Investor-State Arbitration Between Developed Democratic Countries

Investor-State Arbitration Series, Paper No. 1

September 25, 2015

Investor-state arbitration (ISA), also known as Investor-State Dispute Settlement (ISDS), by which a foreign investor is entitled to sue a state for damages resulting from the alleged violation of an applicable bilateral investment treaty or an investment chapter in a regional trade agreement, has come under scrutiny in many parts of the world. But in no countries has it been subject to greater scrutiny and challenge than in developed democracies.

First in Canada and the United States as a result of the adoption of NAFTA Chapter 11, subsequently in the European Union as a result of the adoption of the International Energy Charter, and latterly in other countries such as Australia, critics have alleged that ISA grants an undue privilege to foreign investors whose complaints should be heard by domestic courts instead of panels of international arbitrators. Availability of ISA is in fact worldwide, due to a network of more than 3,200 investment treaties; criticisms have been voiced in different parts of the world and various proposals for change have been made. The criticisms in developed democracies have become sufficiently strong for it to be necessary to raise the question of whether recourse to ISA is appropriate in any form in developed democracies.

Armand de Mestral’s paper is the first in the Investor-State Arbitration project. The series of papers will be prepared by leading experts from a number of developed democracies. Each will review the experience of ISA within specific jurisdictions, with a view to understanding the debates that have occurred in each one. The focus of the debate is on developed democracies, but the implications for the whole international community are very much in mind.

Part of Series

Investor-State Arbitration

Launched in November 2014, this project addresses a central policy issue of contemporary international investment protection law: is investor-state arbitration (ISA) suitable between developed liberal democratic countries? The project reviews legal and policy reactions to ISAs taking place within these countries and summarizes the substantive grounds upon which claims are being made and their impact on public policy making by governments. The project reviews, critically assesses and critiques arguments made in favour and against the growing use of ISA between developed democracies — paying particular attention to Canada, the European Union, Japan, South Korea, the United States and Australia, where civil society groups and academic critics have come out against ISA.

About the Author

Armand de Mestral is a senior fellow at CIGI. He is an expert in international economic law, and professor emeritus and Jean Monnet Chair in the Law of International Economic Integration at McGill University.