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Balancing Investor Protection and Sustainable Development in Investment Arbitration –
Trying to Square the Circle?
Frank Emmert & Begaiym Esenkulova
International investment arbitration is one of the most widely relied upon mechanisms of
resolving disputes between investors and host states.1 Since states typically do not like to submit
to the jurisdiction of foreign courts, and investors often do not want to assume that they would be
treated with complete neutrality and fairness by the courts of the state they are in a dispute with,
arbitration in front of a neutral panel is the obvious alternative. The International Centre for
Settlement of Investment Disputes (ICSID) and many other arbitral institutions provide a platform
for hearing claims by foreign investors against host states.2 ICSID alone has served as an
administering institution for more than 500 investment cases to date.3 Investors prefer arbitration
not only because it is generally considered to offer an impartial forum for bringing claims against
host states, but also because it provides for an effective enforcement mechanism.4 All of these
characteristics of the arbitration process make it important and often indispensable for the
protection of investors' rights. Yet, despite all the advantages of arbitration as a dispute resolution
system, there is now a rising backlash against it. This article explores the mounting criticism
1 For a comprehensive analysis of the nature of investment arbitration see Andrea Bjorklund, The Emerging
Civilization of Investment Arbitration, 113 Penn State Law Review 1269 (2008-2009), at 1269-1300.
2 In this regard, Reinisch and Malintoppi state that the ICSID system “…has known tremendous success, particularly
over the last ten years, and is likely to grow further due to the increase in the number of Bilateral Investment Treaties
… all over the world”. See August Reinisch and Loretta Malintoppi, Methods of Dispute Resolution, in THE OXFORD
HANDBOOK OF INTERNATIONAL INVESTMENT LAW (Christoph Schreuer et al., eds, 2008), at 692; See also August
Reinisch, The Future of Investment Arbitration, in INTERNATIONAL INVESTMENT LAW FOR THE 21ST CENTURY: ESSAYS
IN HONOUR OF CHRISTOPH SCHREUER (Christina Binder et al. eds, 2009), at 894.
3 UNCTAD, ICSID CASES, 2018, http://investmentpolicyhub.unctad.org/ISDS/FilterByRulesAndInstitution (last
visited Aug. 29, 2018); For the analysis of the work of ICSID see Ibironke Odumosu, The Antinomies of the
(Continued) Relevance of ICSID to the Third World, 8 San Diego International Law Journal 345 (2007), at 345-385;
Elizabeth Moul, The International Centre for the Settlement of Investment Disputes and the Developing World:
Creating a Mutual Confidence in the International Investment Regime, 55 Santa Clara Law Review 881 (2015), at
881-916.
4 See MUTHUCUMARASWAMY SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT (2012), at 217
(“Arbitration, in a neutral state before a neutral tribunal, has traditionally been seen as the best method of securing
impartial justice… [for investors]”); Herfried Wöss et al., Valuation of Damages in International Arbitration, in
DAMAGES IN INTERNATIONAL ARBITRATION UNDER COMPLEX LONG-TERM CONTRACTS (Loukas Mistelis ed., 2014),
at 259 (“…[G]overnmental opportunism is restrained … by the potential financial penalties associated with …
misbehaviour arising from … arbitral awards”); Vladimir Pavić, “Non-Signatories” and the Long Arm of Arbitral
Jurisdiction, in RESOLVING INTERNATIONAL CONFLICTS : LIBER AMICORUM TIBOR VÁRADY (Peter Hay at al. eds.,
2009), at 213 (“[A]rbitration promises a relatively relaxed, flexible procedural surrounding, swift delivery of the final
award and very limited opportunities for review”); Stephan Schill, Private Enforcement of International Investment
Law: Why We Need Investor Standing in BIT Dispute Settlement, in THE BACKLASH AGAINST INVESTMENT
ARBITRATION: PERCEPTIONS AND REALITY (Michael Waibel et al. eds., 2010), at 33 (“The existence of investor-state
dispute settlement mechanisms is … crucial for investors to hold host states to their original commitments, whether
given in contractual or statutory form or in an international treaty, and thus to ensure stability and predictability in
investor-state cooperation”).
against investment arbitration and discusses possible solutions to address this criticism to balance
investor protection and sustainable development in investment arbitration.
I. The Legitimacy Crisis in International Investment Arbitration
Investment arbitration is being criticized for becoming an alarmingly all-too powerful
system which threatens the sovereignty of states. In the early decades of investment arbitration,
cases were often about expropriation, and the question was less whether the state should pay
compensation, but how much would be adequate. In a way, this period built a momentum in favor
of investors, almost a presumption that a state may have been within its rights to expropriate or
nationalize an investment, but generally had to do so for a public purpose and with payment of
prompt, adequate, and effective compensation.
In more recent years, states are less in the business of taking away an entire investment,
and the focus has shifted in many cases to regulatory interventions by host states that are messing
with business plans or profit expectations of investors. Since many bilateral and multilateral
investment protection agreements are quite broad when it comes to obligations of host states,
countries are increasingly concerned with the impact that investment arbitration provided in most
of these international investment agreements may have on their right to regulate and undertake
other measures in the public interest.5 States have faced multi-million and multi-billion dollar
arbitration claims by investors for the alleged violation of investment protection standards.6 For
instance, in Micula v. Romania (2013), Romania was held liable for breaching the Sweden-
Romania bilateral investment treaty (BIT) due to its revocation of economic incentives offered to
investors under its national law.7 The tribunal ruled in favor of the investor even though Romania
was required to repeal its law in order to comply with EU state aid obligations, and the investor
was from Sweden, another Member State of the EU bound by EU state aid rules, just like
Romania.8 It is interesting to note that the European Commission has adopted a decision ordering
5 Karl Sauvant and José Alvarez, International Investment Law in Transition, in THE EVOLVING INTERNATIONAL
INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al. eds., 2011), at xxxviii. For a
comprehensive analysis of the growing backlash against the international investment law regime see Asha Kaushal,
Revisiting History: How the Past Matters for the Present Backlash against the Foreign Investment Regime, 50 Harvard
International Law Journal 491 (2009), at 491-534.
6 An example of a developed country facing investment arbitration is Germany. The Swedish investor filed arbitration
claims against Germany with respect to its adoption of laws on phasing out of nuclear power plants by 2022. See
VATTENFALL AB, VATTENFALL EUROPE AG, VATTENFALL EUROPE GENERATION AG V. FEDERAL REPUBLIC OF
GERMANY I. International Centre for Settlement of Investment Disputes [ICSID], ARB/09/6, Mar. 11, 2011,
http://investmentpolicyhub.unctad.org/ISDS/Details/329 (last visited Aug. 15, 2018) (the investor claimed 1400.00
mln. USD as compensation; the case was settled); VATTENFALL AB AND OTHERS V. FEDERAL REPUBLIC OF GERMANY
II. International Centre for Settlement of Investment Disputes [ICSID], ARB/12/12, 2012, http://investment-
policyhub.unctad.org/ISDS/Details/467 (last visited Aug. 15, 2018) (the investor claimed 4700.00 mln. EUR as
compensation; the case is currently pending).
7 IOAN MICULA, VIOREL MICULA AND OTHERS V. ROMANIA. International Centre for Settlement of Investment Disputes
[ICSID], ARB/05/20, Dec. 11, 2013, https://www.italaw.com/sites/default/files/case-documents/italaw3036.pdf (last
visited Aug. 29, 2018).
8 IOAN MICULA V. ROMANIA.
Romania not to pay the compensation awarded to investors by the ICSID tribunal.9 The
Commission has also submitted that the Micula award is “…illegal and unenforceable under E.U.
law” and that “….as a matter of E.U. law, Romania is squarely prohibited from complying with
the Award”.10 At present, enforcement proceedings are pending in the United States. It remains to
be seen whether the award will be enforceable. Similarly, in Eiser v. Spain (2017), the tribunal
found Spain liable to pay compensation in the amount of 128 million Euro to the investor.11
According to the tribunal, Spain violated the fair and equitable treatment standard under the Energy
Charter Treaty12 due to its adoption of measures that reduced the level of subsidies paid to investors
in the Concentrated Solar Power sector and other renewables generators.13 The European
Commission has warned Spain not to pay investor-state awards in this and several other solar
energy cases, on EU state aid grounds.14
Investment arbitration is being criticized by states for being overly protective of investors’
rights and not considering state interests adequately. One example is the recent case of Bear Creek
v. Peru (2017). Bear Creek Mining Corporation was successful in an arbitration against Peru under
the Free Trade Agreement between Canada and Peru.15 Bear Creek, a Canadian company, invested
in the Santa Ana Mining Project in Peru.16 The mining project turned out to be highly contentious.
Local communities, in particular, were against it due to environmental and various other
concerns.17 The protests resulted in the burning of a mining camp in 200818 and continued with
anti-mining marches, massive demonstrations, strikes, and other activities through 2011.19 The
number of protesters grew to 13,000 people in Puno with protests becoming violent and resulting
in the looting of governmental institutions and destruction of commercial establishments in May
of 2011.20 According to the Amici submissions, Bear Creek Mining Corporation “… did not do
what was necessary to understand the doubts, worries and anxieties of the Aymara culture and
9 EU Commission, DECISION ON STATE AID SA.38517 (2014/C) (EX 2014/NN) IMPLEMENTED BY ROMANIA —
ARBITRAL AWARD MICULA V ROMANIA OF 11 DECEMBER 2013, 2015/1470, Mar. 30, 2015, https://www.italaw.
com/sites/default/files/case-documents/italaw9152.pdf (last visited Aug. 25, 2018).
10 EU Commission, BRIEF FOR AMICUS CURIAE THE COMMISSION OF THE EUROPEAN UNION IN SUPPORT OF
DEFENDANT-APPELLANT IN THE CASE OF IOAN MICULA, EUROPEAN FOOD S.A., S.C. STARMILL S.R.L., MULTIPACK
S.R.L., PLAINTIFFS-APPELLEES V. GOVERNMENT OF ROMANIA, at 10, https://www.italaw.com/sites/default/files/
case-documents/italaw9198.pdf (last visited Aug. 24, 2018).
11 EISER INFRASTRUCTURE LIMITED AND ENERGIA SOLAR LUXEMBOURG S.À R.I. V. KINGDOM OF SPAIN. International
Centre for Settlement of Investment Disputes [ICSID], ARB/13/36, May 4, 2017, https://energycharter.org/file-
admin/DocumentsMedia/Disputes/ISDSC-043en.pdf (last visited Aug. 29, 2018).
12 See 1994 ENERGY CHARTER TREATY, Article 10(1), https://energycharter.org/process/energy-charter-treaty-
1994/energy-charter-treaty/ (last visited Aug. 25, 2018).
13 EISER V. SPAIN.
14 Douglas Thomson, EU WARNS SPAIN NOT TO PAY SOLAR AWARDS, Jan. 19, 2018, https://globalarbitrationreview.
com/article/1152912/eu-warns-spain-not-to-pay-solar-awards (last visited Aug. 29, 2018).
15 BEAR CREEK MINING CORPORATION V. REPUBLIC OF PERÚ. International Centre for Settlement of Investment
Disputes [ICSID], ARB/14/21, Nov. 30, 2017, https://www.italaw.com/sites/default/files/case-documents/italaw
3036.pdf (last visited Aug. 29, 2018).
16 BEAR CREEK V. PERÚ, at paras. 150-151.
17 BEAR CREEK V. PERÚ, at paras. 152-153.
18 BEAR CREEK V. PERÚ, at para. 155.
19 BEAR CREEK V. PERÚ, at paras. 169-178, 182.
20 BEAR CREEK V. PERÚ, at paras. 189-190.
religiosity, and did not do the necessary to identify and assess the risks that their own operations
could entail for the population and their rights over their lands and water”.21 Moreover, as noted
in the expert report, “Bear Creek did not engage in sufficient efforts to inform all the communities
within its area of influence of the effects and benefits the project could bring”.22 As a result of the
intense protests against the mining project, the Peruvian government revoked Supreme Decree
08323 which entitled the investor to “… acquire, own, and operate the…mining concessions and
to exercise any rights derived from the ownership”.24 At the time of the revocation, Claimant Bear
Creek had not yet secured 99 agreements for the use of land and still had to have its Environmental
and Social Impact Assessment approved.25 Apart from this, according to witness testimony, it
would have been highly unlikely for the investor’s mining project to continue amidst the strong
anti-mining protests.26 Despite Bear Creek’s lack of permits and widespread protests against its
mining project, the Tribunal decided that Peru had indirectly expropriated Bear Creek’s investment
and ordered it to pay damages in the amount of US$ 18,237,592, as well as reimburse 75% of
Claimant’s arbitration costs.27 This case shows the problem investment arbitration proceedings
have with the adequate consideration of state and local community interests.
Another criticism directed against investment arbitration is the problem of uncertainty and
unpredictability.28 For example, in Yukos v. Russia (2014), the tribunal applied a 25% reduction
in damages for contributory fault, lowering the amount of damages from about 66 billion USD to
approximately 50 billion USD.29 It is not clear how the tribunal arrived at this percentage for
contributory fault. The tribunal simply noted that it had a wide discretion in such cases.30 The
“discretion” in this particular case resulted in a difference of a staggering amount of around 16
billion USD. Similarly, in Occidental v. Ecuador (2012) the tribunal applied a 25% reduction in
damages for contributory fault,31 but it did not explain how it arrived at this percentage. The
21 BEAR CREEK V. PERÚ, at para. 218.
22 Antonio Alfonso Peña Jumpa, EXPERT REPORT AS PART OF THE CASE ON BEAR CREEK MINING CORPORATION V.
REPUBLIC OF PERÚ, Oct. 6, 2015, at para. 96, https://www.italaw.com/sites/default/files/case-documents/italaw
4476.pdf (last visited Aug. 29, 2018).
23 BEAR CREEK V. PERÚ, at para. 202.
24 BEAR CREEK V. PERÚ, at para. 149.
25 BEAR CREEK V. PERÚ, at para. 201.
26 BEAR CREEK V. PERÚ, at para. 265. See also Philippe Sands QC, THE PARTIAL DISSENTING OPINION IN BEAR CREEK
MINING CORPORATION V. REPUBLIC OF PERÚ, Sep. 12, 2007, at para. 38, https://www.italaw.com/sites/
default/files/case-documents/italaw3036.pdf (last visited Aug. 29, 2018) (“[T]he nature and extent of the opposition
made it clear that there was no real possibility of the Project soon obtaining the necessary “social license””).
27 BEAR CREEK V. PERÚ, at paras. 416, 738.
28 See generally August Reinisch, The Future of Investment Arbitration, in INTERNATIONAL INVESTMENT LAW FOR
THE 21ST CENTURY: ESSAYS IN HONOUR OF CHRISTOPH SCHREUER (Christina Binder et al. eds, 2009), at 904 (“It is an
open secret that there are awards and decisions of highly variable quality” with some of them not fulfilling
“…expectations of the users of the system…”). For an analysis of related problems in international arbitration see also
LOUKAS MISTELIS ED., PERVASIVE PROBLEMS IN INTERNATIONAL ARBITRATION (2006).
29 YUKOS UNIVERSAL LIMITED (ISLE OF MAN) V. THE RUSSIAN FEDERATION. Permanent Court of Arbitration [PCA],
Case No. AA 227, July 18, 2014, at para.1637, https://www.italaw.com/sites/default/files/case-documents/ita-
law3279.pdf (last visited Aug. 29, 2018).
30 YUKOS V. THE RUSSIAN FEDERATION, at para.1637.
31 OCCIDENTAL PETROLEUM CORPORATION, OCCIDENTAL EXPLORATION AND PRODUCTION COMPANY V. THE
REPUBLIC OF ECUADOR. International Centre for Settlement of Investment Disputes [ICSID], ARB/06/11, Oct. 5,
tribunal stated that it had “...a wide margin of discretion in apportioning fault”.32 It is important to
note that one of the arbitrators wrote a dissenting opinion in this case, arguing that the tribunal
greatly underestimated Claimants’ contribution to damages and should have applied a 50%
reduction in damages for contributory fault.33 The difference between a reduction by 25% and a
reduction by 50% was about 589 million USD! One of the key problems, as illustrated by these
cases, is that of predictability.
Similar uncertainty arises in cases regarding regulatory expropriation for public purposes.
There have been various extreme and some more balanced positions taken so far. Some tribunals
have adopted the sole effect doctrine, disregarding the purpose of the measure, but looking only at
its effect from the investor point of view.34 For example, an ICSID tribunal ordered Costa Rica to
pay 16 million USD as compensation for a regulatory expropriation which took place after Costa
Rica passed a decree taking the property of investors.35 Although the decree was enacted in order
to expand the territory of a National Park for the purpose of conserving feline species, including
pumas and jaguars, the investment arbitration tribunal did not take this public purpose into
account.36 According to the tribunal, “…[e]xpropriatory environmental measures – no matter how
laudable and beneficial to society as a whole – are…similar to any other expropriatory measures
that a state may take in order to implement its policies: where property is expropriated, even for
environmental purposes, whether domestic or international, the state’s obligation to pay compen-
sation remains”.37 Although every act of expropriation must be followed by compensation, the
arbitral tribunal’s insensitivity to the public purpose behind the measure illustrates the tension
between broad investment protection standards and states’ right to regulate in the public interest.
States are also becoming increasingly concerned with arbitral tribunals reaching dia-
metrically opposed decisions in similar cases.38 There have been a number of cases, where
2012, at para. 687, https://www.italaw.com/sites/default/files/case-documents/italaw1094.pdf (last visited Aug. 29,
2018) (“Having considered and weighed all the arguments which the parties have presented to the Tribunal in respect
of this issue, in particular the evidence and the authorities traversed in the present chapter, the Tribunal, in the exercise
of its wide discretion, finds that, as a result of their material and significant wrongful act, the Claimants have
contributed to the extent of 25% to the prejudice which they suffered when the Respondent issued the Caducidad
Decree”).
32 OCCIDENTAL V. ECUADOR, at para. 670.
33 Brigitte Stern, DISSENTING OPINION IN OCCIDENTAL PETROLEUM CORPORATION, OCCIDENTAL EXPLORATION
AND PRODUCTION COMPANY V. THE REPUBLIC OF ECUADOR, Sep. 20, 2012, at paras. 7, 8, https://www.ita-
law.com/sites/default/files/case-documents/italaw1096.pdf (last visited Aug. 26, 2018).
34 Supportive, for example, Ben Mostafa, The Sole Effects Doctrine, Police Powers and Indirect Expropriation under
International Law, 15 Austl. Int'l L.J. 267 (2008). A more nuanced approach with an endorsement of the kind of
proportionality test applied by the European Court of Justice and the European Court of Human Rights is advocated
by Ursula Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and the State, 8 J. World Investment
& Trade 717 (2007).
35 COMPAÑÍA DEL DESARROLLO DE SANTA ELENA, S.A. V. THE REPUBLIC OF COSTA RICA, International Centre for
Settlement of Investment Disputes [ICSID], ARB/96/1, at para. 111, Feb. 17, 2000, https://icsid.worldbank.org/
ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC539_En&caseId=C152 (last visited
Aug. 18, 2018).
36 SANTA ELENA, S.A. V. COSTA RICA, at para. 18.
37 SANTA ELENA, S.A. V. COSTA RICA, at para. 72.
38 Pia Acconci, Most-Favoured-Nation Treatment, in THE OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT LAW
(Christoph Schreuer et al. eds., 2008), at 367 (“ICSID is criticized by some developed and developing countries that
different tribunals have interpreted the same standard in the same treaty as having a different
meaning. For instance, while in Glamis Gold v. USA (2009), the tribunal interpreted FET in the
NAFTA Agreement as the standard requiring an “egregious,” “shocking,” and “gross” denial of
justice,39 in Bilcon v. Canada (2015), the tribunal interpreted the same standard in the same treaty
as requiring that the conduct of the host state be merely “arbitrary” and “unjust”,40 noting that
“…there is no requirement in all cases that the challenged conduct reaches the level of shocking
or outrageous behaviour.”41 As it may be seen, there is currently a lack of uniformity in arbitral
decisions. In some cases, this has gone as far as tribunals issuing blatantly conflicting awards on
similar issues. The above factors contribute to states’ overall uncertainty as to the outcomes of
their regulatory decisions.
Apart from traditional investment arbitration claims, countries are nowadays also facing
situations, where investors threaten to bring arbitration claims against almost any new law,
regulation or similar measure they perceive in any way burdensome. This results in a “regulatory
chill”,42 i.e. states deciding not to adopt new rules for fear of costly arbitration claims.43
The controversial nature of international investment arbitration largely stems from the fact
that it deals both with private and public law matters. It is the latter aspect that triggers a variety
are no longer satisfied with the increasingly frequent recourse to its arbitration by private investors, resulting in
increasingly complex amounts of inconsistent case-law”). It is also important to note the writings of Prof. Tibor Várady
on this issue. While Várady affirms that it is not likely that the pro-arbitration stance will change to the negative
towards international commercial arbitration, he is not as certain with respect to international investment arbitration
due to „existing reservations (or „hostility“) towards...investment arbitration...“. See TIBOR VÁRADY ET AL.,
INTERNATIONAL COMMERCIAL ARBITRATION: A TRANSNATIONAL PERSPECTIVE (2015), at 81. For further analysis of
these issues see also William McElhiney, Responding to the Threat of Withdrawal: On the Importance of Emphasizing
the Interests of States, Investors, and the Transnational Investment System in Bringing Resolution to Questions
Surrounding the Future of Investments with States Denouncing the ICSID Convention, 49 Texas International Law
Journal 601 (2014), at 601-619; August Reinisch and Loretta Malintoppi, Methods of Dispute Resolution, in THE
OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT LAW (Christoph Schreuer et al. eds, 2008), at 719 (“…[W]ith
a significant growth experienced by investment arbitration over the last two decades…a number of inconsistent and
partially conflicting decisions have been produced”); Nassib Ziadé, Challenges and Prospects Facing the
International Centre for Settlement of Investment Disputes, in THE EVOLVING INTERNATIONAL INVESTMENT REGIME:
EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al. eds., 2011), at 120-124.
39 GLAMIS GOLD, LTD. V. UNITED STATES OF AMERICA. International Centre for Settlement of Investment Disputes
[ICSID], June 8, 2009, at paras. 612, 616, 828-829, https://www.italaw.com/sites/default/files/case-docu-
ments/ita0378.pdf (last visited Aug. 29, 2018).
40 WILLIAM RALPH CLAYTON, WILLIAM RICHARD CLAYTON, DOUGLAS CLAYTON, DANIEL CLAYTON AND BILCON
OF DELAWARE, INC V. GOVERNMENT OF CANADA. Permanent Court of Arbitration [PCA], Case No. 2009-04, March
17, 2005, at paras. 442-444, 591-592, https://www.italaw.com/sites/default/files/case-documents/italaw4212.pdf (last
visited Aug. 29, 2018).
41 BILCON V. CANADA, at para. 444.
42 It is not easy to say who coined the term. For example, see Julia G. Brown, International Investment Agreements:
Regulatory Chill in the Face of Litigious Heat?, 3 Western Journal of Legal Studies (2013), at 1-25; Stephan W.
Schill, Do Investment Treaties Chill Unilateral State Regulation to Mitigate Climate Change?, 24 Journal of Int’l
Arbitration (2007), at 469-477; and Kyla Tienhaara, Regulatory Chill and the Threat of Arbitration: A View from
Political Science, in EVOLUTION IN INVESTMENT TREATY LAW AND ARBITRATION (Chester Brown & Kate Miles,
eds.), 2011, at 606.
43 For further analysis of this problem see Howard Mann, Reconceptualizing International Investment Law: Its Role
in Sustainable Development, 17 Lewis & Clark Law Review 521 (2013), at 527.
of legitimacy related arguments against investment arbitration.44 In this respect, addressing the
negative outcomes of international arbitration for host states, Gus Van Harten rightfully observes
that “….flaws in the system [are] a consequence of the unhappy marriage of international
arbitration and public law”.45 This “unhappy marriage” has already resulted in “divorce” for some
states, as they have taken the decision to leave ICSID.46 In particular, Bolivia denounced ICSID
44 One of these arguments takes issue with tribunals frequently omitting any serious explanation of the calculation and
valuation of damages. See Joshua Simmons, Valuation in Investor-State Arbitration: Toward A More Exact Science,
30 Berkeley Journal of International Law 196 (2012), at 214 (“Although investor-state decisions are moving toward
better explanations of valuation, deficient discussions of specific calculations remain a common exception to the trend.
The failure to explain calculations in detail is perhaps justified in rare cases in which investors claim relatively small
amounts. In most cases, however, the failure to explain valuation adequately hints at a failure to address the issue
methodically, thus exposing an award to greater skepticism”). One concrete illustration of this problem is the case of
Maritime International v. Guinea, where the ICSID ad hoc committee annulled the previously issued arbitral award
for the failure to state reasons in the calculation of damages. See MARITIME INTERNATIONAL NOMINEES
ESTABLISHMENT V. REPUBLIC OF GUINEA. International Centre for Settlement of Investment Disputes [ICSID],
ARB/84/4, Decision for Partial Annulment of the Arbitral Award, Jan. 6, 1988, at para. 6. 109, https://www.ita-
law.com/sites/default/files/case-documents/italaw8608.pdf (last visited Aug. 1, 2018).
For issues related to the rising cost of investment arbitration see Susan Franck, Rationalizing Costs in
Investment Treaty Arbitration, 88 Washington University Law Review 769 (2011), at 769-852.
For arguments related to the lack of proper balancing of interests in the current system of investment
arbitration see generally Aaron Cosbey, The Road to Hell? Investor Protections in NAFTA's Chapter 11, in
INTERNATIONAL INVESTMENT FOR SUSTAINABLE DEVELOPMENT: BALANCING RIGHTS AND REWARDS (Lyuba Zarsky
ed., 2005), at 168 (“…[I]t is inappropriate that the balancing of public policy priorities such as health and safety, the
environment and economic growth be conducted outside of government and with few of the procedural safeguards
that help ensure legitimacy, transparency and accountability”); Stephan Schill, Enhancing International Investment
Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach, 52 Virginia Journal
of International Law 57 (2011), at 69 (“The system of international investment law…[is facing and will]… most likely
continue to face demands for increased transparency, openness, predictability, and fair balance between investors’
rights and public interests”); Susan Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public
International Law through Inconsistent Decisions, 73 Fordham Law Review 1521 (2004-2005), at 1521-1625;
Thomas Schultz and Cédric Dupont, Investment Arbitration: Promoting the Rule of Law or Over-Empowering
Investors? A Quantitative Empirical Study, 25 European Journal of International Law 1147 (2014), at 1147–1168.
For criticism of arguments voiced against investment arbitration see Charles Brower and Stephan Schill, Is
Arbitration a Threat or a Boon to the Legitimacy of International Investment Law? 9 Chicago Journal of International
Law 471 (2008-2009), 471-498; Irene Ten Cate, The Costs of Consistency: Precedent in Investment Treaty
Arbitration, 51 Columbia Journal of Transnational Law 418 (2012-2013), at 418-478; Stanimir Alexandrov, On the
Perceived Inconsistency in Investor-State Jurisprudence, in THE EVOLVING INTERNATIONAL INVESTMENT REGIME:
EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al. eds., 2011), at 60-69; Susan Franck, Considering
Recalibration of International Investment Agreements: Empirical Insights, in THE EVOLVING INTERNATIONAL
INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al. eds., 2011), at 73-94.
45 GUS VAN HARTEN, INVESTMENT TREATY ARBITRATION AND PUBLIC LAW (2008), at 153.
46 L. Yves Fortier, Canadian Approach to Investment Protection: How Far We Have Come! in INTERNATIONAL
INVESTMENT LAW FOR THE 21ST CENTURY: ESSAYS IN HONOUR OF CHRISTOPH SCHREUER (Christina Binder et al. eds,
2009), at 543 (discussing some States leaving ICSID); See also Ilija Mitrev Penusliski, A Dispute Systems Design
Diagnosis of ICSID, in THE BACKLASH AGAINST INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY (Michael
Waibel et al. ed., 2010), at 507, 520-526 (regarding discontent with ICSID and withdrawal from it); Anne van Aaken,
The International Investment Protection Regime though the Lens of Economic Theory, in THE BACKLASH AGAINST
INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY (Michael Waibel et al. eds., 2010), at 550-551 (discussing
withdrawals from the ICSID Convention); Timothy Nelson, “History Ain’t Changed”: Why Investor-State Arbitration
Will Survive the “New Revolution”, in THE BACKLASH AGAINST INVESTMENT ARBITRATION: PERCEPTIONS AND
REALITY (Michael Waibel et al. eds., 2010), at 573-575 (noting several of South American countries’ actions or threats
regarding leaving the ICSID and analyzing their consequences); Susan Franck, Development and Outcomes of
Investment Treaty Arbitration, 50 Harvard International Law Journal 435 (2009), 435-489 (noting States that argued
in 2007,47 Ecuador withdrew from ICSID in 2009,48 and Venezuela did the same in 2012.49 The
strong criticism of Investor-State Dispute Settlement (ISDS) is also being advanced by developed
states. For instance, after facing an investment arbitration claim by Philip Morris Company against
its new tobacco packaging requirements50 Australia decided not to include investment arbitration
as a means of dispute resolution in a number of its newer FTAs51 and has even officially announced
that it is against signing investment agreements that would limit its right to regulate in the public
interest.52 It is also important to note the EU’s criticism of ISDS. In Achmea v. Slovakia (2018)
the arbitral tribunal found Slovakia liable for violating the 1992 Agreement on Encouragement
and Reciprocal Protection of Investments with the Kingdom of the Netherlands due to its reversal
of the liberalization of the private sickness insurance market and ordered it to pay damages to the
investor in the amount of approximately 22 million Euro.53 Slovakia moved to set the award aside
in Germany, and the Federal Court of Justice of Germany (Bundesgerichtshof) submitted a request
to the European Court of Justice (CJEU) for a preliminary ruling under Article 267 TFEU
regarding the compatibility of the arbitration clause in the BIT with EU law.54 The CJEU has ruled
that EU law precludes “…a provision in an international agreement concluded between Member
States, such as Article 8 of the Agreement on encouragement and reciprocal protection of
investments between the Kingdom of the Netherlands and the Czech and Slovak Federative
Republic, under which an investor from one of those Member States may, in the event of a dispute
concerning investments in the other Member State, bring proceedings against the latter Member
against the legitimacy of the investment arbitration system and analyzing the link between the development status of
countries and arbitration).
47 Oscar Garibaldi, On the Denunciation of the ICSID Convention, Consent to ICSID Jurisdiction, and the Limits of
the Contract Analogy, in INTERNATIONAL INVESTMENT LAW FOR THE 21ST CENTURY: ESSAYS IN HONOUR OF
CHRISTOPH SCHREUER (Christina Binder et al. eds, 2009), at 252.
48 Nicolle Kownacki, Prospects for ICSID Arbitration in Post-Denunciation Countries: An Updated Approach, 15
UCLA Journal of International Law & Foreign Affairs 529 (2010), at 532.
49 Federico Lavopa et al., How to Kill a BIT and Not Die Trying: Legal and Political Challenges of Denouncing or
Renegotiating Bilateral Investment Treaties, 16 Journal of International Economic Law 869 (2013), at 871; For greater
analysis of States’ withdrawing from investment arbitration see Muthucumaraswamy Sornarajah, The Retreat of Neo-
Liberalism in Investment Treaty Arbitration, in THE FUTURE OF INVESTMENT ARBITRATION (Catherine Rogers and
Roger Alford eds., 2009), at 291-293.
50 PHILIP MORRIS ASIA LIMITED V. THE COMMONWEALTH OF AUSTRALIA. Permanent Court of Arbitration [PCA], Case
No. 2012-12, Dec. 17, 2015, http://www.pcacases.com/web/sendAttach/1711 (last visited Aug. 19, 2018).
51 AUSTRALIA – UNITED STATES OF AMERICA FREE TRADE AGREEMENT, May 18, 2004, http://investment-
policyhub.unctad.org/Download/TreatyFile/2682 (last visited Aug. 3, 2018); MALAYSIA – AUSTRALIA FREE TRADE
AGREEMENT, May 22, 2012, http://investmentpolicyhub.unctad.org/Download/TreatyFile/2634 (last visited Aug. 3,
2018).
52 Australian Government, the Department of Foreign Affairs and Trade, INVESTOR-STATE DISPUTE SETTLEMENT,
http://dfat.gov.au/trade/topics/Pages/isds.aspx (last visited Aug. 3, 2018) (“The Australian Government is opposed
to signing up to international agreements that would restrict Australia’s capacity to govern in the public interest —
including in areas such as public health, the environment or any other area of the economy”). For further analysis
see Jürgen Kurtz, Australia’s Rejection of Investor-State Arbitration: Causation, Omission and Implication, 27
ICSID Review – Foreign Investment L.J. 65 (2012).
53 ACHMEA B.V. V. THE SLOVAK REPUBLIC. Permanent Court of Arbitration [PCA], Case No. 2008-13, Dec. 7, 2012,
at para. 352, https://www.italaw.com/sites/default/files/case-documents/italaw3206.pdf (last visited Aug. 29, 2018).
54 See the Judgment in Case C-284/16, Achmea, ECLI:EU:C:2018:158.
State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept”.55
The implication of the Achmea decision is that courts in EU will be able to set aside arbitral awards
rendered under intra-EU BITs, thereby reinforcing the EU’s critical stance against the existing
investor-State arbitration model.56
As can be seen, there is a rising backlash against ISDS. This backlash is understandable
considering that the outcome of investment disputes may affect not only the business operations
of a particular company, but entire communities, the work of governments, and national budgets.57
One cannot but agree with Gottwald that “…even a single successful investor claim could wreak
havoc on [a state’s] economy, weaken its capacity to regulate in the public interest, and damage
its reputation as a desirable investment location”.58 How should this growing criticism of
international investment arbitration as a system for settlement of disputes be addressed? If the
international investment arbitration system is to remain successful, it needs to be aligned with
sustainable development goals!
II. Balancing Investor Protection and Advancement of Sustainable Development
in Investment Arbitration as the Way Forward
As the world is approaching the end of the second decade of the 21st century, there is an
increasing recognition of the need for a modern legal framework of investment that provides not
only for the protection of investors’ rights, but also properly addresses the investments’ wider
social, economic, and environmental effects.59 Although historically the emphasis of investment
law was placed primarily on investment protection,60 such an asymmetrical treatment of foreign
55 The Judgment in Case C-284/16, Achmea, ECLI:EU:C:2018:158, at para. 62.
56 For a critical review of the Achmea decision see Csongor István Nagy, Intra-EU Bilateral Investment Treaties and
EU Law After Achmea: “Know Well What Leads You Forward and What Holds You Back”, 19 German Law Journal
981 (2018).
57 As noted by Moss, “[t]he community may be affected by the outcome of the dispute, for example where considerable
payments have to be made from the public budget, or where regulatory measures or administrative practices have to
be changed or adapted to accommodate an award.” See Giuditta Cordero Moss, Commercial Arbitration and
Investment Arbitration: Fertile Soil for False Friends? in INTERNATIONAL INVESTMENT LAW FOR THE 21ST CENTURY:
ESSAYS IN HONOUR OF CHRISTOPH SCHREUER (Christina Binder et al. eds, 2009), at 793.
58 Eric Gottwald, Leveling the Playing Field: Is it Time for a Legal Assistance Center for Developing Nations in
Investment Treaty Arbitration? 22 American University International Law Review 237 (2007), at 239.
59 See generally Marie-Claire Cordonier Segger and Avidan Kent, Promoting Sustainable Investment through
International Law, in SUSTAINABLE DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier Segger et
al. eds., 2011), at 774 (“Instead of regarding international investment law as an isolated regime, an integrated approach
should be adopted, one that will require the promotion of sustainable development law and principles through the legal
framework of international investment law. The only way in which the two may co-exist and support each other is
through reconciliation, beginning with recognition of the stake that each regime has in the other”).
60 Most international investment agreements signed and ratified in the 20th century and early 2000s provide only for
investors’ rights, failing to specify their obligations and contain very broad investment protection standards, such as
indirect expropriation, the fair and equitable treatment standard, full protection and security, and others. For analysis
of the predominantly one-sided nature of these agreements see generally Muthucumaraswamy Sornarajah, A Law for
Need or a Law for Greed?: Restoring the Lost Law in the International Law of Foreign Investment, 6 International
Environmental Agreements 329 (2006), at 331 (“International investment law is “…the law of greed simply because
of the fact that it is built on accentuating only one side of the picture of foreign investment so as to benefit the interests
direct investment (FDI) is slowly but steadily giving way to a new generation legal framework of
FDI, the objective of which is not only to promote and protect investment, but also to advance host
states’ sustainable economic, social, and environmental development.61 According to the 2015
UNCTAD Investment Law Policy Framework for Sustainable Development, “…’new generation’
investment policies place inclusive growth and sustainable development at the heart of efforts to
attract and benefit from investment”.62 Similarly, the Report on “Investment Promotion Agencies
and Sustainable FDI: Moving toward the Fourth Generation of Investment Promotion” emphasizes
the current move to the promotion of not simply any kind of FDI, but sustainable FDI.63 The
underlying idea is to ensure a proper balance between the protection of investors’ rights and those
of other relevant stakeholders. While efforts at reforming the legal framework of FDI in line with
this paradigm shift in investment law are still fragmented, it is clear that sustainable development
has emerged as the foundation of this new generation legal regime of FDI. Accordingly, invest-
ment law reforms must be aligned with goals broadly associated with sustainable development.
of multinational corporations which exist to seek profits for their shareholders”); Mehmet Toral and Thomas Schultz,
The State, a Perpetual Respondent in Investment Arbitration? Some Unorthodox Considerations, in THE BACKLASH
AGAINST INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY (Michael Waibel et al. eds., 2010), at 588 (“…IIAs
seem to fail to impose clear obligations on investors that would allow dispute settlement bodies to adequately address
the issues raised in areas such as human rights and sustainable development”); Tarcisio Gazzini, Bilateral Investment
Treaties, in INTERNATIONAL INVESTMENT LAW: THE SOURCES OF RIGHTS AND OBLIGATIONS (Eric De Brabandere et
al. eds., 2012), at 107; Helene Bubrowski, Balancing IIA Arbitration through the Use of Counterclaims, IMPROVING
INTERNATIONAL INVESTMENT AGREEMENTS (Armand de Mestral et al. eds., 2013), at 216; Jan Wouters et al.,
International Investment Law: The Perpetual Search for Consensus, in FOREIGN DIRECT INVESTMENT AND HUMAN
DEVELOPMENT: THE LAW AND ECONOMICS OF INTERNATIONAL INVESTMENT AGREEMENTS (Olivier De Schutter, et al.
eds., 2013), at 48; Genevieve Fox, A Future for International Investment? Modifying BITs to Drive Economic
Development, 46 Georgetown Journal of International Law 229 (2014), at 232-236.
61 See generally UNCTAD, WORLD INVESTMENT REPORT ON “TOWARDS A NEW GENERATION OF INVESTMENT
POLICIES” (United Nations, 2012), http://unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf (last visited
Aug. 1, 2018); Columbia Center on Sustainable Investment and the World Association of Investment Promotion
Agencies, REPORT OF THE FINDINGS OF THE SURVEY ON FOREIGN DIRECT INVESTMENT AND SUSTAINABLE
DEVELOPMENT, 2010, at 4, http://ccsi.columbia.edu/files/2013/12/fdi.pdf (last visited Aug. 3, 2018). The most widely
accepted definition of the term “sustainable development” is the one provided in the Brundtland Report: “Sustainable
development is development that meets the needs of the present without compromising the ability of future generations
to meet their own needs”. See Report of the World Commission on Environment and Development on “Our Common
Future”, U.N. G.A. Res. A/43/427, Aug. 4, 1987, at 54, www.un-documents.net/wced-ocf.htm (last visited Aug. 3,
2018).
62 UNCTAD, INVESTMENT POLICY FRAMEWORK FOR SUSTAINABLE DEVELOPMENT (United Nations, 2015), at 3,
http://investmentpolicyhub.unctad.org/Upload/Documents/INVESTMENT%20POLICY%20FRAMEWORK%2020
15%20WEB_VERSION.pdf (last visited Aug. 4, 2018); See also UNCTAD, WORLD INVESTMENT REPORT ON
“TOWARDS A NEW GENERATION OF INVESTMENT POLICIES” (United Nations, 2012), at 14, http://unctad.org/en/Pub
licationsLibrary/wir2012_embargoed_en.pdf (last visited Aug. 1, 2018). The Organisation for Economic Co-operation
and Development (OECD) has also placed sustainable development at the forefront of its analysis of investment. In
its key recent work on investment, the OECD states that “…[s]ustainability and responsible investment are integral
parts of a good investment climate and should be factored in from the beginning and not as an after-thought”. See
OECD, POLICY FRAMEWORK FOR INVESTMENT (OECD, 2015), at 18, http://www.oecdilibrary.org/docserver/down-
load/2014041e.pdf?expires=1459242455&id=id&accname=guest&checksum=E28BFF7350ED92EB93C8124B79A
8B987 (last visited Aug. 1, 2018); See also OECD, GUIDELINES FOR MULTINATIONAL ENTERPRISES,
2011, http://www.oecd.org/daf/inv/mne/48004323.pdf (last visited Aug. 5, 2018).
63 Columbia Center on Sustainable Investment and the World Association of Investment Promotion Agencies, REPORT
OF THE FINDINGS OF THE SURVEY ON FOREIGN DIRECT INVESTMENT AND SUSTAINABLE DEVELOPMENT, 2010, at 4,
http://ccsi.columbia.edu/files/2013/12/fdi.pdf (last visited Aug. 3, 2018).
Failure to achieve this paradigm shift may destroy ISDS as we know it. How is it possible to align
international investment arbitration with sustainability objectives? The sections below advance
both substantive and procedural solutions.
1. New Generation International Investment Agreements (IIAs)
One obvious way to address the balance between investor protection and sustainable
development is the negotiation and implementation of new generation investment treaties and the
re-negotiation of old generation treaties in line with sustainable development goals. This is
important, as it is the language of these treaties that ultimately shapes the outcome of arbitral
proceedings. In this regard, Brigitte Stern, currently one of the most frequently appointed
arbitrators by respondents in investor-State arbitration proceedings,64 is correct when noting that
“…if states do not include provisions [advancing sustainable development]…in their investment
treaties…, arbitration can only play a very marginal, or even non-existent role, in making
investments foster sustainable development”.65 Indeed, arbitrators have to apply existing rules. If
these rules provide for or at least allow a balance between the protection of investors’ rights and
those of other stakeholders, then such balanced considerations will be reflected in arbitral tribunal
awards.
Older investment treaties are increasingly being criticized for being one-sided, since they
provide investors with many protection standards, but generally fail to stipulate investor
obligations towards host states.66 This concern is valid, since most of the investment treaties in
64 UNCTAD, INFORMATION ON ARBITRATOR APPOINTMENT, 2018, http://investmentpolicyhub.unctad.org/ISDS/
FilterByArbitrators (last visited Aug. 1, 2018).
65 Brigitte Stern, The Future of International Investment Law: A Balance between the Protection of Investors and the
States’ Capacity to Regulate, in THE EVOLVING INTERNATIONAL INVESTMENT REGIME: EXPECTATIONS, REALITIES,
OPTIONS (José Alvarez et al. eds., 2011), at 175.
66 In particular, Taillant and Bonnitcha have voiced criticism with respect to the one-sided nature of BITs in the
following way: “BITs do not place obligations on foreign investors nor do they set out the rights of Stakeholders. BITs
focus exclusively on the protection of the interests of foreign investors. Again, third party stakeholders, particularly
vulnerable groups whose human rights could be violated by circumstances deriving from upholding BITs, while they
may have an important stake in the outcomes of the execution of activities covered by a BIT, are left to fend for
themselves if their rights are violated as a consequence”. See Jorge Daniel Taillant and Jonathan Bonnitcha,
International Investment Law and Human Rights, in SUSTAINABLE DEVELOPMENT IN WORLD INVESTMENT LAW
(Marie-Claire Cordonier Segger et al. eds., 2011), at 65. For criticisms of existing investment agreements see also
Louis Wells, Preface, in THE EVOLVING INTERNATIONAL INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS
(José Alvarez et al. eds., 2011), at xix (“To be completely accepted by developing countries…an investment regime
should also impose behavioral rules on foreign investors”); Tarcisio Gazzini, Bilateral Investment Treaties, in
INTERNATIONAL INVESTMENT LAW: THE SOURCES OF RIGHTS AND OBLIGATIONS (Eric De Brabandere et al. eds.,
2012), at 107 (“[T]he manifestly asymmetrical nature of…[bilateral investment treaties]…with all obligations
incumbent upon the host State and virtually all rights granted to the foreign investor, has often been criticized”);
Helene Bubrowski, Balancing IIA Arbitration through the Use of Counterclaims, IMPROVING INTERNATIONAL
INVESTMENT AGREEMENTS (Armand de Mestral et al., eds., 2013), at 216 (“…IIAs are asymmetrical,” as they
“produce obligations for host states and corresponding rights for investors”); Andrew Newcombe and Marie-Claire
Cordonier Segger, An Integrated Agenda for Sustainable Development in International Investment Law, in
SUSTAINABLE DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier Segger et al. eds., 2011), at 113;
Howard Mann, Civil Society Perspectives: What Do Key Stakeholders Expect from the International Investment
force today do not have provisions that would help protect the environment or stimulate sustainable
social and economic development. Apart from that, vague and unqualified investment protection
standards, such as the fair and equitable treatment standard, indirect expropriation standard, and
similar open-ended standards that were shaped in a different investment age, have been challenged
for their ability to “…impede, discourage, or even prohibit government measures to ensure the
sustainable development”.67 Indeed, while old generation investment treaties do accord protection
to investors, they do not properly consider the interests of other relevant stakeholders. In this
regard, one cannot but agree with Taillant and Bonnitcha that this problem “…is largely due to the
fact that…international investment law evolved as a specialized regime (with specialized actors)
primarily concerned with protecting foreign investment from unfair interference by host States in
unstable economies” and, therefore, “[t]he public interest in terms of the social, environmental, or
economic negative externalities of large foreign investments, was simply not part of the objectives
pursued in the evolution of…[the] investment legal framework”.68 This observation is accurate.
Investment treaties were created to protect investors from nationalization and other risks in
developing states. That was traditionally the main goal and, indeed, often the only goal.
As we have shown, the very structure of international investment law that seemed
appealing in the 1980s and 90s is no longer fully answering the call of modern times in terms of
advancement of sustainable development with due regard being given to the rights of all relevant
stakeholders. Indeed, many states have started reconsidering their investment agreements to ensure
that they reflect their interests both as capital-exporting and capital-importing states.69 A leading
example in this regard is the case of the United States of America. The USA’s Model BIT of 1984
Regime? in THE EVOLVING INTERNATIONAL INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS (José Alvarez
et al. eds., 2011), at 27.
67 Andrew Newcombe and Marie-Claire Cordonier Segger, An Integrated Agenda for Sustainable Development in
International Investment Law, in SUSTAINABLE DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier
Segger et al. eds., 2011), at 103. See also ANTHONY VANDUZER ET AL., INTEGRATING SUSTAINABLE DEVELOPMENT
INTO INTERNATIONAL INVESTMENT AGREEMENTS: A GUIDE FOR DEVELOPING COUNTRY NEGOTIATORS (2013);
Markus Gehring and Avidan Kent, Sustainable Development and IIAs: from Objective to Practice, in IMPROVING
INTERNATIONAL INVESTMENT AGREEMENTS (Armand de Mestral and Céline Lévesque eds., 2013), at 302; Graham
Mayeda, Sustainable International Investment Agreements: Challenges and Solutions for Developing Countries, in
SUSTAINABLE DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier Segger et al. eds., 2011), at 542.
68 Jorge Daniel Taillant and Jonathan Bonnitcha, International Investment Law and Human Rights, in SUSTAINABLE
DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier Segger et al. eds., 2011), at 59. See also Mahnaz
Malik, The IISD Model International Agreement on Investment for Sustainable Development, in SUSTAINABLE
DEVELOPMENT IN WORLD INVESTMENT LAW (Marie-Claire Cordonier Segger et al. eds., 2011), at 565 (“The
international investment law regime, with few exceptions, has been solely focused on the legal aspects of facilitating
cross-border investment flows and protecting foreign investors”).
69 Karl Sauvant and José Alvarez, International Investment Law in Transition, in THE EVOLVING INTERNATIONAL
INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al eds., 2011), at xxxix-xli; See also
Rainer Geiger, Multilateral Approaches to Investment: The Way Forward, in THE EVOLVING INTERNATIONAL
INVESTMENT REGIME: EXPECTATIONS, REALITIES, OPTIONS (José Alvarez et al eds., 2011), at 155 (Geiger notes that
when developed countries were capital-exporting, they “…were setting rules that were incorporated into bilateral
investment treaties, and as a result strong and almost unqualified investment protection backed by investor-state
arbitration was predominant”. However, this has changed, as the “…same countries today follow a more cautious
approach, as they have become hosts of foreign investment”).
was pro-investor.70 As noted by Alvarez, it was “…the most investor-protective in the world,”
utilizing “…every lawyerly device imaginable to achieve a single unitary object and purpose: to
protect the foreign investor”.71 Obviously, the thinking was that the investor would most likely be
an American entity, while the host state would most likely be a developing nation, rather than the
other way around. Although the direction of the investment flows covered by U.S. BITs has not
really changed in recent years,72 the United States revised its Model BIT in 2004 and again in
2012.73 The most recent iteration, in particular, provides clear mandates for the host state
authorities to pursue environmental goals (Article 12),74 as well as protection of labor rights
(Article 13).75 By contrast, as recently as 2008, Germany published an updated Model BIT that is
a classic old generation treaty and refers only to investor rights and not at all to any other
stakeholders or public interest concerns.76
However, before one calls the Germans backward and praises the U.S. for its more pro-
gressive approach, one has to look at the application of the treaties in practice. Indeed, out of 40
BITs currently in force for the U.S., 38 are based on the old generation model, and 2 have some
modest mention of environmental and labor rights as per the 2004 revision, while not a single BIT
has so far been concluded that follows the most progressive standards adopted in the 2012 Model
BIT.77 This illustrates the problem nicely: Hundreds of BITs negotiated by dozens of countries
over decades are largely in place for the relationships, where investment flows are significant and
protection is potentially needed. They will not easily and quickly be replaced with more modern
versions, since it will always take (at least) two to tango.
A faster route to getting investments covered by more progressive treaties would seem to
be the multilateral approach. Instead of having to negotiate or re-negotiate a multitude of bilateral
treaties, a single multilateral treaty could potentially cover an entire phalanx of bilateral relations.
70 U.S. MODEL TREATY CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT, Feb. 24,
1984, http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1042&context=bjil (last visited Aug. 3, 2018).
71 José Alvarez, The Return of the State, 20 Minnesota Journal of International Law 223 (2011), at 231.
72 U.S. BITs are in force mainly with developing nations, such as Azerbaijan, Cameroon, Congo, Ecuador, Egypt,
Honduras, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Mozambique, Rwanda, Senegal, Sri Lanka, Tunisia, Turkey,
and Ukraine. For a full list of countries see https://tcc.export.gov/Trade_Agreements/Bilateral_Investment_
Treaties/index.asp.
73 U.S. MODEL TREATY CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, 2004,
http://www.state.gov/documents/organization/117601.pdf (last visited Aug. 3, 2018); U.S. MODEL TREATY CONCER-
NING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENT, 2012, https://ustr.gov/sites/de-
fault/files/BIT%20text%20for%20ACIEP%20Meeting.pdf (last visited Aug. 3, 2018). The 2012 Model BIT is also
available in Frank Emmert (ed.), WORLD TRADE AND INVESTMENT LAW – DOCUMENTS (2018), p. 113.
74 Article 12(5) provides that “[n]othing in this Treaty shall be construed to prevent a Party from adopting, maintaining,
or enforcing any measure otherwise consistent with this Treaty that it considers appropriate to ensure that investment
activity in its territory is undertaken in a manner sensitive to environmental concerns.”
75 A clear legacy of the Obama years, this article refers to obligations under ILO Conventions and the ILO Declaration
on Fundamental Principles and Rights at Work. Unsurprisingly, the 2012 Model BIT has so far not been used with
any of the U.S.’s trading partners.
76 See http://investmentpolicyhub.unctad.org/Download/TreatyFile/2865. See also Frank Emmert (ed.), WORLD
TRADE AND INVESTMENT LAW – DOCUMENTS (2018), at 94.
77 U.S. Department of State, UNITED STATES BILATERAL INVESTMENT TREATIES, https://www.state.gov/e/eb/
ifd/bit/117402.htm (last visited Aug. 29, 2018).
An example of this approach would be the 2009 ASEAN Comprehensive Investment Agreement.78
Unfortunately, the ASEAN Agreement does not contain as clear language as found in the 2012
U.S. Model BIT. However, it does contain an almost verbatim reproduction of Article XX of the
GATT 1947. Thus, Article 17 of the ASEAN Agreement, entitled “General Exceptions”, provides
that “[s]ubject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between
Member States or their investors where like conditions prevail, or a disguised
restriction on investors of any other Member State and their investments, nothing
in this Agreement shall be construed to prevent the adoption or enforcement by any
Member State of measures: (a) necessary to protect public morals or to maintain
public order; (b) necessary to protect human, animal or plant life or health; (c)
necessary to secure compliance with laws or regulations which are not inconsistent
with this Agreement, including those relating to: (i) the prevention of deceptive and
fraudulent practices to deal with the effects of a default on a contract; (ii) the
protection of the privacy of individuals in relation to the processing and
dissemination of personal data and the protection of confidentiality of individual
records and accounts; (iii) safety; (d) aimed at ensuring the equitable or effective
imposition or collection of direct taxes in respect of investments or investors of any
Member State; (e) imposed for the protection of national treasures of artistic,
historic or archaeological value; (f) relating to the conservation of exhaustible
natural resources if such measures are made effective in conjunction with
restrictions on domestic production or consumption”.79
The present authors do not have insider information whether considerations of sustainable
development and other public interest concerns were actively discussed in the negotiations that led
to the ASEAN Agreement and the heavy reliance on the GATT provision was the ultimate
compromise acceptable for everyone, or whether the inclusion of the GATT provision with
minimal editing was the result of a lazy drafter looking for a suitable model at a time when the
2012 U.S. Model BIT was not yet available. Be that as it may, it will be exciting to watch whether
and to what extent arbitration tribunals called to apply the ASEAN Agreement will look for
inspiration in the case law of the GATT and WTO.
The ultimate horror scenario arguing against reliance on multilateralism in this regard,
however, is the effort by the OECD to come up with a Multilateral Agreement on Investment,
commonly referred to as “the MAI”. After efforts extending over half a century, the 1998 Draft is
78 See ASEAN COMPREHENSIVE INVESTMENT AGREEMENT, http://www.asean.org/storage/images/2013/economic/
aia/ACIA_Final_Text_26%20Feb%202009.pdf (last visited Aug. 29, 2018). See also Frank Emmert (ed.), WORLD
TRADE AND INVESTMENT LAW – DOCUMENTS (2018), at 495.
79 With regard to the “public order”, the Article contains an official note to clarify that the provision “may be invoked
by a Member State only where a genuine and sufficiently serious threat is posed to one of the fundamental interests
of society”.
potentially more comprehensive than any other and also more ambitious with regard to scope and
coverage. However, it is also riddled with disagreement and alternative proposals, making it
virtually certain that a final and widely acceptable draft will never see the light of day.80
If the 34 most developed nations in the world, under the umbrella of the OECD, cannot
agree upon a multilateral investment treaty, although they should have many interests in common,
it is not surprising that the only multilateral treaty currently in force that is not a regional treaty, is
anything but ambitious. The WTO Agreement on Trade-Related Investment Measures (TRIMs)
can be neatly reproduced on three pages81 and mostly refers back to the GATT, in particular with
regard to exceptions. Indeed, Article 3 of the TRIMs Agreement states that “[a]ll exceptions under
GATT 1994 shall apply, as appropriate, to the provisions of this Agreement.” This is nothing but
a circumlocutory reference to Article XX of the GATT 1947. We may only speculate whether this
was the only acceptable compromise for the states negotiating in the Uruguay Round, or whether
the drafters of the TRIMs were even lazier than the drafters of the ASEAN Agreement.
Nevertheless, the provision is there and 164 countries around the world are bound by it!
In concluding our observations on the propagation of sustainable development goals and
other public interest topics via the negotiation of new generation or re-negotiation of old generation
investment treaties, we may say that any progress in this direction will be “a strong and slow boring
of hard boards”, as Max Weber observed for politics more generally.
If new and better treaties remain de lege ferenda and will not be available any time soon,
however, this makes it more urgent to be more creative in using the existing treaty provisions. To
this end, we will now discuss some innovative proposals that may be achievable de lege lata.
2. Public Interest Attorneys
One of the key problems, as we seek a better representation of sustainable development
goals in ISDS, is the lack of a good advocate for the laudable cause. A good solution could be the
involvement of a public interest attorney to represent sustainable development goals in general,
even if the investor does not bring them up for lack of interest, and the host state does not bring
them up because they do not know how to or otherwise choose not to. The model of the “Advocate
80 The text is available at http://www1.oecd.org/daf/mai/pdf/ng/ng987r1e.pdf. See also Frank Emmert (ed.), WORLD
TRADE AND INVESTMENT LAW – DOCUMENTS (2018), at 161. For commentary see, inter alia, Lance Compa, The
Multilateral Agreement on Investment and International Labor Rights: A Failed Connection, 31 Cornell Int'l L.J. 683
(1998); Riyaz Dattu, A Journey from Havana to Paris: The Fifty-Year Quest for the Elusive Multilateral Agreement
on Investment, 24 Fordham Int'l L.J. 275 (2000-2001); Peter T. Muchlinski, The Rise and Fall of the Multilateral
Agreement on Investment: Where Now?, 34 Int'l L. 1033 (2000); Daniel Egan, The Limits of Internationalization: a
Neo-Gramscian Analysis of the Multilateral Agreement on Investment, Critical Sociology 2001, Vol. 27, No. 3, at 74-
97; Katia Tieleman, The Failure of the Multilateral Agreement on Investment (MAI) and the Absence of a Global
Public Policy Network, UN Vision Project on Global Public Policy Networks, available at
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.627.7992&rep=rep1&type=pdf. See also Stephen Young
and Ana Teresa Tavares, Multilateral Rules on FDI: Do We Need Them? Will We Get Them? A Developing Country
Perspective, Transnational Corporations, Vol. 13, No. 1 (April 2004), at 1-29.
81 See https://www.wto.org/english/docs_e/legal_e/18-trims_e.htm. See also Frank Emmert (ed.), WORLD TRADE AND
INVESTMENT LAW – DOCUMENTS (2018), at 607.
General” who is an independent member of the European Court of Justice and represents the
European interest in cases before the CJEU and makes recommendations for the judges how a
case should be decided, has proven extremely successful.82 The Advocate General is able to
consider the impact of a particular case on a broader scale, removed from the self-interest of the
parties and the more narrow considerations that may inform the judges. His or her recom-
mendations address not only the arguments advanced by the parties, but also other arguments that
could or should be taken into account to get the best possible outcome from a broader perspective
of European integration, all Member States, and all peoples of the EU. In many cases, the Opinions
of the Advocate General, therefore, make for more interesting reading than the judgments adopted
later. Indeed, the CJEU follows the recommendations of its Advocate Generals in more than 80%
of its decisions.83
The problem is, of course, that investors are quite happy with the way things are in ISDS
and have no reason to agree to the involvement of a public interest attorney unless such an
involvement is mandated by a new generation investment treaty. Thus, it is highly unlikely that
we will see a systematic involvement of independent voices for the advancement of sustainable
development in front of investment arbitration tribunals any time soon.
This does not have to be the death sentence to the idea, however. First, if an investment
treaty provides any language in support of balancing investor rights with state and public interest
considerations, arbitral tribunals could appoint experts to analyze the public interest dimension of
a dispute.84 Even if arbitrators should shy away from taking such an approach for fear of not being
appointed in future cases, there is no reason why the respondent state could not bring in the expert
as a party appointed expert or even as a member of the legal team. In particular, if the respondent
is a developing country, the government often does not have highly qualified experts to represent
it in the arbitration. Some countries have, therefore, outsourced the work and brought in expensive
representation from well-known international law firms. However, it is by no means clear that
money spent on this kind of counsel is money well spent because from the perspective of the law
firm, there is little incentive to work beyond the call of duty. Old generation investment treaties
seem to favor the investor, the law firm cashes in regardless of outcome, and the respondent state
is unlikely to become a repeat customer. Creative arguments, for example that the exceptions based
on Article XX of the GATT should be taken into consideration even if they are not mentioned in
the BIT because both parties to it are also Contracting Parties of the WTO and bound by the TRIMs
Agreement, are rarely seen in these kinds of cases. This does not have to be the case, and there are
82 For discussion of the CJEU see, inter alia, Noreen Burrows & Rosa Greaves, THE ADVOCATE GENERAL AND EC
LAW (2007); for more general considerations about public interest advocates at court see Cyril Ritter, A New Look at
the Role and Impact of Advocates-General - Collectively and Individually, 12 Colum. J. Eur. L. 751 (2005-2006).
83 For further analysis see also Frank Emmert, DER EUROPÄISCHE GERICHTSHOF ALS GARANT DER RECHTS-
GEMEINSCHAFT (1998), https://www.researchgate.net/publication/259848618_Der_Europaische_Gerichtshof
_als_Garant_der_Rechtsgemeinschaft (last visited Aug. 28, 2018).
84 This option is specifically provided by Article 32 of the 2012 U.S. Model BIT.
certainly experts available in academia and NGOs that would make more passionate and uncon-
ventional arguments to try to tip the scale toward a better representation of sustainable
development goals.
3. Amicus Submissions
The 2012 U.S. Model BIT provides in Article 28(2) that “[a] non-disputing Party may make
oral and written submissions to the tribunal regarding the interpretation of this Treaty”. Thus, in a
dispute between an investor and a host country, the home country of the investor would be entitled
to make submissions as well, if a BIT based on the 2012 Model were in force.85 Unfortunately, it
is not very likely that the home country of the investor would take “the other side” and advocate
for a limitation of the investor’s rights and an expansion of public interest considerations in the
host country.
More interesting in this regard may be the provision in Article 28(3) of the same 2012 U.S.
Model BIT pursuant to which “[t]he tribunal shall have the authority to accept and consider amicus
curiae submissions from a person or entity that is not a disputing party” (emphasis added). The
U.S. did not invent this rule, however. It is taken almost verbatim from the ICSID Rules of
Procedure for Arbitration Proceedings after their 2006 amendment. The big difference is that under
the ICSID Rules, the tribunal has the authority only “[a]fter consulting both parties” and if certain
conditions are met, including “a significant interest” of the non-disputing party in the proceeding.86
An example, where the conditions were met is AES Summit v. Hungary (2010).87 The investor
claimed that the introduction of certain price control measures in the Hungarian electricity market
violated their rights protected by the Energy Charter. The EU Commission requested and, after
consultation of the parties, was allowed to file limited observations regarding the application of
EU competition or antitrust law. However, for lack of agreement by the parties, the EU
Commission did not get access to the written submissions of the parties.88 As Happ observes, there
is an inherent conflict in Rule 37 of the ICSID Rules. 89 On the one hand, Rule 37(2)(a) requires
that “the non-disputing party submission would assist the Tribunal in the determination of a factual
or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight
that is different from that of the disputing parties” (emphasis added). On the other hand, unless the
85 As we have outlined above, so far the U.S. has not actually entered into BITs based on the 2012 Model. However,
this may still happen in future. Other countries could also craft BITs of their own and include similar language.
86 See Rule 37(2) of the ICSID Rules of Procedure for Arbitration Proceedings. For discussion see Filip Balcerzak,
Amicus Curiae Submissions in Investor - State Arbitrations, 12 Common L. Rev. 66 (2012); as well as Eugenia Levine,
Amicus Curiae in International Investment Arbitration: The Implications of an Increase in Third-Party Participation,
29 Berkeley J. Int'l Law. 200 (2011); and A. Saravanan & S.R. Subramanian, The Participation of Amicus Curiae in
Investment Treaty Arbitration, 5 J. Civil Legal Sci 21 (2016).
87 AES SUMMIT GENERATION LIMITED AND AES-TISZA ERÖMÜ KFT. V. REPUBLIC OF HUNGARY (II). International
Centre for Settlement of Investment Disputes [ICSID], ARB/07/22, Sep. 23, 2010, http://investmentpolicyhub.
unctad.org/ISDS/Details/279 (last visited Aug. 29, 2018).
88 AES SUMMIT GENERATION LIMITED V. HUNGARY, at para. 3.22.
89 See Richard Happ, ICSID Rules, in INSTITUTIONAL ARBITRATION ARTICLE-BY-ARTICLE COMMENTARY ON …
ICSID … (Rolf A. Schütze (ed.) 2013), pp. 923-1005, at para. 206.
disputing parties give broad consent, the non-disputing party will have very limited rights and even
more limited access. But how are the amici supposed to know what they might be able to add
beyond what is already presented to the tribunal by the disputing parties, if they do not have access
to the files?
An even more pertinent example may be von Pezold and others v. Zimbabwe (2015).90 The
investors were various owners of tobacco, tea, and coffee farms that were expropriated in the
course of land reforms undertaken by the Zimbabwean government. The European Center for
Constitution and Human Rights, as well as four indigenous communities of Zimbabweans applied
for leave to participate as amici curiae on behalf of the host state. However, since the investors
objected, the tribunal denied the request,91 although it seems clear that the petitioners had a genuine
interest in the matter, since they were the beneficiaries of the land reforms. The argument made by
the tribunal is quite striking, in fact: since “the circumstances of the petition gave rise to legitimate
doubts as to the independence and neutrality of the Petitioners,” the criteria of the ICSID Rules
were anyways not met.92 It is not clear, where in the Rules the tribunal would locate a requirement
that amici need to be independent and neutral. In light of the fact that Rule 37(2)(c) requires,
expressis verbis, that the non-disputing party must have “a significant interest in the proceeding”,
the opposite would seem to be the case.
What these examples show, unfortunately, is ambiguity inside the ICSID Rules which
leads, once again, to unpredictable outcomes. The authors are not aware whether the drafters of
the 2012 U.S. Model BIT dropped the conditions for participation of amici for these very reasons
to ensure a better integration of sustainable development and other public policy considerations in
the future, or whether it is just a fortuitous coincidence. One can only hope that the 2012 U.S.
Model does not remain merely a Model much longer. Until then, the parties to a dispute may have
to bring their amici on the official ticket.
4. A Multilateral Investment Court
As traditional ISDS is facing mounting criticism, another procedural solution advanced by
commentators is the call for the establishment of an international investment court.93 For example,
90 BERNHARD VON PEZOLD AND OTHERS V. REPUBLIC OF ZIMBABWE. International Centre for Settlement of Investment
Disputes [ICSID], ARB/10/15, July 28, 2015, http://investmentpolicyhub.unctad.org/ISDS/Details/376 (last visited
Aug. 29, 2018).
91 BERNHARD VON PEZOLD V. ZIMBABWE, at paras. 36-38.
92 BERNHARD VON PEZOLD V. ZIMBABWE, at para. 38.
93 For a comprehensive analysis of this issue see Rob House, Designing a Multilateral Investment Court: Issues and
Options, in YEARBOOK OF EUROPEAN LAW, VOLUME 36 (Albertina Albors-Llorens et al., eds, 2017), at 209-236. See
also David Howard, Creating Consistency through a World Investment Court, 41 Fordham International Law Journal
1 (2017), at 3-52; Louis Wells, Backlash to Investment Arbitration: Three Causes, in THE BACKLASH AGAINST
INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY (Michael Waibel et al. ed., 2010), at 349; Ilija Mitrev
Penusliski, A Dispute Systems Design Diagnosis of ICSID, in THE BACKLASH AGAINST INVESTMENT ARBITRATION:
PERCEPTIONS AND REALITY (Michael Waibel et al. ed., 2010), at 529-531; Debra Steger, Enhancing the Legitimacy
of International Investment Law by Establishing an Appellate Mechanism, in IMPROVING INTERNATIONAL
INVESTMENT AGREEMENTS (Armand de Mestral et al. eds., 2013), at 247-264; For the criticism of the idea of a
multilateral investment court see Charles Brower and Jawad Ahmad, From the Two-Headed Nightingale to the
Asif Qureshi calls for a “…Supreme Investment Court … [to be]…set up as such, or as part of a
chamber in the ICJ…”94 in order to “…contribute to greater transparency, accountability, and
legitimacy in the adjudicative process; deal with the asymmetry in the manner in which different
types of investment are currently dealt with; and provide certain safeguards”.95 Similarly, Gus Van
Harten states that “…the lack of an appellate body to review awards makes it difficult, if not
impossible, to unify the jurisprudence into a stable system of state liability”96 and, therefore,
proposes “…an international court with comprehensive jurisdiction over the adjudication of
investor claims”.97 These ideas for reforming the current system of international investment
arbitration may be good to implement in order to advance greater consistency in the arbitral
process. As before, the problem is that the ideas need to be implemented via treaties and those
have to be drafted, negotiated, supported, and ratified by home states and host states, and
preferably many of them.
The biggest proponent of the idea of an investment court system has been the EU. The EU
Commission proposed providing for a permanent investment court in all of the EU’s investment
agreements in 2015.98 The idea behind this has been the need to create an independent, predictable,
comprehensive, cost-effective, and transparent dispute resolution system with a permanent
institution authorized to hear investment claims instead of having only arbitration tribunals set up
on a case-by-case basis.99 As a result, a number of the EU’s investment agreements already provide
for an investment court. For example, the EU-Singapore Investment Protection Agreement
establishes a tribunal of first instance and an appeal tribunal.100 The tribunal consists of two
members nominated by the EU, two members nominated by Singapore, and two members jointly
nominated by the EU and Singapore who are not to be nationals of any Member State of the EU
or Singapore.101 It is interesting to note that the Parties have indicated knowledge or experience in
public international law as one of the key criteria for appointment, along with having qualifications
similar to those required to become a judge in the respective countries or having qualifications
required to be jurists of recognized competence.102 The appointment is made for an eight-year
Fifteen-Headed Hydra: The Many Follies of the Proposed International Investment Court, 41 Fordham International
Law Journal 791 (2018), at 792-820.
94 Asif Qureshi, An Appellate System? in THE OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT LAW (Christoph
Schreuer et al. eds., 2008), at 1165.
95 Id. at 1167.
96 GUS VAN HARTEN, INVESTMENT TREATY ARBITRATION AND PUBLIC LAW (2008), at 152.
97 Id. at 180.
98 EU Commission, A MULTILATERAL INVESTMENT COURT, http://trade.ec.europa.eu/doclib/docs/2017/september/
tradoc_156042.pdf (last visited Aug. 29, 2018).
99 EU Commission, A MULTILATERAL INVESTMENT COURT, http://trade.ec.europa.eu/doclib/docs/2017/september/
tradoc_156042.pdf (last visited Aug. 29, 2018).
100 EU-SINGAPORE INVESTMENT PROTECTION AGREEMENT, Ch.3, http://trade.ec.europa.eu/doclib/docs/2018/april/
tradoc_156731.pdf (last visited Aug. 23, 2018), Ch.3, Art. 3.9, 3.10; For the analysis of the tribunal under the EU-
Singapore Investment Protection Agreement see Leon Trakman, Enhancing Standing Panels in Investor-State
Arbitration: The Way Forward? 48 Georgetown Journal of International Law 1145 (2017), at 1146-1195.
101 EU-SINGAPORE INVESTMENT PROTECTION AGREEMENT, Ch.3, Art. 3.9, Sec. 2.
102 EU-SINGAPORE INVESTMENT PROTECTION AGREEMENT, Ch.3, Art. 3.9, Sec. 4.
term.103 Although the Agreement establishes the dispute resolution system on a bilateral basis, it
also provides for the possibility of a multilateral dispute settlement mechanism.104
Similarly, the Comprehensive Economic and Trade Agreement (CETA) between the EU
and Canada provides for a tribunal and an appellate tribunal.105 The tribunal is to have fifteen
members with five members being nationals of EU Member States, five members being nationals
of Canada, and five nationals of third countries.106 The appointment is made for a five-year term.107
The Agreement also specifies “…demonstrated expertise in public international law” as one of the
key criteria to be appointed as the member of the tribunal108 which stands in stark contrast to the
existing ISDS, where arbitrators do not necessarily have to possess any knowledge of public
international law. The Agreement also notes that the “…Parties shall pursue…the establishment
of a multilateral investment tribunal and appellate mechanism for the resolution of investment
disputes”.109
Apart from including the provision on an investment court in these investment agreements,
the EU has been actively promoting its proposal of a multilateral investment court as “…a logical
next step in the approach to set up a more transparent, coherent and fair system to deal with investor
complaints under investment protection agreements”.110 The EU Council of Ministers has issued
“negotiating directives” for a Convention establishing a multilateral court for the settlement of
investment disputes.111 The negotiations are to take place under the auspices of the United Nations
Commission on International Trade Law (UNCITRAL).112 The Convention is to establish a
multilateral investment court in the form of a tribunal of first instance and an appeals tribunal.113
The Directives stipulate that members of the multilateral court must be “…subject to stringent
103 EU-SINGAPORE INVESTMENT PROTECTION AGREEMENT, Ch.3, Art. 3.9, Sec. 5.
104 EU-SINGAPORE INVESTMENT PROTECTION AGREEMENT, Ch.3, Art. 3.12 (“The Parties shall pursue with each other
and other interested trading partners, the establishment of a multilateral investment tribunal and appellate mechanism
for the resolution of international investment disputes. Upon establishment of such a multilateral mechanism, the
Committee shall consider adopting a decision to provide that investment disputes under this Section will be resolved
pursuant to that multilateral mechanism, and to make appropriate transitional arrangements”).
105 COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT BETWEEN THE EU AND CANADA, Ch. 8, Art. 8.27, 8.28,
http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/ (last visited Aug. 29, 2018). For an analysis of
the dispute settlement mechanism under CETA see David Schneiderman, International Investment Law's Unending
Legitimation Project, 49 Loyola University Chicago Law Journal 229 (2017), at 249-254.
106 COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT BETWEEN THE EU AND CANADA, Art. 8.27, Sec. 2.
107 COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT BETWEEN THE EU AND CANADA, Art. 8.27, Sec. 5.
108 COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT BETWEEN THE EU AND CANADA, Art. 8.27, Sec. 4.
109 COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT BETWEEN THE EU AND CANADA, Art. 8.29.
110 EU Commission, A MULTILATERAL INVESTMENT COURT, http://trade.ec.europa.eu/doclib/docs/2017/september/
tradoc_156042.pdf (last visited Aug. 29, 2018).
111 Council of the European Union, NEGOTIATING DIRECTIVES FOR A CONVENTION ESTABLISHING A MULTILATERAL
COURT FOR THE SETTLEMENT OF INVESTMENT DISPUTES, Mar. 1, 2018, http://data.consilium.europa.eu/doc/document/
ST-12981-2017-ADD-1-DCL-1/en/pdf (last visited Aug. 29, 2018).
112 Council of the European Union, NEGOTIATING DIRECTIVES FOR A CONVENTION ESTABLISHING A MULTILATERAL
COURT FOR THE SETTLEMENT OF INVESTMENT DISPUTES, Mar. 1, 2018, para. 4, http://data.consilium.europa.eu/doc/
document/ST-12981-2017-ADD-1-DCL-1/en/pdf (last visited Aug. 29, 2018).
113 Council of the European Union, NEGOTIATING DIRECTIVES FOR A CONVENTION ESTABLISHING A MULTILATERAL
COURT FOR THE SETTLEMENT OF INVESTMENT DISPUTES, Mar. 1, 2018, para. 10, http://data.consilium.europa.eu/doc/
document/ST-12981-2017-ADD-1-DCL-1/en/pdf (last visited Aug. 29, 2018).
requirements regarding their qualifications and impartiality,” “…appointed for a fixed, long and
non-renewable period of time and enjoy security of tenure” and have to “…receive a permanent
remuneration”.114
Although having a multilateral court instead of the existing ISDS system would be a step
forward, widespread implementation of this idea may be very difficult in practice due to opposition
both to ISDS and to a multilateral investment court coming from various countries around the
world. For example, Brazil does not allow investors to have direct recourse to investment
arbitration in its investment agreements. Brazil’s 2015 Cooperation and Facilitation Investment
Agreement provides for a Joint Committee to “…resolve any issues or disputes concerning
investments of investors of a Party in an amicable manner”.115 It also establishes a National Focal
Point or “Ombudsman” to support the investor and to “…seek to prevent differences in investment
matters, in collaboration with government authorities and relevant private entities”.116 The Model
Agreement only gives Parties the right to a State-to-State arbitration.117 Another example of a State
that opposes international investment arbitration is South Africa. South Africa’s domestic law
provides investors with recourse to mediation instead of arbitration.118
The topic of reforming ISDS and the possible creation of a multilateral investment court is
now being discussed as part of UNCITRAL Working Group III.119 It remains to be seen whether
this idea will be implemented. Even if it is implemented, the multilateral investment court per se
may not be able to solve all problems related to the current imbalance between the protection of
investors and advancement of sustainable development. Therefore, the negotiation and
renegotiation of BITs and IIAs in line with sustainable development goals remains indispensable.
III. Concluding Observations
International investment arbitration is one of the most widely relied upon forms of
alternative dispute resolution, as it offers a neutral and impartial forum for resolving disputes
between foreign investors and host states. However, despite all the advantages of arbitration, there
is now a mounting criticism against investment arbitration due to problems related to inconsistency
of arbitral awards, lack of transparency, and other issues. As has been discussed in the article, if
114 Council of the European Union, NEGOTIATING DIRECTIVES FOR A CONVENTION ESTABLISHING A MULTILATERAL
COURT FOR THE SETTLEMENT OF INVESTMENT DISPUTES, Mar. 1, 2018, para. 11, http://data.consilium.europa.eu/doc/
document/ST-12981-2017-ADD-1-DCL-1/en/pdf (last visited Aug. 29, 2018).
115 MODEL COOPERATION AND FACILITATION INVESTMENT AGREEMENT OF THE FEDERATIVE REPUBLIC OF BRAZIL,
2015, Art. 17, http://investmentpolicyhub.unctad.org/Download/TreatyFile/4786 (last visited Aug. 29, 2018).
116 MODEL COOPERATION AND FACILITATION INVESTMENT AGREEMENT OF THE FEDERATIVE REPUBLIC OF BRAZIL,
2015, Art. 18, http://investmentpolicyhub.unctad.org/Download/TreatyFile/4786 (last visited Aug. 29, 2018).
117 MODEL COOPERATION AND FACILITATION INVESTMENT AGREEMENT OF THE FEDERATIVE REPUBLIC OF BRAZIL,
2015, Art. 24, http://investmentpolicyhub.unctad.org/Download/TreatyFile/4786 (last visited Aug. 29, 2018).
118 Trishna Menon and Gladwin Issac, DEVELOPING COUNTRY OPPOSITION TO AN INVESTMENT COURT: COULD
STATE-STATE DISPUTE SETTLEMENT BE AN ALTERNATIVE? Feb. 17, 2018, http://arbitrationblog.kluwerarbitration.
com/2018/02/17/developing-country-opposition-investment-court-state-state-dispute-settlement-alternative/ (last
visited Aug. 29, 2018).
119 UNCITRAL, WORKING GROUP III, http://www.uncitral.org/uncitral/en/commission/working_groups/3Online_Dis
pute_Resolution.html (last visited Aug. 29, 2018).
the international investment arbitration system is to remain successful, it needs to be aligned with
sustainable development goals. Failure to achieve this paradigm shift may destroy ISDS as we
know it. The traditional approach to investment protection favoring investor rights and ignoring
other stakeholders has already become unsustainable. It is the hope of the authors that both
substantive and procedural solutions advanced in this article will be applied in practice and very
soon in order to balance investor protection and sustainable development in investment arbitration.
As Jack Welch has famously said, “change before you have to.”
