Thursday, February 13, 2020

RCEP, ISDS and a non-gold standard

I have blogged about RCEP and ISDS in the past few posts. Well, that is the flavour of the season. Now this one is on RCEP and ISDS!

Julien Chaisse in this post records that RCEP has been disappointing in terms of not setting a gold standard in investment rule making, especially in the context of ISDS.

Malaysia’s trade minister publicly stated that all countries involved had agreed to exclude ISDS provisions from RCEP.[3] India’s strict position on ISDS and numerous other trade-related issues caused a lowest common denominator approach, explained by its own BITs renegotiations. Both India and Indonesia were opposed, as matter of principle, to ISDS. Despite India’s decision not to join the consensus, the investment chapter should remain untouched, partly because there is still hope that India will sign RCEP in 2020. Capital exporting countries (especially the Republic of Korea, Japan and Australia) agreed to the exclusion of ISDS. Japan could compromise on ISDS (as it did in the ASEAN-Japan FTA which has no investment chapter) as Japanese investors can still rely on BITs (containing ISDS) with ASEAN countries. This means that the noodle bowl of IIAs remains largely unaddressed. In terms of substantive protections, RCEP resembles a slightly enhanced ASEAN Comprehensive Investment Agreement (ACIA). In particular, RCEP further clarifies—and limits—provisions regarding fair and equitable treatment, denial of benefits and performance requirements (which were provisions repeatedly re-assed by ASEAN negotiators in the context of the ACIA implementation).   
The results on ISDS don't seem to be quite striking considering the positions most members held on the issue. ISDS continues to be a contentious issues across forums and trade negotiations - from UNCITRAL to RCEP! 

Wednesday, February 12, 2020

This one is for the ISDS!

In all the criticism of the ISDS system and the need to search alternatives like state to state mechanisms or domestic fora, this blogpost argues that ISDS is important for access to justice. 

It argues that inter-state mechanisms or domestic courts do not provide a viable alternative. It also argues that ISDS is not relevant only to less developed legal systems but also highly evolved ones since international investors are treated differently by domestic law.

Inter-governmental or inter-state mechanisms, such as diplomatic protection, or formal inter-state dispute settlement, in turn, do not provide an adequate substitute for an ISDS mechanism. Affected investors regularly do not have a right vis-à-vis their government to have their claim espoused against a foreign sovereign, making investors dependent on the goodwill of their home country and likely prejudicing smaller compared to larger investors. Giving investors access to an international forum is the most effective means to enforce the substantive rights granted under IIAs.
The critique that investor obligations are not as important as their rights in IIAs and BITs is sought to be answered by a caveat that the asymmetry should be addressed by providing access to ISDS for claims against foreign investors and not just for them

An appropriate solution to the asymmetry problem could then consist in creating investment dispute settlement mechanisms, for example as part of the current UNCITRAL process, that are sufficiently open, so that its jurisdiction can cover not only claims by, but also claims against, foreign investors. This could constitute an important step in addressing gaps in investor accountability and provide comprehensive access to justice in respect of international investment projects for all actors affected.
Well, some food for thought?

Monday, February 10, 2020

BITs and ISDS reform discussions

For an account of new BITs and the influence of provisions relating to human rights and corporate social responsibility, this blog post is a useful reminder of the evolving nature of the legal framework of international investment arbitration.
Human rights considerations increasingly arise in discussions around the evolution of international investment law. IIAs continue to play a foundational role in this trend, as noticeably progressed by newly signed IIAs in 2019. The extent to which disputes arise under the abovementioned IIAs in the coming years, and whether such disputes include human rights considerations, will crucially bear on the trajectory of efforts to gradually align human rights and investment interests.
And for those following the ISDS debates at UNCITRAL, this is an update in the IELP blog regarding the dynamics of the multilateral discussions on ISDS reform:

Flexibility was another core theme arising from the January session. Continuing on the Working Group’s discussions in October, some delegates emphasized the need for an “open architecture”, and a “flexible approach”, that would enable states to pick and choose, via opt-ins or out-outs, from the reform outputs developed through the process. This approach has undoubted appeal in that, under it, no state would be required to accept a reform solution it does not wish to adopt. This can help maximize buy-in for the multilateral instrument, and potentially for a standing body, by allowing states to only opt into certain aspects, such as an appellate mechanism.   

Sunday, February 9, 2020

Trade deals, investment arbitration, underdogs - some weekend readings

Two good weekend readings on international trade and investment issues:

1. What is in store for trade in the context of the US-China trade deal - smaller countries will be the losers. Edward Alden writes in the East Asia Forum:

The real danger of the new agreement, however, is that it replaces a trading system based largely on agreed rules with one based purely on negotiating muscle. The United States long championed a rules-based system, but is now discarding it in favour of a power-based system where the strong do what they can and the weak suffer what they must.
2. ISDS and a new framework in RCEP - Prabhash Ranjan speaks about the underdog in international investment arbitration in the context of the backlash against ISDS provisions.
For the sustainability of the liberal internationalism project to advance international rule of law, it has to be embedded in the social order. This compromise is critical to stem the rise of populism where populist leaders increasingly seek to break free from international institutional controls. A BIT and ISDS framework based on normativity of international rule of law and embedded liberalism will ensure that the interests of the underdogs – hapless investor subjected to whimsical State behaviour and States failing to protect their interests before over-powered foreign investors – shall be protected. This embedded liberal internationalism on foreign investment will be like a new social compact between the market and the State and civil society consistent with Joseph Stiglitz’s template of progressive capitalism to replace neoliberalism.