Open Letter – Assessing Treaty-based Investor-State Dispute Settlement

Some are concerned about treaty-based Investor-State Dispute Settlement (ISDS), especially binding Investor-State Arbitration procedures in investment treaties and Free Trade Agreements. One response includes public calls for states to eschew such procedures completely in future treaties, for example in the expanded Trans-Pacific Partnership Agreement presently under negotiation. This approach would essentially leave foreign investors to approach local courts if host states illegally interfere with their investments, or to encourage their home states to activate an inter-state dispute resolution process, or to try to negotiate individualised arbitration agreements with host states.
An alternative approach is to identify and address more specific concerns with treaty-based ISDS. An example is the scoping paper and Public Consultation on ISDS generated by the Organisation for Economic Cooperation and Development, over 16 May – 23 July.
As a constructive contribution to this debate, we created an online form asking for views on whether ISDS should be left as is, abandoned completely, or adapted in various listed ways. As explained below, no respondents favoured eschewing ISDS completely. Yet that position represents the policy shift announced by Australia in the “Gillard Government Trade Policy Statement” (April 2011), resulting in ISDS being omitted from the Australia-Malaysia FTA (May 2012) but difficulties in negotiating other bilateral treaties (with Korea, and Japan) and the TPPA. Implications and other topics related to the TPPA negotiations will be discussed at a Roundtable in Canberra on 8 August, hosted by the Crawford School of Public Policy (ANU College of Asia and the Pacific).

On 13 June 2012 we circulated the hyperlink to the online form among members of an e-mail listserv comprising individuals familiar with international investment dispute resolution (OGEMID). That is a subscription-based service, so we also widened the pool of potential respondents by notifying others interested in the issues. These included alumni groups associated with the FDI International Arbitration Moot, and contributors to Vivienne Bath and Luke Nottage (eds) Foreign Investment and Dispute Resolution Law and Practice in Asia (Routledge, 2011).
By 19 July we had received 25 valid responses: 22 believed treaty-based ISDS could be usefully changed in some ways, three considered it should remain unchanged, and none believed it should be abandoned altogether. Thirteen individuals consented to disclosing their identities (listed on the next page): 12 favoured various changes to ISDS, as summarised in Appendix A. Appendix B summarises the views of the 22 respondents who suggested changes, to varying degrees. Appendix C adds the specific answers and/or general comments provided by consenting respondents. [Full Appendices and the original version of this Open Letter: downloadable here (4MB file).]
These preliminary results do not profess to comprise a representative sample of contemporary views on this important topic. But we hope they provide a helpful and nuanced indication, from a variety of reasonably well-informed commentators, about how to conceptualise and address significant current issues in treaty-based ISDS.
Chris Campbell (Salzburg), Sophie Nappert (London) & Luke Nottage (Sydney)
Appendix A: 13 non-anonymous signatories
– Suggesting various changes to ISDS:

Chris Campbell – Assistant Director, Center for International Legal Studies, Austria; Co-Director FDI Moot, Vice-President European Court of Arbitration, Austrian Chapter; Adj. Professor of Law, Suffolk University School of Law
Dr. Luke Nottage – Professor of Comparative and Transnational Business Law, University of Sydney; Director, Japanese Law Links Pty Ltd, Australia
Michael Ostrove – Partner, DLA Piper UK LLP
Tony Cole – Senior Lecturer, Brunel Law School, UK
Velimir Zivkovic – PhD Candidate, Faculty of Law, University of Belgrade, Serbia
Technical Expert, Swiss SECO/OPTIMUS Center for Good Governance
Dr. Ardeshir Atai – Visiting Lecturer for the LLM (international commercial law and maritime law), University of Hertfordshire School of Law, UK
Dr. Nils Eliasson – Partner, Mannheimer Swartling, Hong Kong
Dr. Gabriel Cavazos – Villanueva – Professor of Law and Associate Dean, School of Business, Social Sciences and Humanities, Tecnológico de Monterrey (ITESM) – Campus Monterrey, Mexico
Baiju Vasani – Partner, Jones Day, USA
Dr. R. Shashi Kumaar – Reader in Economics, Bangalore University, India
Dr. Diego P. Fernandez Arroyo – Professor, Sciences Po Law School, France
Ian Laird – Counsel, Crowell & Moring; Adjunct Professor, Columbia Law School, USA
– Suggesting ISDS should remain as it is:
Geoffrey M. Beresford Hartwell – Independent Practitioner, UK; Former Chairman, CIArb; Former External Professor of Arbitration Law, University of Glamorgan; Former Chartered Engineer, Europa Ingénieur

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.