Today, the International Bar Association (IBA) issued a statement correcting misconceptions and inaccurate information around the discussions on investor-state dispute settlement (ISDS) – a mechanism that allows investors and governments to settle disputes arising from international law, including treaties such as the Transatlantic Trade and Investment Partnership(TTIP) and theTrans-Pacific Partnership (TPP), through international arbitration rather than through national courts.
David W Rivkin, IBA President, said: ‘The IBA Arbitration Committee and I are concerned that the discussions about ISDS in the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership are being compromised because, in some instances, erroneous information is subverting debate.’ He added: ‘It is imperative that the deliberations be concentrated on facts rather than incorrect assertions. The members of the IBA Arbitration Committee have extensive experience in ISDS cases, in which they have served as counsel for investors and states and as arbitrators. We have, therefore, issued today a four-page statement comparing various assertions that have been made about ISDS with the actual facts. The Committee has also announced plans to widen the discussion by inviting members of the public with an interest in the matter to participate in a detailed survey. We are hopeful that the corrected inaccuracies contained within the statement will be received by all stakeholders, including the TTIP and the TPP negotiators, as a positive contribution to ensure properly informed judgement.’
The IBA Arbitration Committee – particularly its Subcommittee on Investment Treaty Arbitration, members of which are drawn from the governments of both developed and developing countries, arbitral institutions, corporate users and the legal profession – is undertaking an in-depth analysis of the perceived benefits of ISDS and the spectrum of criticisms and concerns voiced regarding ISDS, in order to identify which criticisms and concerns are fact-based and which are not, and to recommend actions for those aspects of ISDS that may benefit from change.
The Co-Chairs of the IBA Arbitration Committee, Paul Friedland and Anne-Véronique Schlaepfer, together with the Chair of the IBA Subcommittee on Investment Arbitration, Gaëtan Verhoosel, have said that setting the record straight on basic facts relating to ISDS is a first step, and one that, as representatives of the legal profession, they feel duty-bound to make. They will next engage in a wide-ranging fact-finding exercise in consultation with interested stakeholders and observers, and on that basis formulate recommendations regarding aspects of the present system that may benefit from change.
In the present discourse about ISDS, a number of misconceptions and erroneous assertions have been identified that can be addressed before completion of the Subcommittee’s survey. A few of these errors, together with correcting facts, are listed here:
Assertion: Investors always win.
Fact: Data show that states have won a higher percentage of cases than investors, and that around one-third of all cases end in settlement.
Assertion: ISDS enables investors to reap huge windfalls.
Fact: Data show that claimant investors, when successful, recover on average less than half of the amounts claimed.
Assertion: ISDS forces states to change their policies and laws.
Fact: When a state is found to have breached its treaty obligations, it is typically ordered to pay monetary compensation to the investor and, less frequently, to refrain from taking specific action against the investor. But, unlike in the WTO system, states subject to investment treaty arbitration cannot be ordered to amend their laws or change their policies, and awards issued by investment tribunals do not order states to change their policies or laws.
Assertion: ISDS prevents states from regulating in the public interest.
Fact: When a state enters into a treaty – any treaty – it freely exercises its sovereignty to place limitations on its sovereignty. While investment treaties limit states’ ability to inflict arbitrary or discriminatory treatment, they do not limit (and, in fact, expressly safeguard) a state’s sovereign right to regulate in the public interest in a fair, reasonable and non-discriminatory manner.
Assertion: ISDS uses ‘secret tribunals’ and ISDS proceedings are insulated from public scrutiny.
Fact: Most ISDS awards are published, some ISDS proceedings are broadcast live via internet web feeds, and the investment chapters in recent investment treaties contain provisions allowing members of the public to attend proceedings. Efforts are ongoing to increase the transparency of the ISDS process (eg, through the transparency rules established by the United Nations Commission on International Trade Law and the 2014United Nations Convention on Transparency in Treaty-based Investor-State Arbitration).
To read the broader list contained in the IBA statement, click here.
The IBA will present this ISDS fact sheet to the TTIP negotiators at a stakeholders’ meeting organised by the US Trade Representative in New York on Thursday 23 April, following this week’s negotiations.
Notes to the Editor
To read the IBA statement ‘Investor-state dispute settlement: the importance of an informed, fact-based debate’ click here.
The IBA Arbitration Committee focuses on laws, practice and procedures relating to the arbitration of transnational disputes. Through its publications and conferences, the Committee seeks to share information about international arbitration and promote its use and improve its effectiveness. The Committee has four Subcommittees: Recognition and Enforcement of Arbitral Awards; Investment Treaty Arbitration; IBA Arbitration Guidelines and Rules; and IBA Arb40 (young arbitrators). For further about the IBA Arbitration Committee and its Subcommittees click here.
The International Bar Association (IBA), established in 1947, is the world’s leading organisation of international legal practitioners, bar associations and law societies. Through its global membership of individual lawyers, law firms, bar associations and law societies it influences the development of international law reform and shapes the future of the legal profession throughout the world.
The IBA’s administrative office is in London. Regional offices are located in: São Paulo, Brazil; Seoul, South Korea; and Washington DC, US, while the International Bar Association’s International Criminal Court Programme (IBA ICC) is managed from an office in The Hague.
The International Bar Association’s Human Rights Institute (IBAHRI) works to promote, protect and enforce human rights under a just rule of law, and to preserve the independence of the judiciary and the legal profession worldwide.
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