Should the system of investor-state dispute settlement (ISDS) be reformed?

Should the system of investor-state dispute settlement (ISDS) be reformed? That is the question being considered by the United Nations Commission on Trade Law (UNCITRAL).

ISDS provisions are contained in about 3,000 investment treaties and investment chapters of free trade agreements. The provisions permit a foreign investor in the form of a company or individual to bring a claim directly against a State where the investor believes that its investment is being threatened by an action of the State.Foreign-Direct-Investment

FDI and ISDS

FDI can be a valuable tool to exploit resources and build production facilities while creating jobs and infrastructure, particularly in developing countries. Investment agreements aim to create an enabling environment for foreign investors. Among other things, the provisions protect them against expropriation without adequate compensation and guarantee their ability to freely move assets in and out of the country. Sovereign States, on the other hand, need to govern with a multiplicity of interests in mind and their actions can, inadvertently or deliberately, deprive the foreign investor of an intended benefit. ISDS procedures provide the mechanism by which such disputes are resolved.

The most common procedures are drawn from the world of commercial arbitration, used to determine disputes between two commercial parties. They involve the use of an arbitral tribunal which gives equal standing to the investor and the State and whose decisions are binding.

The majority of developing countries rely on foreign direct investment to foster economic growth and development. The overwhelming majority of defendants in arbitral proceedings are the governments of developing and emerging economies. The outcome of ISDS arbitral tribunals can and do impact the ability of governments to develop and implement policy.

Concerns Regarding ISDS

A note by the UNCITRAL Secretariat – “Possible reform of investor-State dispute settlement” and the Report of its Working Group on ISDS summarize expressed concerns regarding ISDS. They include:

  • Inconsistency of arbitral decisions – instances where the host State is sued by different investors on the same issue but with different outcomes from different tribunals;
  • Lengthy duration and extensive cost of ISDS – States that have been sued may not have the resources to adequately defend its policies and actions or to pay arbitral awards;
  • Lack of transparency – States are using public funds and tribunal decisions may be sealed;
  • Lack of an early dismissal mechanism to address unfounded claims;
  • Lack of a mechanism to address counterclaims by respondent States;
  • Heavy reliance on arbitrators from the investor States and who may not understand policy.

Questions at the heart of these concerns address the overall legitimacy of the process. Should a system created to address disputes between two commercial parties be used to resolve policy issues that may impact millions of people? Is it acceptable to exclude domestic investors from the same recourse available to foreign investors?

Proponents of ISDS acknowledge the validity of some of these concerns and say they can be addressed by reforming the current system of ISDS. They also point to the underlying concerns that led to the use of ISDS in the first place – politicization from the use of diplomacy to address dispute and the slow judicial processes in some countries’ domestic legal system.

Concerns are not limited to those expressed by emerging economies. The EU’s submission to the UNCITRAL Working Group highlights systemic issues it believes warrants establishment of a multilateral investment court that would replace the use of arbitral tribunals. A March 2018 ruling of the European Court of Justice concluded that the ISDS clauses in an intra-EU investment treaty were incompatible with EU law.

The Trump Administration has also inserted its perspective on ISDS in the context of the NAFTA re-negotiations. The U.S. Government has consistently expressed its displeasure at being required to abide by the decisions of international panel decisions it finds not to its liking. In August 2017, the Trump Administration floated the idea of opting out of NAFTA ISDS provisions (Chapter 11). Should the US remove itself from the NAFTA ISDS provisions this would be a major departure in US policy and a disappointment for US corporations but a shot in the arm for opponents of ISDS.

Investment Facilitation

UNCITRAL will continue its deliberations. A growing consensus appears to be that while ISDS serves a role the system needs to be reformed. Meanwhile, in December 2017, 70 WTO members agreed to begin discussions to develop the framework for a Multilateral Investment Facilitation Agreement. Discussions will not address ISDS reform, but the purpose will be to minimize the likelihood of disputes by creating a more transparent, efficient, and predictable environment for facilitating cross-border investment.

To the extent that disputes arise because of tension between development-oriented policies of host States and investor goals, conflicts can best be minimized by incorporating a true development dimension into whatever frameworks are used to manage the FDI inflows into developing countries.

(Cross-posted from DevelopTradeLaw blog.)

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“Mind the Gap”- ICC ASP Side Event on Progress in Drafting a Convention on the Prevention and Punishment of Crimes against Humanity

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Participants attending the Side Event.

On December 11, 2017, the Harris Institute hosted a well-attended Side Event entitled “Progress in Drafting a Convention on the Prevention and Punishment of Crimes against Humanity” at the Sixteenth Session of the Assembly of States Parties of the International Criminal Court. The side event was co-sponsored by the Republic of Chile, the Federal Republic of Germany, the Hashemite Kingdom of Jordan, the Republic of Korea, and the Republic of Sierra Leone at UN Headquarters in New York.

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Side Event Panelists (left to right): Judge O-Gon Kwon, Professor Sean Murphy, Professor Leila Sadat, Professor Charles Jalloh, Professor Claus Kress, and Mr. Solomon Sacco.

The panel featured Special Rapporteur Sean Murphy, Professor Charles Jalloh, Professor Claus KressPresident-Elect of the ASP Judge O-Gon Kwon, Solomon Sacco from Amnesty  International, and Professor Leila Nadya Sadat. The side event provided a briefing by the Special Rapporteur on the preamble, draft articles and annex adopted by the UN International Law Commission (ILC) in 2017 on the proposed crimes against humanity (CAH) convention. Then expert panelists commented briefly on the Commission’s work from their perspectives, followed by interventions from the audience.

Professor Sean Murphy began by providing a summary of the Commission’s work since the project was launched in 2014. The draft articles adopted by the Commission on its first reading fall into five general areas: prevention of CAH (articles 2, 4, and 5); investigation and prevention of CAH (articles 3 and 6); rights of the alleged offender and rights of victims, witnesses, and others (articles 11 and 12); inter-state cooperation (articles 13, 14, and the annex on mutual legal assistance); and inter-state dispute settlement (article 15).

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Professor Charles Jalloh

Professor Charles Jalloh, also a member of the ILC, noted the tremendous progress of the Commission on this significant project. He noted that the legal text has the potential to become a treaty which is significant for the international community. He discussed the pressing need to have a CAH convention to “mind the gap” in international criminal law. Genocide, CAH, and war crimes are all considered international core crimes; however, while we have a Genocide Convention and the 1949 Geneva Conventions covering war crimes, the world still lacks a convention on preventing and punishing CAH.

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Professor Claus Kress

Professor Claus Kress suggested that the provisions in the draft convention could enhance the coherency of international criminal law. With this draft convention, Bosnia and Herzegovina v. Serbia and Montenegro could have been decided differently because the Court would have been able to analyze the situation in a more legally comprehensive manner. He also noted the possibility of the draft convention having a positive spill-over, an inspirational effect.

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Left to right: Professor Sean Murphy, Judge O-Gon Kwon, and Professor Leila Sadat.

 

ASP President-Elect Judge O-Gon Kwon gave his full support to the ILC’s work, noting the need to enhance the complementarity regime of the International Criminal Court.

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Mr. Solomon Sacco

 

Solomon Sacco of Amnesty International observed that the draft was a good start but found room for improvement, in particular as regards to the non-refoulement, mutual legal assistance, and rights of victims provisions. He specifically advocated for a clause prohibiting amnesties, the use of military tribunals, and reservations.

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CORRUPTION CRISIS OVERTAKES GUATEMALA

A new president takes office with no government experience and a background as a TV personality. He comes to the job after squaring off against a woman candidate, who he accuses of corruption. He promises that things will be different, but he can’t get much done. He’s forced to rely on a small group of retired military officers, some of them with shady pasts. Worse, information starts emerging about his party’s illegal campaign finance schemes, and an independent investigation turns up evidence of wrongdoing. To avoid further scrutiny, the president tries to get rid of the investigator, but runs into political resistance. A constitutional crisis ensues.

 

Sound familiar? Welcome to Guatemala.

 

The president is Jimmy Morales, former comedian, who on August 27 declared persona non grata the head of the U.N. Commission Against Impunity in Guatemala, Colombian jurist Ivan Velásquez. The Commission, known by its Spanish initials as CICIG, was created in 2006 through an innovative agreement between the United Nations and the Guatemalan government in order to deal with clandestine groups that had infiltrated the state and were attacking human rights defenders and others. In 2014, the U.N. appointed Velásquez to the post, and he helped shift CICIG’s priorities to the endemic, large-scale corruption that has sapped the country’s resources and allowed for strategic alliances among government and military officials, economic elites and organized crime. CICIG cannot prosecute, but acts as a civil party in cases brought by the local Prosecutors’ office.

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Update on Gender Parity at the Human Rights Council

On November 8, I published Taking-stock: The Human Rights Council and Gender Parity in Special Procedures after 10 years in this blog. The Article was also cross-posted at the Human Rights Brief. To complement my article, the Human Rights Brief recently interviewed Ambassador Marta Maurás Pérez from Chile. Ambassador Maurás is a pioneer for gender parity in the UN Human Rights Council (HRC). As the only woman in the 2015 HRC Consultative Group, she was a leader in the Consultative Group’s creation of the 2015 Gender Parity Guidelines. She continues to work to increase the number of women holding special procedures positions. The interview with Ambassador Maurás discusses her dedicated work on closing the gender gap within the UN and around the world. In addition, she discusses the challenges ahead to ensure that gender parity becomes mandatory in the work of the HRC. The full interview is posted at the Human Rights Brief. I hope her words encourage us to continue our advocacy to promote gender parity at the HRC and other international tribunals and organs.

Nuevo libro para abogados hispano- y angloparlantes/New Book for Lawyers Who Speak Both Spanish and English

(English version follows)

Tres mujeres y profesoras de derecho: S.I. Strong de la Universidad de Missouri (Estados Unidos), Katia Fach Gómez de la Universidad de Zaragoza (España) y Laura Carballo Piñeiro de la Universidad de Santiago de Compostela (España) tenemos el honor de presentar el libro Derecho comparado para abogados anglo- e hispanoparlantes: Culturas jurídicas, términos jurídicos y prácticas jurídicas/ Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices  (Edward Elgar Publishing Ltd., 2016). Este trabajo supone una plasmación por escrito de algunas de las características más relevantes de nuestras carreras profesionales: trayectorias académicas y de práctica de la abogacía internacional desarrolladas en español e inglés, y en estrecho contacto con las comunidades jurídicas latinoamericana, europea y estadounidense. En consonancia con ello, la obra que hemos elaborado permite que abogados y estudiantes de derecho que hablan inglés y español adquieran fluidez jurídica en un segundo idioma. Realizar dicho esfuerzo es extremadamente importante no sólo para abogados especializados en derecho internacional, sino también para abogados dedicados al derecho nacional pero que tratan con clientes cuya lengua materna es un idioma extranjero.

La forma en que “Derecho comparado para abogados anglo- e hispanoparlantes” involucra a abogados y estudiantes de derecho en la práctica jurídica bilingüe es única por diversos motivos. En primer lugar, y dado que la mayoría de los abogados bilingües trabajan con otros abogados y con clientes que cuentan con unos orígenes legales y culturales muy variados, el libro no se limita a analizar unas jurisdicciones concretas. Por el contrario, el libro ofrece información sobre diversos países hispanoparlantes (fundamentalmente, España y México) y angloparlantes (fundamentalmente, Estados Unidos y Reino Unido). En segundo lugar, la monografía contextualiza la información, no sólo ubicando el nuevo vocabulario y los principios legales en el contexto lingüístico apropiado –el libro es completamente bilingüe-, sino también ofreciendo abundantes comparaciones con la legislación y la práctica de otras jurisdicciones. En tercer lugar, este tipo de análisis permite que los abogados y estudiantes de derecho aprecien las diferencias existentes en las culturas jurídicas, empresariales y sociales relevantes. Ello ayuda a los lectores a no incurrir en ofensas que puedan derivarse de problemas de comunicación involuntarios. El libro también explica por qué existen dichas diferencias y cuál es su fundamento en un contexto jurídico determinado.

Profundizar en la comprensión a través de barreras nacionales, sociales y culturales es un objetivo esencial de un mundo cada vez más pluralizado. Derecho comparado para abogados anglo- e hispanoparlantes es una herramienta muy útil para aquellos que trabajan cruzando fronteras lingüísticas. Como este libro de 700 páginas demuestra, no hay que temer a las diferencias, sino que hemos de alegrarnos de que la diversidad jurídica y lingüística exista.

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unnamedThree law professors – S.I. Strong of the University of Missouri, Katia Fach Gómez of the University of Zaragoza and Laura Carballo Piñeiro of the University of Santiago de Compostela – have the honor of presenting their new book, Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices / Derecho comparado para abogados anglo- e hispanoparlantes: Culturas jurídicas, términos jurídicos y prácticas jurídicas (Edward Elgar Publishing Ltd., 2016).  This work reflects some of the characteristics that are most relevant to our professional careers as academics and practitioners working in both English and Spanish, and involving jurisdictions in Latin America, Europe and the United States.  Consistent with that, the book that we have written helps lawyers and law students who speak Spanish and English become legally fluent in their second language.  This effort is extremely important not only for specialists in international law, but also for domestic lawyers whose clients speak different languages.

 

Comparative Law for Spanish-English Speaking Lawyers: Legal Cultures, Legal Terms and Legal Practices / Derecho comparado para abogados anglo- e hispanoparlantes” introduces lawyers and law students to bilingual legal practice in several ways.  First, the book does not focus solely on single jurisdictions, since most bilingual lawyers work with clients and co-counsel from a variety of legal and cultural backgrounds.  Instead, the book offers information on several English-speaking nations (primarily the U.S. and the U.K.) and Spanish-speaking countries (primarily Spain, Mexico and Argentina).  Second, the text seeks to contextualize the information, not only by placing the new vocabulary and legal principles in the appropriate linguistic setting (the book is entirely bilingual) but by providing extensive comparisons to the law and practice of other jurisdictions.  Third, the discussion helps lawyers and law students appreciate differences in the relevant legal, business and social cultures, thereby helping them avoid giving offense through any inadvertent miscommunications, and explains why those differences arose and why they make sense in that particular legal environment.

 

Increasing understanding across national, social and cultural lines is an important goal in our increasingly pluralistic world, and Comparative Law for Spanish-English Speaking Lawyers provides a useful tool for those who work across linguistic lines.  As this 700+ page text shows, legal and linguistic differences need not be feared but can instead be celebrated.

 

Two Steps Forward, One Step Back

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Book cover, courtesy International Nuremberg Principles Academy. (Original: Montana Historical Society)

On 4 November 2016 in Nuremberg, at its annual forum commemorating the 70th anniversary of the adoption of the Nuremberg Principles by the UN General Assembly, the International Nuremberg Principles Academy launched its first book, a volume of deterrence studies titled, Two Steps Forward, One Step Back: The Deterrent Effect of International Criminal Tribunals. This volume comprises ten country studies (Serbia, Kosovo, Rwanda, Sierra Leone, DRC, Uganda, Darfur, Kenya, Cote d’Ivoire and Mali), as well as a chapter on methodology, and conclusions drawing from all the country studies, with recommendations for further action.

Two Steps Forward is notable in a number of respects. While various articles have addressed deterrence in international criminal law in some fashion, it is apparently the first volume that addresses the issue so comprehensively. It also ventures to offer conclusions on the question of deterrence based on quantitative and qualitative research, noting that nearly 20 years have passed since the ICTY and ICTR’s establishment, and nearly 15 since the ICC and Sierra Leone Special Court’s establishment. While the Nuremberg trials themselves arguably took several generations for their effects to be fully felt, enough time has passed that it is fair to begin to examine what has been the deterrent effect so far of international tribunals, and how that effect can be enhanced or improved.

The good news is that in all of the country situations surveyed, at least some deterrent effect was reported. The authors draw on quantitative factors first to assess whether overall criminality has risen or fallen, a fundamental baseline for asking whether crimes have thereafter been deterred. The authors draw on qualitative factors to assess perceptions of deterrence, in particular amongst perpetrators and potentially like-minded individuals, including members of militaries and rebel groups, political actors, diplomats and politicians, as well as academics, civil society members and victims. Perceptions of deterrence are as significant as objectively measurable deterrence; people act on their perceptions, for good or bad, and these actions can help determine whether further crimes will be committed. In all the situation countries surveyed, the authors found that while the international court or tribunal concerned had a deterrent effect, both objective and perceived, it proved difficult to sustain because the factors supporting it often fell apart. This is an important starting point for examining how to ensure that any hard-won deterrent effect is not ultimately lost. Continue reading

Job Opportunity: Post Doc Positions

WZB Berlin Social Science Center

The WZB Berlin Social Science Center is seeking to appoint two research fellows to be employed fulltime (39 hours/week) for up to five years, commencing on 16th January 2017 or as soon as possible thereafter.

Main tasks involve the theory-based research of transnational and international institutions, their social and political prerequisites, and the repercussions on national processes. The successful candidates are to work within the framework of the research programme of the Global Governance unit.

Please see the unit’s website or following attachment for more information: