CAUSATION, STANDARDS OF PROOF AND VALUATION UNDER UNCITRAL WORKING GROUP III: Reducing Uncertainty and Decisional Subjectivity
By José Manuel Alvarez Zárate
The assessment of damages has been one of the areas in which States participating in UNCITRAL Working Group III have expressed concerns about inconsistency, unpredictability and the correctness of ISDS awards. The successive versions of the draft provision on damages were intended to address those concerns. The revised Draft Provision 20 in WP.268 have incorporated a but-for test, requires loss or damage to be directly caused by the breach, replaces the former requirement of satisfactory evidence with a reasonable degree of certainty, and, for certain future damages, proposes a clear and convincing evidence standard. These developments, however, do not fully resolve the evidentiary and causal problem. Identifying who bears the burden of proof does not determine how much uncertainty that party must overcome before a factual proposition may be treated as established. Nor does reasonable degree of certainty, without further criteria, explain how the evidence should be assessed or what a tribunal must identify before concluding that the standard has been satisfied. This still leaves substantial room for subjective and divergent approaches to causation and quantum to Tribunals.
This paper argues that Draft Provision 20 should distinguish more clearly between the existence of the alleged loss, factual causation, legal compensability and quantification. Causation should determine which alleged economic losses are attributable to the breach before questions of legal compensability and valuation arise. For each material head of loss, the tribunal should identify the alleged causal mechanism, the relevant counterfactual, the material factual propositions on which it depends and the material alternative explanations for the same economic outcome before the loss proceeds to valuation. The paper proposes that a material factual proposition necessary to establish the existence of loss and factual causation should be treated as proven only where the evidentiary record provides an objective and verifiable basis for that finding. The tribunal should identify the evidence supporting and contradicting the proposition, assess its reliability, contemporaneity, source independence, corroboration, consistency and completeness, address material competing explanations supported by the record, and explain why the evidence establishes the proposition despite the residual possibility of error. Quantification should likewise rest on identified factual inputs and assumptions supported by the record, and the amount awarded should remain within the limits that the evidence can support.
The purpose is to make the exercise of adjudicative judgment transparent, disciplined and objectively reviewable. Findings on loss and causation should be capable of being reconstructed from the evidence, and the loss ultimately valued should correspond to the loss established as caused by the breach and determined to be compensable under the applicable law.
Reclaiming Authority in Investment Arbitration: Joint Interpretations in International Investment Agreements and Investor-State Dispute Settlement
By Adamant Aldo Ruddyard, Diego Flávio Fontoura José, Sidney Tambasi Netya
Supervisor: Prof. Fuad Zarbiyev
Prepared for the South Centre as part of the Geneva Graduate Institute’s LL.M. Legal Clinic Programme, International Economic Law Stream
In order to analyze to what extent joint interpretations of international investment agreements (IIAs) influence the decision-making of arbitration tribunals in investor-State dispute settlement (ISDS), this report will explore the evolving role of joint interpretations in international investment law and their impact on the balance of power between States and arbitral tribunals. The first section examines the shift towards joint interpretations and State control, highlighting key developments in treaty design and the increasing use of joint interpretation clauses (JICs) and how they potentially reshape investment tribunals’ decision-making. The second section delves into the characteristics and benefits of joint interpretations, discussing their effectiveness in addressing ambiguities in investment treaties and their potential outcomes to investment arbitrations. Finally, the report will conclude by offering recommendations for enhancing the role of joint interpretations in the investment arbitration framework. The recommendations will address the challenges States face in ensuring the effective use of these mechanisms, proposing ways to integrate JICs into the broader reform efforts of international investment law.
Beyond Amicus Curiae: Rethinking the Role of Third-Party Participation in Investment Arbitration and Environmental Governance
By Paulina Kuehme, Lakshmi Swathi Ganti, Brian Kelly Nyaga, Mattia Semenza
Supervisor: Prof. Elena Cima
Prepared for the South Centre as part of the Geneva Graduate Institute’s LL.M. Legal Clinic Programme, International Environmental Law and Governance Stream
This document examines third-party participation in Investor-State Dispute Settlement (ISDS), with a particular emphasis on environmental considerations. It investigates how to ensure procedural fairness and enable meaningful involvement of affected communities in cases concerning environmental protection. The study assesses the scope and challenges of such participation, including the ability to present evidence and legal arguments related to environmental impacts. It also explores the potential role of third-party involvement in shaping counterclaims against investors for environmental damage, and its possible influence in mitigating compensation by introducing arguments and evidence related to environmental costs. Through this analysis, the project aims to support a more balanced and sustainable ISDS framework – one that protects both investors and the environment – while fostering community empowerment and strengthening accountability for environmental harm.
The Constitutional Shield: How Colombia’s Judiciary Shapes Investment Treaties Through Joint Interpretation
By Daniel Uribe Teran
This policy brief examines an innovative judicial approach by the Colombian Constitutional Court in response to an increase in investor-state dispute settlement (ISDS) claims. The Court introduced a doctrine called ‘conditional constitutionality’ (exequibilidad condicionada), which mandates the executive to negotiate binding joint interpretative declarations prior to ratifying an International Investment Agreement (IIA). This process aims to clarify ambiguous language and ensure that IIA provisions align with constitutional principles, particularly concerning the sovereign right to regulate and the protection of human and environmental rights.
The analysis examines the “constitutional shield” doctrine established by this domestic mechanism, emphasising its legal basis in Article 31.3(a) of the Vienna Convention on the Law of Treaties. However, it highlights a significant discrepancy: the uncertain acknowledgement of these subsequent agreements within the international investment arbitration framework. The brief notes that arbitral tribunals, which often function as autonomous legal systems, may not consistently respect such domestic constitutional provisions. This creates ongoing tension between national sovereignty and arbitral independence. The policy brief concludes by addressing the limitations of relying solely on domestic solutions and calls for systemic reforms at the international level, such as within the United Nations Commission on International Trade Law (UNCITRAL) Working Group III.
Contract-based Arbitration: Lessons Learned from Bolivia’s Extractives Industries
By Daniel Uribe Teran
Bolivia has undergone a significant shift in its approach to investment dispute resolution, moving away from reliance on Bilateral Investment Treaties (BITs) and international arbitration towards domestic mechanisms and contract-based arbitration. This shift, driven by a desire to assert greater state sovereignty over natural resources, seeks to align dispute resolution with national development priorities while reducing the costs associated with international arbitration. The recent Shell Bolivia Corporation v. YPF Bolivia case highlights the complexities inherent in contract-based arbitration within the extractive sector, emphasizing the need for meticulous contract drafting and a clear definition of arbitrable disputes within the framework of Bolivian law.
This article analyses Bolivia’s transition from reliance on international investment treaties and arbitration to a domestic, contract-centred approach for resolving disputes in its extractive industries. The article examines how the legal framework adopted by Bolivia highlights the role of contract-based arbitration in addressing disputes related to investment, production, technology transfer, environmental and social impacts, labour relations, and contract interpretation. The article draws lessons from other developing countries’ experience, recommending that Bolivia further strengthen its investment framework by adopting clear protection standards, prioritizing fair administrative procedures, and emphasizing domestic remedies. This approach seeks to balance attracting responsible investment with protecting state sovereignty and promoting sustainable development in Bolivia’s extractive industries.
Investor Obligations in International Investment Law
by David Cheng, Jai Abhijit Unde, and James Casey Ryan
Prepared for the South Centre as part of the Geneva Graduate Institute’s LL.M. Legal Clinic Programme
This report first outlines key instruments and different approaches that some States across Africa, Asia, Europe and the Americas have taken to reform the international investment regime in relation to investor obligations. Second, it charts the trends arising from investment tribunals following Urbaser across environmental and human rights cases. Third, it describes and evaluates the reform efforts at the multilateral level. Finally, it summarises and evaluates avenues for policy reform by States.
Ensuring a Balanced Approach for the Global South in UNCITRAL Working Group III
By José Manuel Alvarez Zarate
This paper examines the ongoing efforts of the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WG III) to reform the Investor-State Dispute Settlement (ISDS) system. It argues that the current approach prioritises the concerns of developed countries over those of the Global South. The document highlights the disproportionate focus on the Permanent Multilateral Investment Court (MIC) and related issues, while neglecting procedural and cross-cutting concerns crucial for developing nations. The paper proposes concrete actions to rebalance the discussions, including prioritising procedural reforms and ensuring equitable representation in the MIC’s structure and appointment process. It emphasises the need for transparency, depoliticisation, and genuine consideration of the Global South’s concerns to achieve a genuinely legitimate and balanced ISDS reform.
Discussions on Draft Provisions on Damages in the Investor-State Dispute Settlement System in UNCITRAL Working Group III
By José Manuel Alvarez Zárate
This paper summarizes the discussions within the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WG III) on the reform of investor-state dispute settlement (ISDS) regarding the two draft provisions on damages prepared by the UNCITRAL Secretariat as part of the two drafts on procedural and cross-cutting issues. It covers the period from September 2022 to July 8, 2024. It describes the draft provisions on damages and related provisions on procedural and cross-cutting issues of document A/CN.9/WG.III/WP.231, dated 26 July 2023, as well as the comments made on it by some members of WG III and observers. It also describes the changes to the above document contained in the second draft on the procedural and cross-cutting issues, dated July 8, 2024, contained in document A/CN.9/WG.III/WP.244.
The purpose of this paper is to provide an overview of the comments made by some States on the draft provisions on damages, the substantive changes made by the Secretariat to the first draft, mostly based on the comments made by some States, and the exclusion of important aspects highlighted by some Global South States in their interventions. In the light of this review, countries of the Global South may consider commenting on document A/CN.9/WG.III/WP.244 to ensure that their concerns are effectively taken into account.
Painting the Grass Green: A Climate Change Carve-Out in Investment Agreements
By Daniel Uribe
During the Twenty-Eighth Session of the Conference of the Parties (COP-28) of the United Nations Framework Convention on Climate Change (UNFCCC), States recognised the critical need to accelerate efforts to mitigate climate change and called on Parties to take action to transition away from fossil fuels in energy systems, to achieve net zero emissions by 2050. However, implementing such a transition finds obstacles in investor-state dispute settlement (ISDS) mechanisms, which can undermine regulatory actions necessary for climate policies, leading to a ‘regulatory chill’. As a response to these challenges, the Organisation for Economic Co-operation and Development’s (OECD) Future of Investment Treaties program has proposed a model carve-out provision to exclude fossil fuel sectors from ISDS protection with procedural safeguards, but its effectiveness may be limited. A holistic reform of investment agreements and additional measures, such as withdrawal from international investment agreements, are necessary to safeguard regulatory space and promote sustainable investment and a just transition.
The India-EFTA Deal: A New Model for Developing Countries?
By Danish
Governments are shifting from investor-state dispute mechanisms to treaties that encourage and ease investment. The India-European Free Trade Association (EFTA) Trade and Economic Partnership Agreement could be setting a new standard for developing countries to promote and benefit from foreign investment.
Preserving Regulatory Space for Sustainable Development in Africa
By Roslyn Ng’eno
Investment has an important role for achieving sustainable development in developing countries. Although international investment agreements (IIAs) can serve as instruments to promote such objective, protection oriented IIAs have undermined the ability of States to regulate in the benefit of the community. Likewise large financial reparations imposed by arbitral tribunals have increased the threat of regulatory chill in the face of major global challenges. Strengthening the right to regulate of States and addressing regulatory chill are key matters to consider in the reform of IIAs and the international investment regime.
El mecanismo multilateral permanente propuesto y su posible relación con el universo existente de solución de controversias entre inversionistas y estados
por Danish y Daniel Uribe
La opción de reforma del Mecanismo Multilateral Permanente (SMM) que se está debatiendo actualmente en el Grupo de Trabajo III (GTIII) de la Comisión de las Naciones Unidas para el Derecho Mercantil Internacional (CNUDMI) ha planteado una serie de importantes preocupaciones sistémicas para las reformas procesales de la solución de controversias entre inversionistas y Estados. El presente documento trata en primer lugar de situar los debates sobre la SaaaMM en su contexto histórico y contemporáneo. A continuación, examina el Documento de Trabajo 213 de la CNUDMI y las disposiciones legales que contiene, que constituyen la base de los debates actuales sobre esta opción de reforma en el GTIII. Además, explora la posible relación de esta propuesta de SMM con diferentes aspectos del régimen jurídico internacional vigente en materia de inversiones. El documento concluye proporcionando algunos elementos que requieren una mayor consideración en este proceso, especialmente para proteger los intereses de los países en desarrollo.
