.Lack of transparency in investment disputes .3 2.2.Costs: diversion of public money from public goods and services 3 Personal recommendations 3.1 Transparency .5 3.2 Aiming for consistency in arbitral awards: setting up of an appellate body III CONCLUSION .6 I INTRODUCTION In the past 10 years, the number of cases of foreign investors suing the Government has increased in both quantity and value of disputes In order to protect the rights of its citizens in international investment activities, the countries of the investor have developed models for settling disputes between investors and the state on the basis of international treaties on Investment - investor-state dispute settlement mechanism (ISDS) Investor-State Dispute Settlement (ISDS) mechanisms are found in more than 000 international investment treaties, but have been increasingly criticised in recent years Now, let’s take a look at “Analyse two major criticisms against the current investor-state dispute settlement mechanism (ISDS)” II BODY Overview Investor-State Dispute Settlement (ISDS) mechanism offers investors recourse to international arbitration to settle investment disputes with the host State It serves as a main means of enforcement of substantive treaty protections and allows depoliticization of disputes International dispute settlement is concerned with the techniques and institutions which are used to solve international disputes between states and/or international organisations International disputes can be solved either by use of force (coercion) or by peaceful settlement Techniques used for peaceful settlement of international disputes are negotiation, inquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful means of their own choice (Art 33, UN Charter).1 Hanoi Law University, Textbook on International Investment Law,p.159 2 Two major criticisms against the current investor-state dispute settlement 2.1 mechanism (ISDS) Lack of transparency in investment disputes Investment arbitration is continually evolving and the question of Transparency of the arbitral process is no exception Transparency has also been a principle under development for the last 20 years of the ISDS system, which has been taken into account for a long time as an evolving principle of the investment arbitration practice in its different expressions (i.e CAFTA-DR, NAFTA, Amicus Curiae and Third party rights, etc.)2 Transparency has evolved into its new role by positioning itself as one of the global norms in international investment law by means of the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, which has been adopted by the UN as the UN Convention on transparency for investor-state dispute resolution.3 ISDS procedures are in most cases confidential The ICSID is the most 'open' of the arbitration fora, publishing most awards and a list of cases However not all awards are published, nor the submissions of the parties Other organisations involved in arbitration are even less transparent One of the most secretive is the International Chamber of Commerce, where all details of individual cases are secret Except for ICSID, which requires the publication of some limited information about cases, other sets of rules originally developed to deal with commercial disputes between private parties, have no provisions on transparency.4 2.2 Costs: diversion of public money from public goods and services ICSID Rule 32(2) and Rule 37 Investor-State Dispute Settlement (ISDS) State of play and prospects for reform, p.5 Dolzer R, Schreuer C, op cit., p 237 The growing number of ISDS cases and the broad range of policy issues they raise have put the system of investment arbitration under intensive scrutiny by States, NGOs, and other stakeholders This discontent is the result of a perceived failure in the functioning of the ISDS system, particularly, in relation to (i) its legitimacy and transparency (ii) problems of consistency of the arbitral decisions (iii) concerns about the independence and impartiality of arbitrators and (iv) the alleged costly and timeconsuming nature of arbitrations.6 Under NAFTA alone, the series of investor-state cases has given rise to the payment of over US$350 million in compensation.7Average legal and arbitration costs of a case are US$8 million, with the main part being the cost of legal representation and experts (80% of the total).8 Law firms charge as much as US$1 000 per hour, per lawyer, with several on each case The arbitrators' fees are also high, at an average of US$3 000 a day, plus travel and subsistence.9 The high costs of arbitration explain to some extent the growing phenomenon of 'third- party funding of claims' Investment firms (banks, hedge funds and insurance companies) offer to invest in a company's cases in exchange for a share (from 20% to 50%) of the potential final compensation awarded By reducing the financial risk for companies, such 'third-party funding' contributes to an increase in 'frivolous cases' for which states still bear full legal costs NGO observers also deplore the huge public costs of the compensation ordered to be paid to investors by states The largest known award hit Ecuador 10 in October 2012: US$2.4 billion In some instances, States have denounced the ICSID Convention while others have withdrawn from the ICSID Convention and withdrawn or renegotiated their own treaties For example, Bolivia withdrew from ICSID in 2007 and was followed by Ecuador in 2009 and Venezuela in 2012 In 2012, Argentina announced that it would withdraw from ICSID although it is still ICSID member, whereas at the same time Canada has recently ratified the ICSID convention UNCTAD, Investor-State Dispute Settlement [2014] Series on Issues in International Investment Agreements II Investor-state disputes in trade pacts threaten fundamental principles of national judicial systems/ Kelsey J, University of Auckland; Lori Wallach, Public Citizen's Global Trade Watch, p Gaukrodger D, Gordon K, op cit., p 19 Mc Donagh T, op cit., pp & 15 10 https://www.citizen.org/wp-content/uploads/oxy-v-ecuador-memo.pdf Personal recommendations 3.1 Transparency Some adjustments have already been implemented to overcome the criticisms on transparency The new transparency standards have been adopted by ICSID in 2006 and UNCITRAL in 2013 Additionally, the Mauritius Convention on Transparency, which entered into force in October 2017, aims at applying the 2014 UNCITRAL Rules on Transparency in treaty-based investor-state arbitration The Rules now apply by default to all investor-State arbitrations conducted under the UNCITRAL Arbitration Rules pursuant to treaties concluded on or after April, 2014 3.2 Aiming for consistency in arbitral awards: setting up of an appellate body When the ICSID arbitral system was designed, despite the desirability of a consistent interpretation, proposals for the possibility to appeal on grounds such as an error of law/substantial error were rejected Consistency, which encompasses the coherent interpretation of applicable principles and standards of law, is fundamental to improve predictability, enhance trust in the ISDS system and to develop a homogenous international investment law The inconsistency of the interpretation of the fair and equitable treatment standard has led not only to the modification of treaties by states to either include a “minimum standard of treatment” obligation instead or an exhaustive definition of fair and equitable treatment but it has also led to contradictory decisions about the same facts, such as in CME v Czech Republic and Lauder v Czech Republic A permanent or semi-permanent appellate body might be seen as a solution, but the very idea of its creation in the existing system raises several questions III CONCLUSION In conclusion, International investment disputes, in essence, are always a special type of dispute with the participation of both private and public entities Throughout the development of international investment, the system of rules governing this type of dispute has always been changed towards limiting or expanding the obligations of the host country depending on needs of the members of the agreement, or in the direction of limiting the settlement of disputes at domestic judicial authorities in the host country or granting investors the right to initiate lawsuits in international arbitration LIST OF REFERENCES Hanoi Law University, Textbook on International Investment Law,p.159 ICSID Rule 32(2) and Rule 37 Investor-State Dispute Settlement (ISDS) State of play and prospects for reform, p.5 Dolzer R, Schreuer C, op cit., p 237 In some instances, States have denounced the ICSID Convention while others have withdrawn from the ICSID Convention and withdrawn or renegotiated their own treaties For example, Bolivia withdrew from ICSID in 2007 and was followed by Ecuador in 2009 and Venezuela in 2012 In 2012, Argentina announced that it would withdraw from ICSID although it is still ICSID member, whereas at the same time Canada has recently ratified the ICSID convention UNCTAD, Investor-State Dispute Settlement [2014] Series on Issues in International Investment Agreements II.7 Investor-state disputes in trade pacts threaten fundamental principles of national judicial systems/ Kelsey J, University of Auckland; Lori Wallach, Public Citizen's Global Trade Watch, p Gaukrodger D, Gordon K, op cit., p 19 Mc Donagh T, op cit., p & 15 10 https://www.citizen.org/wp-content/uploads/oxy-v-ecuador-memo.pdf