UN group meets to discuss ISDS reform
January 9, 2018: A working group of the United Nations Commission on International Trade Law (UNCITRAL) recently held talks to discuss current concerns about the investor-state dispute settlement (ISDS) scheme, and possible reforms. UNICTRAL is one of the two bodies which provides panels of investment law arbitrators for ISDS disputes.
According to IAReporter, based on the transcript of the proceedings, the main concerns raised by government delegations were the cost and lengthy duration of ISDS disputes, the issue of corporations failing to pay costs if awarded against them, frivolous claims by investors, inconsistent rulings and lack of transparency. Concerns were also raised about the independence and impartiality of arbitrators.
These are all issues raised by AFTINET and other civil society groups which have led some governments and the ALP, Greens and Nick Xenophon Team to oppose the inclusion of ISDS in trade agreements.
One of the biggest issues identified by some delegations was the lack of consistency in the current ISDS system. Australia, Canada and the E.U. all noted that government lawyers have had trouble interpreting treaties, and Australia admitted that “… in terms of providing advice internally to government on new policy initiatives it can be challenging to work out where a tribunal might come out on a particular issue.”
Broadly, there were three different positions taken by delegates on the need for reform.
Some like Brazil said there was no need for investor-initiated disputes at all, and that disputes could be dealt with by government-to-government disputes processes which are part of all trade agreements.
Others including the U.S., Chile, Mexico, Russia and Japan cast doubt on the severity of problems, and argued that states can use various bilateral tools to alleviate any problems. The U.S. was joined by Russia, Korea and Israel in arguing that the ‘non-uniform’ arbitration system was a positive thing, as it allowed ‘regional specificities’ to be considered.
Other delegations like the E.U., Canada, Mauritius and Argentina called for multilateral solutions (such as a permanent court and an appellate mechanism). The E.U. argued that ‘the question of consistency still remains a problem’, and suggested that holistic improvements could be made to the treaty system.
There was also a focus by some on negative public perceptions of the ISDS scheme, and the need for UNCITRAL to respond. This group included Mauritius, which admitted that ISDS has become ‘highly politicized’, and Australia, which considered the UNCITRAL review an opportunity to recover the ‘social license’ that ISDS lost after the costly Philip Morris case.
The working group will meet again in April 2018, to discuss more concerns. They have not explored solutions yet.