ISDS Reform at UNCITRAL: Two Guiding Principles

By Lisa Sachs

October 16, 2019

Over 60 governments, and various representatives from civil society, the private sector, and academia are in Vienna at the United Nations Commission on International Trade Law (UNCITRAL) to work on reforming international investment treaties. In particular, they are focusing on those treaties’ investor-state dispute settlement (ISDS) provisions, which enable investors to sue governments in international arbitration. Governments and other participants have widely recognized that ISDS is fundamentally flawed and needs deep reform. Concerns identified range from the critique that the decision-makers determining ISDS claims lack expected independence and impartiality; to more sweeping critiques that the system of ISDS is not serving its purported aims, and is being used instead to enable law firms, lawyers, and investment funds to profit from suing governments for what is often good faith conduct in the public interest.

Stakeholders are engaging in this UNCITRAL process in an effort to address these concerns. In order for this exercise to be meaningful, it is essential to first consider what the investment treaties aim to achieve, and then to consider what form(s) of dispute settlement will best advance those objectives. This means not only looking at reform of the existing ISDS mechanism, but also alternatives to it.

Given the concerns about ISDS, and the continued absence of evidence that its expected public benefits outweigh its public costs (see here and here), it is crucial to ensure that this multilateral UNCITRAL process does two things:

To contribute to UNCITRAL’s work on these two points, CCSI, together with the International Institute for Environment and Development (IIED) and the International Institute for Sustainable Development (IISD), has submitted to the UNCITRAL process four documents outlining potential reform options and considerations:

We also have short videos outlining each of those four proposals.

There is considerable disagreement within UNCITRAL on what the right solutions are for ISDS reform. Some, like the European Union and its member states, are advocating for the process to be used to create a standing international “court” and appellate body to hear investment treaty claims by multinational enterprises and other international investors. Others, such as Chile, Israel, Japan, Mexico and Peru, support a less “structural” way forward to ISDS reform, instead advocating reforms on discrete aspects of ISDS such as development and enforcement of adjudicator codes of conduct.

For all considered approaches, it is vital that this United Nations process account for the need to both create space for a shift away from the problematic status quo, and to develop solutions that are consistent with and advance inclusive, rights-compliant sustainable development.