Host states’ legitimate expectation

Scenic landscapes of Northern ArgentinaThe investor’s legitimate expectations are often a key question in ISDS cases. Such expectations can be based on, for example, the host state’s laws, policies, or contractual commitments – such as when a host state granted the investor mining rights for a certain number of years. A violation of these expectations can be a ground for the investor to bring an ISDS claim against the host government. Several tribunals have ruled that a host country cannot act contrary to the investor’s legistimate expectations.

Karl P. Sauvant and GüneşÜnüvar have written an article published by Columbia Center for Sustainable Investment, introducing the question of whether or not states can also have legitimate expectations towards the foreign investor. According to the article, such expectations may arise from, for instance, the investor’s statements of its contribution to the host country.

As an example, the article points to Sempra v Argentina, where Argentina argued that it “had many expectations in respect of the investment that were not met or otherwise frustrated … (such as)… work diligently and in good faith…”. The article also notes, however, that since governments currently cannot initiate ISDS proceedings against foreign investors, their reliance on legitimate expectations is limited to counterclaims brought in response to investors’ claims. See our previous post about counterclaims here.

Finally, the article proposes that future international investment agreements (IIAs) could explicitly stipulate that host states’ legitimate expectations are protected, thereby establishing a right for host states to bring a claim on this basis.

Vattenfall v. Germany live stream

Blogg_v41_2In the much-publicised ICSID case between Vattenfall and Germany, the main hearing is currently taking place. The parties have agreed to broadcast the hearing live and those who are interested in ISDS can follow this link to see what a hearing looks like. The broadcast starts at 19.00 CET, every night this week and the next.

Just published: Peter Allard v. Canada

Blogg_v41A much-anticipated award is now released for public, Peter A. Allard v Barbados.

As we have written before, a Canadian investor, Peter Allard, brought a claim against Barbados in Permanent Court of Arbitration in 2010. The case concerned Mr Allard’s environmental sanctuary in coastal Barbados. He grounded his claim on the failure of the government of Barbados to enforce its own environmental law which, as a result, has polluted his sanctuary.

The investor claimed that the government’s failure amounted to violation of Canada – Barbados Bilateral Investment Treaty.

In an award rendered in June 2016, the tribunal rejected the investor’s claim on all grounds.

The tribunal disagreed with the investor that Barbados has failed to accord him full protection and security by failing to prevent pollution from coming to the sanctuary. As a departing point, the tribunal asserted that the obligation of the State to provide the investment with full protection and security standard is of ”due diligence” and ”reasonable care” – not of strict liability.

In this case, the tribunal found that Barbadian officials have taken reasonable steps to protect the sanctuary. Among others, the tribunal pointed out that the officials established a committee tasked with developing plans for preservation of the sanctuary.

The claim of expropriation was also dismissed. The tribunal concluded that there was no substantial deprivation of the investment since the investor remains the owner of the sanctuary and operates a cafe there. The tribunal further referred to the investor’s statement during the hearing that ”there is some kind of business remaining there”.

Meanwhile, Simon Lester, a trade policy analyst for Cato Institute, argues that the case sends an important signal for environmental protection. According to him, the legal standard in BIT may pave the way for future cases that environmentalists could help investors bring against governments who may do too little to protect the environment. An example mentioned is if the impact of climate change, for instance rising sea level, caused damage to an investor’s property.

Practical guide: information about ISDS

Books close up are on the tableIt could be difficult to get an overview of what happens in the ISDS world. This is because the international nature of this field and the fact that it lacks centralized information system. However, things are happening fast – new arbitral awards are rendered and states are concluding and terminating international investment agreements (IIAs)

We offer some practical guides to ISDS through the following sources.


Free services:


The website, which has been around for a long time, publishes arbitral awards and other documents from ISDS proceedings. Researchers at the University of Victoria are managing the website. If you search for a particular ISDS dispute on the internet, it is often that Italaw comes first, which may indicate that the website has been visited a lot.


The website of the United Nations Conference on Trade and Development provides user-friendly search functions for both arbitral awards and IIAs that contain ISDS as dispute settlement mechanism. In addition, it publishes reports on new updates and statistics on IIAs and ISDS.

PluriCourts Investment Treaty Arbitration Database (PITAD)

PITAD is a database project of all known ISDS cases, currently under construction by the University of Oslo. The database can be accessed via a request to the responsible researchers.  The researchers behind the project takes empirical approach and uses coded variables to classify hundreds of well-known arbitral awards.


ICSID administers most ISDS cases and automatically publishes information about them (as long as the parties do not actively object to it). PCA, on the other hand, publishes information with the consent of the parties. Both organizations have searchable databases.


Service with paid subscription

Investment Arbitrator Reporter

This website publishes news and information about ISDS including in-depth but brief analysis of the outcome of the cases, which could be helpful for those who do not want to read the hundred-pages awards. In principle, one should pay for subscription, however it is also provides free trials and discounts for those whose employers do not pay the subscription. IAReporter obtains the materials for the analysis from Italaw.

Global Arbitration Review

This publication primarily targets legal practitioners in the arbitration field – but often publishes interesting interviews and summaries of proceedings for those interested in learning more about the practical sides of ISDS work.

Combating Climate Change through ISDS

White lily in an environment of green leaves on waterAn article demonstrates how ISDS provides the necessary tools to improve regulatory stability and predictability necessary for low-carbon investment. According to the author, ISDS has the potential to protect low-carbon investments against the risk of regulatory changes that can affect climate policies.

The text takes its starting point at the importance of private capital and technology in the transition to a low-carbon economy. The Kyoto Protocol establishes different implementation mechanisms for State parties to reduce greenhouse gas emissions, mechanisms in which private actors play important roles. In turn, governments may also establish different support schemes for investment in low-carbon technology. Some of the common schemes are guaranteed a minimum price for electricity produced by renewable resources (the so-called feed-in tariff) and investment aid for renewable energy producers.

The article points out some risks for low-carbon investment, including that authorities could withdraw the promised support or shorten its duration.

It further argues that some substantive protections under international investment agreements may play an important role.

One example is the ISDS case, Nykomb v. Latvia. In this case, the tribunal found that the government provided support scheme for low-carbon installations operated by domestic investors, but not for installations operated by foreign investors. The tribunal held that this amounted to discrimination, and the investor obtained compensation.

The article concludes that climate law and investment law are based on comparable principles but having different perspectives. Climate law creates rights and expectations for investors, while investment law aims to protect them. In turn, investment arbitration has the potential to limit the instability that currently affects the implementation of climate change mitigation policies.

Examples of national courts acting in ISDS


National courts play important roles in safeguarding the rule-of-law outcome of ISDS proceedings. Under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a party to an ISDS proceeding may request a national court to set aside an arbitral award. This can be done however on limited grounds, among others, if one of the parties was unable to present its case and if the arbitral procedure was not in accordance with the agreement of the parties. In addition, arbitration laws of a country also may provide grounds for setting aside an award.

Let’s take a look when this actually happened in practice.

In CME Czech Republic v Czech Republic, the tribunal found that the country’s media authority had destroyed the investor’s exclusive position as services provider for a private Czech TV channel, which left the company with assets but without business. In this case, the tribunal sided with the investor that the actions constituted an expropriation under the Netherlands – the Czech Republic Bilateral Investment Treaty.

The Czech Republic further requested the Svea Court of Appeal in Sweden to set aside the award under the Swedish Arbitration Act, on the grounds that, among others, one of the arbitrators had been excluded from the deliberations and that the award violated Swedish public policy. The Court of Appeal rejected this claim and found that the tribunal had given the arbitrators reasonable time to submit comments. Further, the Court viewed that the Czech Republic had failed to show that the award violated public policy. The Court therefore rejected the request on all grounds.

Meanwhile, in Metalclad v. Mexico, the tribunal found a violation of Chapter 11 of the North American Free Trade Agreement since the investor was denied fair and equitable treatment by the government due to the absence of clear rules about a certain permit. According to the tribunal, this amounted to a failure by the government to ensure transparency for the investor.

Mexico submitted a request to the British Columbia Supreme Court in Canada to set aside the award, on the grounds that the tribunal had incorrectly considered that transparency requirement formed part of minimum standard of treatment and expropriation provisions of Chapter 11 of the NAFTA. The Court agreed with Mexico and ruled that the tribunal had decided a matter beyond its jurisdiction. The award was therefore partly set aside the award.

Philip Morris v. Uruguay

Blogg_v34Our next case summary is Philip Morris v. Uruguay. This summary is prepared based on the publicly-available award rendered in July 2016.

The case reminds us of the one between Philip Morris and Australia. In both cases, Philip Morris claimed that their investment had lost value due to a new tobacco legislation and therefore the company is entitled to compensation.

The case against Australia was dismissed at an early stage, when the tribunal held that Philip Morris unlawfully took advantage of a subsidiary in order to get access to ISDS. Therefore, the tribunal did not examine the main issue of the case, which was the tobacco legislation itself. Meanwhile, the dispute with Uruguay went all the way to the assessment of the measure in dispute, and the majority of the tribunal found that the Uruguayan tobacco legislation did not violate the bilateral investment treaty between Switzerland and Uruguay (BIT).

Philip Morris based its arguments on two main parts of the Uruguayan legislation: first was the decision by the country’s Ministry of Health that bans selling different types of presentations of the same brand of cigarettes (it is not allowed to sell a product that is ”light”, ”menthol” or ”gold”). The second is a presidential decision which requires that the images of health warning on cigarette package increase from 50% to 80%.

The company argued that these measures violated several provisions in the BIT, including a violation of its intellectual property rights.

In the 300-page award, the tribunal asserted that intellectual property rights are indeed protected by the BIT – however it did not find that the state violated the agreement as the company failed to prove that it had suffered a level of damage required to find violation. Further, according to the tribunal, the state has a large policy space to implement reforms aiming to protect legitimate interest – and therefore this type of measure cannot be considered an expropriation or a breach of the fair and equitable treatment standard of protection as long as they are made on rational grounds and in good faith. It found that Uruguay had a genuine interest in protecting public health – and that the government adopted the reforms in a serious and well-motivated manner.

Another argument by Philip Morris was that it was denied a fair trial in the Uruguayan courts, where the company had first tried to appeal the tobacco measures. The company claimed that two different instances of court system in the country had ruled contrary to each other. In this case, even though the Supreme Court sided with the company, an administrative court chose ignore the Supreme Court and rejected the company’s appeal. The tribunal agreed that this was strange but at the same time viewed that this fact was not enough to consider that Philip Morris had been denied a fair trial.

Because Philip Morris’ claims were dismissed on its entirety, the company was ordered to pay the entire cost of the dispute, as well as 70% of Uruguay’s legal fees.

Arbitration throughout history

Close-up of open book and penThe Arbitration Institute of the Stockholm Chamber of Commerce will turn 100 years in 2017. As part of the celebrations in January, a book about the history of arbitration will be published, where lawyers and diplomats from all over the world each write about one particular dispute.

One of the contributions is written by the winner of a large competition initiated by the SCC and aimed at young lawyers. The competition inspired many highly qualified contributions and several were so well-written that they will now be published in a separate edition of Transnational Dispute Management Journal (TDM).

The four texts deal with four different arbitrations that affected international relations: from a border dispute between the United States and Great Britain in what is now Canada, via an early ISDS case from the year 1900 over a Portuguese railway project and a relatively recent arbitration between Singapore and Malaysia, which was concluded at the Permanent Court of Arbitration in 2014.

You can read more about the publication, including the foreword by SCC Secretary-General Annette Magnusson, here.

ICSID Statistics: Increased Diversity of Arbitrators

National flags of different countryThe ICSID Secretariat has recently published its latest case statistics where it reports that up to 30 June 2016, the number of overall ISDS cases has reached 570 cases.

Overall, most respondent states are countries in Eastern Europe, Central Asia and South America.

Investors involved in overall ICSID cases mostly come from the service industry, where information and communication, finance, service and trade, transportation and tourisms sector together make up 29% of claimants.

As for outcome of the cases, States are successful in the majority of cases. ICSID reports that tribunals have declined jurisdiction in 26% of cases, dismissed all claims in 27% of cases and upheld claims in partial or in full in 46% of cases.

The report also covers cases initiated and completed in ICSID Fiscal Year 2016, which is the period of 1 July 2015 –30 June 2016. In this period, most cases involved investors in power and energy industry, followed by the service sector.

There is an apparent increase in diversity of arbitrators in terms of nationality during the Fiscal Year 2016. During this period, arbitrators, conciliators and ad hoc committee members from South America, Central America and the Carribean, Middle East and North America, Sub-Saharan America, South & East Asia and the Pacific, Eastern Europe and Central Asia made up 39% of cases. This represents a significant improvement compared to just 24% in the previous fiscal year.

Investing for sustainable development



The World Investment Forum was held on 17 – 21 July in Nairobi with the theme ”Investing for Sustainable Development”. Hosted by the United Nations Conference on Trade and Development, this year’s forum brought together more than 6,000 participants from Heads of States, government officers, intergovernmental organizations, academia and civil society.

The UN Secretary General, Ban Ki-Moon, opened the conference with an important message. “The global trade slowdown and a lack of productive investment have sharpened the deep divides between those who have benefited from globalization, and those who continue to feel left behind,” he said.

One of the focuses of the conference was how fill annual USD 2.5 billion investment gap in developing countries. Businesses voiced that policies are hampering investment, for instance in some countries policy cycles follow election cycles. Further, they viewed that policies are not catching up with the rapid progress in technology.

The conference also discussed investment issues beyond financial policies and market structure – such as gender inequality and knowledge gap. Governments asserted that it is still more difficult for women entrepreneur to obtain loans for their business which hampers more participation of women in trade. On the other hand, businesses voiced that it could be difficult to find the right talent to fill different roles within their business activity because of the lack of quality in the education system.

As part of the conference, a seminar on reform on international investment agreements (IIA) was held. Government representatives voiced different ideas on reform proposals, including making the substantive terms more specific, inserting corporate social responsibilities in new treaties, and ensuring ISDS is accessible for small and medium enterprises.

The SCC was invited to contribute in the discussion and SCC statement can be found here.