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Investor-State Dispute Settlement (ISDS) Reforms in the Asia-Pacific
Investor-State Dispute Settlement (ISDS) Reforms in the Asia-Pacific
Introduction:
The Regional Arbitral Institutes Forum (RAIF) convened its annual conference in Bangkok, Thailand, on 10 November 2023, bringing together representatives from nine professional arbitration institutes across the Asia-Pacific region. The focus of the conference was on the challenges and potential reforms surrounding Investor-State Dispute Settlement (ISDS). Hosted by the Thailand Arbitration Center (THAC), the event shed light on the concerns of Asia-Pacific host states and stakeholders, particularly addressing the issues of regulatory chill, the unpredictability of arbitral awards, and the need for ISDS reform.
Challenges Facing Asia-Pacific Host States and Stakeholders:
The panel discussion, moderated by Ms Angela Abala, brought forward key concerns shared by the panellists, including Prof. Dr Colin Ong KC, Prof. Shin-Ichiro Abe, Mr Jesusito G. Morallos, and Mr Toby Shnookal KC. The primary apprehension of Asia-Pacific host states and stakeholders regarding ISDS is regulatory chill, which hinders their ability to enact measures in the public interest. The fear of potential investment arbitration claims discourages states from legislating in crucial areas such as public health, human rights, and environmental protection. Mr. Morallos emphasized additional concerns, such as the inconsistency and unpredictability of arbitral awards impacting the public and issues related to corruption, investors with unclean hands, and inflated claims. Prof. Dr. Ong highlighted the absence of defined standards of proof for corruption in current arbitration rules, particularly in investment treaty arbitration in Asia.
Reforming ISDS:
The panellists discussed various reform options, emphasizing the need to balance investor interests with the legitimate interests of host states. Prof. Dr. Ong stressed the importance of flexibility in ISDS reform to accommodate the time constraints of states involved in disputes, considering government bureaucracy while safeguarding investor rights. To address the legitimacy crisis in investment arbitration, the creation of an appellate mechanism for reviewing awards and establishing precedent was proposed. Prof. Abe, however, argued for improving the quality and trustworthiness of arbitral awards rather than introducing a new appellate mechanism. Suggestions for greater transparency included allowing amicus curiae participation in proceedings and establishing an advisory centre to assist states in investment disputes. Investment mediation emerged as an alternative to arbitration, with Mr. Shnookal advocating for its use during cooling-off periods or parallel to arbitration proceedings. The effectiveness of mediation in resolving investment disputes was highlighted, drawing on Mr. Shnookal's experience in Australia.
Striking a Balance:
As the world faces evolving challenges in climate change, public health, and human rights, the need for a modernized approach to ISDS becomes evident. The panellists stressed the importance of striking a balance between protecting investors' rights and ensuring host states' ability to regulate in the public interest. Modernizing bilateral investment treaties (BIT) was identified as a key step to achieving this balance, with a focus on clarifying substantive provisions that are currently deemed too broad. In conclusion, the panellists acknowledged the uncertainty surrounding the future of ISDS reforms. Mr. Morallos anticipated a world of extremes, with states either withdrawing from BITs or establishing a consensus on a multilateral investment court. Prof. Dr. Ong emphasized the difficulty of predicting specific topics in the rapidly changing global landscape.
Conclusion:
The challenges faced by Asia-Pacific host states and stakeholders in the realm of ISDS highlight the importance of addressing concerns and reforming the system to meet the needs of a modern world. As the world grapples with dynamic issues, including environmental protection, public health, and human rights, a comprehensive ISDS reform that balances investor protection and state regulatory interests is imperative. Modernizing BITs emerges as a pragmatic step towards achieving this delicate equilibrium in the Asia-Pacific region.
- Investment mediation emerged as an alternative to arbitration, with Mr. Shnookal advocating for its use during cooling-off periods or parallel to arbitration proceedings.
- As the world faces evolving challenges in climate change, public health, and human rights, the need for a modernized approach to ISDS becomes evident.
- The challenges faced by Asia-Pacific host states and stakeholders in the realm of ISDS highlight the importance of addressing concerns and reforming the system to meet the needs of a modern world.
