Tag Archives: Sustainable development

UNCTAD at the Stockholm Energy Charter Treaty Forum

summer meadow with high-voltage towers rowThe need to scale up energy investment was address by Deputy Secretary-General of the United Nations Conference of Trade and Development (UNCTAD), Joakim Reiter, at the recent Stockholm Energy Charter Treaty Forum, In his speech, Mr Reiter also remarked that international investment agreements (IIAs) can play a critical role in achieving this objective.

The Deputy Secretary General emphasized that energy poverty is the immense challenge of our time, when almost a fifth of the world’s population today have no access to electricity of any kind.  The amount of investment needed to address this problem is staggering, where for sustainable energy alone, the required amount reaches USD 800 billion. In this respect, he pointed out that the Energy Charter Treaty, as the only multilateral investment agreement in the field of energy, can play an important role in fostering sustainable energy future.

DSG Reiter remarked that international investment agreements (IIAs) have the potential to reinforce investor confidence by fostering predictability and transparency. It can also foster good governance and therefore improving the host country climate. However, he viewed that the new IIAs should strike a better balance between investment protection and the right to regulate of host government.

When it comes to ISDS, he noted the increasing number of ISDS has raised concerns. However, he asserted that the choice is not between having ISDS and not having ISDS. The choice is between having ISDS that works for sustainable development and ISDS that does not.

Read our previous posts about ISDS in support of climate change mitigation, about more environmental languages in IIAs and also about ISDS at COP 21.

Stockholm Energy Charter Treaty Forum was held on 8 February 2016 as a result of collaboration between the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), Energy Charter Secretariat, the International Centre for Settlement of Investment Disputes (ICSID) and the Permanent Court of Arbitration. The theme of this year’s forum was how to boost energy investment as well as to remove related barriers and risks. Among the speakers were high-level government officers from Asia, South America and Africa as well as energy investors, law practitioners and academics.

Philip Morris v. Australia dismissed

AustraliaBlogOn 17 December 2015, the tribunal in Philip Morris Asia Ltd. v. Australia issued the long-anticipated award on the case, declining jurisdiction, as known from a statement from Philip Morris.

The case concerns Australia’s Tobacco Plain Packaging Act 2011 which prohibits use of trademarks, symbols, graphic or images on tobacco products and packaging. The investor argued that the measure has expropriated its intellectual property rights because it cannot use its logo in the cigarette package.

The tribunal’s reasoning for declining jurisdiction remains unknown. However, it is known that Australia has submitted jurisdictional objection among others that the dispute had arisen before the investor obtained protection under the bilateral investment treaty between Hong Kong and Australia and that the commencement of the arbitration shortly after the investor’s restructuring is considered an abuse of rights.

As published by the Permanent Court of Arbitration website, the award will not become public until the parties agree on the redaction of any confidential information contained in the award.

ISDS AT COP21: ENFORCEMENT OF CLIMATE COMMITMENTS

Globe between two pairs of clasped handsIn a speech in Paris during the COP21 summit, the president of the International Bar Association David Rivkin expressed hope that ISDS could bridge the current enforcement gap in international environmental law.

Specifically, Rivkin highlighted the role of neutral and accessible dispute resolution mechanisms in enforcing commitments and underlying pledges made by state parties to the UNFCCC negotiations. He also noted that the existence of mechanisms for resolving disputes between investors and states is crucial to incentivizing foreign investment in renewable energy.

Noting that the fiercest critics of ISDS tend to focus on the system’s purported chilling effect on a state’s regulatory ambitions, Rivkin explained that this “regulatory chill” relates to the substantive terms of the treaties rather than to ISDS procedure.

Rivkin remarked that in the “new wave” of investment treaties and agreements, “environmental issues are being considered increasingly by states at the outset of drafting investment chapters”. Today, most BITs include some environmental language, and many contain a general reservation of policy space for environmental regulation. Rivkin emphasized that a number of recent BITs have included specific obligations to promote sustainable development, to encourage trade in environmental products, or to facilitate FDI in environmental technologies or eco-labeled goods.

Commenting on these developments, Rivkin noted:

It is clear that we are entering a new era of BITs/FTAs, in which states are delineating more specific obligations in the negotiation of these agreements, both as to standards of investor protection and regulatory autonomy. As we are seeing in the context of TTIP, CETA and TPP, ‘self-calibration’ of the ISDS system is already evident. In the future we may also see more movement in the areas of state counterclaims, which would be particularly relevant for environmental claims.

Rivkin also discussed the recent report by the IBA Task Force on Climate Change Justice and Human Rights, which provides a comprehensive coverage of pro-environment clauses included in investment chapters.

Read the full speech here.

Who are the investors?

Investors from a wide range of industries and company sizes have resorted to ISDS to enforce States’ obligations under international investment agreement.

As a recent study concluded that in general ISDS cases are concentrated in sectors like electricity and mining.

ISDS however have not only been used by investors from those sectors. From sustainable development perspective, ISDS has shown the potential to protect investment in climate change mitigation efforts. In the past three years, renewable energy investors such as wind power and solar power investors have brought claims to ISDS alleging, among others, breach of host government’s specific commitment regarding incentives for their investments.

Further, an investor who owns an environmental sanctuary have also recently brought a claim to ISDS, arguing that the host government has failed to enforce its own environmental law which harms the sanctuary.

In addition, many other investors are represented in ISDS, from producers of biscuit, ice cream and paper to eco-tourism businesses. For example, the investor in paper business brought a case arising from government’s ban to import a certain raw material, contrary to a previous authorization that the investor was allowed to do so.

The above has shown that ISDS as an efficient dispute resolution is important not only for rule of law but also for the functioning of the global economy. Foreign investors who have obtained specific promises from a government with regards to their investment, typically in the form of government contracts or permit for certain period, may enforce this promise through ISDS, as an international neutral venue.

Small and medium size enterprises benefit from ISDS procedural efficiency; it is usually faster and less costly compared to proceedings in domestic court.The importance of ISDS for SMEs is also confirmed by an OECD survey according to which 22% of ISDS claimants are either individuals or very small corporations with limited foreign operations. Extremely large multinationals only account for 8% of the claimants in the survey.

2014: A Strong Year for New Investment Protection Regimes

sustainabledevA lot of new development took place last year in the investment protection regime. This is demonstrated for example by a yearly report from the United Nations Conference on Trade and Development (UNCTAD), which summarizes statistics and development surrounding the regime and ISDS.

States, to a large extent, continue to display interest and trust in the investment protection regime. This year’s finding shows that States have concluded 27 international investment agreements (IIAs), which means one every other week.

Sustainable development is at the heart of the newly-adopted IIAs. Most treaties concluded in 2014 include sustainable-development oriented features, for examples by preserving regulatory space for public policies of host countries and discouraging parties to relax environmental standards in order to attract foreign investments.

States maintain control in investment treaty-making and the design of ISDS provisions. In parallel to the adoption of new IIAs, 45 countries are revising their model Bilateral Investment Treaties. New model agreements have been concluded, notably by Brazil and India. This trend may also open up opportunities to include carefully-drafted investment protection in the IIA in support of sustainable development.

The total number of known ISDS claims decreased in 2014, from 54 cases in 2012 and 59 cases in 2013 to 42 cases last year.

Sustainable development target for future treaties

Reform of the international investment agreement (IIA) regime was discussed at a recent Expert Meeting hosted by the United Nations Conference on Trade and Development (UNCTAD) in Geneva. On 25-27 February 2015, more than 250 participants including governmental representatives, academics, business organizations and other civil organizations engaged in constructive discussions on how to enhance investments and sustainable development. The Stockholm Chamber of Commerce delegations were also present, which were the Trade Policy Advisor and the Legal Counsel of the Arbitration Institute.

The point of departure of the discussion is that a large number of IIAs will expire soon – and in parallel to that, there are negotiations of mega-regional investment pacts such as the TTIP and TPP. This recent development opens up the opportunity to further develop the IIA and ISDS regime, essentially to promote sustainable development. The meeting sought insights and expertise from participants to achieve this goal.

For the substantive part, provisions of early IIAs have been viewed as broad and vague. The discussions revolved around whether to specify these provisions (such as indirect expropriation and fair and equitable treatment) or to leave the issues to be developed through case laws.

For the procedural part, participants still voiced strong supports for ISDS.

The question is how to design ISDS to be more cost-efficient and to safeguard consistency in the outcome of the cases. Options such as establishment of appellate mechanism and international investment court were discussed, even though participants still differed to a great extent on whether these reform options will address the problems or will add the problems.

There was however a broader consensus that it is rather more difficult to reform the IIA regime as it is not codified in one single system, for instance such as the WTO.

A good note to take home was a reminder from participants that the design of the new IIA and ISDS regime should focus on the main purpose of the regime, which is to promote investment, most importantly investment in sustainable development. To this end, government representatives agreed to learn from one another’s best practices and to continuously seek expertise from the UNCTAD.