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I Introduction

Sabahi Rubins

From: Investor-State Arbitration (2nd Edition)

Borzu Sabahi, Noah D Rubins, Don Wallace, Jr

From: Investment Claims (http://oxia.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. date: 03 December 2023

Foreign Direct Investment — Investment ‘in accordance with host state law’ — Investor — Full protection and security

(p. 1) Introduction

A.  Overview

1.01  The subject of investor-state arbitration1 lies at the cutting edge of international law and dispute resolution, and plays an important role in the development of the global economic system.2 Study of this form of arbitration provides insight into the evolving content of customary international law, the inevitable tension between capital-importing and capital-exporting states, the status of individuals and corporations in the international legal order, and conflict between the protection of investor rights and the public interest (e.g. environment and health).

1.02  The modern law on the protection and promotion of foreign investment is codified in a vast network of bilateral and multilateral investment treaties. Under these treaties, foreign entities from a signatory state that have made a qualifying investment in the territory of another signatory state enjoy a range of protections, in particular from discrimination and expropriation without compensation, as well as a requirement of fair and equitable treatment and full protection and security of investments.

(p. 2) 1.03  When an investor feels that its rights under the treaty have been violated, it can directly sue the host state of investment before an international arbitral tribunal, normally composed of three individuals and administered under the auspices of a prominent arbitral institution such as the International Centre for the Settlement of Investment Disputes (ICSID), the International Chamber of Commerce (ICC), the Stockholm Chamber of Commerce (SCC), and the Singapore International Arbitration Center (SIAC), as well as ad hoc tribunals. This direct right eliminates the diplomatic and political barriers to direct dispute resolution that exist at customary international law.3 It is this mechanism that is known as investor-state arbitration or ISDS.

1.04  This book focuses on the theory and practice of this novel system of arbitration. In the remainder of this chapter, we explain the importance of foreign investment for capital importers (Section B), protection as a fundamental condition for attracting foreign investment (Section C), investment treaties and ISDS as a key tool in providing such protection, the global backlash against ISDS, and initiatives to reform the ISDS system (Section D). Finally, we provide an outline of the topics covered in the second edition of the book (Section E).

B.  The Importance of Investment Flows for Capital Importers and Exporters

1.05  Cross-border investment is fundamental to twenty-first century commerce, but it is hardly a new phenomenon. Although national and political frontiers have traditionally slowed the migration of both people and capital from one country to another, only in rare instances have such barriers proven insurmountable. And for good reason: although the emigration of capital necessarily means that the funds do not promote development at home, it is likely that the funds have found a more productive use elsewhere, and some portion of the investment proceeds will find its way back to the investor’s home economy.4

1.06  There are three broad categories of cross-border investment: portfolio investment, direct investment, and indirect investment.5 Portfolio investments include publicly traded securities, such as stocks and bonds of foreign companies. Foreign direct investment (FDI) typically consists of medium- and long-term infusions of cash, equipment, expertise, or other assets in another country, into either ongoing enterprises or new companies created for the purpose of carrying on some business. The International (p. 3) Monetary Fund (IMF) defines this kind of investment as ‘investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise’.6 As a result of a scarcity of commercial bank loans, improved macroeconomic conditions, and liberalizing regulatory regimes, the flow of direct investment across borders grew exponentially during the last decades of the twentieth century.7 Indirect investments, meanwhile, are methods used to move resources across borders in a targeted fashion without actually participating in the resulting programme or project.8 Examples include patent licences and other intellectual property transfers, technical assistance agreements, and joint marketing arrangements.9

1.07  Likewise, the concentration of natural resources and labour in developing countries of the metaphorical south made cross-border investment an essential part of sustainable development and continued economic growth for the entire world. Because the expertise and initial capital necessary for exploiting resources remained largely in the north, less-developed countries (LDCs) could not unlock the potential of their natural assets without a boost of FDI at the outset of development initiatives.

1.08  Cross-border investment brings benefits not only to the investors, but also to the recipients in both developed and developing countries. A developed country such as the United States can be both an importer and exporter of capital.10 Foreign investment has tremendously contributed to the prosperity of the United States.11

1.09  In developing countries, the positive effects of FDI are more than simply providing scarce financing for needed improvements. Management experience, new technologies, and the establishment of lasting commercial links with other countries that can (p. 4) be used to increase future exports are all felicitous side effects of increased foreign investment.12 The positive effect of FDI on the economy of developing countries is undisputed.13

1.10  Some, however, argue that freedom of investment allows multinational corporations to exploit the assets of poorer countries, buying resources for less than their true value, and expatriating them to their home country. At the very least, the influx of capital does not necessarily mean that the profits gained from that investment will remain in the developing host country. Between 1965 and 1986, ‘net transfers’ of FDI, meaning the flow of investment adjusted for the repatriation of profits, was either negative or only slightly positive for developing countries.14

1.11  Some argue that an increase in direct investment into a LDC may not necessarily provide substantial support for long-term development projects, infrastructure improvements, or other welfare-enhancing activities.15 Furthermore, the drain of repatriating profits may in fact harm a capital-importing country’s balance of payments if FDI flows are inconsistently renewed, and the outward transfer of profits continues.

C.  BITs and ISDS as Mechanisms to Provide Security, Attract and Protect Foreign Investment

1.12  Investors have choices regarding the placement of their resources, but one key element in any investment decision is the issue of security. One commentator notes:

Private investors invest to make profits and not for reasons of benevolence. Thus, if they make profits they expect, albeit not unnaturally, to keep them, subject to payment of appropriate taxes to the local authorities; if they acquire property they expect to be entitled to keep it. The feeling of insecurity in these respects is, perhaps, the major deterrent to the flow of direct foreign investment in less-developed countries (LDC[s]).16

1.13  One of the principal purposes of the global investment protection regime is to reduce this investor insecurity, increase investment, and reduce poverty, especially in the developing world. Opportunities for investment exist throughout the world, and the (p. 5) market for capital placement is driven by the realistic rate of return investors can expect. The real rate of return, meanwhile, depends on various risks—especially political risks—to which a given investment will be subjected.

1.14  Since the end of the Second World War, states and international organizations have created a variety of legal instruments and mechanisms to help manage investment risks. These instruments together constitute the modern legal framework governing promotion and protection of foreign investments.17 We discuss this framework and its historical roots more fully in Chapter III. Among the tools used to protect investment are international investment contracts such as concession agreements for extraction of national resources; political risk insurance issued by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) as well as by other state-owned18 and private insurers; the International Centre for the Settlement of Investment Disputes, formed by the ICSID Convention with more than 150 member states as part of the World Bank Group; national legislation on the promotion of foreign investment as well as sector-specific laws (e.g. energy sector statutes); and more broadly, national legislation protecting contractual and property rights.

1.15  Last but not least bilateral investment treaties (BITs) and other investment agreements with similar provisions establish standards to protect foreign investors against a variety of political and sovereign risks, such as the risk of uncompensated expropriation, unfair and inequitable treatment, discrimination, restrictions on transfers of funds, and the like. More importantly and perhaps controversially the ISDS mechanism enables foreign investors to sue the host state of investment directly for violations of treaty obligations. No longer do investors have to rely on their home states to espouse their claims or to use local courts to address their grievances. ISDS has become a tangible tool for foreign investors to enforce their rights.

1.16  A number of commentators have concluded that investment protection, particularly through BITs, does increase FDI inflows.19 Some more recent studies have taken a more qualified approach suggesting that BITs improve FDI flows only in those economic sectors that demand high sunk costs such as extractive industries.20 Another (p. 6) group of commentators have found little correlation between investment protection and increased capital flows, or are ‘agnostic’ on the point.21 Concerns such as these drove South Africa to terminate its BITs.22

1.17  In any event, investment promotion and protection remains a major goal of global institutions such as the UN whose Secretary General in 2014 emphasized the importance of foreign investment flows for ‘sustainable development’.23

D.  Early Experiences with the ISDS, Backlash, and Possible Reform

1.18  Overall, the experience of many countries with investment treaty arbitration has not been entirely positive. The initial excitement of capital-exporting states about the advent of this novel mechanism as a powerful tool at the disposal of their investors has been replaced by a sober realization that it cuts both ways, and advanced economies are as likely to find themselves ‘in the dock’ as are developing countries.

1.19  A watershed moment in this context was the series of early NAFTA Chapter 11 cases in the late 1990s and early 2000s, which were filed against the United States and Canada.24 The idea that these countries would become the targets of several massive arbitrations25 under Chapter 11 of NAFTA was not central to their considerations when negotiating NAFTA. It was widely thought that Mexico would be the main target of ISDS claims. (p. 7) The experience of the last two decades of NAFTA Chapter 11 arbitrations refuted that perception, as both the United States and Canada have been sued in numerous arbitrations, and Canada probably as many times as Mexico.

1.20  ISDS has not spared other developed countries either; several European countries have been sued, Spain, Czech Republic, Germany, and Italy to name a few. In Asia, India, South Korea, and China, among others, have been named as defendants in several cases. Nevertheless, developing and transitional countries have overall been defendants more than the developed bloc.

1.21  Some observers have expressed concern that ISDS tribunals composed of private arbitrators should have the authority to decide claims against sovereign states. More troubling still for some is the notion that such tribunals may second-guess government policy and even court decisions under principles of international law,26 particularly in the areas of public health,27 environment,28 taxation,29 and banking;30 areas in which governments expect deference to their public mandate.

1.22  Other areas of concern that have been expressed with respect to ISDS include:

  • •  Potential inconsistency between arbitral awards concerning similarly-worded treaty provisions, such as some most-favoured nations clauses (see Chapter XVII) and umbrella clauses (see Chapter XV);

  • •  The pursuit in parallel of ISDS and commercial arbitration or court proceedings (see Chapter XIV);

  • •  ‘Treaty shopping’, by which investors set up or use holding companies to acquire the requisite nationality for advancing claims in ISDS (see Chapter XI);

  • •  Conflicts of interest and the perceived partiality of arbitrators, particularly the so-called ‘double hatting’ problem, where arbitrators serve both as counsel and arbitrator at the same time in ISDS cases;

  • •  The magnitude of the claims relative to the GDP of respondent countries.

1.23  Mounting criticisms of ISDS from both developed and developing countries, as well as from civil society groups, has triggered a backlash in some quarters,31 leading to the termination of BITs,32 withdrawal of certain states from the ICSID (p. 8) Convention,33 and the curtailing of protections afforded to foreign investors and investments in new treaties,34 such as the recent overhaul of NAFTA, which excludes Canada entirely from the ISDS mechanism.35 Developments within the European Union have been equally transformative with the European Commission insisting that member states terminate BITs between them, and the European Court of Justice outlawing intra-EU investment arbitration in Achmea.36 Brexit adds another major uncertainty, and its effects are hotly debated in various forums.37

1.24  Paradoxically, while the debate regarding shortcomings of ISDS continues, states have continued to negotiate BITs and mega regional agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11),38 the Association of Southeast Asian Nations (ASEAN) Comprehensive Investment Agreement,39 and the African Union’s Pan-African Investment Code (PAIC).40 Several dormant investment treaties, including the Unified Agreement for the Investment of Arab Capital in the Arab States and Organisation of Islamic Cooperation’s (OIC) Agreement on Promotion, Protection and Guarantee of Investments, have been re-discovered and used as the foundation for investment claims.41

1.25  Critique of the ISDS system set in motion a response from UNCITRAL, which formed Working Group III (WGIII) to study possible reforms of the ISDS.42 WGIII is a government-led and consensus-driven process by which representatives of the (p. 9) sixty UNCITRAL member states as well as observers comment on each issue raised. Also participating are key institutions such as ICSID and the EU, arbitral institutions such as the Permanent Court of Arbitration (PCA), and the International Chamber of Commerce (ICC); a number of NGOs including the International Bar Association (IBA), the American Society of International Law (ASIL), the Inter-American Bar Association (IABA), the International Law Institute (ILI); representatives of civil society groups and non-profit organizations focusing on labour, environment, and trade issues, academic institutions and some practitioners.

1.26  WGIII has developed a three-step mandate: ‘(a) first, identify and consider concerns regarding investor-State dispute settlement; (b) second, consider whether reform was desirable in light of any identified concerns; and (c) third, if the Working Group were to conclude that reform was desirable, develop any relevant solutions to be recommended to the Commission’.43

1.27  The first step of the mandate was completed during UNCITRAL’s 34th and 35th sessions which took place in November/December 2017 and April 2018, respectively.44 According to the report of the UNCITRAL Secretariat, delegates identified four areas of concern: (1) consistency, coherent, predictability, and correctness of arbitral decisions; (2) arbitrators and decision-makers; (3) cost and duration of ISDS cases; and (4) other concerns.45

1.28  A range of solutions have been proposed. At one end of the spectrum, there are proposals to make modest changes such as developing a code of ethics for arbitrators and counsel,46 or a mechanism to provide authoritative interpretation of treaty texts. A number of options are on the table with respect to this latter proposal, including the release of BIT travaux preparatoires, and state parties’ joint interpretations, and designating a qualified body to provide authoritative interpretations. A more fundamental solution is the establishment of an appellate court or even an investment court of first instance (the EU’s preferred option ).47

(p. 10) 1.29  The second step of the WGIII mandate was mostly completed in Vienna, Austria from 29 October 2018 to 2 November 2018. At this session, WGIII reviewed the concerns previously identified (consistency, decision-makers, cost, and duration) and concluded that they necessitated reform, whether systemic (e.g., creation of a court) or more in form of a ‘soft law’. The modalities of reform, and work plan were left for WGIII’s subsequent sessions.

1.30  In its April 2019 session in New York, WGIII identified third-party funding as a concern requiring reform, and with that it completed the second stage of its mandate. WGIII immediately started the work on the third stage of its mandate by focusing on developing a work plan to address the identified concerns. A number of states such as Chile, Costa Rica, Israel, Japan, Morocco, and Thailand had presented work plans to the WGIII. Ultimately, however, a relatively late compromise proposal by Switzerland provided the main basis for various delegations to devise a plan which called for pursuing in parallel both structural reform projects such as the EU’s proposed investment court as well as other reforms such as creation of a code of conduct for arbitrator and counsel. A notable proposal was the Nigerian delegation’s suggestion to have regional investment courts, in the event that the idea of establishing a court was adopted by the Working Group.

1.31  The concerns with ISDS have also mobilized the ICSID Secretariat, which handles about 60 to 70 per cent of all known investment arbitration cases. In August 2018, ICSID released its proposed amendments to the ICSID Arbitration Rules (‘Arbitration Rules’) and Additional Facility Rules. In a September 2018 presentation in Washington, DC, the ICSID Secretary General explained that the amendments were meant to update the ICSID rules, which had last been updated in 2006; to incorporate best practices; and to address some of the concerns of states and non-state actors about the legitimacy of investment arbitration. The main concerns that ICSID has tried to address in its proposed amendments relate to transparency, third-party funding, time, and costs. ICSID plans to put the proposed amendments to a vote by the ICSID member states in October 2019. If approved, the new rules would go into effect in January 2020. If members demand (p. 11) additional modifications before approval, then the new rules would go into effect in January 2021.48

1.32  The initiatives to reform ISDS together with statistics showing that investors continue to initiate treaty arbitration at a steady rate49 suggest that this area of practice remains vibrant. With the number of concluded investment treaty cases approaching 1,000, there is a real opportunity to study the results.

E.  Topics Covered in the Second Edition

1.33  Since the first edition of this book was released, there have been a wide array of developments. As a result, significant parts of the second edition were re-written to ensure it reflects current practice.

1.34  Chapters I–III cover the history of the treatment of aliens and investments under international law and provide an overview of the most important international treaties that give investors the right to arbitrate. This historical analysis is essential for understanding the development of investor-state arbitration and such recurring concepts as state responsibility, denial of justice, exhaustion of local remedies, and espousal. We also touch upon WGIII’s reform project and the amendment of ICSID Arbitration Rules. Other innovations and treaty amendments are discussed in the relevant chapters.

1.35  Chapters IV–VI provide an analysis of the arbitration rules most commonly employed in ISDS, and explain issues that commonly arise in the conduct of proceedings. Chapter IV provides a detailed and updated coverage of arbitral rules. Chapter V explores national court involvement in arbitral proceedings. Chapter VI traces the course of an investment arbitration outlining typical procedural steps. This chapter includes the law applicable to procedure (Chapter V in the first edition), as well as some new topics, including third-party funding, admissibility versus jurisdiction, inherent powers of arbitral tribunals, a more detailed coverage of counterclaims, and evidentiary privilege. Chapter VII covers various applications and motions used in arbitral proceedings, such as arbitrator challenges, early dismissal of frivolous claims (a new topic for this edition), interim relief, third party submissions, and consolidation (Chapter VIII in the first edition) and the new topic of mass claims.

1.36  We have not covered in detail the proposed amendments to the ICSID Rules in this volume. As noted above, those amendments are currently subject to review and may not be in effect before 2021.

(p. 12) 1.37  Chapters VIII–XXI outline the most important substantive rules in investor-state arbitration, including applicable law, consent, national and most-favoured nations treatment, fair and equitable treatment, full protection and security, expropriation, umbrella clauses, and finally quantification of damages. In this edition, we have dedicated three new chapters to: jurisdiction ratione temporis (Chapter XII); state responsibility, attribution, and circumstances precluding wrongfulness (Chapter XVI); and transfers of funds (Chapter XX). We have also added new subtopics to cover treaty shopping and reflective loss (Chapter XI), and war clauses (Chapter XIX), among others. The damages chapter (XXI) was re-written to reflect major developments in this topic since 2007.

1.38  Chapters XXII and XXIII deal with annulment, set-aside, and enforcement of arbitral awards. The chapter on annulment is much expanded, because there have now been more than 100 annulment decisions, making the topic fruitful for research and practice.

1.39  We hope our readers find this second edition useful.


1  Investor-state arbitration is one of many terms and abbreviations used to describe arbitration of disputes pursuant to investment protection treaties, particularly bilateral investment treaties. Other terms used to describe this mechanism are ‘investment treaty arbitration’ or simply ‘investment arbitration’. A commonly used abbreviation is ISDS, which stands for Investor State Dispute Settlement.

2  The topic of investor-state dispute resolution differs markedly from other related areas of law. It differs from public international law (and the subtopic of diplomatic protection) in that one of the parties involved is nearly always a private entity, not traditionally considered a subject of international law at all. Ian Brownlie, Principles of Public International Law 57–8 (Oxford University Press 6th ed. 2003) (referring to states and international organizations as ‘normal types of persons on the international plane’); see also 1 Restatement (Third) of the Foreign Relations Law of the United States, 70 (American Law Institute 1987). Although investor-state arbitration borrows procedures from international commercial arbitration, the standards for liability and compensation are derived not from the parties’ agreement but largely from the language of treaties and customary international law. See Chapter VIII on governing law. See also Chapter XXI on assessment of compensation and damages.

3  On the right of investors to directly initiate arbitration against a state, see Chapter IX on consent.

4  Bernardo M. Cremades, Promoting and Protecting International Investments, Int’l Arb. L. Rev. 53 (2000) (‘Capital tends to flow to places where it can be more productive (i.e. where the return is higher), and from economies where it is abundant, such as developed countries and financial centres, towards countries where capital is scarce and where the capabilities associated with private enterprises are lacking.’).

5  K. V. S. K. Nathan, The ICSID Convention: The Law of the International Centre for Settlement of Investment Disputes 111 (Juris Publishing 2000).

6  IMF Balance of Payments Manual 136 (4th ed. 1977).

7  Ibrahim Shihata, Legal Treatment of Foreign Investment: The World Bank Guidelines 2 (Martinus Nijhoff 1993) (Treatment of Investment). Annual FDI flows to the developing world increased from US$500 million in 1965 to US$38 billion in 1992. World Bank, Global Economic Prospects and Developing Countries 27 (1993).

8  World Bank, The Role of Foreign Direct Investment in Development, Presentations to the 41st Meeting of the Development Committee 39 (1991).

9  Nathan, Law of ICSID, supra note 5, at 111.

10  At the beginning of the twentieth century, the United States was nicknamed ‘the greatest debtor nation in history’. Mira Wilkins, The History of Foreign Investment in the United States to 1914 144 (Harvard University Press 1989). After the First World War, it gradually emerged as one of the main lenders in international markets and until the 1980s was a net exporter of capital. After that, the tide turned again. Curtis M. Jolly et al., U.S. Competitive Position and Capital Investment Flows in the Economic Citizen Market: Constraints and Opportunities of the U.S. Investor Program, 57(2) Am. J. Econ. & Soc. 155, 157 (1998). At the end of 2005, for example, the United States was by far a net importer of foreign capital. See Bureau of Econ. Analysis, U.S. Dep’t of Commerce, News Release: U.S. Net International Investment Position at Yearend 2005 (29 June 2006). As of October 2017, the United States remained the largest recipient of FDI in the world. See U.S. Department of Commerce, Foreign Direct Investment in the United States, 3 Oct. 2017, at 3 and 12 (suggesting that in 2016, the FDI position in the United States was ‘$3.7 trillion on a historical cost basis, $6.6 trillion on a market value basis or $4.4 trillion on a current-cost basis’.), available at https://www.commerce.gov/sites/commerce.gov/files/migrated/reports/FDIUS2017update.pdf.

11  For statistics regarding the positive effects of FDI on the US economy see Bureau of Econ. Analysis, News Release, supra note 10 (based on data provided by the Bureau of Economic Analysis showing that FDI creates good jobs, innovation from research and development, boosts wages, and strengthens US manufacturing). For recent trends on FDI inflows see also UNCTAD, World Investment Report 2018, Chapter 1 (Current FDI Trends), available at http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2130, visited on 13 Sept. 2018 (2018 WIR).

12  See Anabel Gonzalez, Christine Zhenwei Qiang, and Peter Kusek, Overview, 2017/2018 Global Investment Competitiveness Report: Foreign Investor Perspectives and Policy Implications 1 (World Bank Group 2018).

13  For an assessment of the effect of FDI on the economic welfare of the host countries, see, e.g. UNCTAD, World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development 183 (2006). See also UNCTAD, 2018 WIR, supra note 11, at 12 et seq. (FDI as a component of financing for development).

14  The World Bank, 1 World Debt Tables 1992–93, 20–1 (1992).

15  Shihata, Treatment of Investment, supra note 7, at 9–11. For a more recent commentary on this topic, see M. Abdur Rahman Malik, Chaudhry Abdul Rehman, Muhammad Ashraf, and Rana Zamin Abbas, Exploring the Link between Foreign Direct Investment, Multinational Enterprises and Spillover Effects in Developing Economies, 7(1) Int’l J. Bus. & Management 230 (2012); José-Daniel Reyes, FDI Spillovers and High-Growth Firms in Developing Countries, Policy Research Working Paper 8243 (World Bank, Nov. 2017).

16  Adeoye Akinsanya, International Protection of Direct Foreign Investments in the Third World, 36 Int’l Comp. L. Q. 58 (1987).

17  For an overview of the modern international law on protection of foreign investment see Muthucumaraswamy Sornarajah, The International Law on Foreign Investment (4th ed. Cambridge University Press 2017); see also Peter Muchlinski, Multinational Enterprises and the Law (Oxford University Press 2007).

18  See, e.g. the U.S. Government’s Overseas Private Investment Corporation (OPIC).

19  See, e.g. Michael Frenkela and Benedikt Walteray, Do Bilateral Investment Treaties Attract Foreign Direct Investment? The Role of International Dispute Settlement Provisions, WHU - Otto Beisheim School of Management, Working Paper 17/08 (Dec. 2017); Niti Bhasin and Rinku Manocha, Do Bilateral Investment Treaties Promote FDI Inflows? Evidence from India, 41(4) VIKALPA 275 (Dec. 2016). See also Jeswald Salacuse and Nicholas Sullivan, Do BITs Really Work: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain, 46 Harv. Int’l L. J. 67, 106–7 (2005); Peter Egger and Michael Pfaffermayr, The Impact of Bilateral Investment Treaties on Foreign Direct Investment, 32 J. Comp. Econ. 788 (2004); Eric Neumayer and Laura Spess, Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries? (May 2005, Revised version). For a review of various views on both sides of this discussion see also The Effect of Treaties on Foreign Direct Investment Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (K. Sauvant and L. Sachs eds, Oxford University Press 2009).

20  See, e.g., Liesbeth Colen, Damian Persyn, and Andrea Guariso, Bilateral Investment Treaties and FDI: Does the Sector Matter?, 83 World Development 193, 193 (2016).

21  Bruce A. Blonigen and Ronald B. Davies, Do Bilateral Tax Treaties Promote Foreign Direct Investment? (National Bureau of Economic Research, Working Paper No. W8834, Mar. 2002); Zachary Elkins, Andrew T. Guzman, and Beth Simmons, Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000 (UC Berkeley Public Law Research Paper No. 578961, Aug. 2004). See also Jennifer Tobin and Susan Rose-Ackerman, Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties (Yale Law & Economics Research Paper No. 293, 2 May 2005); Kevin P. Gallagher and Melissa Birch, Do Investment Agreements Attract Investment? Evidence from Latin America, 7(6) J. World Inv. & Trade 961 (2006); J. P. Tumman and C. F. Emmert, The Political Economy of U.S. Foreign Direct Investment in Latin America: A Reappraisal, 39(3) Latin Am. Res. Rev. 9–29 (2004); Mary Hallward-Dreimeier, Do Bilateral Investment Treaties Attract FDI? Only a Bit . . . And It Might Bite (World Bank Policy Research Working Paper Series, No. 3121, Wash., DC 2003); UNCTAD, Bilateral Investment Treaties in the Mid-1990s (United Nations, New York 1998). Doubts also remain as to whether increases in FDI inflows benefit the developing world. Developing countries may well be concerned about increased economic domination by foreign interests, loss of public control over vital industrial sectors, undue influence of foreign investors over internal politics, and so on. Stephen J. Toope, Mixed International Arbitration: Studies in Arbitration between States and Private Persons 220, n.7 (Grotius 1990).

22  See Ambassador Xavier Carim, The Evolution of South Africa’s Policy on Bilateral Investment Treaties, lecture, Columbia Center on Sustainable Investment Speaker Series, Columbia University Law School, New York, NY (2 Apr. 2015) available at https://livestream.com/columbialaw/ccsi-s15-speakerseries-xaviercarim/videos/82550267.

23  Giorgio Sacerdoti, Investment Protection and Sustainable Development: Key Issues, in Shifting Paradigms in International Investment Law 20 (S. Hindelang and M. Krajewski, eds, Oxford University Press 2016).

24  See particularly Loewen Group, Inc. and Raymond L. Loewen v. U.S., ICSID Case No. ARB(AF)/98/3 (Award of 26 June 2003); Methanex v. U.S. (NAFTA Arbitration under UNCITRAL rules, Award of 3 Aug. 2005); Pope & Talbot Inc. v. Canada (UNCITRAL/NAFTA Arbitration, Final Merits Award of 10 Apr. 2001); S.D. Myers, Inc. v. Canada (UNCITRAL Arbitration, First Partial Award of 13 Nov. 2000).

25  See George Kahale, Is Investor-State Arbitration Broken?, 9(7) TDM (2012), available at http://www.transnational-dispute-management.com/. Kahale uses the term ‘mega case’ to highlight the negative impact of billion-dollar treaty awards (which used to be rare in litigation) on government policymaking, budgets, and other interests.

26  See Chapter III, Section on NAFTA, Professor Don Wallace Jr. comments on civil society groups at ¶ 3.26.

27  See e.g. Philip Morris v. Uruguay, ICSID Case No. ARB/10/7 (Award of 8 July 2016).

28  See e.g. Marion Unglaube v. Costa Rica, ICSID Case No. ARB/08/1 (Award of 16 May 2012).

29  See e.g. Sergei Paushok v. Mongolia, UNCITRAL (Award on Jurisdiction and Liability of 28 Apr. 2011). See also Fouad Alghanim and Sons Company for General Trading and Contracting WLL and Alghanim v. Jordan, ICSID Case No. ARB/13/38 (Award of 14 Dec. 2017).

30  See e.g. Invesmart v. Czech Republic, UNCITRAL (Award of 26 June 2009).

31  See e.g. The Backlash against Investment Arbitration: Perceptions and Reality (M. Waibel ed., Kluwer 2010); Kahale, supra note 25.

32  Ecuador terminated the last twelve BITs to which it was a member in May 2017, while South Africa has terminated most of its BITs, Indonesia has terminated all of its sixty-seven BITs, and India has served notices to fifty-seven countries seeking termination. Cesar Ortega, Ecuador and ISDS—A Rough Journey and a Possible New Beginning, Investment Claims (21 Dec. 2017); Marie Davoise and Markus Burgstaller, Another One BIT the Dust: Is the Netherlands’ Termination of Intra-EU Treaties the Latest Symptom of a Backlash Against Investor-State Arbitration?, Kluwer Arbitration Blog (11 Aug. 2018), available at http://arbitrationblog.kluwerarbitration.com/2018/08/11/another-one-bit-dust-netherlands-termination-intra-eu-treaties-latest-symptom-backlash-investor-state-arbitration/.

33  Bolivia, Ecuador, and Venezuela have all withdrawn from the ICSID Convention. Joost Pauwelyn and Rebecca Hamilton, Exit from International Tribunals, 9(4) J. Int’l Disp. Sett. 679 (2018).

34  See e.g. US Model BIT, art. 3(b), art. 5; Stephen Schwebel, The United States 2004 Model Bilateral Investment Treaty: an Exercise in the Regressive Development of International Law, 3(2) TDM (2006), available at http://www.transnational-dispute-management.com/. See also 2015 Indian Model BIT, which does not include a most-favoured nation clause, and Grant Hanessian and Kabir Duggal, The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See?, 32(1) ICSID Review—Foreign Investment Law Journal 216 (2017), available at https://doi-org.proxygt-law.wrlc.org/10.1093/icsidreview/siw020.

35  See Alison Ross, New NAFTA curbs ISDS, Global Arbitration Review (1 Oct. 2018), available at https://globalarbitrationreview.com.

36  Slowakische Republik (Slovak Republic) v. Achmea BV, Court of Justice of the European Union, Case C-284/16 (Judgment of 6 Mar. 2018) ¶¶ 55–60. The European Commission noted in 2018 that ‘EU investors cannot invoke intra-EU BITs, which are incompatible with Union law and no longer necessary in the single market. They cannot have recourse to arbitration tribunals established by such intra-EU BITs, or for intra-EU litigation, to arbitration tribunals established under the Energy Charter Treaty.’ European Union: European Commission, Communication from the Commission to the European Parliament and the Council on the Protection of intra-EU investment, COM/2018/547 final (19 July 2018), available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52018DC0547&from=EN.

37  See Burkhard Hess, The Fate of Investment Dispute Resolution after the Achmea Decision of the European Court of Justice, 15(5) TDM (2018).

38  See Dave Sherwood and Felipe Iturrieta, Asia-Pacific Nations Sign Sweeping Trade Deal without U.S., Reuters (8 Mar. 2018), available at https://www.reuters.com/article/us-trade-tpp/asia-pacific-nations-sign-sweeping-trade-deal-without-u-s-idUSKCN1GK0JM.

39  See Diane Desierto, ASEAN Investment Treaties, RCEP, AND CPTPP: Regional Strategies, Norms, Institutions, and Politics, 27(2) Wash. Int’l L. J. 349 (2018).

40  See Makane Moïse Mbengue and Stefanie Schacherer, The ‘Africanization’ of International Investment Law: The Pan-African Investment Code and the Reform of the International Investment Regime, 18 J. World Inv. & Trade 414 (2017).

41  See Meriam Alrashid and Leonardo Carpentieri, The Revival of Islamic and Middle East Regional Investment Treaties: A New Way Forward?, 12(2) TDM (2015), available at http://www.transnational-dispute-management.com/.

43  Report of the United Nations Commission on International Trade Law, 50th session, 3–21 July 2017, available at http://undocs.org/A/72/17.

44  See UNCITRAL, Report of WGIII (Investor-State Dispute Settlement Reform) on the work of 34th session (Vienna, 27 Nov.–1 Dec. 2017), p. I available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V18/029/83/PDF/V1802983.pdf?OpenElement; UNCITRAL, Report of WGIII (Investor-State Dispute Settlement Reform) on the work of its 34th session (Vienna, 27 Nov.–1 Dec. 2017), P. II, available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V18/029/89/PDF/V1802989.pdf?OpenElement; Report of WGIII (Investor-State Dispute Settlement Reform) on the work of its 35th session (New York, 23–27 Apr. 2018), available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V18/029/59/PDF/V1802959.pdf?OpenElement.

45  For a review of all the concerns see Note by the Secretariat, Possible Reform of Investor-State Dispute Settlement (ISDS), prepared for the UNCITRAL’s 36th session during 29 Oct.–2 Nov. 2018, available at http://www.uncitral.org/pdf/english/workinggroups/wg_3/WGIII-36th-session/149_main_paper_7_September_DRAFT.pdf.

46  The UNCITRAL and ICSID Secretariats are currently working on such a code. See ICSID Secretariat, Proposals for Amendments of ICSID Rules—Synopsis, 1 (2018), available at https://icsid.worldbank.org/en/Documents/Synopsis_English.pdf; Note by the Secretariat, Settlement of Commercial Disputes: Possible Future Work on Ethics in International Arbitration, prepared for the UNCITRAL’s 50th session during 3–21 July 2017, available at http://undocs.org/A/CN.9/916.

47  See Note by the Secretariat, supra note 45. Commentators have been thinking about the reform and possible solutions for some time now. See Anna Joubin-Bret and Jean Kalicki, Introduction TDM Special Issue on ‘Reform of Investor-State Dispute Settlement: In Search of a Roadmap’, 11(1) TDM (2014), available at http://www.transnational-dispute-management.com/; more recently see Sergio Puig and Gregory Shaffer, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, 112 Am. J. Int’l L. 361 (2018); Anthea Roberts, Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration, 112 Am. J. Int’l L. 410 (2018); Marc Bungenberg and August Reinisch, From Bilateral Arbitral Tribunals and Investment Courts to a Multilateral Investment Court: Options Regarding the Institutionalization of Investor-State Dispute Settlement (Springer 2018); Stephan W. Schill and Geraldo Vidigal, Cutting the Gordian Knot: Investment Dispute Settlement à la Carte, 21 Nov. 2018, available at https://www.ictsd.org/themes/global-economic-governance/research/cutting-the-gordian-knot-investment-dispute-settlement-%c3%a0. See also Gabrielle Kaufmann-Kohler and Michele Potestà, The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards, Geneva Center for International Dispute Settlement (2017), available at http://www.uncitral.org/pdf/english/workinggroups/wg_3/CIDS_Supplemental_Report.pdf; Gabrielle Kaufmann-Kohler and Michele Potestà, Can the Mauritius Convention Serve as a Model for the Reform of Investor-State Arbitration in Connection with the Introduction of a Permanent Investment Tribunal or an Appeal Mechanism? Analysis and Roadmap (2016), available at http://www.uncitral.org/pdf/english/CIDS_Research_Paper_Mauritius.pdf.

48  For latest information on the status of amendment of the ICSID Rules see https://icsid.worldbank.org/en/amendments.

49  UNCTAD, Investor State Dispute Settlement: Review of Developments in 2017, 2 Int’l Investment Agreements Issues Notes (2018).