Stability and Change in International Investment Law – Assessing the Risks and Challenges for the Next 25 Years
Summary of virtual panel discussions held on October 23,30 and November 6
On October 23, 30 and November 6, 2024, the Center on International Commercial Arbitration at American University Washington College of Law (Washington, DC) and the Institut Suisse de Droit Comparé (Lausanne, Switzerland) organized a series of online round tables with thought leaders from around the world to assess the future of international investment law and dispute resolution. The panels discussed what lies ahead for investment protection in the next 25 years. The three panels focused on the perspectives of international institutions, industrialized nations and emerging economies.
The first panel was moderated by Krista Nadakavukaren, Vice-Director and Head of the Legal Division at the Swiss Institute of Comparative Law. It was focused on the investment protection regime and what is changing on the institutional level. The panel offered the views of the three most influential institutional players in this field: the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on Trade and Development (UNCTAD) and the United Nations Commission on International Trade Law (UNCITRAL)’s Working Group III, which has the mandate the topic of Investor-State Dispute Settlement Reform.
First, ICSID Secretary General Martina Polasek discussed ICSID’s mandate, services, and structure, as well as its evolution over the past thirty years. She underlined that ICSID is starting to have new, expanded roles. In order to adapt to changing circumstances and user needs, ICSID has updated its arbitration rules in 2006 and 2022. New items are early claims dismissal for claims that are manifestly without legal merit both in terms of jurisdiction and merits. ICSID also added a whole new chapter on expedited arbitration and mediation rules.
Vincent Beyer, from UNCTAD, addressed how potential changes in the system may affect the world economy. He calculated the damages awards ever awarded to investors plus the total of all the settlements for which data exists. The aggregated amount awarded in ISDS is $118.75 million.
Prof. Güneş Ünüvar, who is a counsel at Ozgur Unuvar Bakiler, provided insights into UNCITRAL Working Group III, which is a forum where potential changes to the investment protection regime are being discussed. He explained that the ISDS reform process began as a slow initiative but saw an increase in its dynamic around 2014-2015, aligning with the Mauritius Convention on transparency. The reform discussions focus on several key ISDS issues, including democratic legitimacy, coherence of arbitral awards, transparency, and review mechanisms. Over time, specific concerns like ethics and conflicts of interest in "double hatting" by arbitrators drew increasing attention. As a result, UNCITRAL led an effort to draft the Code of Conduct for Adjudicators, incorporating a "3-3-1" cooling-off period to address potential conflicts involving former arbitrators. Approved in 2023, this code aims to enhance the legitimacy of ISDS.
The second panel, titled The Industrialized Economies' Response to the Transformations in International Investment Law, examined how key industrialized nations are navigating the evolving landscape of international investment law. Moderated by Prof. Horacio A. Grigera Naón, Director of the Center on International Commercial Arbitration, panelists explored these industrialized nations’ responses to the tranformations in investment protection, covering Switzerland, the European Union, the US, and some major Asian economies, such as Japan, South Korea, and Singapore.
Amb. Thomas Zimmermann emphasized Switzerland’s reliance on Foreign Direct Investment (FDI) due to its small population and limited natural resources. He highlighted that Switzerland's success lies in its internationally oriented industries and its dependence on foreign capital for growth. FDI and trade are essential pillars, driving innovation and economic stability. He also pointed out that robust international investment protection frameworks are vital for attracting and securing FDI, ensuring Switzerland remains competitive in the global economy.
Lauren Mandell, partner at WilmerHale, discussed the U.S.’ evolving stance on Investor-State Dispute Settlement (ISDS). While the U.S. hasn't introduced new investment protection agreements since 2018, recent agreements like the USMCA, the U.S.-Colombia, and the U.S.-Korea agreements include critical changes, such as limiting ISDS. He raised the question of whether Congress will push for new trade promotion legislation or a revised U.S. investment model in light of these changes.
Prof. Jansen Calamita presented the investment policy approaches of Japan, China, Singapore, and South Korea. China has been both an adopter and innovator of ISDS reforms, including an appellate mechanism. Japan supports investment protection but resists significant ISDS changes. South Korea advocates for ISDS reforms and multilateral investment facilitation. Singapore is active in ISDS reform, especially within UNCITRAL. Each country’s approach reflects a mix of adaptation and innovation, driven by strategic economic priorities.
Prof. Ursula Kriebaum outlined the EU’s refined approach to FDI, emphasizing its continued importance despite political shifts. New treaties focus on including more precise definitions of protection standards, such as Fair and Equitable Treatment (FET) and indirect expropriation, wile limiting the use of Most-Favored Nation (MFN) clauses. The EU's model text also emphasizes transparency, the prevention of multiple proceedings, and mandating tribunals to applying only international law, signaling a shift towards a more international law-focused approach to the investment arbitration framework.
The third panel was moderated by Krista Nadakavukaren and focused on developing economies’ perspective on international investment law and protection. The panel discussed potential regional responses and changes from the perspectives of Egypt, Cambodia, Argentina, and India.
First, Nagla Nassar, of Nassar Law Firm, addressed how Africa’s path to foreign investment has evolved significantly since decolonization in the 1950s, moving from suspicion to gradual acceptance, especially as countries realized investment could drive development. Foreign investments were limited to natural resources, but under the influence of neoliberal policies in the 1980s, Africa started to adopt investment laws and BITs to attract investments from broader sectors of the economy. Recently, Africa also sought inter-African investment through initiatives like the OHADA treaty and adoption of international conventions like the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Nagla Nassar pointed out that despite the progress in creating an investment-friendly environment, Africa still faces challenges from corruption and instability.
Prof. Prabhash Ranjan discussed how India's approach to investment treaties has shifted significantly, driven by economic liberalization and enthusiasm for foreign investment. After facing multiple ISDS claims, particularly following the White Industries case, India unilaterally terminated around 70 treaties and adopted a restrictive, state-focused model BIT. This model excludes key investor protections like MFN and FET, and requires investors to exhaust local remedies over a five-year period. Recent Free Trade Agreements (FTAs) with countries like Australia and the UAE omit investment protection clauses altogether, demonstrating India's preference to limit international obligations on investment protection. Prof. Ranjan noted that India’s future position in international investment law is likely to be shaped by ongoing negotiations with the UK and the EU.
Prom Savada (LL.M.’16), partner at the Rajah & Tann Sok & Heng Law Office, talked about Cambodia, a rapidly growing economy in Southeast Asia, which has evolved its approach to international investment law since the 1990s, following years of civil conflict. Cambodia’s investment framework shifted in the late 2000s following a backlash from environmental and social impacts. As a result, Investment Law has been updated, emphasising sustainable and responsible growth, environmental sustainability. She also mentioned that Cambodia is enhancing its dispute resolution framework by promoting mediation and prioritising investments that align with ESG standards.
Fernando Tupa, partner at Curtis in the firm’s Buenos Aires office, discussed investment law and protection in Latin America, emphasising the complex relationship of the region with foreign direct investments and investor-state dispute settlement. For example, Ecuador, Bolivia and Venezuela have denounced the ICSID Convention, showing a shift in approach. Countries like Argentina and Brazil explore models for investment protection, including BITs and FTAs, without ISDS clauses. Brazil only allows for contract-based investment arbitration. With almost 30% of global ISDS cases, Latin America is a major region for investment disputes, especially in the energy sector.
