Getting up to speed: IIA and ISDS trends from 2014
On the eve of its Expert Meeting on the Transformation of the IIA Regime UNCTAD released its annual Issues Note on trends in international investment agreements (IIAs) and investor-State dispute settlement (ISDS).
In terms of treaty making, countries continue to use IIAs as a tool for international investment policy making.
The year 2014 saw the conclusion of 14 bilateral investment treaties (BITs) and 13 "other IIAs" . The annual number of "other IIAs" has remained stable over the past few years, while the annual number of BITs continues to decline (see figure 1).
(Explore UNCTAD's collection of treaties in our IIA Navigator ; should you be aware of a treaty that is not in our database, please inform us by sending an email to firstname.lastname@example.org or by commenting on this blog.)
The IIA universe is evolving with regard to substantive provisions: pre-establishment commitments and sustainable development-oriented provisions are on the rise. As we have done in past World Investment Reports (WIRs), UNCTAD "mapped" the sustainable development features of the 2014 IIAs for which text is available (see country and clause specific findings in table 1 of the IIA Issues Note).
The substantive evolution of the IIA regime is also illustrated by the increasing number of countries that are reviewing their model IIAs in line with recent developments in international investment law, including the sustainable development imperative. At least 45 countries and four regional integration unions are currently revising, or have recently revised, their model IIAs. Some notable examples are Brazil and India. We look forward to hearing from them and from other countries regarding best practices and innovative approaches next week at the Expert Meeting.
In terms of investment disputes, investors continue to use the ISDS mechanism. Claimants initiated 42 known treaty-based ISDS cases in 2014 (see figure 2). This number only represents a portion of existing cases, however. As most IIAs allow for fully confidential arbitration, the actual number of cases could be higher. Annex IV of our annual update contains a list of new cases. Please feel free to review it and provide us with any unreported cases by sending an email to email@example.com or by commenting on this blog.
In total, 32 countries faced new claims in 2014. The most frequent respondent States were Spain, followed by Costa Rica, the Czech Republic, India, Romania, Ukraine and Venezuela. Three countries – Italy, Mozambique and Sudan – faced their first known ISDS cases yet. Overall, 101 governments from all over the world have been respondents in one or more known ISDS claims. The relative share of cases brought against developed countries continues to be on the rise. In 2014, 60 per cent of all cases were brought against developing and transition economies, while the remaining 40 per cent were brought against developed countries.
There were two types of governmental measures that were challenged the most by investors in 2014. The first were measures that cancelled or allegedly violated contracts of concessions. Second were measures that revoked or denied licences or permits. Other challenged measures include: legislative reforms in the renewable energy sector, alleged discrimination of foreign investors via-à-vis domestic ones, alleged direct expropriations of investments, alleged failure on the part of the host country to enforce its own legislation, alleged failure to protect investments, as well as measures related to taxation, regulation of exports and bankruptcy proceedings. Some of the new cases concern public policies, including water tariff regulation, environmental issues, anti-money laundering and taxation.
Concerns about IIAs and ISDS have prompted a debate about their challenges and opportunities in multiple forums. Today, there is an emerging consensus that the regime of IIAs and the related dispute settlement mechanism need to be reformed to make them work better for sustainable development. As mentioned during the IIA Conference that was held at UNCTAD's 2014 World Investment Forum ( WIF), such reform would need to be undertaken in a comprehensive and gradual way, taking into account the interests of all stakeholders.
It is therefore time to take stock of all of available options and consider the implications of each and every one of them. This can help identify the best possible mix of approaches and alternatives so as to maximize the benefits and minimize the potential risks. The UNCTAD Expert Meeting on the Transformation of the IIA Regime offers an important opportunity in this regard.
 “Other IIAs” refers to economic agreements other than BITs that include investment-related provisions (e.g. investment chapters in economic partnership agreements (EPAs) and free trade agreements (FTAs), regional economic integration agreements and framework agreements on economic cooperation).