Open Letter on the Asymmetry of ISDS
Erasmus Institute for Public Knowledge
Open Letter on the Asymmetry of ISDS
The Investor-State Dispute Settlement (ISDS) system, as codified by International Investment Agreements, has been criticized for its asymmetric structure, whereby the public interest of states and communities potentially affected by investment activities remains subordinate to the private interests of investors. Academics, including from Erasmus University and EIPK, have released an open letter calling on states to start taking seriously this well documented problem and include it in the reform agenda led by the UNCITRAL Working Group III.
The letter is made public on February 13, 2019 and remains open for signatures by academics until March 10. You can join the letter by sending an email with your name and affiliation to Prof. Alessandra Arcuri arcuri@law.eur.nl and Dr. Federica Violi (violi@law.eur.nl)
AN OPEN LETTER TO THE CHAIR OF UNCITRAL WORKING GROUP III AND TO
ALL PARTICIPATING STATES CONCERNING THE REFORM OF THE INVESTORSTATE
DISPUTE SETTLEMENT: ADDRESSING THE ASYMMETRY OF ISDS
The international investment regime is subject to widespread criticism by civil society and by political
and institutional actors as well as academics. Objections have mostly focused on the Investor-State
Dispute Settlement (ISDS) mechanism. To address these critiques and consider reform, UNCITRAL
has established Working Group III (WG III). In the work of WG III, a number of concerns have
been raised, including transparency, consistency, costs and duration of the arbitration procedures, and
ethics and impartiality of arbitrators. These issues seem likely to shape any multilateral reform agenda.
While the identified concerns may be considered important, one of the paramount deficiencies of
ISDS remains largely unaddressed by WG III. In its broadest terms, this issue arises from the
asymmetric structure of the ISDS, whereby 1) the public interest of states and communities
potentially affected by investment activities (e.g. protection of human rights and environment)
remains subordinate to the private interests of investors and 2) investors remain largely
unaccountable under international law for any misconduct. Legal and socio-legal scholars, as well as
researchers in public interest institutions, have painstakingly documented the characteristics and at
times disturbing consequences of this asymmetry.
Ongoing developments addressing ISDS shortcomings
In this regard, we note some developments at the level of arbitration procedure and practice and in
treaty law making that respond to this asymmetry. We refer especially to four trends: 1) the enhanced
admissibility of states’ counterclaims in ISDS, as clarified by arbitration tribunals and in revised
arbitration rules (e.g. Burlington Resources v Republic of Ecuador); 2) the recognition of human rights
obligations of investors as part of the applicable law to investment disputes, as clarified by arbitration
tribunals (e.g. Urbaser v Argentina); 3) the inclusion of specific obligations for investors in International
Investment Agreements (IIAs) based on new treaty texts (e.g. Morocco-Nigeria BIT; India-Belarus
BIT; the Pan-African Investment Code), which could potentially be invoked in ISDS; and 4) the
complete eradication of ISDS, and the subsequent return to either purely domestic and/or alternative
state-to-state dispute settlement, possibly complemented by an Ombudsperson (e.g. Brazil
Cooperation and Facilitation Investment Agreement).1
Existing reform proposals to reconfigure the asymmetry in ISDS
A number of proposals for systemic reform of ISDS have been articulated by various actors. For
example, UNCTAD has formulated a series of policy tools for states to redesign ISDS,2 and a group
of academic scholars has drafted a Model Treaty on Sustainable Investment for Climate Change
Mitigation and Adaptation.3 In a similar vein, a number of proposals have been submitted to the UN
Business and Human Rights Forum in response to a call for crowd-drafting of human rightscompatible
investment treaties.4 Some of the recurring proposals include:
1. Host states’ right to invoke counterclaims in investment arbitration: IIAs should
explicitly state the right of host States to commence counterclaims. Investors’ consent to
counterclaims would be deemed to have been given upon admission of the investment to the
host state.
2. Direct claims of states and investment-affected communities: Host states and
communities that are negatively affected by an investment activity should have the right to
initiate a dispute before an arbitral tribunal. Investors’ consent would likewise be deemed to
have been given upon admission of the investment in the host state.5
3. Integration of relevant decisions and reports of grievance mechanisms into arbitration
proceedings: a number of public bodies such as Ombudspersons and OECD National
Contact Points already are (or could be) entrusted with the task of receiving complaints from
investment-affected communities. Arbitration tribunals should explicitly refer to pertinent
conclusions of such bodies when giving reasons in awards.
4. Exhaustion of domestic legal remedies: In all cases, exhaustion of reasonably available
domestic remedies within a reasonable amount of time should be an a priori mandatory
requirement for all investment disputes to be heard before an arbitral tribunal.
Although we may have different visions of the extent to which the current system can be cured of its
defects, we all concur that, at a minimum, these proposals should be seriously considered within
UNCITRAL Working Group III. With this open letter, we call on States and the UNCITRAL
Working Group III to include the asymmetry in ISDS as one of the concerns to be addressed
in the current UNCITRAL reform efforts. We also call on them to facilitate and consolidate
the discussion of the patterns identified for addressing and correcting asymmetry and to
engage seriously with the proposals mentioned above. By doing so, states and UNCITRAL WG
III would show commitment to shaping the international economic order so that it protects the
common interest of all instead of a narrow and particular group of interests.
Footnotes
1 In this context, some have also proposed a multilateral mechanism to either terminate existing BITs or withdraw consent to ISDS, available at https://uncitral.un.org/sites/uncitral.un.org/files/mediadocuments/uncitral/en/uncitral_recs_and_justification_final.pdf.
2 See for example, UNCTAD Policy Tools available at: https://unctad.org/en/PublicationsLibrary/diaepcb2017d8_en.pdf.
4 The submitted proposals are available at the UN Forum Website: https://www.ohchr.org/EN/Issues/Business/Pages/IIAs.aspx.
5 For a proposal articulating specific provisions in relation to the basis for direct claims and counterclaims of states and affected communities see Arcuri, Montanaro, Violi (2018) Proposal for a Human Rights-Compatible International Investment Agreement: Arbitration for All, available at https://www.ohchr.org/EN/Issues/Business/Pages/IIAs.aspx. See also Model Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation, note 3.
- More information
Signatories
1. Antonella Angelini, Human Rights Institute, Columbia Law School
2. Antony Anghie, National University of Singapore and University of Utah
3. Laurens Ankersmit, Department of Public International and European Law, University of Amsterdam
4. Alessandra Arcuri, Erasmus School of Law, Erasmus University Rotterdam
5. Alessandra Asteriti, Competition and Regulation Institute, School of Law Leuphana
University
6. Marija Bartl, Department of Private Law, University of Amsterdam
7. Christian Bellak, Vienna University of Ecomics and Business
8. Nadia Bernaz, Wageningen University
9. Martin Björklund, Swedish School of Social Science, The Erik Castrén Institute of
Helsinki
10. Jonathan Bonnitcha, the University of New South Wales Sydney
11. Tomer Broude, Faculty of Law, Hebrew University of Jerusalem
12. Claudiu Paul Buglea, International Arbitration Research Centre, University of Bucharest
13. Leïla Choukroune, School of Business and Law, University of Portsmouth
14. Marjorie Cohen, Simon Fraser University
15. Julia Dehm, School of Law, La Trobe University Australia
16. Sara Dehm, Faculty of Law, University of Technology Sydney
17. Nicolas De Sadeleer, University of St. Louis Brussels
18. Antoine Duval, Asser Institute
19. Daria Davitti, Faculty of Law, Lund University
20. Luis Eslava, Kent Law School, University of Kent
21. Isabel Feichtner, Faculty of Law, Julius-Maximilians-University Würzburg
22. Tom Flynn, School of Law, University of Essex
23. Kevin Gallagher, Frederick S. Pardee School of Global Studies, Boston University
24. Juan Garcia Blesa, International Graduate School, Fern Universität Hagen/Westphalia
25. Frank J. Garcia, Boston College Law School
26. Paul Gilbert, Department of International Development, University of Sussex
27. Edward Guntrip, University of Sussex
28. Yogi Hale Hendlin, Erasmus School of Philosophy, Erasmus University Rotterdam
29. Robert Howse, New York University School of Law
30. Jean Ho Qing Ying, School of Law, National University of Singapore
31. Jane Kelsey, Faculty of Law, The University of Auckland
32. Markus Krajewski, Friedrich-Alexander Universität Erlangen - Nürnberg
33. Nico Krisch, the Graduate Institute Geneva
34. Malcolm Langford, Faculty of Law, University of Oslo
35. Emmanuel Laryea, Faculty of Law, Monash University
36. Jessica Lawrence, Department of Legal Studies, Central European University
37. Sean Morris, Faculty of Law, University of Helsinki
38. Marta Morvillo, Amsterdam Centre for European Law and Governance, University of
Amsterdam
39. Laura Murguía-Goebel, Faculty of Law, Julius-Maximilians-University Würzburg
40. Andria Naudé Fourie, Erasmus School of Law, Erasmus University Rotterdam
41. Sundhya Pahuja, Institute for International Law and Humanities, University of
Melbourne
42. Lorenzo Pellegrini, International Institute of Social Studies, Erasmus University
Rotterdam
43. Gustavo Prieto, Department of Law, University of Turin
44. Robi Rado, Melbourne Law School, the University of Melbourne
45. Nikolas M. Rajkovic, Tilburg Law School, Tilburg University
46. Patricia Ranald, Department of Political Economy, University of Sydney
47. Margot E. Salomon, Law Department, London School of Economics and Political
Science
48. Stefano Saluzzo, University of Piemonte Orientale
49. Mavluda Sattorova, University of Liverpool
50. Harm Schepel, Brussels School of International Studies, University of Kent
51. Kim Lane Scheppele, Princeton University
52. David Schneiderman, University of Toronto
53. Craig Scott, Osgoode Hall Law School
54. Prabhakar Singh, Centre for International Legal Studies, Jindal Global University
55. Muthucumaraswamy Sornarajah, Faculty of Law, National University of Singapore
56. Kyla Tienhaara, School of Environmental Studies and Department of Global
Development Studies, Queen's University
57. Ntina Tzouvala, ARC Laureate Fellow, Melbourne Law School
58. Anne Van Aaken, University of Hamburg
59. Gus Van Harten, Osgoode Hall Law School
60. Tara Van Ho, University of Essex School of Law
61. Irene Van Staveren, International Institute of Social Studies, Erasmus University
Rotterdam
62. Ingo Venzke, Faculty of Law, University of Amsterdam
63. Federica Violi, Erasmus School of Law, Erasmus University Rotterdam
64. Aleksandra Vonica, Abstract Institute Romania
65. Anil Yilmaz Vastardis, School of Law and Human Rights Centre, University of Essex