Trends in the Investment Treaty Regime and a Reform Toolbox for the Energy Transition

IIA Issues Note, No. 2, 2023 (PDF version in English)


  • Work to reform the international investment agreement (IIA) regime continued in 2022–2023. This included new types of investment-related agreements, the termination of existing bilateral investment treaties and ongoing multilateral discussions on reforming investor–State dispute settlement mechanisms.
  • For the third consecutive year, treaty terminations exceeded new IIAs. This brought the IIA universe to 3,265 treaties, of which 2,584 are in force.
  • In 2022 claimants filed 46 new ISDS cases under IIAs, bringing the total count of publicly known cases to 1,257. Most new ISDS cases were brought under old-generation IIAs.
  • The landscape is still largely dominated by old-generation IIAs, which are characterized by inconsistencies with the global sustainability imperative and can hinder governments’ policy space to implement measures needed for the energy transition. This makes reforming the IIA regime even more urgent.
  • UNCTAD developed an IIA toolbox for the promotion of sustainable energy investment. The objective is to transform IIAs into instruments that actively support the energy transition.

Table of contents

1. Trends in IIAs: new treaties and other policy developments

2. Trends in ISDS: new cases and outcomes

3. International investment agreements and sustainable energy investment

1. Trends in IIAs: new treaties and other policy developments

Several notable developments in 2022 continued the reform of international investment agreements (IIA) regime at the bilateral, regional and multilateral levels. These include new types of investment-related agreements, the termination of bilateral investment treaties (BITs) and continued multilateral discussions on the reform of investor–State dispute settlement (ISDS) mechanisms.

a. Developments in the conclusion and termination of IIAs

In 2022, countries concluded at least 15 new IIAs: 10 BITs and 5 treaties with investment provisions (TIPs). This brought the size of the IIA universe to 3,265 (2,830 BITs and 435 TIPs). [1] In addition, at least 17 IIAs entered into force in 2022, bringing the total of IIAs in force to at least 2,584 by the end of the year (figure 1). The network of IIAs currently in force is complex and largely dominated by old-generation IIAs (figure 2).

Figure 1.

The IIAs currently in force create a network of more than 4,400 bilateral IIA relationships between pairs of economies. Close to a third of them overlap with at least one other IIA between the same economies. Over 88 per cent of IIA relationships are based on IIAs signed before 2012, and the IIA networks of all but eight economies contain such old-generation IIAs. In addition, at least 40 per cent of the relationships created by new-generation IIAs coexist with an earlier one between the same economies. This is the case also for the majority of relationships created by megaregional agreements such as the Regional Comprehensive Economic Partnership (2020) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (2018) (UNCTAD, 2019).

The number of terminations in 2022 exceeded the number of newly concluded IIAs: At least 58 IIAs were effectively terminated, of which 54 were by mutual consent, 1 was unilateral and 3 were replacements (through the entry into force of a newer treaty). Most terminations by mutual consent were based on the agreement to terminate intra-EU BITs, which became effective in 2022 among all 23 EU Member States that had signed it. [2] By the end of the year, the total number of effective terminations reached at least 569, with about 70 per cent of IIAs terminated in the last decade (figure 3).

Figure 2.

The TIPs signed in 2022 can be grouped into two categories:

1. Agreements with obligations commonly found in BITs, such as substantive standards of investment protection:

  • New Zealand–United Kingdom FTA
  • Pacific Alliance (Chile, Colombia, Peru)–Singapore FTA

2. Agreements with limited investment provisions (e.g. market access, national treatment (NT) and most-favoured-nation treatment (MFN) with respect to commercial presence, investment promotion, facilitation and cooperation):

  • Australia–India Economic Cooperation and Trade Agreement
  • India–United Arab Emirates Comprehensive Economic Partnership Agreement
  • Indonesia–United Arab Emirates Comprehensive Economic Partnership Agreement

IIAs signed since 2020 feature many reformed provisions aimed at safeguarding States’ right to regulate and reforming ISDS (figure 4). In light of emerging interpretations of reformed provisions in investment treaty arbitration cases, it remains to be seen whether they are sufficiently robust to support and not hinder countries’ implementation of legitimate measures and their efforts towards achieving the SDGs. In addition, hortatory references to the protection of broader policy goals or sustainable development in the treaty preamble continue to be the most common reform feature (96 per cent of surveyed IIAs), despite their limited effect. Only a minority of new-generation IIAs address other important areas of IIA reform. Less than half of the IIAs reviewed contain proactive provisions that promote and facilitate investment and only 13 per cent include investor obligations.

The problems arising from the limited depth of these reforms are compounded by the fact that most recent IIAs continue to bind countries for long periods, with an initial period of validity of 10 years or more, automatic renewal and a survival clause. This can limit countries’ ability to adapt to changing economic realities and new regulatory imperatives, such as the urgency of addressing climate change and other global challenges.

Figure 3.

New-generation IIAs also continue to exist in parallel with older IIAs (see figure 2), highlighting the importance of expediting the modernization and consolidation of the existing stock of treaties through amendment, replacement or termination. Few of the IIAs signed since 2020 replace an earlier treaty or ensure that the reformed provisions they contain would be effectively applied (where parallel old-generation IIAs exist).

Figure 4.

Selected features of IIAs: description

Right to regulate safeguards. Reforms language of the majority of key substantive IIA provisions, as defined in UNCTAD’s IIA Reform Accelerator, including those most often invoked in ISDS. (For this category, IIAs are counted that contain reform language for at least five key substantive IIA provisions, including at least a circumscribed fair and equitable treatment standard and a clarified indirect expropriation clause, or a general exceptions clause alongside other reformed clauses, in line with UNCTAD’s IIA Reform Accelerator (UNCTAD, 2020a).)

ISDS reformed. Contains procedural improvements or limits the access to ISDS for certain types of claims or omits ISDS altogether.

Excluding importation of elements from unreformed IIAs. Excludes application of most-favoured-nation and non-derogation provisions to obligations in other IIAs.

Proactive promotion/facilitation provisions. Includes specific commitments such as transparency and regulatory coherence.

Duration/survival clause of less than 10 years. Provides for initial duration of validity and survival clause of fewer than 10 years or omits them.

Investor obligations. Contains obligations applicable to investors, such as responsible business behaviour, avoiding corruption, environmental management and the like.

Old-generation IIA(s) replaced. Provides for the termination or suspension of at least one IIA upon entry into force.

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b. Other developments relating to investment rulemaking

The year was marked by the conclusion of negotiations of several investment governance instruments that contain proactive investment facilitation features and pay greater attention to responsible investment and to the right of host States to regulate in the public interest. African Heads of State and Government adopted the African Continental Free Trade Area (AfCFTA) Investment Protocol, recognizing UNCTAD’s work on IIA reform in its preamble. At the same time, plurilateral efforts to amend the ECT appeared to reach a stalemate, highlighting the difficulty of reforming the existing stock of IIAs (table 1).

Table 1.

Several investment policy guidance documents were launched in 2022 that built on UNCTAD’s Core Investment Principles and its Investment Policy Framework for Sustainable Development. They provide overarching principles for countries in their efforts to reform their IIA networks in line with sustainable development and climate action objectives, taking into account countries’ national development objectives (table 2.

International organizations’ work continued on diverse aspects of international investment governance, with advances in negotiations on investment facilitation and first outputs agreed upon for the reform of ISDS (table 3). All these developments and their implications for the IIA regime and climate change will be discussed at the IIA Conference, an inclusive, multi-stakeholder dialogue platform on IIAs and ISDS, during the 2023 World Investment Forum.

Table 2.

Table 3.

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2. Trends in ISDS: new cases and outcomes

As of 1 January 2023, the total number of publicly known ISDS claims had reached 1,257. To date, 132 countries and one economic grouping are known to have been respondents to one or more ISDS claims.

a. New cases initiated in 2022

In 2022 claimants filed 46 new publicly known ISDS cases under IIAs (figure 5), the lowest annual number of known cases since 2010 and significantly below the 10-year average of 75 cases per year (2012–2021). As some arbitrations can be kept confidential, the actual number of disputes filed in 2022 (and previous years) is likely higher. [3]

(i) Respondent States

The new ISDS cases in 2022 were initiated against 32 countries. Mexico, Romania, Slovenia and the Bolivarian Republic of Venezuela were the most frequent respondents, with three new known cases each. Two countries – Portugal and Sweden – faced their first known ISDS claims. As in previous years, the majority of new cases (about 65 per cent) were brought against developing countries.

(ii) Claimant home States

Developed-country claimants brought most – about 65 per cent – of the 46 known cases in 2022. The highest numbers of cases were brought by developed-country claimants from the United States (eight), the Netherlands (five) and the United Kingdom (four). Four cases were brought by claimants from China. Between 1987 and 2022, claimants from five countries – the United States, the Netherlands, the United Kingdom, Germany and Spain – initiated about 45 per cent of the 1,257 known ISDS cases.

(iii) Applicable investment treaties

About 80 per cent of investment arbitrations in 2022 were brought under BITs and TIPs signed in the 1990s or earlier. The ECT (1994) was the IIA invoked most frequently in 2022, with 10 cases, followed by NAFTA (1992), the Netherlands–Bolivarian Republic of Venezuela BIT (1992) and the Panama–United States BIT (1982) with two cases each. [4] Between 1987 and 2022, about 20 per cent of the 1,257 known ISDS cases have invoked either the ECT (157 cases) or NAFTA (79 cases).

Figure 5.

b. ISDS outcomes

(i) Decisions and outcomes in 2022

In 2022, ISDS tribunals rendered at least 44 substantive decisions in investor–State disputes, 25 of which were in the public domain at the time of writing. Ten of the public decisions principally addressed jurisdictional issues (including preliminary objections), and the tribunals declined jurisdiction in all of them. The remaining 15 public decisions were rendered on the merits, with 12 holding the State liable for IIA breaches and 3 dismissing all investor claims.

In addition, eight publicly known decisions were rendered in annulment proceedings at the International Centre for Settlement of Investment Disputes (ICSID). Ad hoc committees of the ICSID rejected the applications for annulment in all of them.

(ii) Overall outcomes

By the end of 2022, at least 890 ISDS proceedings had been concluded. The relative share of case outcomes changed only slightly from that in previous years (figure 6).

Figure 6.

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3. International investment agreements and sustainable energy investment

The energy transition adds to the urgency of reform of international investment governance. Most IIAs do not include proactive investment promotion and facilitation provisions that support low-carbon investment. UNCTAD has developed a toolbox for transforming IIAs into instruments that are conducive to the energy transition.

a. The IIA regime and sustainable energy investment

Existing old-generation IIAs are insufficiently attuned to ensure an effective energy transition from high- to low-carbon economies. New IIAs fare relatively better by safeguarding States’ right to regulate but remain weak in incorporating specific provisions relevant to sustainable energy investment and the energy transition.

(i) Taking stock of IIAs

Some 3,400 IIAs were concluded between 1959 and 2011, representing over 85 per cent of all IIAs ever signed; about 2,300 of these old-generation IIAs are still in force. Typically, they do not contain explicit provisions to preserve States’ regulatory space for a sustainable energy transition. Their substantive treatment standards are formulated in broad and vague ways, with few exceptions or safeguards. Such old-generation IIAs serve as the basis for virtually all existing ISDS claims. As old IIAs significantly outnumber more recent ones, it is critical to address the problems and risks they pose (UNCTAD, 2018). The urgency of making an effective energy transition has generated more attention to the need to reform the IIA regime.

In addition to old-generation BITs, the IIAs regime includes plurilateral investment treaties such as the ECT, which governs energy-related investment, trade and transit. The ECT is the most frequently invoked IIA in ISDS cases.
It can amplify existing burdens on countries that are trying to shift from traditional fossil fuel projects to renewable energies. A sustainable energy transition requires a deep and comprehensive reform of the ECT. The ECT’s investment protection chapter is undergoing a modernization process that was formally initiated in 2020.

IIAs concluded in the last decade fare slightly better with respect to promoting and facilitating renewable energy investment. They more regularly safeguard States’ right to regulate and incorporate specific provisions on the protection of the environment, climate action and sustainable development. They generally contain more circumscribed and clarified substantive provisions, often accompanied by narrower access to ISDS (UNCTAD, 2020b).

Yet, even in recent IIAs, provisions that effectively safeguard regulatory space are still relatively rare (figure 7). It remains to be seen whether more refined provisions in newer IIAs will significantly shield energy transition measures from ISDS claims or prevent investors with high-carbon investment from invoking ISDS to claim compensation.

Much more remains to be done. The reform of existing IIAs is essential to ensure that they do not prevent States from implementing measures aimed at promoting and facilitating sustainable energy investment, including the transition to low-carbon economies. The reform should minimize States’ risk of facing ISDS claims related to phasing out investment that is not aligned with sustainable energy production. It should also recognize the rapidly shifting landscape, which requires flexibility in policymakers seeking to attract renewable energy investment.

Figure 7.

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(ii) Proactive policy measures in IIAs in support of sustainable energy investment

Few new-generation IIAs (mostly broader economic agreements with investment provisions) include matters of relevance to the sustainable energy transition. These matters include general provisions on promoting and facilitating sustainable investment, cooperation on climate action, express recognition of the right to regulate for climate change and implementation of climate action treaties. Such provisions can come in the form of broad preambular references or be more specific in supporting the energy transition.

Old-generation IIAs and even most newer ones continue to lack detailed binding provisions for proactively promoting and facilitating investment and for encouraging the technology transfer needed to switch from high- to low-carbon energy production. Some notable exceptions exist: The AfCFTA Investment Protocol explicitly includes provisions for promoting and facilitating renewable energy investment. The Japan–United Kingdom Comprehensive Economic Partnership Agreement includes provisions facilitating investment of particular relevance to climate change mitigation, such as investment related to renewable energy and energy-efficient goods and services.
The Moldova–United Kingdom Trade and Cooperation Agreement is an example that includes provisions promoting the diffusion of safe and sustainable low-carbon and adaptation technologies.

Similarly, the Investment Cooperation and Facilitation Agreements spearheaded by Brazil as well as the recent Angola–EU Sustainable Investment Facilitation Agreement fare much better in supporting the energy transition. They do not refer to energy investment as such but contain clauses relating to sustainable development, environmental protection, investment promotion and facilitation, as well as corporate social responsibility.

Some new-generation IIAs also include specific procedures and mechanisms to implement States’ climate action policies through inter-State cooperation. For example, they establish joint committees, joint dialogues, climate action consultations and panels of experts. The United States–Mexico–Canada Agreement is a case in point.

If IIAs are to be an effective tool to aid countries in the sustainable energy transition, far more is needed. Reliance on the nascent approach of including proactive promotion and facilitation elements for sustainable investment in IIAs needs to be significantly expanded. The same is needed with regard to provisions on corporate social responsibility and technology transfer, including associated know-how that is crucial to supporting a sustainable energy transition.

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b. Energy-related ISDS

The 2022 Intergovernmental Panel on Climate Change (IPCC) report highlighted the risks of ISDS being used to challenge climate policies (IPCC, 2022). At this point, it is clear that these risks do not exist only in the abstract. Many IIA-based ISDS cases have related to the energy sector (UNCTAD, 2022c). ISDS cases in two areas are particularly relevant to the sustainable energy transition: (i) fossil fuels and (ii) renewable energy.

Energy-related ISDS cases show that IIAs may raise the costs of adapting energy-related regulatory frameworks in host States. States need flexibility for the necessary regulatory experiments that support the transition to low-carbon economies. While investors seek stability and guarantee of returns, States should not be unduly hindered in phasing out unsustainable investment and experimenting with incentive schemes in the renewable energy sector, including by adopting and later changing or abrogating such schemes.

Fossil fuel investors have been frequent ISDS claimants, initiating over 15 per cent (219) of all known treaty-based cases against different types of State conduct (box 1).

Box 1. Fossil fuel-related ISDS cases based on IIAs

At least 219 IIA-based ISDS cases have been brought in relation to fossil fuels. These arbitral proceedings involve investment in the following economic activities: [a]
  • Mining of coal and lignite
  • Extraction of crude petroleum and natural gas
  • Power generation from coal, oil and gas
  • Transportation and storage of fossil fuels

Not all these underlying disputes involved challenges of measures that were related to climate action or the protection of the environment. For example, fossil fuel investors alleged the violation of IIAs with respect to changes in regulatory frameworks applicable to the investment and the denial or revocation of permits on other than environmental grounds. Nonetheless, as fossil fuel investors have frequently resorted to ISDS, they can also be expected to use existing arbitral mechanisms to challenge climate action measures aimed at restricting or phasing out fossil fuels.

A recent high-profile example is the RWE v. Netherlands case. The case resulted from the Dutch Government’s decision to ban the burning of coal for electricity generation by 2030 in compliance with the country’s Paris Agreement commitments. The case is currently pending, with the proceedings being suspended since October 2022. It nevertheless demonstrates the risks that States face when implementing regulations for phasing out fossil fuels.

Source: UNCTAD.

[a] Building on the definition used in IISD (2021), fossil fuel ISDS cases relate to investment activities in the extraction, processing, distribution, supply, transportation and storage of coal, oil and gas, as well as the power generation from these fuels.

In addition to fossil fuel cases, at least 119 ISDS proceedings arose in relation to the renewable energy sector. Many of these cases challenged legislative initiatives involving reductions in feed-in-tariffs for renewable energy production (box 2).

Past ISDS cases related to the sustainable energy transition provide some insights. Investors in both fossil fuels and renewable energy frequently rely on investment arbitration, together accounting for about 25 per cent of total ISDS cases. Moreover, challenges to government conduct take aim at measures undertaken by both developed and developing countries. As in other sectors, the overwhelming majority of energy-related ISDS cases relied on old-generation IIAs.

ISDS is costly. In general, the disputing parties – including the respondent States – incur significant expenditures for the arbitrators’ work, the administration of proceedings and legal representation, all of which usually amount to several million dollars or more per case. Spain, for example, the major respondent in the renewable energy cases, is reported to owe €1.2 billion in damages and €101 million in legal and arbitration fees (Mehranvar and Sasmal, 2022). In addition, claimants and respondent States face several years of uncertainty while ISDS proceedings concerning the challenged measures continue.

Box 2. Renewable energy–related ISDS cases based on IIAs

During the last decade, ISDS cases brought by investors in the renewable energy sector have proliferated, totaling at least 119. Many of these cases challenged legislative changes involving reductions in feed-in-tariffs for renewable energy production. The cases primarily concerned investment in solar photovoltaic power generation. A small number related to wind and hydroelectric power. Spain was the respondent State in about 45 per cent of cases, which typically related to the same set of legislative and regulatory measures. The proceedings mainly concern evolving incentives to promote investment in renewable energy. Unsustainable State expenditures and budget deficits, as well as advances in technology for renewable energy, generally meant that incentives were lowered, prompting challenges by investors.
The vast majority of these cases were initiated on basis of the Energy Charter Treaty (1994) by claimants from developed regions against other developed countries. About 40 per cent of the ISDS cases are currently pending. Among those concluded, about 45 per cent were decided in favour of the investor (with damages awarded), and 35 per cent were decided in favour of the State. The remaining cases have been discontinued, settled or decided in favour of neither party, or the outcome is unknown. Investors in renewable energy cases have, thus, been more successful than the global average for investors in all ISDS cases (28 per cent of all cases have been decided in favour of the investor).

Source: UNCTAD.

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c. IIA toolbox for promoting sustainable energy investment

Various options exist to transform IIAs into tools that promote and facilitate sustainable energy investment and climate objectives more generally. IIA reform actions should pursue a dual goal: (i) ensure that all provisions in IIAs appropriately safeguard the right and duty of States to regulate in the public interest, including in areas where frequent regulatory change is necessary such as energy investment, and (ii) enhance the ability of IIAs to positively contribute to the sustainable energy transition. The first goal secures that IIAs do not impede the transition to low-carbon economies. The second goal ensures that they effectively accelerate the transition. In implementing this second goal, attention should be paid to the objective of ensuring access to affordable, reliable, sustainable and modern energy for all (SDG 7).

UNCTAD has developed a toolbox with a focus on four related action areas (table 4). These four areas relate to the promotion and facilitation of sustainable energy investment, technology transfer, the right to regulate for climate action and the energy transition as well as corporate social responsibility. For each action area, different policy options, accompanied by explanations, are indicated. There are synergies between many of these options, and they can all be adopted in IIAs in accordance with countries’ national development objectives.

Table 4.

d. Putting into action the IIA toolbox for promoting sustainable energy investment

Countries have numerous options for modernizing their stock of IIAs. As old-generation IIAs significantly outnumber new-generation ones, it is critical to address the problems and risks they pose. In 2017, UNCTAD presented countries with 10 IIA reform actions for old-generation IIAs, including joint interpretation, amendment, replacement and termination (UNCTAD, 2017).

The new IIA toolbox for promoting sustainable energy investment could primarily be put into place by amending or renegotiating existing treaties. Approaching a treaty afresh enables the parties to achieve a high degree of change and to be rigorous and conceptual in designing an IIA that reflects their contemporary shared vision. When new IIAs are concluded to replace old ones, countries may wish to formulate appropriate transition clauses and will need to be mindful of termination provisions and survival clauses in the earlier treaty (UNCTAD, 2018). The entry into force of new IIAs may take a significant amount of time. It may therefore be preferable to ensure that transitional arrangements are provisionally applied as of the date of signature of the new agreement. These transitional arrangements should (i) unequivocally disable the survival clause in the previous IIA and (ii) explicitly terminate all of its provisions. This can be done, for example, in the treaty text of the new IIA and/or a side letter.

Terminating an IIA is another reform option, including termination on a unilateral basis. The latter can be pursued alongside attempts to renegotiate an old-generation IIA. While the existence of survival clauses may have a deterrent effect on consideration of this option, many terminated BITs have or will in the next two to five years reach the end of the period of survival clause application.

UNCTAD’s World Investment Forum, to be held from 16 to 20 October 2023, will also present concrete solutions for the reform of the IIA regime to increase investment in sustainable energy and to tackle the global climate crisis. The forum will take place ahead of the annual climate summit (COP28) and as such will enable IIA policymakers and other stakeholders to find solutions and reach consensus on priority issues that could feed into COP28 negotiations.


This IIA Issues Note was prepared by UNCTAD’s IIA team, under the overall guidance of James X. Zhan.

The IIA team is managed by Hamed El-Kady.

This IIA Issue Note is based on research published in UNCTAD’s World Investment Report 2023.

The research for this note was conducted by Dafina Atanasova, Vincent Beyer, Hamed El-Kady, Diana Rosert, Yihua Teng and Alina Nazarova, with contributions provided by Alex Woodin.


Mehranvar, L., and S. Sasmal (2022). “ The role of investment treaties and investor–State dispute settlement in renewable energy investments ”. New York: Columbia Center on Sustainable Investment.

IISD (International Institute for Sustainable Development) (2021). Investor–State Disputes in the Fossil Fuel Industry . Winnipeg: IISD.

IPCC (Intergovernmental Panel on Climate Change) (2022). Climate Change 2022: Mitigation of Climate Change . Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. Geneva: IPCC.

UNCTAD (2017). World Investment Report 2017: Investment and the Digital Economy . New York and Geneva: United Nations.

UNCTAD (2018). UNCTAD’s Reform Package for the International Investment Regime . New York and Geneva: United Nations.

UNCTAD (2019). World Investment Report 2019: Special Economic Zones . New York and Geneva: United Nations.

UNCTAD (2020a). International Investment Agreements Reform Accelerator . New York and Geneva: United Nations.

UNCTAD (2020b). World Investment Report 2020: International Production Beyond the Pandemic . New York and Geneva: United Nations.

UNCTAD (2022a). World Investment Report 2022: International Tax Reforms and Sustainable Investment . New York and Geneva: United Nations.

UNCTAD (2022b). “ The international investment treaty regime and climate action ”. IIA Issues Note, No. 3, September.

UNCTAD (2022c). “ Treaty-based investor–State dispute cases and climate action ”. IIA Issues Note, No. 4, September.

UNCTAD (2023). World Investment Report 2023: Investing in Sustainable Energy for All . New York and Geneva: United Nations.

[1] The total number of IIAs is revised in an ongoing manner as a result of retroactive adjustments to UNCTAD’s IIA Navigator.

[2] For more information on this agreement, see agreement-termination-intra-eu-bilateral-investment-treaties_en .

[3] On the basis of newly revealed information, the numbers of known cases for 2020 and 2021 were adjusted to 77 each.

[4] Under Annex 14-C of the USMCA, parties consent to the submission of so-called “legacy investment claims” under NAFTA until three years after the termination of NAFTA, i.e. 1 July 2023.

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