Category Archives: Reports & Statistics

UNCTAD updates ISDS statistics for 2016

Blogg_v9United Nation Conference on Trade and Development (UNCTAD) is the UN body responsible for investment issues. It regularly publishes reports and analyses about ISDS, as well as on about general investment treaty trends, including an annual update on recent developments. We have written about the reports from 2014 and 2015, but recently UNCTAD also updated its database with information from 2016.

 

Examples of statistics from this latest development include:

  • There were 62 new ISDS cases in 2016, a relatively high number compared to earlier years, with the exception of 2015, when 74 cases were initiated.
  • Colombia, India and Spain were the most frequent respondent states (with four cases each) but the cases were spread over 49 different host states.
  • The United States and the Netherlands were the most common investor nationalities.
  • Roughly two thirds of the cases were brought under bilateral treaties, but 10 were based on the multilateral Energy Charter Treaty.

All UNCTAD data, including the updates from 2016, are available in a searchable database here.

New report on investment arbitration

invstatesccnews

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has published a new report prepared by legal counsel Celeste E. Salinas Quero. She describes, among others, the economic sectors involved, the states’ measures most frequently challenged by investors, the outcomes and costs of investment disputes under the SCC Rules.

SCC is a preferred venue for investment arbitrations. Over the past 20 years, the SCC has administered and acted as appointing authority in more than 90 investment arbitrations, both in small-sized and in large-scale disputes.

The report shows that most awards have been rendered in favor of respondent states, with 21% of tribunals declining jurisdiction, 37% denying all of the investor’s claims and 42% of tribunals upholding the investor’s claims in part or in full. As regards costs, the report reveals that while “splitting the baby” is a common approach taken by tribunals, most tribunals allocate and apportion the costs between the parties in a proportion that reflects each party’s relative success and conduct throughout the proceedings.

Read the full article below.

Article: Investor-state disputes at the SCC – by Celeste E. Salinas Quero

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:

Italaw

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.

UNCTAD

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 and PCA

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. IAReporter engages in ongoing investigative reporting, which leads to their reporting on many cases, awards and developments that are otherwise confidential. IAReporter also offers in-depth summaries and analysis of awards and decisions, which could be helpful for those who do not want to read the hundred-pages awards. In principle, one must pay for subscription, however IAReporter also provides free trials and discounts for those who cannot gain access otherwise.

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.

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.

ISDS not used to change legislation

law concept. studio shotsIt has been perceived that States who entered into international investment agreements (IIAs) with arbitration clause risk being sued by foreign investors when they change legislation which causes negative impact on certain investments. However, a study by German and Dutch researchers have shown that foreign investors have very rarely used ISDS to seek damages due to legislative changes. Neither has ISDS been used to hamper introduction of a new law.

The study shows that most ISDS cases have targeted contracts between a State and foreign investors, or the rejection or modification of licenses. Another study by the Columbia Center on Sustainable International Investment, quoted in the German and Dutch study, shows that among all ICSID cases up to 2014, only 9% of cases dealt with legislation. Only half of the cases concerned government actions, and the rest dealt with decision-making by local governments and state-owned companies.

Previous claims under the North American Free Trade Agreement (NAFTA) for damages caused by legislative changes have all failed, according to the study. In a well-known case where investors brought a claim for damages allegedly caused by legislative changes, the recently-decided Philip Morris v. Australia, the investor’s claims were dismissed at an early stage.

In conclusion, studies have shown that it is very rare that foreign investors used ISDS to challenge States’ legislative powers in areas such as for example environment protection and public health. Instead, the study found that in the vast majority of cases, investors claim compensation on grounds that the State violated its concrete commitments in the form of contracts or licenses.

Just published: UNCTAD report on ISDS development  

?????????????????????The United Nations Conference on Trade and Development (UNCTAD) has recently published a report on developments of ISDS in 2015. The report addresses ISDS cases initiated in 2015 as well as the statistics on overall ISDS cases from 1987 to 2015.

The report finds that there were 70 ISDS cases initiated in 2015, which brings an overall number of publicly known ISDS cases to 696. Most of the cases initiated in 2015 arose from old bilateral investment treaties dating back in the 1990s.

Investors from developed countries made the most frequent claimants in cases initiated in 2015, with the top three home states of investors being the United Kingdom, Germany and Luxembourg. This is also true when it comes to the home states of claimants in total since 1987, where investors from the United States, the Netherlands and the United Kingdom top the list.

On the state side, Spain was the most frequent respondent state in cases initiated in 2015, followed by Russia, Czech Republic and Ukraine. Overall since 1987, most frequent respondent states in ISDS cases are still developing countries, with Argentina and Venezuela top the list.

As for the matters being disputed, a number of cases initiated in 2015 concerned sustainable development sectors such as infrastructure and climate change mitigation. Approximately 30% of cases were triggered by the regulation of renewable energy producers, all of which were brought against EU member States (Bulgaria, Italy, and Spain).

ISDS tribunals rendered at least 51 decisions in 2015, 31 of which were in the public domain at the time of the writing of the report. This brings the number of concluded cases to 444 by the end of 2015, with 36% of the cases decided in favour of the State, 26% in favour of investors and 26% cases were settled.

IIA reform continues

IIAsBlogStates continue to sign new international investment agreements (IIAs) in recent years, where by the end of 2015, the IIA universe consisted of 3,286 agreements. Among these agreements, 2,928 are bilateral investment treaties (BITs) and 358 are other IIAs (for example, trade agreements with investment chapters).

At the same time, as many as at least sixty countries have developed or are developing new model IIAs.

Here we bring out some progress of the reform.

As noted by the United Nations Conference on Trade and Development (UNCTAD) in its latest report, IIA reform is happening against the backdrop of the global trend to formulate a “new generation of investment policies” that place inclusive growth and sustainable development at the heart of efforts to attract and benefit from investment.

In general, most of the new models include provisions safeguarding the right to regulate, including for sustainable development objectives. It is also clear that states intend to move away from the “protection (only) model” to a more balanced “investment for sustainable development” model.

India’s new model BIT is particularly interesting because it includes some provisions not found in many other BITs. For instance, it promotes transparency by requiring states to ensure that all laws and regulations are published or available for those who are interested. This model also tries to provide more balance in the state-investor relationship by providing obligations to foreign investor, which consists of requirement to comply with host state’s laws, including environmental and human rights law. It further mandates foreign investors to voluntarily incorporate internationally-recognized standards of corporate social responsibility (CSR) in their practices and internal policies.

Meanwhile, the Netherlands model BIT excludes “mailbox” companies from the scope of the BIT. Finally, the recently-signed Trans-Pacific Partnership includes some clarification on expropriation provisions and a special denial of benefits clause for tobacco-related claims.

New Report on the Proposed EU Permanent Investment Court

EFILA_EUThe European Federation for Investment Law and Arbitration (EFILA) recently released a new report on the permanent investment court proposed by the European Commission within the context of the TTIP negotiations. The report is highly critical of the EU proposal, on two main grounds. First, under the proposed court system, states have the exclusive power to appoint judges, while investors lack any influence over who hears the disputes. This removes a significant benefit of arbitration as a method of dispute resolution, and creates an inherent imbalance between investors and states. Second, the proposed system has two tiers – the Tribunal of First Instance and the Appeals Tribunal – and allows parties to appeal an award on issues of law and fact. This undermines the finality of arbitral awards, and is likely to burden small and medium-size investors by increasing the length and cost of proceedings.

EFILA launched the report at its Annual Conference, held in Paris on 5 February 2016. The event, entitled “Investment Arbitration 2.0?”, brought together experienced arbitration experts, state officials, and representatives of investors to discuss current issues in investment arbitration. Panels discussed such topics as third party funding, the role of tribunal secretaries, and the relationship between investment arbitration and the rule of law.

One session of the conference was dedicated to discussing the EU court proposal. Most, but not all, panelists agreed with the criticisms advanced in the EFILA report. One speaker noted that investors are unlikely to trust the neutrality of judges that are appointed and paid by states. A U.S.-based academic retorted with examples from other permanent international courts showing that state-appointed judges are not necessarily pro-state in how they rule. Another panelist noted that the proposed investment court would not have a secretariat or its own set of arbitration rules, and that it would be impossible to apply a pre-existing set of arbitration rules to the proposed two-tier court structure populated by permanent judges.

Someone commented that the EU proposal “appears half-baked”. Nonetheless, as EFILA secretary-general Nikos Lavranos emphasized, the arbitration community must take it seriously.

JUST PUBLISHED: Predicting the Outcomes of ISDS

StatisticJan2016The research uses data from 159 cases where arbitrators rendered awards that resulted in a determination of damages. The awards examined were those that are publicly-available as of 1 January 2012.

Here are some key findings:

  1. States were successful in 60.4% of the cases, and investors won approximately 39.6% of the cases.
  2. In cases when investors won, they generally obtained roughly one-third of the compensation claimed.
  3. Focusing exclusively on the small subset of cases where investors obtained damages, investors obtained a mean award of US$45.6 million.
  4. For the eight largest claims, only one case was successful.
  5. The vast majority of investors bringing billion-dollar claims obtained nothing.

New Report: ICSID Cases Relating to Asia

magnifying glass on a document with columns of figures

The ICSID Secretariat recently published a statistics report focusing on the South and East Asia and the Pactific (SEAP) region.

As of 1 October 2015, a total of 539 cases have been registered with the ICSID Secretariat since 1972. Of those 539 cases, 42 involved a state party from the SEAP region—including 8 cases against Pakistan, 7 against Indonesia, 5 against Bangladesh, 4 against the Philippines, and 3 each against Korea, Malaysia and Sri Lanka. In 13 of the 42 cases involving SEAP states, the investor bringing the claim was also from a SEAP country; in the remaining cases, the investor was from a country outside the SEAP region.

Of the 42 cases involving a SEAP state:

  • 62 percent were based on a bilateral investment treaty (BIT), and 29 percent were based on an investment contract between the investor and the host state.
  • 43 percent settled, and 57 percent were decided by an arbitral tribunal. Of the cases that were decided by an arbitral tribunal, 47 percent ended in an award declining jurisdiction, 24 percent resulted in an award dismissing all of the investors’ claims, and 29 percent ended in an award upholding the investor’s claims in part or in full.
  • 38 percent concerned the oil, gas and mining industry; 12 percent related to electric power or other energy; and the transportation, construction, and services/trade sectors accounted for 10 percent each.

A number of SEAP nationals have served as arbitrators in ICSID cases. In total, as of 1 October 2015, SEAP nationals accounted for about 11 percent of all appointments made in ICSID cases. Most of the SEAP appointees were from Australia and New Zealand, but Singapore, the Philippines and Bangladesh are also represented on the list of appointees.