Tag Archives: Numbers in perspective

ISDS key figures and findings

worldisdsA report by Notre Europe Jacques Delors Institute, a think-tank working on European Union issues, summarizes important numbers related to bilateral investment treaties (BITs) and ISDS.

The report puts numbers into perspective – with some of its findings as follows:

  1. The number of BITs increased five-fold between the late 1980s and the end of 1990s.
  2. In parallel, the external stock of FDI demonstrates a ten-fold increase over 20 years with a growth from USD 2,400 billion in 1992 to USD 23,600 billion in 2012.
  3. There is now a total of 3,200 investment agreements worldwide, 93% of them provides an ISDS clause.
  4. Out of the 98 countries who have been a respondent in an ISDS proceeding, about three-quarters were developing countries or economy in transition. Less than one-third of claims were brought against developed countries.
  5. The average compensation claimed was USD 343.5 million, however the average amount awarded was USD 10.4 million.

The European Union member states have signed a total of 1,356 BITs with non-EU member states, in addition to around 190 BITs between themselves.

With regards to the EU – United States relationship, the report notes that nine member states have signed investment agreements with the U.S – all include ISDS as dispute resolution mechanism. These member states consist of Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. There have been so far 9 known ISDS claims between the U.S and the EU, all submitted by US investors (4 against Poland, 3 against Romania, 1 against the Czech Republic and 1 against Estonia).

ISDS is included in the EU’s upcoming agreements, including free trade agreements with Canada and Singapore – the negotiations of which have been concluded. According to the report, ISDS is also mentioned in agreements currently negotiated between the EU and China, Myanmar, Morocco, Thailand and Vietnam.

Empirical research does not support perceived bias of ISDS awards

Isdsbiased

A recent academic article by Susan D. Franck, Professor of Law of Washington and Lee School of Law analysed the issue of whether or not ISDS could be said to favour host states from either the developed or the developing world. To this end, all ISDS awards that are publicly available as of 1 January 2012 were analysed.

At the outset, it is noted that ISDS is intended to provide investors with a real forum for non-politicized rule of law adjudication.

The main conclusion of the empirical research is that States’ relative success in ISDS appears to operate independently of development status. This, according to the author, suggests that other factors, such as the host state’s level of democracy and domestic political infrastructure may have more influence in the outcomes of ISDS.

Therefore, purely based on outcomes of the cases, available data does not show that ISDS favours host states from the developed world.

The article also carefully puts numbers into perspective. States won in equal or greater proportions than investors. Even when investors won in ISDS, the tendency is that they recovered less than USD 20 million in compensation on average. Overall, investors roughly obtained only 30% of the amount claimed.

Putting these numbers in mind, it should be difficult, if at all possible, to conclude that ISDS is either pro-investor, or pro-state. As in any well-functioning legal system, the reality of ISDS is more balanced than this and does not lend itself to simplified descriptions of who the system favours, or not.