This note seeks to provide policy-makers with a list of international investment reform options and indicate mechanisms through which they may implement these reforms. Broadly speaking, the note identifies three approaches. The first approach, re-domestication, consists in the elimination of special rules and procedures to protect foreign investment, i.e. Investor-State Dispute Settlement (ISDS) regime. Foreign investments and investors would be subject to the same guarantees available to their national peers in the host state. The second approach, reconceptualization, seeks to transform the international investment regime, rethinking the assumptions and beneficiaries of the system. It endeavors to replace the traditional, special protections to foreign investors through ISDS with different guarantees and fora to discuss their grievances. This approach expands the scope of stakeholders and includes the notion of sustainable investment. The third approach, ISDS reform, keeps current assumptions in place, but seeks to reduce the reach of the ISDS system and to fix problems and abuses. Most efforts to change the system until now seem to fall under this last approach.
It should be noted that these approaches are not a single undertaking, thus a country’s reform efforts could encompass initiatives that fall within more than one approach. For instance, a government might be trying to align the substantive obligations of its international investment agreements (IIAs) with the protections that its jurisdiction concedes to national investors—an elimination of special protections for foreign investors falling under the re-domestication approach. At the same time, that government might include exhaustion of local remedies as a condition to initiate an international arbitration—which would fall under the reform approach, as an effort to improve on ISDS.
Thus, these approaches present a useful taxonomy to think about the international investment regime and its potential alternatives. The note describes a wide array of procedural and substantive issues, as well as the mechanisms to address them, seeking to guide policy analysis and potential reform.
ISDS is one of the mechanisms devised after World War II to help manage investment risks faced by Global North companies investing in the developing world. The idea was to generate a legal framework to protect foreign investment that overcomes the shortcomings of national courts, perceived as unreliable, corrupt or both. To that extent, ISDS allows investors to bring claims against host states before ad hoc international tribunals, based on obligations enshrined in international investment agreements (IIAs).(1) For a long time, most countries agreed on the inclusion of investor-state dispute settlement provisions in their IIAs, driven by the belief that it would increase or at least facilitate the flow of foreign direct investment into their economies. However, the high number of disputes, as well as the lack of evidence that proves that having IIAs actually increases FDI inflows, has led some countries to adopt measures to eradicate ISDS protections.
A. Procedural Aspects
On an international level and with the specific objective of eliminating the access to arbitration to foreign investors, countries like Ecuador, Bolivia, India, Indonesia, and South Africa decided to terminate most of their IIAs. Moreover, Ecuador, Bolivia and Venezuela withdrew their consent from the ICSID Convention. These countries saw those measures as “efficient” ways to eliminate the special protections that such instruments grant to foreign investors.
Yet, there are a number of caveats that are relevant when opting for this avenue. First, most IIAs contain survival clauses, which establish that the guarantees contained in the treaty, including ISDS, would remain in force after its termination for a period of time that could range from 5 to 20 years. In that sense, even after terminating their treaties, investors would have the possibility to sue states for alleged IIAs breaches for a protracted period of time. Second, this contingency is not controlled by denouncing the ICSID Convention. Whilst some IIAs only mention ICSID as the forum where investors can bring claims against the State, most of them contain alternatives, such as ad hoc arbitrations under UNCITRAL Arbitration Rules or International Chamber of Commerce (ICC) arbitration. To that extent, exiting the ICSID system usually leaves the door open for litigation at the international level. The difference would be that investors would not benefit from the status of ICSID awards, which are deemed “equivalent to a final judgement of a court”, and would have to undertake recognition and enforcement proceedings to execute an award. In that sense, while the consequences of terminating IIAs are significant, they will only appear in the long term.
The Bolivian case is illustrative in this regard. Bolivia implemented simultaneous measures to exit from the ISDS system by withdrawing from ICSID and terminating IIAs between 2007 and 2009. However, Bolivia kept receiving notices of arbitration by foreign investors. Under ICSID, investors took advantage of the deferred effect of the denunciation (6 months pursuant to Article 71 of the ICSID Convention) or put forward innovative arguments of extended jurisdiction. Under UNCITRAL rules, claimants used the Permanent Court of Arbitration as a forum to raise their grievances.
Denouncing the ICSID Convention also arises a contingency with regards to claims by dual nationals that must be taken into account by states assessing the possibility of pursuing this alternative. Whilst Article 25(2)(a) of the ICSID Convention precludes the possibility of an investor holding dual nationality to sue one of the states that has conferred citizenship while using his other nationality, other arbitration rules are silent concerning this issue. This lacuna in, particularly, UNCITRAL Arbitration Rules has been used by investors to sue Venezuela through the Venezuela-Spain BIT, after its decision to withdraw from the ICSID Convention. This IIA allows arbitration under UNCITRAL rules if ICSID arbitration is not available. Specifically, in the García Armas and García Gruber v. Venezuela case the tribunal accepted claims from investors holding both the Spanish and Venezuelan citizenship. Moreover, two other disputes with similar fact patterns have been filed against Venezuela in recent years. Some IIAs, just like the ICSID Convention, such as the Canada-Venezuela BIT, close the door to such claims. Hence, countries should be mindful of the specific undertakings made in their IIAs with regards to dual nationals, before opting for denouncing the ICSID Convention.
Mindful of the aforementioned risks, the Columbia Center on Sustainable Investment (CCSI), the International Institute for Environment and Development (IIED), and the International Institute for Sustainable Development (IISD) have put forward a proposal that would allow countries to orderly terminate IIAs through a multilateral instrument. This mechanism is seen as a holistic response to the fundamental issues and concerns—both procedural and substantial—regarding ISDS. Its supporters claim that it is a short-term solution to the problems of existing treaties, enabling states to more clearly focus on crafting international investment instruments better designed to catalyze and govern investment for sustainable development. Additionally, through this proposal, states could get rid of the survival clauses, provided that all parties of an IIA become also parties to the multilateral convention.
In practice, the instrument would provide for two opt-in solutions that states could select on a treaty-by-treaty, opt-in list basis. This initiative is similar to the mechanism contained in the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), in the sense that each state selects either termination (Option 1) or withdrawal of consent to arbitrate (Option 2) to apply to a specific treaty or treaties. At the end, the “matching” outcome would apply to the designated treaty or treaties. If both parties select the same option, the agreement would be modified accordingly. To the extent one treaty party designates a specific treaty for withdrawal of consent (Option 2) and its treaty counterparty designates such treaty for termination (Option 1), withdrawal of consent (Option 2) will be the default option for such treaty.
Taking into account the consequences of the ISDS system and consistent with the Achmeajudgement, the majority of European Union Member States, signed on May of 2020 an agreement to terminate all bilateral investment treaties that have been concluded between two Member States of the EU.
Most recently, we are evidencing an “opt out” or “asymmetric” approach in the treaty practice. For instance, New Zealand agreed with five countries to exclude access to ISDS under CPTPP. Under USMCA, Canada excluded access to ISDSalthough Canada and Mexico are maintaining access to ISDS among themselves through CPTPP.
On the domestic level, some countries have decided to eliminate access to international arbitration granted to investors by amending the constitution or by enacting national laws. As mentioned before, Bolivia implemented simultaneous measures to exit from the ISDS system: on an international level by withdrawing from ICSID and terminating IIAs, and on a domestic level by establishing in its Constitution that the Oil and Gas sector was out of the scope of ISDS.
Similarly, Ecuador adopted measures on an international and domestic level. At the same time that Ecuador denounced the ICSID Convention in 2008, it terminated most of its BITs and adopted a new constitution. Article 422 of the Ecuadorian Constitution forbids entering into treaties or international instruments that provide jurisdiction to international arbitration in contractual or commercial disputes. Ecuador used this provision as a solution to prevent future investment arbitration disputes arising out of IIAs. In fact the Constitutional Court in Ecuador issued an opinion declaring all BITs incompatible with article 422. On the other hand, some scholars and practitioners argue that the scope of the prohibition contained in article 422 only extends to contractual or commercial disputes. Despite Ecuador’s efforts to avoid ISDS in the past, the measures adopted do not foreclose the possibility of investment claims given the fact that it has included investment arbitration clauses in some of its recent administrative contracts.
Furthermore, Venezuela also adopted measures on an international and domestic level. In 2014, Venezuela enacted the Foreign Direct Investment Law which provides no mechanism for international arbitration between foreign investors and the State and does not contain any substantive protections as such to foreign investors. Later, in 2017 Venezuela enacted a law which explicitly specifies that foreign investments shall be subject to the jurisdiction of the national courts. Thus, Venezuela tried to eliminate via national laws the possibility of investors to access international arbitration. Although Venezuela denounced the ICSID Convention and enacted national laws subjecting foreign investors to national courts, Venezuela did not terminate its IIAs and therefore it is still subject to be sued internationally. In fact, as of today Venezuela has 12 investment arbitration pending cases.
Another way to eliminate the access to arbitration to foreign investors is through the exclusion of certain sectors from the coverage of ISDS guarantees. It is important to note that some specific sectors, normally characterized by being capital-intensive and with high sunk costs, tend to be overrepresented in the total number of investor-State disputes. In Latin America, half of the disputes that have arisen out of IIAs are related to mining, oil & gas, and the provision of electricity or gas. Considering this clustering of cases in specific sectors, countries have been interested in reducing the contingencies that arise out of these activities.
For instance, and as mentioned before, Bolivia established in its Constitution that the Oil and Gas sector was out of the scope of ISDS. Mexico, for example, enacted the Pemex Act, which establishes that Mexican federal courts have jurisdiction over national disputes regardless of the existence of arbitration clauses. In August 2014, Mexico passed a new Hydrocarbons Law that provides for arbitration as the main method to resolve disputes arising from hydrocarbon contracts but excludes the administrative rescission of contracts from arbitration, and therefore this matter is of the exclusive jurisdiction of domestic courts. In consistency with the Hydrocarbons Law, the model Production-Sharing contract, issued in 2015, maintains this exclusion, attributing disputes arising out of this category of contract termination exclusively to Federal Courts. In these cases, the modification of the domestic legal system is used as a commitment device that prevents future governments from offering undertakings with regards to sensitive sectors. In Commisa v. Pemex the “arbitrability” of the rescission of the underlying contract was highly discussed. The arbitral tribunal held that it had jurisdiction concerning the rescission of the contract. However, the Mexican court of appeals later vacated the award on the ground that the arbitral tribunal addressed matters that were not arbitrable and the administrative courts had exclusive jurisdiction to hear the matter. Later in this case, the US District Court for the Southern District of New York recognized the annulled award. Finally, the US Court of Appeals affirmed the district court’s decision concluding that this case raised issues of fundamental fairness and public policy that justified exercising its authority to recognize a foreign arbitral award that had been annulled in the seat of arbitration. It will be interesting to see how future courts and tribunals apply statutes that preclude the arbitrability of the type of claim involved in the controversy.
B. Substantive Aspects
On the substantive front, ISDS tribunals have been subject of several critiques, including lack of consistency in their interpretations, invasion of the legitimate regulatory space of governments and issuance of exorbitant awards based on obscure quantum determinations. These unexpected outcomes have led some countries to eliminate not only the access to international fora, but also the removal of special substantive obligations vis-à-vis foreign investors. The aforementioned decision by Ecuador, Bolivia, India, Indonesia and South Africa to terminate IIAs has this practical consequence.
Of the latter, South Africa is a special case. While it effectively terminated most of its IIAs, the South African Parliament enacted the Protection of Investment Act of 2015. Concerning substantial obligations, it is worth noting that this legislation contains specific rights granted to foreign investors. Namely, national treatment, physical security of investment and repatriation of funds. Whilst these are not equivalent to the ample guarantees conferred to foreign investors through IIAs, they are indeed certain special protections for foreign investment to continue attracting capital inflows. However, some commentators maintain that, in practice, the Protection of Investment Act only requires South Africa to provide a foreign investor only the same treatment enjoyed by national investors.
An alternative to equate the treatment granted to foreign investors to the one available to domestic investors is to tie the standards contained in IIAs to the domestic law. To that end, countries have used joint interpretative declarations, as it was the case of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States. At the time of signature of the agreement, the contracting parties issued a joint interpretative instrument that, inter alia, clarifies that CETA will not result in foreign investors being treated more favorably than domestic investors. Another alternative, on the national level, to attempt to equate the international standards of IIAs to domestic law protecting local investors is reflected in the latest Trade Promotion Authority’s (TPA) objectives in the United States. TPA is a mechanism that enables the use of “fast track” procedures to approve trade and investment international agreements, as long as they comply with the objectives approved by the Congress. In the 2015 mandate, the US Congress indicated that the principal objective on foreign investment is: “to reduce or eliminate artificial or trade distorting barriers to foreign investment, while ensuring that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than domestic investors in the United States (...)”. As of 2020, the United States-Mexico-Canada Agreement (USMCA) was the only instrument negotiated under this authority. To that extent, it should abide by the mandate enshrined in the 2015 TPA.
The effectiveness of these last initiatives is still to be proven. To the extent that CETA and the USMCA still provide grounds for foreign investors to initiate international disputes, there is a risk of tribunals, fueled by investors’ arguments, interpreting the guarantees conceded in those agreements in an expansive fashion, surpassing the rights that domestic law gives to domestic investors. There have been cases in the past where claimants have undoubtedly attempted this strategy. For instance, in Methanex v. United States, the investor argued that the Free Trade Commission interpretation of Article 1105 of the NAFTA (explained with greater detail below) was, in effect, an amendment and, to that extent, non-binding for the tribunal. In spite of the fact that ultimately the tribunal dismissed this argument, this case exemplifies the argumentation and interpretation room that international adjudication leaves, which could be used to interpret CETA and USMCA provisions in an ample fashion.
In that regard, it seems that a multilateral convention terminating IIAs would be the most effective solution for countries that wish to exit the system. As a second-best option, countries opting for this approach might want to engage in negotiations to terminate bilaterally their IIAs, given that this would be the only other way in which they could eliminate survival clauses and, hence, prevent the initiation of new disputes in the short- and medium-term. Finally, South Africa’s strategy can also be taken as an example, as it complemented international with domestic actions to reduce its ISDS exposure. It is worth noting that after the Foresti case, which triggered the reform process, the country has not received new ISDS claims.
Taking into account the preceding considerations, the following diagram depicts the procedural and substantive issues related to the elimination of the special regime for foreign investment and the possible means of reform available to governments.
Some countries have deemed that eradicating every kind of special prerogative for foreign investors might be extreme, unnecessary or counterproductive. Conversely, they have endeavored to develop a special regime for international investment that does not revolve around investment protection, but that has as primordial objective maximize the contribution of foreign investment to the sustainable development of the host state.
The backdrop of this change of paradigm is the adoption of the United Nations Sustainable Development Goals (UN SDGs) in 2015, which are an urgent call for action by all countries to end poverty and other deprivations, but also improve health and education, reduce inequality, and spur economic growth; all while tackling climate change and preserving the environment. Moreover, the same year the UN General Assembly embraced the Addis Ababa Action Agenda on Financing for Development. This instrument recognizes the essential role that mobilizing international investment has on complementing national development efforts, but also buttresses the need to develop policies that better align private sector incentives with public goals.
The strategies geared towards reconceptualizing the international investment regime—rethinking the assumptions and beneficiaries of the system and expanding the scope of stakeholders—constitute an important part of the policies needed to maximize international investment’s contribution to the achievement of the SDGs. /p>
A. Procedural Aspects
Another way to reduce the asymmetries in the allocation of rights and obligations between foreign investors and domestic actors (including both national investors and affected communities) is replacing Investor-State Dispute Settlement provisions for State-State arbitration, an ombudsman mechanism or joint committees. Besides this, scholars have advocated for enhanced third-party rights in ISDS disputes to demand compliance by investors of both international standards and domestic regulation.
Brazil, for instance, has adopted a sui generis investment treaty model without the inclusion of investor-state arbitration provisions. Rather, Brazil’s Cooperation and Facilitation Investment Agreement Model (CFIA) includes an initial dispute prevention phase and if it fails the aggrieved party can initiate a State-State arbitration. Thus, Brazil has implemented an Ombudsman mechanism under which both states designate an ombudsman who shall be responsible to support investors from the other party in its territory, and to address differences in investment matters with a view to help in prevention of disputes. Later, if one of the parties considers that the other state breached one of the CFIA obligations, the first state submits a written request to the Joint Committee along with the underlying finding of facts and law. The Joint Committee prepares a report with its findings with the aim of resolving the disputes or at least preventing its escalation. Only if the Joint Committee fails to resolve the disputes the parties may initiate a state-state arbitration. Most recently, in January 2020, India and Brazil signed a CFIA including an ombudsman and joint committee mechanism and a state-state arbitration provision as well.
Likewise, several countries are also developing alternative BIT models including state-state arbitration provisions such as India, Indonesia, and Tanzania. Plurilateral investment agreements such as the Pacific Agreement on Closer Economic Relations Plus does not include an investor-state provision. Going further, the Intra-Mercosur Cooperation and Facilitation Agreement explicitly excludes investor-state arbitration, rather it incorporates an ombudsman mechanism to solve the disputes between the parties of the agreement.
South Africa’s Protection of Investment Act includes mediation before domestic courts as a mechanism for settlement of investment disputes. Under this Act, the investor may only submit a mediation petition before domestic courts given its exclusive jurisdiction over investment claims brought by the investor. The mediator must be appointed by agreement between the government and the foreign investor from a pre-approved list of mediators in the absence of a list, from individuals proposed by either party. However, the investor is not precluded from approaching any competent court, independent tribunal or statutory body within the state. This act also allows state- state arbitration with the requisite of previous exhaustion of domestic remedies.
Another alternative adopted by African countries on a domestic level is to enact national investment laws that offer the possibility of investor state arbitration without providing consent upfront. According to UNCTAD 59 per cent of investment laws have ISDS clauses, and some of them use the case-by-case approach under which national laws offer the possibility of ISDS but require an additional act of consent by the host State government before an ISDS arbitration can go forward. For instance, Egypt’s Investment Law (2017) does not provide consent in advance to investor- state arbitration, Namibia’s Investment Promotion Act (2016) does not provide consent in advance to investor- state arbitration, and arbitration in Namibia is only possible upon explicit consent, and Tanzania’s Natural Wealth and Resources Act (2017) does not provide consent in advance to investor- state arbitration and precludes proceedings in foreign courts or tribunals.
With regards to third-party rights, scholars have noted the shortcomings of the current ISDS framework to factor-in the profound impacts that investment projects can have on local communities and indigenous peoples. To redress this issue, they propose to create a legal right for directly affected third parties to intervene in arbitration proceedings to protect their rights and enforce relevant investors’ obligations. Furthermore, the IISD Model International Agreement on Investment for Sustainable Development proposes that third parties should be able to initiate actions for damages under the domestic law of the host state or the one of the home state if an investor breaches treaty obligations. This proposal was developed by Nigeria and Morocco in their 2016 BIT, in which parties agreed that investors shall be subject to civil actions in the home state if their actions lead to significant damage, personal injuries or loss of life in the host state. Some have gone further and have advocated for the inclusion of the possibility of communities affected by investment projects to have the right to initiate disputes before international arbitral tribunals.
In the same vein, the United Nations Working Group on Business and Human Rights released in 2018 a draft on a legally binding instrument to regulate the activities of transnational corporations and other business enterprises and to provide remedy for victims in the context of business activities. Under this instrument, States would agree that any future trade and investment agreements they negotiate, shall not contain any provisions that conflict with the implementation of the convention and shall ensure upholding human rights in the context of business activities by parties benefiting from such agreements.Similarly, a group of international lawyers and academics developed the “The Hague Rules on Business and Human Rights Arbitration” project as an alternative to resolve human rights disputes involving private parties in arbitration proceedings. However, this initiative has been criticized because, among other aspects, the instrument does not include anti-retaliation protections, there is ambiguity regarding early dismissal of claims lacking legal or factual merit and third parties may need to bear the costs of their participation.
B. Substantive Aspects
Besides changing the fora in which foreign investors submit their grievances against host states and enhancing third party rights, a reconceptualization of the international investment regime could entail putting sustainable development in the centerstage of substantial provisions. Even in the context of UNCITRAL’s Working Group III—where the focus is on procedural concerns, states frequently mention the importance of including sustainable development considerations in the ISDS reform efforts. This idea is often related to the notion that “any dispute settlement regime should appropriately address the rights and obligations of foreign investors and that the right to regulate and the flexibility of States to protect legitimate public welfare objectives should be respected”. To that end, the two central elements of introducing sustainable development concerns into the substantive aspect of the international investment regime are: (i) creating obligations for investors; and (ii) protecting states’ right to regulate to pursue legitimate public welfare objectives.
Recently, both developing and developed countries have started to include investors obligations in their IIAs and BIT Models, with a sustainable development angle.
For instance, the 2016 Morocco-Nigeria BIT contains a series of specific obligations upon investors. Among others, investors must apply the precautionary principle, maintain an environmental management system, uphold human rights in accordance with core labor and environmental standards, never engage or be complicit in corruption practices, meet or exceed national and internationally accepted standards of corporate governance, operate through high levels of socially responsible practices and apply the ILO Tripartite Declaration on Multinational Investments and Social Policy. Furthermore, a breach of investors’ anti-corruption obligations is deemed to constitute a breach of the domestic law of the host state. This clearly enables the jurisdictional defense by the State, according to which there is not a covered investment under the terms of the treaty if the suing investor was engaged in acts of corruption. Another approach has been taken by Colombia, whose 2017 Model BIT includes human rights violations, serious environmental damage, fiscal fraud, corruption, labor law violations, and money laundering as grounds to deny the benefits of IIAs.
With regards to the developed world, the new model text issued by the Netherlands in 2019 has been seen as a prototype for a new generation of investment treaties, paving the way with progressive rules on sustainable development. Specifically concerning investors’ obligations, Article 7(3) states: “The Contracting parties reaffirm the importance of investors conducting a due diligence process to identify, prevent, mitigate and account for environmental and social risks and impacts of its investment”. Additionally, pursuing Article 23, tribunals are expected to take into account non-compliance by the investor of its commitments under the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.
Likewise, the efforts to protect governments' regulatory space have been materialized in the texts of newer agreements. A number of recent BITs contain provisions reaffirming the State’s right to regulate. For instance, Article 23 of the aforementioned 2016 Morocco-Nigeria BIT establishes that “the Host State has the right to take regulatory or other measures to ensure that development in its territory is consistent with the goals and principles of sustainable development, and with other legitimate social and economic policy objectives”; and that “non-discriminatory measures taken by a State Party to comply with its international obligations under other treaties shall not constitute a breach of this Agreement”.
The attempt to protect states’ right to regulate has also been enshrined in exceptions to the obligations enshrined in IIAs. A notable example is contained in the Investment Chapter of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which in its Article 9.17 contains the following exception: “Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives”. The noteworthy element of this exception is its “self-judging” nature, derived from the use of the expression “that it considers appropriate”.
Another salient element of the CPTPP related to the right to regulate is the tobacco carve-out. Article 29.5 of this agreement allows parties to deny the benefits of the Investment Chapter to investors making claims related to tobacco control measures.
Other agreements and model BITs provide the inclusion of general exceptions provisions that allow the State to enact laws designed to protect human rights, among others.
However, these reforms could also be achieved in a more holistic manner that goes beyond the modification or establishment of specific bilateral relations amongst countries. Specifically, the Harrison Institute has proposed a framework convention model to shift focus from investor-protection to sustainable development. These instruments have the following features; they: (i) establish common goals and principles; (ii) create a platform for continuing negotiations and consensus building; (iii) allow for a flexible and incremental approach; and (iv) elevate the profile of the issue. To that extent, a framework convention on sustainable investment could serve as a platform for countries interested in reconceptualizing the international investment regime, where, progressively, agreements could be hammered out to include the procedural and substantive solutions described above.
The MLI-type model, explained in detail in the next section, could also be used as a multilateral tool to implement some of the most practical reconceptualization solutions, such as State-State arbitration, third party rights, protection of policy space and establishing obligations for foreign investors. This is an alternative to the framework convention, if the latter proves difficult to obtain given the important amount of political capital that creating platforms for continuing negotiation and consensus building implies. For instance, a flexible convention would allow parties to implement State-State arbitration, replacing investor-state provisions with other types of mechanisms to settle disputes. A flexible instrument would also allow reservations by specifying the treaties covered by the convention through an opt-in or opt-out mechanism or choosing which reforms apply to covered treaties by allowing parties a decision between alternative options.
Finally, UNCTAD has also pursued the idea of integrating sustainable development in international investment policy. In that sense, it has asserted that states must have "the sovereign right to establish entry and operational conditions for foreign investment, subject to international commitments, in the interest of the public good and to minimize potential negative effects”.
In that sense, governments could devise investment screening mechanisms to assess the conformity of the incoming investment with the fulfillment of its sustainable development strategy. Existing investment review proceedings can be helpful to devise such a mechanism. Whereas most of them are centered in national security considerations, some allow the government to review investment proposals and block or condition them if it deems that they could be contrary to the “national interest”. For instance, when assessing if an investment project is consistent with its national interest, Australia takes into account, inter alia, the environmental impact and the effects on the economy and the community.
The basic tenets of a mechanism of this sort, that would promote international investment that contributes to the fulfilment of the SDGs, could also be agreed under the umbrella of a framework convention.
The following diagram depicts the procedural and substantive avenues to reconceptualize the international investment regime. It is worth noting how many of the solutions could be implemented through a multilateral convention, either in a framework version or a MLI-type instrument. Additionally, Brazil’s approach to reconceptualize the international investment regime is notable. CFIAs contain many of the alternative dispute resolution mechanisms discussed and also include substantive provisions that further sustainable development.
A less progressive solution to reform the procedural and substantive issues that have arisen from IIAs litigation is restraining the availability of ISDS as a forum to challenge states’ decisions and reducing the reach of the obligations undertaken by states through this type of agreements. This approach keeps current assumptions in place but seeks to reduce the reach of the ISDS system and to fix problems and abuses.
A. Procedural Aspects
Current discussions at UNCITRAL, Working Group III are focused only on the procedural aspects of the ISDS system. The procedural concerns included in the agenda of discussions are the following: (i) “tribunals, ad hoc and standing multilateral instruments (multilateral advisory center, stand-alone review or appellate mechanism and standing first instance and appeal investment court with full-time judges)”, (ii) “arbitrators and adjudicators appointment methods and ethics (ISDS tribunal members' selection appointment and challenge and code of conduct)”, (iii) “treaty Parties' involvement and control mechanisms on treaty interpretation”, (iv) “dispute prevention and mitigation (strengthening of dispute settlement mechanisms other than arbitration such as ombudsman and mediation, exhaustion of local remedies, procedure to address frivolous claims, including summary dismissal, multiple proceedings, reflective loss and counterclaims by respondent States”, (v) “cost management and related procedures (expedited procedures and principles or guidelines on allocation of cost and security for cost”, (vi) third-party funding, and (vii) “multilateral instrument for the implementation of ISDS reforms”.
The following are the procedural concerns that would likely improve the existing ISDS system by limiting the scope of arbitration. States can limit the scope of arbitration by (i) requiring exhaustion of local remedies, (ii) including fork in the road provisions, (iii) allowing counterclaims, (iv) restricting third-party funding, (v) including early dismissal of frivolous claims provisions, and (vi) establishing keyholes—such as the existence of a government contract—to get access to special protections. Points (iii), (iv), and (v) have been included in the UNCITRAL reform agenda.
In the first place, the exhaustion of local remedies refers to the use of domestic remedies for a certain period of time before international arbitration may be initiated. Exhaustion of local remedies aim to preserve the sovereignty of the host State and provide it with the opportunity, within its internal legal system, to redress the breach. For instance, Article 10 of the Argentina-Germany BIT, includes a provision that requires the use of domestic remedies between 3 months to 2 years. Similarly, Article 14(D)(5) of USMCA (2018) conditions and limits the consent to arbitration to the pursuit of local remedies with respect to the measures alleged to constitute a breach before a competent court or administrative tribunal for a period of 30 months, unless, seeking local remedies is “obviously futile”. Thus, a good way to limit the access to arbitration is to require both judicial and administrative means before access to arbitration, given that some Tribunals have dismissed cases on jurisdictional grounds due to lack of exhaustion of local remedies.
Secondly, states may include a fork in the road provision in their treaties. Under this provision, the investor elects to submit a claim at one particular forum that may include the national courts of the host state or an investment arbitration tribunal. That election is definitive and final, and the investor may not submit another claim, related to the same matter or underlying measure to other fora. The inclusion of a fork in the road condition “forecloses the possibility of electing any other dispute resolution procedures potentially available. USMCA for example incorporates an “asymmetrical” fork in the road provision. This provision states that an investor of the United States may not submit to arbitration a claim that Mexico has breached an obligation under the investment chapter if the investor has alleged that breach of an obligation under the same investment chapter in proceedings before a court or administrative tribunal of Mexico. Thus, this provision prohibits an investor who has brought a claim for breach of the USMCA in Mexican courts from bringing a claim for the same breach of the USMCA in international arbitration.
Some tribunals have declined jurisdiction under fork in the road provisions. For instance, in Pantechniki v. Albania, the tribunal found that the investor’s claims were precluded from being heard by an ICSID tribunal because they arose out of the same alleged entitlement to payment for contractual losses that the investor had already brought before the courts in Albania. Similarly, in, H&H v. Egypt the Award concluded that the Tribunal lacked jurisdiction over the dispute because H&H’s previous submission of claims with the same fundamental basis to an arbitral tribunal, and therefore the investor had triggered the fork-in-the-road provision. Thus, one of the advantages of the fork in the road provision is that it prevents the duplication of procedures and claims. However, it should be noted that certain tribunals have held that the requirements of triggering fork in the road clauses are difficult to satisfy.
Thirdly, States may include explicitly the possibility to bring counterclaims in their investment treaties and this possibility might also be included in arbitral rules. In fact, the State may bring against the investor a claim related to violations of investor obligations and the obligations should not be limited only to environmental obligations as commonly believed. States may also include other obligations related to the compliance of laws and regulations of the host states with the purpose of elevating local violations to treaty breaches. Thus, Article 13 of the COMESA Investment Agreement (2007) states that investors “shall comply with applicable domestic measures of the Member State in which their investment is Made.” Furthermore, article 28(9) of the same treaty states that “the State may bring claims concerning failure of the investor “to comply with all applicable domestic measures.” Arbitral rules are also an instrument to allow counterclaims in arbitration proceedings. For instance, Rule 46 of the ICSID Convention also provided for such a possibility. Allowing counterclaims could eliminate parallel proceedings and therefore have a positive impact on duration and costs and also in other related aspects as third-party funding. In Urbaser v. Argentina the Tribunal found that Argentina’s right to bring counterclaims against investors was “supported by the need to avoid duplication of procedures and to prevent the risk of contradictory decisions.” Most recently, in Perenco v. Ecuador, under the host state’s environmental counterclaim, the tribunal ordered the investor to compensate Ecuador USD 54 million.
Fourthly, states may prohibit or regulate third-party funding through treaties or national laws. There are two alternatives to address this issue: (a) Prohibit the mechanism o (b) regulate the practice by introducing mechanisms to ensure transparency. There are different ways to regulate the behavior, such as creating rules for third party funding through (i) treaties, (ii) national legislation, or (iii) arbitration rules. Third-party funding can be regulated through IIAs treaties or a potential Framework Convention regulating for instance the extent of the disclosure, identity of the funders, and terms of the agreement. States may also opt for regulating third-party funding through national laws following the example of Hong Kong and Singapore. Singapore allows the disclosure of the identity of the funders to see if there is a potential conflict of interests. However, most arbitration laws and arbitration rules are silent about issues of protection of confidential and privileged information and generally leave the issues to the arbitrators’ discretion. In addition, solutions to these questions would vary depending on the legal traditions. Lastly, Third- party funding can be also regulated through Arbitral Rules, ICSID for example, proposed a rule to regulate third party funding requesting only the disclosure of the name and address of the third-party funder.
States can also include early dismissal of frivolous claims provisions in their treaties. A frivolous claim is that one ‘lacking a legal basis or legal merit’, ‘not serious’ or ‘not reasonably purposeful’. A mechanism of dismissal of frivolous claims can be inserted in treaties but also in arbitration rules or a framework convention.
Finally, the United States-Mexico-Canada Agreement (USMCA) includes a novelty in the legal engineering of IIAs. Whereas most investors are only allowed to bring claims based on direct expropriation, national treatment, and most-favored nation substantive obligations; those who are parties to a covered government contract and operate in a covered sector can use the whole array of disciplines contained in the Investment Chapter (including the minimum standard of treatment). The covered sectors are: (i) oil & gas exploration, extraction, refining, transportation, distribution, or sale, (ii) supply of power generation (iii) telecommunications services (iv) transportation services, and (v) the ownership or management of roads, railways, bridges, or canals.
To that extent, the existence of a covered government contract can be seen as a keyhole necessary to get access to the more favorable protections contained in the agreement. In this way, governments can reduce their exposure to investor claims and only agree to higher protections for certain sensitive sectors.
During the UNCITRAL Working Group III discussions, several governments have presented submissions supporting the idea of a multilateral instrument as the appropriate means to implement several of the discussed procedural reforms. As a consequence, UNCITRAL’s Secretariat has recently issued a paper discussing the possible characteristics that such an instrument might have. This proposal specifically refers to Colombia’s submission, suggesting that a unique multilateral convention, inspired in the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), would provide a means to modify existing IIAs in an efficient and consistent manner, while allowing an important degree of flexibility to its signatories.
B. Substantive Aspects
As for the reform agenda with regards to substantive norms, during the last years countries have engaged in a process of what has been known as modernization of IIAs obligations, i.e. reducing the scope and reach of such undertakings. Among the obligations that have been reformed, fair and equitable treatment (FET), most favored nation (MFN) and the protection against indirect expropriation have been at the centerstage.
FET is by far the most litigated and controversial standard granted to investors in IIAs. Widely adopted in BITs negotiated during the late 1960s and the 1970s, FET quickly developed to encompass various interpretations of fairness, including arbitrariness, consistency, stability, transparency, coercion and legitimate expectations. Particularly, the latter element, i.e. legitimate expectations, has been highly controversial among states and commentators. This is so, because some arbitrators have interpreted that FET is breached whenever a State does not live up to the representations and assurances made by public officials to foreign investors. Furthermore, states and commentators have maintained that respecting “legitimate expectations” establishes an unrealistic, stringent and utopian standard that requires a regulatory freeze for governments.
Moreover, the specific drafting of a FET clause is instrumental to determine its scope and content. Broad formulations establishing that contracting parties shall ensure fair and equitable treatment, without any reference to the minimum standard of treatment to aliens under customary international law, often lead to excessive leeway to arbitrators to decide cases with their own notions of justice and fairness. For instance, in Pope & Talbot v. Canada, while interpreting NAFTA Article 1105(1), the tribunal held that FET was “additive” to the minimum standard of treatment.
Traditionally, the Most Favored Obligation (MFN) aims to guarantee that a certain country would not discriminate based on nationality. It is usually understood as a contingent standard, as it depends from the treatment that the host country is giving to the products, entities or investment from other countries. With regards to foreign investment protection, MFN clauses aim to prevent less favorable treatment to investors from the signatory State vis-à-vis comparable investors from any third country. In spite of this straightforward objective, in practice, these kind of undertakings have been extensively used by foreign investors to claim the application of more “investor-friendly” provisions in other IIAs concluded by the host State with third countries. The issue with this practice is that it allows investors to cherry pick the most advantageous clauses from different treaties concluded by the host State, thereby potentially undermining individual treaty bargains.
Protection against unlawful takings has been, historically, one of the main concerns of foreign investment protection regimes. For that reason, virtually every IIA contains provisions that regulate the way in which states can expropriate property and businesses of foreign investors. In order to avoid circumvention of the conditions imposed to traditional takings, most agreements cover both direct and indirect expropriation. The latter refers to situations where there is an effective transfer of property rights, without physically seizing or formally taking over the property. However, investors have taken advantage of the indirect expropriation concept to challenge general non-discriminatory regulations that turn out to have a detrimental impact on their investments. Examples of such regulatory actions are a ban on certain kinds of activities or the imposition of restrictions on a business on environmental grounds. In these cases, states are rightfully concerned about a potential invasion of their legitimate public policymaking sphere.
The preferred solutions, until now, by which states have tried to address the unforeseen consequences of the interpretations made by tribunals of these obligations have been either reducing the reach and clarifying the extent of the disciplines or eliminating them entirely. Both alternatives are materialized through joint interpretations, new BIT models or new agreements.
With regards to reduction of the reach of obligations, for instance, to counter the expansive interpretations of FET, NAFTA’s contracting parties issued notes of interpretation asserting that the concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition beyond the minimum standard of treatment. This precedent eventually led the US to include the same formulation in its Model BIT and, it was followed by several countries, such as Chile, Singapore, Australia, New Zealand, China and Japan, which limited the scope of FET on their subsequent IIAs. In a similar way, concerning MFN, CETA clarifies that substantive obligations in other IIAs do not in themselves constitute “treatment”, absent measures adopted by a State pursuant to such obligations. On its account, CPTPP clarifies that MFN does not encompass international dispute resolution procedures or mechanisms. Finally, with regards to indirect expropriation, Canada and US BIT models exclude certain types of State regulation—even those that harm investments—from the definition of indirect expropriation and insert in explanatory annexes a list of factors intended to help tribunals with their interpretation when assessing an indirect expropriation claim.
Concerning elimination of substantive obligations, India went a step further and stripped out FET from its Model BIT in 2015, leaving only some elements associated with the obligation, such as denial of justice and fundamental breach of due process. Furthermore, USMCA, in practice, also removes the majority of substantive protections—including FET and full protection and security—as general rule. Likewise, several new agreements do not include MFN as a standard of treatment granted to foreign investors.
The following diagram depicts the discussed solutions with the avenues of reform. It is important to recall that, in spite of the fact that the current mandate of UNCITRAL Working Group III is limited to procedural reforms, a multilateral instrument like the one proposed by Colombia in that forum could be also applicable to carry out substantive reforms, where there is enough consensus in the international community. Concerning bilateral avenues, recent agreements—such as USMCA, CETA, and CPTPP—can be seen as the most developed attempts to reform ISDS, while keeping its core assumptions in place.
The international investment regime setup is in flux. Mounting criticism towards ISDS has led countries to engage in several and diverse reform agendas to align their investment policies with the fulfillment of general policy goals. Among those agendas, three approaches stand out, i.e. ISDS re-domestication, reconceptualization of the international investment regime, and ISDS reform.
States’ re-domestication attempts aim to the elimination of special rules and procedures to protect foreign investment, availing to foreign investors the same guarantees at the disposal of domestic investors. To eradicate both the procedural and substantive guarantees that support ISDS an important number of developing countries have terminated several IIAs. However, the long survival clauses enshrined in those agreements maim the effectiveness of such strategy. Denouncing the ICSID Convention does not prevent these liabilities, due to the existence of alternate ISDS fora. States attempting to withdraw from the system have also carried out reforms to their domestic legal systems. However, without a parallel international strategy these initiatives have been clearly limited, as shown by the case of Venezuela. Conversely, South Africa’s experience shows how it is possible to complement international and domestic actions to reduce ISDS exposure.
In this context, proposals with a multilateral focus, such as the “Withdrawal of Consent to Arbitrate and Termination of International Investment Agreements Convention” suggested by CCSI, IIED, and IISD, seem like promissory solutions, if a critical mass of states with enough political will get behind them.
The reconceptualization of the international investment regime is underpinned by the UN SDGs, the Addis Ababa Action Agenda on Financing for Development, and the acknowledgement that foreign investment is necessary to complement national development strategies. To achieve this, alternative means of dispute resolution—more mindful of the developmental needs of host countries—are required. Furthermore, countries and stakeholders that advocate for reconceptualization buttress the need of rebalancing the system, imposing obligations on investors, allowing regulatory space for states, and enhancing third party rights in investment disputes. In that regard, Brazil and its CFIA model provides an interesting example of international agreements dealing with investment, but with a totally different focus compared to traditional ISDS-centered BITs. This model prefers dispute prevention and alternative means to solve altercations, such as joint committees and ombudsman mechanisms, and include provisions that respect the states’ right to regulate.
This approach could also have a multilateral dimension, either in the form of a framework convention on sustainable investment or by the negotiation of a MLI-type instrument. Whereas the former would provide an ongoing platform to, incrementally, achieve substantive and potentially transformative consensus; the latter allows for quick-fixes to introduce the reforms most needed.
Finally, most countries, to the moment, are devoting their efforts in the ISDS reform approach. The initiatives encompassed within this approach keep current assumptions in place, but seek to reduce the reach of the ISDS system and to fix problems and abuses. On the procedural level, the developments of UNCITRAL’s Working Group III are promising, and the idea of negotiating a MLI-type instrument to materialize them is inspiring. However, several countries have expressed the need of a deeper and wider reform than the one permitted by UNCITRAL’s current mandate. Partially due to this reason, reform solutions have found their way into recent IIAs, such as USMCA, CETA, and CPTPP.
All in all, it is important to bear in mind that the approaches recognized in this brief are not mutually exclusive. Countries can, and effectively have, engage in initiatives that can be encompassed in more than one approach. To a certain degree, the means of reform limit the extent to which reform can be achieved. Domestic solutions have clear limitations and bilateral agreements require a substantial alignment of interests of the negotiating parties. In that sense, the multilateral initiatives that have been appearing in each of the identified approaches can set the floor for the overarching and deep transformation that the system currently needs.
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 5 (Oxford University Press, 2nd ed. 2019).
 Michael Frenkela & Benedikt Walteray, Do Bilateral Investment Treaties Attract Foreing Direct Investment? The Role of International Dispute Settlement Provisions (WHU - Otto Beisheim School of Management, Working Paper 17/08 2017).
 Bolivia and Ecuador withdrew from the ICSID Convention in 2009. Venezuela withdrew in 2012.
 U.N. Conference on Trade and Development (UNCTAD), Denunciation of the ICSID convention and BITS: impact on investor-state claims, IIA Issues Note 3 (2010).
 Sergey Ripinsky, Venezuela’s Withdrawal From ICSID: What it Does and Does Not Achieve, Investment Treaty News (2012), https://www.iisd.org/itn/es/2012/04/13/venezuelas-withdrawal-from-icsid-what-it-does-and-does-not-achieve/#_ftn7.
 José Carlos Bernal Rivera & Mauricio Viscarra Azuga, Life after ICSID: 10th anniversary of Bolivia's withdrawal from ICSID, Kluwer Arbitration Blog (2017), http://arbitrationblog.kluwerarbitration.com/2017/08/12/life-icsid-10th-anniversary-bolivias-withdrawal-icsid/
 Javier García Olmedo, Claims by Dual Nationals under Investment Treaties: A New Form of Treaty Abuse?, EJIL:Talk! Blog of the European Journal of International Law (2015), https://www.ejiltalk.org/claims-by-dual-nationals-under-investment-treaties-a-new-form-of-treaty-abuse/
 See Domingo García Armas, Manuel García Armas, Pedro García Armas and others v. Bolivarian Republic of Venezuela (PCA Case No. 2016-08) and Luis García Armas v. Bolivarian Republic of Venezuela(ICSID Case No. ARB(AF)/16/1).
 Clovis Trevino, Treaty Claims by Dual Nationals: A New Frontier?, Kluwer Arbitration Blog (2015), http://arbitrationblog.kluwerarbitration.com/2015/10/08/treaty-claims-by-dual-nationals-a-new-frontier/
 Submission to UNCITRAL Working Group III on ISDS Reform, contributed by Columbia Center on Sustainable Investment (CCSI), International Institute for Environment and Development (IIED), and International Institute for Sustainable Development (IISD), Draft Treaty Language: Withdrawal of Consent to Arbitrate and Termination of International Investment Agreements (15 July 2019), https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/wgiii_withdrawalconsent_0.pdf
 This draft text is inspired by the EU’s initiative to terminate intra-EU bilateral investment treaties and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), a legal instrument based on the text below would enable states to efficiently and legally (i) secure international termination of existing IIAs or (ii) amend existing IIAs so as to restrict access to ISDS (while leaving underlying treaty obligations and the possibility of state-to-state dispute settlement in place). States could also use this approach to limit ISDS to certain causes of action, amending IIAs to retain consent to ISDS for some claims (e.g., direct expropriation after exhaustion of domestic remedies) while eliminating it for others (e.g., fair and equitable treatment).
 Draft Treaty Language: Withdrawal of Consent to Arbitrate and Termination of International Investment Agreements. This document was submitted to UNCITRAL Working Group III on ISDS reform in accordance with paragraph 83 of document A/CN.9/970 (Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its 37th session (New York, 1-5 April 2019) at 3. See also footnote 10.
 Slovak Republic v. Achmea B.V., CJEU Case C-284/16, ¶ 58-60. In this case the Court found that investor-State arbitration clauses in intra-EU bilateral investment treaties are incompatible with the EU Treaties.
 Agreement for the Termination of Bilateral Investment Treaties Between the Member States of the European Union, EU Doc. A/T/BIT/en 1 (2020), https://ec.europa.eu/info/files/200505-bilateral-investment-treaties-agreement_en  New Zealand, Foreign Affairs and Trade, Comprehensive and Progressive Agreement for Trans-Pacific Partnership text and resources, https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/cptpp/comprehensive-and-progressive-agreement-for-trans-pacific-partnership-text-and-resources/
USMCA, Agreement between the United States of America, the United Mexican States, and Canada, Chapter 14 (2019) https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5737/download
 M. Angeles Villarreal and Ian F. Fergusson, NAFTA and the United States-Mexico-Canada
Agreement (USMCA), Congressional Research Service, R44981 at 23 (2 March 2020), https://crsreports.congress.gov/product/pdf/R/R44981  Bolivia, Constitución Política del Estado (2009), Art. 366, https://www.oas.org/dil/esp/Constitucion_Bolivia.pdf
 Article 422(1) of the Ecuadorian constitution states that “Treaties or international instruments where the Ecuadorian State yields its sovereign jurisdiction to international arbitration, in contractual or commercial disputes, between the State and natural persons or legal entities cannot be entered into (…).”
 According to the Ecuadorian Constitution and local laws, denunciation of certain international treaties requires the National Assembly’s approval and, additionally, a previous and binding opinion issued by the Constitutional Court.
 Javier Jaramillo and Camilo Muriel-Bedoya, Ecuadorian BITs’ Termination Revisited: Behind the Scenes, Kluwer Arbitration Blog (2017), http://arbitrationblog.kluwerarbitration.com/2017/05/26/ecuadorian-bits-termination-revisited-behind-scenes/
 César Coronel Ortega, Ecuador and ISDS – A Rough Journey and a Possible New Beginning (December 2017), https://oxia.ouplaw.com/page/674. See also, Andres Arauz G., Ecuador’s Experience with International Investment Arbitration, South Centre, Investment policy Brief No. 5 at 4 (August 2015), https://www.southcentre.int/wp-content/uploads/2015/08/IPB5_Ecuador%E2%80%99s-Experience-with-Intl-Investment-Arbitration_EN.pdf
 Official Gazette, Decree Law No. 1438 - Decree with Status, Value, and Force of Foreign Investment Law, (18 Nov 2014), http://www.traviesoevans.com/memos/2014-11-18-6152-inversiones-extranjeras.pdf,
 Venezuela, Constitutional Law on Productive Foreign Investment (enacted on December 29, 2017) Art 6, http://dctos.finanzasdigital.com/Gaceta-Oficial-41310-Ley-Inversion-Extranjera.pdf
 Current pending cases: Maeso v. Venezuela (2019), Williams Companies and others v. Venezuela (II) (2019), Abanto v. Venezuela (2018), Kimberly-Clark v. Venezuela (2018), Smurfit Holding B.V. v. Venezuela (2018) Trapote v. Venezuela (2018), Air Canada v. Venezuela (2017), Venoklim v. Venezuela (2017), Agroinsumos Ibero-Americanos and others v. Venezuela (2016), García Armas v. Venezuela (2016), Saint Patrick Properties v. Venezuela (2016), Venezuela US v. Venezuela (2013). Some Tribunals have declined jurisdiction given the lack of consent to arbitration due to the denunciation of the ICSID Convention. For example, in Fabrica de vidrios v. Venezuela the tribunal concluded that it would only have had jurisdiction over the dispute if Venezuela had entered into an agreement with the investors to submit disputes to ICSID arbitration before the notice of denunciation. Since this was not the case, and Venezuela had withdrawn from the ICSID Convention before the investors submitted the case, perfected consent was not given, and the tribunal consequently had no jurisdiction over the dispute. Furthermore, the Tribunal held that “ICSID arbitration was only available if the conditions for access to ICSID arbitration in both the investment treaty and the ICSID Convention had been satisfied.”
Center for the Advancement of Rule of Law in the Americas (CAROLA), ISDS Reform in Latin America (2019), https://www.law.georgetown.edu/carola/wp-content/uploads/sites/29/2020/05/ISDS-Landscape-in-LA.pdf
 Pemex Law, Ley de Petroleos Mexicanos (11 August 2014) Article 115, Available at http://www.diputados.gob.mx/LeyesBiblio/pdf/LPM_110814.pdf
 Hydrocarbons Law (11 August 2014) Available at http://www.diputados.gob.mx/LeyesBiblio/ref/lhidro/LHidro_orig_11ago14.pdf
 Alejandro López Ortiz and Gustavo Fernandes, A Year of Legal Developments for International Arbitration in Latin America, Kluwer Arbitration Blog (2016), http://arbitrationblog.kluwerarbitration.com/2016/01/11/a-year-of-legal-developments-for-international-arbitration-in-latin-america/
 Steven Finizio and Santiago Bejarano, Annulled Commisa v Pemex arbitration award enforced, LexisPSL Arbitration at 2 (October 10, 2016), https://www.wilmerhale.com/en/insights/publications/2016-10-12-annulled-commisa-v-pemex-arbitration-award-enforced. Later in this case, Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploración y Producción, 962 F.Supp.2d 642 (S.D.N.Y. 2013), the US District Court for the Southern District of New York recognized the annulled award. The US Court of Appeals decided that “the Mexican court of appeals retroactive application of the new law was ‘repugnant to United States law,’ and unfair. The court reasoned that, not only had the Mexican decision applied legislation that was not in effect at the time the contract was entered into, but that there was no other statute or law that otherwise precluded the arbitrability of the type of claim involved.”
 South Africa, Protection of Investment Act, Act No. 22 of 2015, Official Gazette, Vol. 606, No. 39514 (2015), https://investmentpolicy.unctad.org/investment-laws/laws/157/south-africa-investment-act
 D.M. Davis, Bilateral Investment Treaties: Has South Africa Chartered A New Course?, in Globalization Reimagined: A Progressive Agenda for World Trade and Investment Law (Alvaro Santos, Chantal Thomas & David Trubek eds., Anthem Press 2019).
 Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States, Paragraph 6. Text available here http://data.consilium.europa.eu/doc/document/ST-13541-2016-INIT/en/pdf.
 Sec. 102(b)(4). Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015)
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 641 (Oxford University Press, 2nd ed. 2019).
 Piero Foresti, Laura de Carli and others v. Republic of South Africa (ICSID Case No. ARB(AF)/07/1).
 United Nations Sustainable Development Goals, https://sustainabledevelopment.un.org/?menu=1300 (last visited May 18, 2020).
 Addis Ababa Agenda of the Third International Conference on Financing for Development, https://sustainabledevelopment.un.org/frameworks/addisababaactionagenda (last visited May 18, 2020).
 For the dispute prevention phase, Brazil relies on Focal Points or Ombudsman Mechanism whose principal function will be to provide governmental support to the investments of the other Party in their country. See Brazil: Brazil – Angola Agreement on Cooperation and Facilitation of Investment, Article 5.
 Article 23 of the Ethiopian CFIA; Article 24 of the Surinamese CFIA. See also Natali Cinelli Moreira, Cooperation and Facilitation Investment Agreements in Brazil: The Path for Host State Development, Kluwer Arbitration Blog (2018), http://arbitrationblog.kluwerarbitration.com/2018/09/13/cooperation-and-facilitation-investment-agreements-in-brazil-the-path-for-host-state-development/.
 Cooperation and Facilitation Investment Agreement between India and Brazil (2020), Article 14.
 Id. Articles 14 and 19.
 Tony Dymond and Z J Jennifer Lim, Investment Treaty Arbitration in the Asia-Pacific, Global Arbitration Review (2019), https://globalarbitrationreview.com/chapter/1193372/investment-treaty-arbitration-in-the-asia-pacific. See also Uché Ewelukwa Ofodile, African States, Investor–State Arbitration and the ICSID Dispute Resolution System: Continuities, Changes and Challenges, ICSID Review - Foreign Investment Law Journal, 6 April 2020.
 Protocolo De Cooperación y Facilitación de Inversiones Intra-mercosur, Art 18 and 24 (2019),https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5548/download
 Mediation is essentially a negotiation facilitated by a neutral third party. Unlike arbitration, which is a process of ADR somewhat similar to trial, mediation doesn't involve decision making by the neutral third party. Document available at https://www.thedti.gov.za/gazzettes/39514.pdf. Art. 13. (1) An investor that has a dispute in respect of action taken by the government, which action affected an investment of such foreign investor, may within six months of becoming aware of the dispute request the Department to facilitate the resolution of such dispute by appointing a mediator.
 Like South Africa, other African countries have adopted national investment laws that focus on amicable settlement or Alternative Dispute Resolution -ADR- e.g. mediation in national courts before arbitration.
 UNCTAD, Reforming Investment Dispute Settlement: A Stocktaking, IIA Issues Note, No. 1 at 10 (March 2019), U.N. Doc UNCTAD/DIAE/PCB/INF/2019/3, https://unctad.org/en/PublicationsLibrary/diaepcbinf2019d3_en.pdf
 Egypt’s Investment Law (2017), Namibia’s Investment Promotion Act (2016), South Africa’s Protection of Investment Act (2015), Tanzania’s Natural Wealth and Resources Act (2017). See Id. at 11, See also WIR17 and WIR18, Chapter III.
 The term third party refers to amicus curiae (‘friends of the court’), indigenous communities, and local residents that can be affected by investor-state proceedings. Currently, these actors have “little or no voice in investor state arbitration proceedings”. Lorenzo Cotula and Nicolás M. Perrone, Reforming investor-state dispute settlement: what about third-party rights, IIED Briefing, p. 1 (February 2019), https://pubs.iied.org/pdfs/17638IIED.pdf . See also, Perrone, The international investment regime and local populations: are the weakest voices unheard? Transnational Legal Theory 7(3) (2016) p. 383–405.
 Lorenzo Cotula and Nicolás M. Perrone, Reforming investor-state dispute settlement: what about third-party rights, IIED Briefing (February 2019), https://pubs.iied.org/pdfs/17638IIED.pdf
 International Institute for Sustainable Development, Model International Agreement on Investment for Sustainable Development (April 2005), https://www.iisd.org/pdf/2005/investment_model_int_agreement.pdf
 Morocco-Nigeria BIT (2016) Article 20. Text available here https://investmentpolicy.unctad.org/international-investment-agreements/treaties/otheriia/3711/morocco---nigeria-bit-2016-
 Erasmus University Rotterdam, Open Letter on the Asymmetry of ISDS (February 2019), https://www.eur.nl/en/news/erasmus-institute-public-knowledge. See also, Arcuri, Montanaro Violi, Proposal for a Human Rights-Compatible International Investment Agreement: Arbitration for All (2018), https://www.ohchr.org/EN/Issues/Business/Pages/IIAs.aspx Opens external This proposal articulates specific provisions in relation to the basis for direct claims and counterclaims of states and affected communities. See also, Model Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation (2018) note 3, http://stockholmtreatylab.org/wp-content/uploads/2018/07/Treaty-on-Sustainable-Investment-for-Climate-Change-Mitigation-and-Adaptation-1.pdf
 U.N. Working Group on Business and Human Rights, Legally Binding Instrument to Regulate, In International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises (2018), https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/Session3/DraftLBI.pdf
 Id., Article 13.6
 Center for International Legal Cooperation - The Business and Human Rights Arbitration Working Group, The Hague Rules on Business and Human Rights Arbitration (2018), https://www.cilc.nl/project/the-hague-rules-on-business-and-human-rights-arbitration/
 See Columbia Center on Sustainable Development, Elements for consideration in draft arbitral rules, model clauses, and other aspects of the arbitral process (January 31, 2019), http://ccsi.columbia.edu/files/2019/02/CCSI-Submission-on-BHR-Arbitration-Elements-Paper.pdf
 WGIII Report on Thirty-Sixth Session ¶16 (Nov. 6, 2018), https://undocs.org/en/A/CN.9/964
 Tarcisio Gazzini, The 2016 Morocco-Nigeria BIT: An Important Contribution to the Reform of Investment Treaties, Investment Treaty News (2017), https://www.iisd.org/itn/2017/09/26/the-2016-morocco-nigeria-bit-an-important-contribution-to-the-reform-of-investment-treaties-tarcisio-gazzini/
 Morocco-Nigeria BIT (2016) Article 17.4. Text available here https://investmentpolicy.unctad.org/international-investment-agreements/treaties/otheriia/3711/morocco---nigeria-bit-2016-
 Colombia BIT Model, https://www.mincit.gov.co/temas-interes/documentos/model-bit-2017.aspx (last visited May 18, 2020).
 Kabir A.N. Duggal & Laurens H. van den Ven, With Rights Come Responsibilities: Sustainable Development and Gneder Empowerment under the 2019 Netherlands Model BIT, Kluwer Arbitration Blog (2019), http://arbitrationblog.kluwerarbitration.com/2019/06/15/with-rights-come-responsibilities-sustainable-development-and-gender-empowerment-under-the-2019-netherlands-model-bit/.
 Colombia BIT Model, https://www.mincit.gov.co/temas-interes/documentos/model-bit-2017.aspx (last visited May 18, 2020); see also Japan–Mozambique BIT (2013), Article 18.
 UNCTAD, Investment Policy Framework for Sustainable Development (2015), https://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf .
 Australia’s Foreign Investment Policy, https://firb.gov.au/guidance-resources/policy-documents (last visited May 18, 2020).
 See UNCITRAL, Working Group III (Investor-State Dispute Settlement Reform), Thirty-eighth Sess., Possible reform of investor-State dispute settlement (ISDS), U.N. Doc. A/CN.9/WG.III/WP.166 at 5 (30 July 2019), https://undocs.org/en/A/CN.9/WG.III/WP.166
 Id. at 7.
 Id.at 8.
 Id. at 10-12.
 Id. at 12.
 Id. at 13.
 Id. at 14.
 Martin Dietrich Brauch, Exhaustion of Local Remedies in International Investment Law, IISD Best Practices Series at 2 (2017), https://www.iisd.org/sites/default/files/publications/best-practices-exhaustion-local-remedies-law-investment-en.pdf
 The mentioned article states as follows: “the claimant or the enterprise obtained a final decision from a court of last resort of the respondent or 30 months have elapsed from the date the proceeding in subparagraph (a) was initiated.”
 See Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan (ICSID Case No. ARB/10/1) (Award of 2 July, 013) ¶ 6.6.1., p.76. The Tribunal held in this case that “neither it, nor the Centre, has jurisdiction over this arbitration, due to the Claimant’s failure to comply with the mandatory requirement of prior submission of the dispute to Turkmenistan’s courts under Article VII.2 of the BIT.” See also, Ömer Dede and Serdar Elhüseyni v. Romania (ICSID Case No. ARB/10/22).
 Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles at 63 (Oxford University Press 2017).
 Christian Klausegger, Austrian Yearbook on International Arbitration (Beck, Stämpfli & Manz 2010) at 273; APEC and UNCTAD, International Investment Agreements Negotiators’ Handbook’ at 145 (2012). See for example, Article 28(9) of the Common Market for Eastern and Southern Africa - COMESA Investment Agreement (2007) which states: “If the COMESA investor elects to submit a claim at one of the forums set out in paragraph 1 of this Article [it includes national courts of the host State], that election shall be definitive and the investor may not thereafter submit a claim relating to the same subject matter or underlying measure to other forums.”
 Kiran Nasir Gore, The Trump Effect on the Resolution of Future International Business Disputes, American Bar Association (16 September 2019), https://www.americanbar.org/groups/business_law/publications/blt/2019/10/trump-effect/
 USMCA Appendix 3 available at https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/14-Investment.pdf
 Pantechniki S.A. Contractors & Engineers v. Republic of Albania (ICSID Case No ARB/07/21) (Award of 30 July 2009) ¶64 p. 16 and ¶107 p.27, https://www.italaw.com/sites/default/files/case-documents/ita0618.pdf
 H&H Enterprises Investments, Inc. v. Arab Republic of Egypt (ICSID Case No. ARB/09/15). Excerpts of the Award of May 6, 2014 ¶385, p.40. Excerpts available at https://www.italaw.com/sites/default/files/case-documents/italaw7979.pdf
 Supervision y Control v. Costa Rica (ICSID Case No. ARB/12/4) (Award of 18 January 2017) ¶293 p.134. In this case the Tribunal held that “the existence of national courts and international arbitration as mechanisms for resolving disputes can generate a significant risk of duplication and a problem in determining what is the proper dispute resolution mechanisms for disputes that may arise during the investment period.”
 In Khan Resources v. Mongolia (PCA Case No. 2011-09) (Decision on Jurisdiction of 25 July 2012) ¶391 p. 84. The Tribunal stated that the requirements of triggering the fork in the road provision need to remain difficult to satisfy since “this could have a chilling effect on the submission of disputes by investors to domestic fora, even when the issues at stake are clearly within the domain of local law. This may cause claims being brought to international arbitration before they are ripe on the merits, simply because the investor is afraid that by submitting the existing dispute to local courts or tribunals, it will forgo its right to later make any claims related to the same investment before an international arbitral tribunal.”
 Investment Agreement for the COMESA Common Investment Area (signed 23 May 2007), https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/3092/download
 See also Trans-Pacific Partnership (TPP) Article 9.18(2): “When the claimant submits a claim pursuant to [Investment chapter provisions], the respondent may make a counterclaim in connection with the factual and legal basis of the claim or rely on a claim for the purpose of a set off against the claimant.” See also, Southern African Development Community- SADC Model BIT, Article 10.2. “A Host State may initiate a counterclaim against the Investor before any tribunal established pursuant to this Agreement for damages or other relief resulting from an alleged breach of the Agreement.”
 Article 46 of the ICSID Convention states that “Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.”
 Urbaser, S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Bizkaia Ur Partzuergoa v. The Argentine Republic, (ICSID Case No. ARB/07/26) (Award of 8 December 2016) ¶1118 p.297. The tribunal also held that “In light of the reasons given above, the Tribunal concludes that it has jurisdiction to deal with Respondent’s Counterclaim in accordance with Articles 25 and 46 of the ICSID Convention and Article X of the BIT, and that this claim is admissible to be examined on the merits.” ¶1155 p. 308.
 Perenco Ecuador Limited v. Republic of Ecuador (ICSID Case No. ARB/08/6) (Award of 27 September 2019) ¶1023 (b) p.374. “Perenco Ecuador Limited shall pay to the Republic of Ecuador the costs of restoring the environment in areas within Blocks 7 and 21 and remedying the infrastructure in these two Blocks in the amount of US$54,439,517.00. To that amount, post-award interest will accrue at a rate of LIBOR for three-month borrowing plus two percent, compounded annually. Post-award interest will accrue from 1 December 2019, until the date of full and final payment.”
 Some of the concerns about third-party funding were set out in some of the UNCITRAL discussions. In particular, third party funding (i) have the potential to increase the number of frivolous claims, (ii) it would likely have a negative impact on amicable resolution of disputes, (iii) it could have an impact on foreign direct investment flows, and (iv) it could potentially create an structural imbalance in the ISDS regime due to the fact that generally speaking investors have access to it and host states do not. On the other hand, third-party funding can create potential conflicts of interests, or certain influence over arbitration proceedings, impact on confidentiality , costs, and security for costs. There is also a perception of lack of transparency in the use of the third-party funding given the existent lack of regulation that might jeopardize the integrity and legitimacy of international arbitration proceedings.
 The Ordinance of 2017 in Hong Kong Special Administrative Region, Section 98T (1)(a)(b); Civil Law (Amendment) and in Singapore the Act 2017, Singapore, Section 5(b)(2).
 World Bank Group, International Centre for Settlement of Investment Disputes (ICSID), Proposals for Amendment of the ICSID Rules, Working Paper #4, Rule 14 at 37 (February 2020). Rule 14 Notice of Third-Party Funding (1) A party shall file a written notice disclosing the name and address of any non-party from which the party, directly or indirectly, has received funds for the pursuit or defense of the proceeding through a donation or grant, or in return for remuneration dependent on the outcome of the proceeding (“third-party funding”). (2) A non-party referred to in paragraph (1) does not include a representative of a party. (3) A party shall file the notice referred to in paragraph (1) with the Secretary-General upon registration of the Request for arbitration, or immediately upon concluding a third-party funding arrangement after registration. The party shall immediately notify the Secretary-General of any changes to the information in the notice. 4) The Secretary-General shall transmit the notice of third-party funding and any notification of changes to the information in such notice to the parties and to any arbitrator proposed for appointment or appointed in a proceeding for purposes of completing the arbitrator declaration required by Rule 19(3)(b). (5) The Tribunal may order disclosure of further information regarding the funding agreement and the non-party providing funding pursuant to Rule 36(3) if it deems it necessary at any stage of the proceeding.” Document available at https://icsid.worldbank.org/en/Documents/WP_4_Vol_1_En.pdf
 Michele Potestà and Marija Sobat, Frivolous claims in international adjudication: a study of ICSID Rule 41(5) and of procedures of other courts and tribunals to dismiss claims summarily, Journal of International Dispute Settlement, Volume 3, Issue 1 p.137-168 (March 2012).
 See Article 21(1) of the India Model BIT (2015) states that: “Without prejudice to a Tribunal’s authority to address other objections, a Tribunal shall address and decide as a preliminary question any objection by the Defending Party that a claim submitted by the investor is: (a) not within the scope of the Tribunal’s jurisdiction, or (b) manifestly without legal merit or unfounded as a matter of law.”
 See Nathalie Bernasconi-Osterwalder, USMCA Curbs How Much Investors Can Sue Countries—Sort of, International Institute for Sustainable Development, https://www.iisd.org/library/usmca-investors
 United Nations, Commission on International Trade Law, Possible reform of investor-State dispute settlement (ISDS) Multilateral instrument on ISDS reform. Note by the Secretariat ¶40 U.N. Doc. A/CN.9/WG.III/WP.194 (16 January 2020), https://undocs.org/en/A/CN.9/WG.III/WP.194
 United Nations, Commission on International Trade Law, Possible reform of investor-State dispute settlement (ISDS) Multilateral instrument on ISDS reform, Submission from the Government of Colombia. U.N. Doc. A/CN.9/WG.III/WP.173 (15 June 2019), https://undocs.org/en/A/CN.9/WG.III/WP.173
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 631-633 (Oxford University Press, 2nd ed. 2019).
 Tecnicas Medioambientales Tecmed SA v. United Mexican States (ICSID Case No. ARB(AF)/00/2) (Award of 29 May 2003).
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 645-646 (Oxford University Press, 2nd ed. 2019).
 Organisation for Economic Co-operation and Development (OECD), Fair and Equitable Treatment Standard in International Investment Law, OECD Working Papers on International Investment, 2004/03, (OECD Publishing 2004).
 Pope & Talbot Inc. v. Canada (UNCITRAL/NAFTA Arbitration) (Award of 10 Apr. 2001) ¶ 110 -113.
 UNCTAD, UNCTAD’s Reform Package for the International Investment Regime 33 (2018).
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 578 (Oxford University Press, 2nd ed. 2019).
 UNCTAD, UNCTAD’s Reform Package for the International Investment Regime 37 (2018).
 Borzu Sabahi, Noah Rubins & Don Wallace, JR., Investor-State Arbitration 640-641 (Oxford University Press, 2nd ed. 2019).
 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Article 9.5.3.
 Suzy H. Nikièma, Best Practices Indirect Expropriations (International Institute for Sustainable Development 2012)
 Grant Hanessian. & Kabir Duggal, The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See?, 32 ICSID Review 216, 216–226 (2017).
 EU-Singapore FTA (2014), India-Malaysia FTA (2011), ASEAN–Australia–New Zealand FTA (2009), Japan–Singapore FTA (2002) and the SADC Model BIT (2012).