UN experts say ISDS undermines human rights as governments meet to review it

Thursday April 4, 2019: A group of seven Special Rapporteurs in the United Nations system have told another UN body – the UN Commission on International Trade Law (UNCITRAL) - that Investor-State Dispute Settlement in trade agreements need systemic reform, not only procedural improvements.

“The current reform proposals, which are limited in scope and nature, can only offer superficial solutions to symptoms of the fundamental flaws in the ISDS system. We believe what is necessary is a fundamental, systemic change, which entails moving towards a fairer and more transparent multilateral system, which duly takes into account the rights and obligations of investors and States in line with all applicable international laws and standards concerning human rights, labour rights and environmental rights. A special attention should be paid to differentiated and disproportional negative impact of IIAs [International Investment Agreements] and the ISDS mechanism on women as well as on indigenous peoples, particularly in relation to resource extraction in or near indigenous peoples’ territories”, they said in a letter on March 7, 2019.

Their focus is the 37th session of UNCITRAL Working Group III on Investor-State Dispute Settlement (ISDS) Reform, meeting in New York from April 1-5, 2019. Australia is one of sixty members of UNCITRAL Working Group III.

The UN experts expressed overarching concerns that IIAs and their ISDS mechanism have often proved to be incompatible with international human rights law and the rule of law.

They reminded participating governments that UNCITRAL was established in 1966 under the UN Charter to “achieve international co-operation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction.”

“There is a critical need to fundamentally reform IIAs and ISDS, so that they foster international investments that effectively contribute to the realization of all human rights and the SDGs [Sustainable Development Goals], rather than hindering their achievement. In our view, such a paradigm change is not only desirable, but also necessary if UNCITRAL is to effectively fulfil its mandate”, they wrote.

AFTINET and hundreds of civil society groups have made similar criticisms of ISDS, as have sixty-five academics from around the globe. A recent paper from the South Centre says there is a growing international consensus to fundamentally reform ISDS, but that developing countries are under-represented in the UNCITRAL process. The UN Conference on Trade and Development also says there is a new trend to limit companies’ access to ISDS, by omitting ISDS from trade and investment treaties, limiting treaty provisions subject to ISDS, excluding policy areas from ISDS coverage, and limiting time periods to submit claims.