Criticisms of ISDS Sample Clauses

Criticisms of ISDS. All of the reviewed IIAs contain both state-to-state dispute settlement (SSDS) and ISDS mechanisms. In this chapter, ISDS specifically refers to investor-state arbitration, which has been scrutinised by many countries; indeed, some have even decided to exclude ISDS altogether.39 Several economics studies specifi- cally analyse the effects of having ISDS provisions in investment treaties to FDI region. Still related to the first criticism, some critics suggest that ISDS should be replaced by SSDS, including one such as the WTO DSB. There are several is- sues regarding this proposition. First, SSDS may re-politicise an investor-state dispute. Indeed, ISDS is one of the main innovations introduced by IIAs to enable an individual (investor) to bring a dispute directly against a state, instead of having to exhaust local remedies for a lengthy period and, if not successful, completely rely on its home state to exercise diplomatic protection (Xxxxxxx, 2014, p. 2). Second, a state may not litigate a case of an aggrieved investor due to resources concerns, particularly if the home state is a developing country and has numerous investors requesting the state to litigate their respective disputes. In that situation, the aggrieved investor would be left with no other recourse than the domestic court system (which may be problematic) in the host state. Xxxxxxx (2014) argues that exercise of diplomatic protection in SSDS mech- anism can be useful, e.g. for individuals or small companies who cannot afford bringing a direct claim themselves, for class actions where the injuries are indi- vidually small but collectively large, or for investors who fear retaliation by a host state if they were to launch an investor-state arbitration. However, in order to create a WTO DSB-like dispute settlement mechanism, it may require tremen- dous commitments of nations to agree on its establishment as well as amend- ments of the existing IIAs’ dispute settlement clauses. As the effort to create a multilateral investment agreement has not even progressed since its failure in the late 1990s (Xxxxxx, 2009), it will be a while until this could be materialised. In the meantime, the WTO DSB could perhaps be a model to develop a per- manent investment court system as being proposed by CETA and the EU-Viet Nam IPA. Second, some critics argue that ISDS exposes governments to expensive lit- igation. This may be true, but it can be resolved by ensuring that ISDS is used only as a last resort. The c...
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Related to Criticisms of ISDS

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