Bart-Jaap Verbeek’s Post

This week, UN Trade and Development (UNCTAD) issued its latest briefing, showing that the number of treaty-based investor–state dispute settlement (ISDS) cases has more than doubled in the past 10 years. ISDS is a mechanism that allows foreign investors to sue host governments in international arbitration tribunals for alleged violations of their rights under the treaty. According to UN Trade and Development (UNCTAD), there were fewer than 600 known ISDS cases at the end of 2013, against more than 1,300 at the end of 2023. In 2023 alone, claimants initiated at least 60 new arbitration cases. Developing countries faced the majority of investor–state disputes, often brought by claimants from developed countries. This is consistent with previous reports that have been issued, exposing the double standard in international investment treaties. Treaties with ISDS provisions enable multinational corporations to challenge national policies designed to protect environmental standards, public health, and labour rights often through international arbitration mechanisms that prioritise investor protections over the well-being of local communities and ecosystems. ISDS provisions in many investment agreements have been widely criticised for undermining countries’ sovereignty and ability of countries to regulate industries in the public interest. Africa has particularly been a big victim of this for many years. Countries like Rwanda, Tanzania, DR Congo, Egypt, Libya, Zimbabwe, and Algeria, among others, have recently been confronted with exorbitant investor-state dispute claims. These disputes are often arbitrated at the International Centre for Settlement of Investment Disputes (ICSID) in Washington, a World Bank affiliated settlement body.  At the Civil Society Forum underway in Uganda, African trade and investment experts have been clear: the current investment architecture is one-sided and the current investor-state dispute settlement mechanism must be reformed. As the former Minister of Trade and Industry of South Africa, Rob Davies, told me, the current system has caused a “package of troubles” to Africa as opposed to attracting investments. The system has collectively cost most African governments billions of dollars in arbitration. Failure to reform or dismantle the current investment architecture risks stalling Africa’s progress. Check out Africa Finance Today's exclusive analysis and coverage on this. https://lnkd.in/eY_R_GKr

This week, UN Trade and Development (UNCTAD) issued its latest briefing, showing that the number of treaty-based investor–state dispute settlement (ISDS) cases has more than doubled in the past 10 years. ISDS is a mechanism that allows foreign investors to sue host governments in international arbitration tribunals for alleged violations of their rights under the treaty. According to the UN Trade and Development (UNCTAD), there were fewer than 600 known ISDS cases at the end of 2013, against more than 1,300 at the end of 2023. In 2023 alone, claimants initiated at least 60 new arbitration cases. Developing countries faced the majority of investor–state disputes, often brought by claimants from developed countries. This is consistent with previous reports that have been issued, exposing the double standard in international investment treaties. Treaties with ISDS provisions enable multinational corporations to challenge national policies designed to protect environmental standards, public health, and labour rights often through international arbitration mechanisms that prioritise investor protections over the well-being of local communities and ecosystems. ISDS provisions in many investment agreements have been widely criticised for undermining countries’ sovereignty and ability of countries to regulate industries in the public interest. Africa has particularly been a big victim of this for many years. Countries like Rwanda, Tanzania, DR Congo, Egypt, Libya, Zimbabwe, and Algeria, among others, have recently been confronted with exorbitant investor-state dispute claims. These disputes are often arbitrated at the International Centre for Settlement of Investment Disputes (ICSID) in Washington, a World Bank affiliated settlement body. At the Civil Society Forum underway in Uganda, African trade and investment experts have been clear: the current investment architecture is one-sided and the current investor-state dispute settlement mechanism must be reformed. As the former Minister of Trade and Industry of South Africa, Rob Davies, told me, the current system has caused a “package of troubles” to #Africa as opposed to attracting investments. The system has collectively cost most African governments billions of dollars in arbitration. Failure to reform or dismantle the current investment architecture risks stalling Africa’s progress. Check out Africa Finance Today's exclusive analysis and coverage on this. https://lnkd.in/efTfEkYx

Bilateral Investment Treaty (BIT) disputes under International Centre for Settlement of Investment Disputes (ICSID) arbitration is a subject I developed an interest in while I was doing my LLMs in international business law and Oil & Gas Law. Unlike commercial arbitration, many ICSID arbitral awards are publicly available for scrutiny and research. In what is known as "Roundtrip" BIT, 3 relatively recent BIT cases (below) have effectively set a precedent on the issue of jurisdiction challenge in BIT disputes, involving a state and its own citizens investors, notwithstanding that the investment companies they owned were registered in a foreign jurisdiction. The states argued that the the BIT and the ICSID Convention prohibited nationals from one contracting party to bring BIT claims against their own country. The takeaway  here is that the tribunal (majority decisions in two out of three cases) determined that Article 25 of the ICSID Convention granted discretion to the contracting parties of international investment agreements regarding the definition of nationality criteria. In the absence of explicit instructions, the tribunals believed it was not permissible to impose additional limitations on the nationality requirements. Does this ICSID position make sense? Obviously, not for the descending opinions in two of the cases - how about you? Sources: Jus Mundi and IAReporter . 1.     Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18. The bifurcated award on jurisdiction was issued on 29/4/2004. The majority tribunal affirmed jurisdiction. Interestingly, in the case presided over by Prosper Weil (chair), a divergence emerged regarding their jurisdiction over the claim under the Lithuania-Ukraine BIT. Tokios Tokelés was owned by Ukrainian nationals.  This resulted in an unusual split of votes with the majority formed by the two arbitrators appointed by the parties. The tribunal chair Mr. Weil couldn't overlook the economic reality central to the matter, leading him to dissent and, in a rare occurrence, resign from the tribunal. 2.       Longreef v. Venezuela, ICSID Case No. ARB/11/5.  Longreef was formally incorporated under Dutch laws and was owned and controlled by Venezuelan nationals. A unanimous award on 12/2/2014  confirmed its jurisdiction on the case. The final award was rendered on 6/11/2017 in favor of the investor. 3.     Agroinsumos Ibero-Americanos v. Venezuela, ICSID Case No. ARB/16/23. In a final Award on 23 Mar 2022, the tribunal majority upheld jurisdiction. In his partial dissenting viewpoint, Mr. Bottini, the State's appointed arbitrator, argued that the tribunal should have rejected jurisdiction because of the clear absence of foreign investment, because of the fact that the investment was initially made by Venezuelan nationals and later transferred to the claimants through an intra-group transaction, without any funds or assets entering Venezuela. #BITDisputes #Arbitration #InternationalInvestment #ICSID #

🌍 “Discuss Amongst Yourselves” – Sovereign Rights & Investment Dispute Resolution 🌍 I’ve really enjoyed the exchanges over the past month around some big issues in international arbitration. First, we discussed proposed changes to the English Arbitration Act, then followed up with thoughts on the doctrine of separability. Now, I’d like to dive into another hot topic in international arbitration: the flexibility of sovereign rights in shaping dispute mechanisms for investment treaties. Consider this scenario: Greece and the United States are both part of a broader multilateral investment treaty that provides a framework for resolving investment disputes. Now, imagine that Greece and the U.S., by mutual agreement, decide to carve out a separate arrangement just for their investors. Instead of following the multilateral treaty’s arbitration process, they establish a unique bilateral tribunal to handle U.S.-Greek investment disputes. This raises some intriguing questions: 1. Can two sovereign nations mutually decide to modify dispute resolution for their own investors, provided it doesn’t affect the rights of other treaty members or their investors? 2. Since investors don’t directly create these treaties but benefit from rights granted by their governments, should sovereigns have the freedom to adjust or withdraw these rights for their own nationals? 3. Does a carve-out like this weaken the multilateral treaty framework, or is it a valid expression of sovereign autonomy within an international agreement? For those familiar with investment arbitration, it’s clear what my questions are referencing (Achmea). Further note, that though I am not taking a position here, I am looking to generate discussion. Thanks all! #InternationalLaw #InvestmentTreaties #SovereignRights #GlobalEconomy #InternationalArbitration #DisputeResolution #MultilateralAgreements #LegalTheory #InvestmentDisputes #PolicyDebate #Sovereignty #InvestorRights #InternationalRelations #TreatyFlexibility #LegalPhilosophy #ADR #InternationalArbitration #Achmea #EU #EULaw

YEGEUBAYEV & PARTNERS ADVISED ON SETTLEMENT BETWEEN STATI PARTIES AND THE GOVERNMENT OF KAZAKHSTAN. It is difficult to overestimate and too easy to underestimate the significance of this event. This is the largest international arbitration award in the country's history. The positive effect from the Settlement Deed is multiplicative. The Settlement Deed is extremely positive for the country and the entire post-Soviet region, for litigation practitioners, for professional negotiators, for the Government and, most importantly, for the citizens of Kazakhstan. Only recently The National Bank of Kazakhstan announced the return of the National Fund (National Investment Corporation of the NBK (NIC) assets from Sweden as a positive effect from the Settlement. The Government of the Republic of Kazakstan, the The National Bank of Kazakhstan , and #Stati parties, with the support and approval of leading #Tristan_Oil creditors, have successfully completed the process of resolving a long running dispute over oil and gas assets in Kazakhstan. The signed Agreement on final settlement shall be the basis for the termination of all ongoing disputes without the right to reopen them in the future. The specific terms of the Agreements are confidential. Daniel Chapman, CEO of Argentem Creek Partners*: « This settlement and the approach taken by the Republic of Kazakhstan to find a fair resolution for all parties underscores that the country is a place where investor rights are respected. We thank President Kassym-Jomart Tokayev for his leadership in transforming the way foreign investors see Kazakhstan. We look forward to working on new projects in the future » Azamat Yeskarayev, Minister of Justice of the Republic of Kazakhstan: « With the end of the long dispute, #Kazakhstan has additional opportunities to develop its economy, including by attracting investment. At the same time, as I noted earlier, funds from the republican budget were not used as part of the settlement. » https://lnkd.in/gC4ntXAj #arbitration #negotiations #settlement #award #winwin #lawfirm #law #foreign_investments #kazakhstan #stati #deed #investments #ECM #DCM #capital_markets

🌍 Does the Political Situation Affect the Enforcement of Arbitral Awards? 🌍 Legal and regulatory challenges posed by war or geopolitical tensions can lead to the banning of arbitral awards from enforcement. 🖊️ Here are some key points to consider: 1️⃣ Impact of War and Sanctions on Procedural Aspects: War affects procedural aspects of arbitration involving nationals of warring countries, including the choice of arbitrators, legal representation, and the conduct of hearings. For instance, in the case of Rimat Akhmetov v. Russia, the appointing authority upheld Russia’s challenge to a US arbitrator over a LinkedIn post promoting fundraising for Ukrainian soldiers. Sanctions and restrictions on travel and financial transactions can limit the ability of parties, institutions, and arbitrators to participate fully in the arbitration process. 2️⃣ Arbitrability and Jurisdiction: Significant questions arise regarding the arbitrability of disputes and jurisdictional issues in investment arbitrations during war. For example, in PJSC Ukrnafta v. Russia, the respondent challenged the arbitral award, contending that the matter underlying the dispute was the change of status of Crimea, which was outside the scope of the 1998 BIT. Such defenses seek to limit the scope of disputes in the context of ongoing conflict. 3️⃣ Recognition and Enforcement of Awards: National courts may refuse to enforce awards rendered in an enemy or unfriendly state on public policy or national interest grounds. This has become a significant hurdle in the enforcement of awards in Russian national courts. 💬 Discussion Points: 🔹 How can arbitration institutions adapt to ensure fair proceedings during geopolitical conflicts? 🔹What measures can be taken to protect the integrity of arbitral awards in such situations? 🔹Should there be international guidelines to address these challenges? 🔍 Join the Conversation: Share your thoughts and experiences on how political situations have impacted arbitration in your practice. Let's discuss the future of arbitration in a world of increasing geopolitical tensions. #Arbitration #LegalChallenges #Geopolitics #WarAndLaw #InternationalLaw #ArbitralAwards #LegalCommunity #ConflictResolution #Sanctions #LegalDiscussion #ICCA

India’s Model Bilateral Investment Treaty (BIT) requires foreign investors to attempt to resolve disputes through India's legal system for at least five (5) years before seeking international arbitration. However, the new India-UAE BIT, which entered into force on August 31, 2024, has reduced this period to three (3) years - thereby giving foreign investors easier access to Investor-State Dispute Settlement (ISDS). The UAE is India’s seventh largest FDI source with a cumulative investment of almost USD 20 billion (from April 2000 to June 2024). Importantly, the reduced time period with respect to exhaustion of local remedies could attract more FDI. Further, unlike India's Model BIT, which excludes portfolio investments from the ambit of treaty protection, the treaty with the UAE includes them. This will allow investors with passive financial holdings to also use ISDS. Given that a 2022 committee on external affairs (its report is available at https://lnkd.in/g7Web8-m) strongly advised the government to sign more BITs to attract higher levels of FDI, it remains to be seen whether other countries demand similar terms from India. The UAE treaty may signal the birth of a new trajectory involving India’s willingness to deviate from its Model BIT when a key investment partner is involved. Accordingly, India’s ongoing and future treaty negotiations will assume added importance, including on the possibility of: (1) reintroducing the most-favored-nation (MFN) clause (which is absent in India’s Model BIT), and relatedly, (2) MFN clauses being invoked in respect of dispute settlement provisions. #isds #uae #investindia #dubai

In his recent piece, Prof. Dr. Nikos Lavranos provides an overview of the 2024 Report on compliance with investment treaty awards by States. Nikos dives into the complexities of State compliance with Investor-State Dispute Settlement (#ISDS) awards, especially in light of recent #EU developments. The 2024 Report highlights a rise in ISDS disputes and reveals that States often prevail more than investors, contrary to popular belief. However, unpaid awards and compensation amounts have increased, with Spain leading in non-compliance. The Report also notes divergent #enforcement trends within and outside the EU, with countries like Australia, the UK, and the US emerging as favorable jurisdictions for enforcing intra-EU awards. #internationallaw #internationalarbitration #disputeresolution #investmentarbitration

Under the recently signed Bilateral Investment Treaty ("BIT") with the United Arab Emirates ("UAE"), the time frame for foreign investors to seek international arbitration has been reduced from five years to three years. This is a departure from India’s model BIT, and it brings new opportunities and challenges. The new BIT broadens the scope of protected investments to include shares and bonds, thereby extending protections beyond traditional foreign direct investments ("FDI"). This broadening of scope is a critical aspect of the treaty, as it allows investors holding portfolio investments, such as shares and bonds, to access the Investor-State Dispute Settlement ("ISDS") mechanism, ensuring recourse to international arbitration in case of disputes. The reduction of the arbitration window from five to three years is a significant legal change. While this move is intended to expedite the dispute resolution process and enhance efficiency, it also has legal implications for the domestic dispute resolution system. By reducing the period within which investors can seek arbitration, India may face increased pressure to resolve disputes internally within a shorter time frame, failing which the disputes would automatically be escalated to international arbitration. This shortened period could potentially limit India’s ability to address disputes domestically, thereby increasing the likelihood of international arbitration claims. The inclusion of shares and bonds as protected investments broadens the treaty’s ambit, diverging from India’s model BIT, which traditionally excluded portfolio investments. This shift is notable as it extends protections to a wider array of financial instruments, including those that may not directly contribute to long-term economic development. The expanded definition of investments aligns with international standards but also raises concerns regarding India's exposure to claims involving passive financial holdings. With $19 billion of UAE investments in India and $15.26 billion of Indian investments in the UAE since 2000, the BIT is positioned to further strengthen the economic partnership between the two nations. The treaty seeks to strike a balance between investor protection and state regulatory autonomy, ensuring that while investor rights are safeguarded, the state retains sufficient policy space to regulate in the public interest. The provisions related to the minimum standard of treatment and non-discrimination are intended to provide investors with a fair and equitable environment, while also ensuring that the state can legislate and implement policies without undue restriction. The India-UAE BIT is expected to boost investor confidence by assuring a predictable dispute resolution framework and establishing an independent forum for arbitration. #arbitration

Grateful for the authors’ valuable insights! Russia’s investment policy continues to create significant obstacles to the fair enforcement of international arbitration awards. Russian courts frequently show clear reluctance to recognise and enforce arbitral awards, particularly when they affect state assets. The problem is further complicated by Russia’s demands in ongoing disputes to exclude arbitrators from countries it considers 'unfriendly,' creating additional challenges for fair dispute resolution. Numerous arbitration awards against Russia are already being pursued for enforcement worldwide, with many more claims expected to seek compensation for losses linked to destruction and asset loss caused by military aggression. To ensure fair compensation for these losses, Ukraine has initiated the establishment of an International Compensation Mechanism. As part of this mechanism, an International Register of Damages has already been created, and work is underway to establish a Claims Commission to review claims from affected parties. Modelled on the system used for Iraq after the occupation of Kuwait, this mechanism, if fully implemented, could be a crucial tool for enforcing compensation decisions.