An OECD study shows that arbitration costs in investment disputes average US$ 8 million; in one case involving mass claims, the parties spent almost US$ 40 million in legal fees just to reach the decision on jurisdiction. Under these circumstances, it is no wonder that third party funding has become the talk of the town.
<p>The Canada-China BIT could provide insight on the key issues to be discussed in a possible US-China BIT. A particularly controversial issue will be the terms of investor-state arbitration (ISA). But as ISA becomes increasingly controversial between developed democratic states, it may become harder to negotiate ISA with China.</p>
The International Centre for Settlement of Investment Disputes (ICSID) has emerged as a powerful actor within the field of inter-state investment arbitration. However, as with other international institutions, its existence depends on continued acceptance by domestic actors.
In July 2013, after nearly three years of work, the United Nations Commission on International Trade Law (UNCITRAL) adopted a set of arbitration rules that will help open some investor-state arbitrations to public view. The UNCITRAL Rules on Transparency in Treaty - based Investor - State Arbitration (Transparency Rules) were crafted with input from governments, academics, arbitration practitioners, and non-governmental organizations, and approved by consensus by the member states. When applied, the Transparency Rules will require disclosure of information submitted to, and issued by, arbitral tribunals throughout proceedings, mandate open hearings and expressly allow for participation by non-parties to a dispute. The Transparency Rules also guard against disclosure of confidential information and establish a repository in which all information will be published.
Many governments offer incentives to attract foreign direct investment (FDI). For example, the renewable energy sector has benefitted from large national incentive schemes in the past decade. However, the withdrawal of such incentives can lead to investors bringing investment treaty claims against host countries. This Perspective looks at some claims host countries face from investors in the renewable energy sector and their implications.
Rafael Tamayo-Álvarez, Maria Alejandra Gonzalez-Perez, and Juan David Rodriguez-Rios
Publication Date:
06-2014
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
Free trade agreements (FTAs) and international investment agreements (IIAs) are regarded as instruments to promote world trade, investment flows and market liberalization. The question, however, is whether they promote sustainable development as well. This Perspective contemplates incorporating voluntary codes of conduct for multinational enterprises (MNEs) in IIA s to strengthen the protection of labor rights, “the social component [...] embedded in the notion of sustainable development.”
In their contribution to the FDI Perspectives series, Baiju Vasani and Anastasiya Ugale drew attention to an emerging trend in favor of the so-called “costs follow the event” (CFtE) (or loser pays) approach, which is in contrast to the more “traditional” approach under which parties share the costs of arbitration equally, with each party covering its own legal fees.