Wednesday, December 9, 2020

Of lows and highs - ISDS and RCEP

 I have discussed the debate over Investor State Dispute Settlement (ISDS) in many blogposts. The tension between state regulatory power and investor rights has captured the imagnation of treaty negotiators. The results have led to oscillation from rejecting ISDS to making a modified ISDS framework with greater balance.

Now that RCEP is the talk of the town, an analysis of the dispute settlement provisions in RCEP in this post in Kluwer Arbitration Blog once again shows how ISDS is not universally acceptable. The RCEP investment chapter has rejected the ISDS for now and has settled for the traditional, more non-controversial State to State dispute settlement.

This, nonetheless, does not mean that investors are left without any recourse for breaches of RCEP Investment Chapter by a host state. Although the RCEP Investment Chapter does not specify any DSM, an all-purpose state-to-state DSM is provided under Chapter 19 (Dispute Settlement) (the RCEP DSM). This means that if a Party to RCEP commits any breach of the obligations under the RCEP Investment Chapter, the relevant investors could request their home state to espouse their claims by way of diplomatic protection, and subsequently the home state may bring a claim against the host state under Article 19.3(1) of RCEP. Article 17.11 of RCEP, however, carves out a major area of protection by providing that the RCEP DSM is not applicable to disputes relating to pre-establishment rights, namely those disputes relating to admission or approval of foreign investment during the screening process applied by the Parties.

Well, as the blogpost suggested - is this the lowest common denominator as far as investment dispute settlement is concerned? It depends on what one considers "low" and "high" in norm setting in investment treaty making! For some, the ISDS is the new low point. 

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