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Investor – State Arbitration. Armand de Mestral. What is ISA?. Special form of international arbitration provided by bilateral investment treaties (BITs) to protect the interests of foreign investors and foreign investments 2700 total today Most BITs between developed and LDCs

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Presentation Transcript
what is isa
What is ISA?
  • Special form of international arbitration provided by bilateral investment treaties (BITs) to protect the interests of foreign investors and foreign investments
  • 2700 total today
  • Most BITs between developed and LDCs
  • Several hundreds between developed states (Canada – USA; EU Member States;
  • Promoted by regional trade associations ASEAN, MERCOSUR etc
  • Major LDCs also – China, India major negotiators
why is isa significant
Why is ISA significant?
  • Legally
  • Profesionally
  • Politically
legal basis of isa
Legal Basis of ISA
  • BITs
  • FTAs
  • NAFTA Ch 11
  • ICSID
where is isa conducted
Where is ISA conducted?
  • ICSID
  • ICC Paris
  • LCIA London
  • Stockholm Chamber of Commerce
  • Dubai, HK, SPORE
rights usually granted to foreign investors and foreign investments under bits
Rights usually granted to “foreign investors” and “foreign investments” under BITs
  • MFN
  • NT
  • Fair and equitable treatment
  • No performance requirements
  • No expropriation (direct or indirect) without compensation
how does isa operate
How does ISA operate?
  • Treaty promise to the foreign investor to arbitrate claims
  • No need to negotiate the establishment of an arbitration
isa arbitrators
ISA Arbitrators
  • Who is chosen?
  • How are they chosen?
  • To whom are they responsible?
claims
Claims
  • Notice of arbitration
  • Statement of claim
  • Must be from a foreign investor in respect of a foreign investment
  • Must allege economic loss due to failure to respect standards required by the treaty
  • Claim seeks monetary compensation only
kinds of claims made
Kinds of claims made
  • Asian Agricultural Products v Sri Lanka 1987
  • Wena Hotels v Egypt 1998
  • Argentine claims since 2002 (40)
  • Loewen v USA 2002
  • Methanex v USA
  • UPS v Canada
  • Canadian Cattlemen V USA
  • Waste Management v Mexico 1998
  • HFCS Cases v Mexico
  • Dow Chemical v Canada
procedure
Procedure
  • Notice – Statement – Procedural orders
  • Challenge to Jurisdiction
  • Merits- presentation of evidence – written pleadings – oral pleading – deliberation – Award
  • Damages
  • Costs
  • Review - ICSID only
  • Time needed – 2 – 5 years
complex litigation
Complex litigation
  • Teams of lawyers and other experts
  • Governments
  • Private practice
  • Canadian expertise
how do arbitrators decide
How do arbitrators decide?
  • Duty to conduct a fair hearing
  • Equality of the parties
  • Independence of the arbitrators
  • Decision must be motivated and grounded in law
applicable law
Applicable law
  • Domestic law
  • BIT
  • International law
  • General principles of law
  • Delicacy of the process
  • Novel use of international law – determining the rights of private persons and companies
the state as a party consequences
The state as a party – consequences?
  • Compare with WTO or NAFTA ch 20
  • Can the state still control the proceedings?
  • Does the state enjoy all the privileges of sovereignty?
  • Are parties really to be treated as equals?
  • Yes
isa public or private
ISA public or private?
  • Is this just another form of international commercial arbitration?
  • No
  • Is it purely public?
  • No
  • Issues are mixed and arbitrators have to be aware of the public and private dimensions of issues before them
necessary balance
Necessary balance
  • Sri Lanka – defence that there was a military operation which could not be second guessed
  • Argentine cases – plea of necessity by Argentina – need to protect public interest in a crisis
  • Waste Management – need to give the state room to regulate but sanction unfair and disproportionate means chosen
criticisms of isa
Criticisms of ISA
  • Secret
  • Private disposition of public issues
  • Avoiding normal national courts
  • Promotion of an international corporate agenda
  • Blindness to the public interest
  • Special privilege given to foreigners
  • Quis custodiet ipsos custodes?
  • Unfair to LDCs
  • Inappropriate in a democracy
how have governments responded to criticisms
How have governments responded to criticisms
  • Agree – try to get out – Venezuela, Bolivia, Ecuador
  • Accept - as the price of attracting investment – Mexico
  • Legislate to make enforcement harder - Grave political crisis – Argentina today
  • Canada and USA – decision to make all documents, pleadings and decisions and hearings public
  • ICSID attempt to follow
situation of isa today
Situation of ISA Today?
  • 2700 BITs
  • Many trade agrements have investment chapters
  • China has 110 BITs
  • Over 200 cases decided
  • Another 150 cases pending
  • Challenge to ISA or ICSID by Venezuela, Bolivia and Ecuador
  • Considerable concern in developed democracies – Canada, USA, Japan, EU Member states
  • Canada and USA changing model BITs to incorporate provisions on public interest and exceptions
why did canada buy into this process
Why did Canada buy into this process?
  • NAFTA 1994 Ch 11 (Canada – USA FTA 1988)
  • Ethyl, S.D. Myers
  • Canadian BITs (FIPAs) – 30 in force
  • 15 more under negotiation
  • Possible inclusion in future Canada – EU trade agreement