FOREIGN investors are increasingly resorting to investor-State arbitration to
settle investment disputes, with a record number of cases filed last year,
according to a new report released today by the United Nations Conference on
Trade and Development (UNCTAD).
The
report, “Recent Developments in Investor–State Dispute Settlement (ISDS)”,
showed that 62 new cases were filed in 2012, of which 68 per cent were from
developing or transition economies.
Foreign investors challenged a broad range of government measures,
including revocations of licences, breaches of investment contracts,
irregularities in public tenders, changes to domestic regulatory frameworks,
withdrawal of previously granted subsidies, direct expropriations of investments
and imposition of taxes.
Nine
decisions in 2012 awarded damages, including the World Bank's International
Centre for the Settlement of Investment Disputes (ICSID), which ordered Ecuador
to pay $1.77 billion to Occidental Petroleum Corp as compensation for taking
over its assets in 2006. The monetary award was the highest in the history of
Investor-State Dispute Settlement (ISDS).
In
addition, for the first time in treaty-based ISDS proceedings, an arbitral
tribunal affirmed its jurisdiction over a counterclaim lodged by a respondent
State against the investor.
By
the end of 2012, the total number of known cases reached 518, and the total
number of countries that have responded to one or more ISDS claims increased to
95, according to UNCTAD.
The
overall number of concluded cases reached 244, out of which approximately 42 per
cent were decided in favour of the State and 31 per cent in favour of the
investor. Approximately 27 per cent of the cases were settled.
“Recent developments have amplified a number of cross-cutting challenges
that are facing the ISDS mechanism, which gives credence to calls for reform of
the investment arbitration system,” said James Zhan, Director of UNCTAD's
Division on Investment and Enterprise, which published the report.
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