UN Commission to Consider Investor-State Dispute Changes

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By Brian Flood

A United Nation’s commission will study ways to revise the investor-state dispute resolution system when it meets in New York June 25-July 13.

Among other things, the United Nations Commission on International Trade Law (UNCITRAL) will take a look at ways to improve consistency, transparency, and coordination of investor-state dispute outcomes.

The commission is made up of a rotating group of 60 UN member countries that publishes a set of rules that are frequently used in international trade arbitration.

The commission’s working group on ISDS reform, which was formed in 2017, met for the second time in New York in April, and recently released a report on possible reforms to the investor-state dispute system.

Some members of the group noted that “ISDS had nowadays become politicized in a growing number of states,” with some members of the public and the media questioning the system’s legitimacy and accusing it of operating against the interest of developing countries.

The investor-state dispute system allows investors to sue foreign governments for alleged violations of their rights before an impartial, independent arbitral tribunal, instead of a domestic court.

Consistency, Coordination

Members of the working group floated various proposals that could make investor-state dispute rulings more consistent across cases, including better coordination among tribunals and improved review mechanisms.

To address concerns that arbitrators lack impartiality and independence, some members of the group suggested a more transparent appointment process, as well as greater diversity among arbitrators with respect to age, gender, geography, and ethnicity.

The commission’s work comes at a time when the U.S. is hotly debating what ISDS procedures to include in various trade agreements that are under negotiation or renegotiation, including the North American Free Trade Agreement.

The Trump administration has been critical of ISDS, with U.S. Trade Representative Robert Lighthizer saying that it impinges on U.S. sovereignty. Lighthizer is pushing to remove the U.S. from NAFTA investor-state provisions.

But in March, a group of more than 100 Republican lawmakers in Congress sent Lighthizer a letter warning that “ISDS provisions at least as strong as those contained in the existing NAFTA must be included in a modernized agreement to win congressional support.

Melinda St. Louis, international campaigns director with the Global Trade Watch at Public Citizen, a nonprofit consumer advocacy organization, told Bloomberg Law that the commission’s proposed changes indicate that the international arbitration community is beginning to the growing opposition to ISDS across the political spectrum, in the U.S. and abroad.

ISDS gives foreign investors and multinational companies access to a parallel system of justice that unions, governments, and the general public don’t have, St. Louis said.

To contact the reporter on this story: Brian Flood in Washington at bflood@bloomberglaw.com

To contact the editor on this story: Jerome Ashton at jashton@bloomberglaw.com

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