Category Archives: Reports & Statistics

The ICSID Caseload – Statistics 2014

The ICSID recently published its latest caseload statistics of ISDS cases since 1972 until 30 June 2014. According to an UNCTAD report, ICSID has administered the majority of ISDS cases, which accounts for 62% of all ISDS cases as per 31 December 2013.

Below are some interesting points from the statistics:

  1. Since 1972 until 30 June 2014, ICSID has registered 464 investment arbitration cases and 9 conciliation cases.
  2. The basis of the ICSID jurisdiction is found not only in bilateral investment treaties or free trade agreements, but also in investment law of host states and investment contracts between investors and host states.
  3. Among all ICSID cases that have been decided by tribunals so far, tribunals have declined jurisdiction in 25% of cases, dismissed all claims in 28% of cases and decided that the claims are manifestly without legal merit in 1% of cases. This means that government prevailed in 54% of cases. In 46% of cases, tribunals have upheld investor’s claims in part or in full.
  4. South American, Eastern European and Central Asian countries remain the mostly-involved State party in ICSID cases, followed by the countries in Sub-Saharan Africa, Middle East and North Africa.

Looking at the latest trend, between 1 July 2013 and 30 June 2014, tribunals declined jurisdiction in 48% of cases and dismissed all claims in 24% of cases. This means that governments prevailed in 72% of cases. In 28% of the cases the investors’ claims have prevailed in part or in full.

What caused the rise of ISDS claims?

In a recent report by the European Centre for International Political Economy, Demystifying Investor-State Dispute Settlement, the history of the rise of investment protection and ISDS claims is analyzed.

The report responds to the question whether the increasing use of ISDS is a signal that investors have too much power in challenging actions by States.

It concludes the following:

a. At its core, the number of ISDS cases reflects the amount of investment in the world. The growth of ISDS cases and the growth of foreign direct investment (FDI) largely follow the same trend.

b. The key explanation behind the rise of cases is that the volumes of FDI have grown enormously. A portion of such FDI is made in developing countries and transition economies, hence resulting to greater problems faced by investors.

c. There is a growing support of the principle of international rule of law in commerce, demonstrated by the rising numbers of Bilateral Investment Agreements (BITs), as well as the WTO agreements.

d. The most active claimants in ISDS are investors from EU countries. This is not surprising as the EU is by far the biggest source of FDI in the world, representing 43% of all global outward FDI.

e. ISDS cases are concentrated to specific sectors that are highly dependent on public buyers or political support, for example the electricity sector. This is also not surprising since sectors with significant government involvement naturally have a greater degree of political and regulatory risk.

The increasing number of ISDS cases may be described as an increase of trust and reliance on international law in general, and to international arbitration specifically, both by investors and States.

Infographics: Facts on ISDS

The Stockholm Chamber of Commerce has created an infographics guide with facts on the dispute resolution mechanism Investor-State Dispute Settlement (ISDS).

The ISDS infographics guide presents core facts and statistics about ISDS in a quick, clear and creative manner.

What industries have brought claims to ISDS? Who are the investors in ISDS cases and who administers them?

Learn more about ISDS through the downloadable infographics guide below!

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Click image to enlarge and to download PDF-version.

Positive Impact of Investment Agreement and ISDS on Foreign Investment

The United Nations Conference on Trade and Development (UNCTAD) recently released a paper on the relationship between International Investment Agreement (IIA) and Foreign Direct Investment (FDI). The research concludes the followings:

a. The majority of empirical studies found that IIA does have a positive impact on the flow of FDI.

b. IIA plays a complementary role among several factors which may boost FDI, among others economic, political and social stability as well as protection of property rights.

c. The existence of ISDS was associated with a positive impact of IIA on FDI.

The roles of IIA, however, have to be seen within the context. The report notes that since its role is complementary; it cannot substitute for the need of sound domestic policies, regulatory and institutional frameworks. IIA is not an insurance that more FDI will come, if the country’s domestic policies are not favorable and stimulating enough for foreign investors. Similarly, we may not expect that IIA can turn a weak domestic policy into a strong one.

Let’s take renewable energy as an illustration. Investment in renewable energy is of great importance since it is seen as one of the solutions to tackle climate change. Many countries have great potentials for renewable energy, but not all have favorable domestic policy to support its development. It would be hard to imagine that foreign investment will come just because of the fact that a country has an IIA in place; domestic policy is also a necessary prerequisite.

As addressed in the paper, attracting FDI is neither the prime nor the only role of IIAs. Its key role is to contribute to predictability, stability and transparency in investor relation. IIA thus ensures that for example a renewable energy investor can reasonably rely on the laws and regulations currently in place when making the investment,  and also that the investor should be able to rely on permits and contracts with government. This stability allows foreign investors to plan its investment – which in the end will boost investor’s confidence.

The fact that IIA has a positive impact on the flow of FDI opens up opportunities for governments to boost investment in a particular area, such as for example sustainable development. ISDS, in turn, safeguards the implementation of the IIA by providing an efficient enforcement mechanism for the terms of the treaty.

Who is the investor?

The description of the investor in the ISDS debate has grown to almost mythical proportions. For an outside observer it would be easy to get the impression that the beneficiaries of investment treaty protection treaties – and the users of investor-state dispute settlement – are a narrow group of multinational companies, who use treaties to bully states. This assumption is simply not supported by the basic facts.

Investment protection treaties, be they bilateral or multilateral like the NAFTA or the TTIP that is now being negotiated, generally put no lower threshold on the size of investment to be protected. The treaties’ definitions of which types of investments are protected in practice presuppose some kind of risk-taking and long-term commitment in the host state but apart from that, definitions are wide and include a wide range of activities. As a matter of principle, investors small and big, get the same protection.

In reality, about one fourth of all ISDS claims have been brought by individuals or very small corporations, according to a comprehensive OECD study. This share of the caseload increases significantly if also medium-sized companies are included. Conversely, the same survey found that the very large multinational companies count for only 8% of the known cases.

Unlike the impression often painted in the debate, a minority of claims relate to public health or environmental protection. By way of example, one of the sectors with most ISDS claims launched in the last few years is the renewable energy sector, as many states have recently withdrawn different incentives for renewable energy investments. Some international investors claim that these measures violate the Energy Charter Treaty, which has led to over 20 arbitration cases.  Many of these solar and wind power companies are relatively small.

It also deserves pointing out that a large number of investment treaty claims have been launched by private persons (see cases listed at www.italaw.com).