AUDITING THE REFORM PROCESS: KEY DEVELOPMENTS IN THE NEW NORMAL OF INVESTMENT TREATY ARBITRATION
There has been much discussion about the need for reform of the investor state dispute settlement (ISDS) system. The United Nations Commission on International Trade Law Working Group III (UNCITRAL WGIII) was due to host its sixth session on the topic in late March, absent the COVID-19 pandemic, as a state-led initiative. Although stakeholders were unable to meet then, they agreed that reform was desirable and should address concerns including: (i) consistency, coherence, predictability and correctness of arbitral rulings; (ii) independence, impartiality and diversity of decision makers; and (iii) cost and duration of ISDS proceedings. They disagreed on the methodology, however, splintering into cohorts on the best path forward. Two hypotheses discussed below include reforms to the existing system by way of innovative international investment treaties with state-to-state arbitration and the creation of a newly defined state-to-state multilateral investment court.
Reform to the system: new model bilateral investment treaties (BITs)
The 1990s saw a wave of states entering treaties, signalling cooperation and encouraging private investors. A decade later, these states became accountable to a parallel wave of investor-state arbitration claims against them. In response, states adapted to include more specific language in subsequent iterations of their treaties or reinvented where their earlier provisions were too vague, such as broad application limiting state policy evolution and delegation of jurisdiction and arbitrability to arbitrators, for example. Thus, a new phase of game-changing BITs are emerging with state-to-state formulas. Two countries of interest with burgeoning economies, population density divided between diverse states and expanding global enterprises are India and Brazil. Both countries take an innovative approach to investment treaties as it transforms to attract increasing quantity and quality of foreign direct investments (FDI).
Jul-Sep 2020 issue
New York International Arbitration Center (NYIAC)