ISDS or Investor State dispute settlement, is an international law governing the cross-border commerce which allows foreign investors to get rightful solutions to the disputes they are facing or to agreements that are breached with a host state, where their investment lies. These settlements are normally done in a neutral forum wherein, agreements are in the form of investment treaties or investment and trade deals, which fosters foreign investment between state parties. Many multinational companies used ISDS to sue host countries, who eventually had to take back their new tax or other policies.
Issues faced by ISDS
The energy charter treaty (ECT) is the only ISDS agreement signed by the EU that includes 52 European and Central Asian countries as a part of the agreement. But though there are quite a few cases solved through ISDS over the last 30 years, there are negotiations that ISDS causes human rights violations, is unnecessary and illegitimate as a public policy. Therefore, many developing countries like Argentina, Indonesia, South Africa and India, from their previous experience feel that, the ISDS agreements are completely abused and there are certain flaws in it, which need to be rectified.
Complexity and expenses of handling the cases while paying the lawyers for long case durations, receipt of awards that are much lesser than what was claimed, cases being resolved without an inclusion of voted lawyers or third party, the confidentiality of the reports without public disclosure which leads to very little transparency and doubts in the minds of citizens, the limited ability of the best or elite arbitrators to take up new cases which ultimately causes a delay in handling the cases while increasing expenses and third party funding are some of the issues which have raised questions about ISDS.
New Reforms for ISDS
ISDS provisions have either been modified, limited to certain agreement breaches or enhanced from its previous model in certain cases. US and Korea signed a treaty in 2018, that amended their 2008 ISDS treaty. The new treaty helps both countries in accomplishing their objectives and clears the issue on minimum standard of treatment. US, Mexico and Canada signed a new NAFTA agreement, and Canada withdrew itself from ISDS. This way US and Mexico can concentrate on their own disputes.
EU on the other hand has completely opposed the traditional ISDS treaty, and created a recent treaty with Canada, Vietnam and Singapore in the form of Investment Court System (ICS). The ICS is a modern treaty wherein, the disputes can be handled in permanent courts and the members of the court are impartial and independent as they are selected prior to dispute settlement by the States. This makes the system much more legit and faster.
The European Union and its Member states are in further discussions to support a Multilateral Investment court (MIC) to completely remove the Bilateral Investor dispute Settlement System. The MIC project will include some key changes from that of the ISDS. The MIC will have a permanent set of competent Judges who are ethical and follow a code of conduct. It will be accessible by all investment states, be it an old or a new dispute. A fixed and permanent remuneration will be provided to the Judges to increase transparency and avoid being picked on a random basis, by favourable parties only. This also reduces delays in judgement.
To understand if the claim is really valid the MIC will have an appeal and a normal tribunal. The appeal tribunal will verify the errors and decisions given by the normal tribunal to provide fair solution with a broader scrutiny. Most of all, the proceedings will be published to be viewed by the public, to ensure that the claims are true and not frivolous.
A series of negotiations are happening to put MIC into place and create a proper framework for its establishment. What happens further is for us to wait and watch. Read More Continue
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