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.
Advancing Responsible Foreign Investment through a Legally Binding Instrument on Transnational Corporations and Other Business Enterprises
By Daniel Uribe Terán
Foreign Direct Investment (FDI) presents a complex dynamic, offering potential economic growth while posing significant risks of human rights abuses and environmental degradation. This policy brief considers that current voluntary frameworks, such as Economic, Social, and Governance (ESG) and voluntary due diligence standards, are insufficient to protect human rights, as they primarily focus on mitigating investor financial risk rather than preventing actual harm. Furthermore, the international investment regime, particularly the Investor-State Dispute Settlement (ISDS) mechanism, systemically undermines States’ sovereign right to regulate in the public interest. ISDS cases often penalise governments for enacting environmental, labour, and human rights protections, creating a “regulatory chill” that prioritises corporate profits over social welfare. The proposed Legally Binding Instrument (LBI) on business and human rights is presented as a necessary response to establish mandatory, enforceable obligations for corporations. This includes robust Human Rights Due Diligence (HRDD) and legal liability mechanisms, thereby rebalancing the system to ensure corporate accountability and align investment with sustainable development goals.
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.
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.
Potential Claims related to IP and Public Health in Investment Agreements: COVID-19, the Proposed TRIPS Waiver and Beyond
By Cynthia Ho
An under-examined issue during the COVID-19 crisis is the potential liability of countries under investment agreements for taking steps to mitigate COVID issues. This Policy Brief provides an overview of how countries may be liable to companies for taking domestic action to protect public health, including pre-COVID claims related to Intellectual Property (IP), as well as possible claims because of COVID emergency measures, including claims that could result if the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Waiver was adopted. The current COVID-19 crisis opens the opportunity to consider and reevaluate the unnecessary threat of international agreements that allow for investment claims and potentially consider their termination.
UNCITRAL Working Group III: Moving forward towards consensus or loosing balance?
By Daniel Uribe and Danish
This policy brief considers some concerns arising from the ongoing discussions on procedural reform of investor-State Dispute Settlement (ISDS) in the United Nations Commission on International Trade Law (UNCITRAL) Working Group III. It highlights the need to allocate sufficient time to deliberate upon the important issues being raised by developing countries. It further discusses some structural reform options that have been identified by the Working Group and reflects on some concerns arising from a possible ‘single undertaking’ approach being implemented through a future possible multilateral agreement on ISDS.
Investment Policy Options for Facing COVID-19 Related ISDS Claims
By Daniel Uribe and Danish
Developing and least developed countries have undertaken a number of measures to fight against the multidimensional impacts of the COVID-19 pandemic. Such measures and those that may be adopted in the context of the recovery efforts are, however, susceptible to challenges by foreign investors using investor-State dispute settlement mechanisms.
This policy brief first considers the kinds of measures States have adopted to limit the spread of COVID-19, protect their strategic sectors and promote economic recovery, including through foreign investment aftercare and retention. It then addresses how the investor-State dispute settlement system (ISDS) has been used by investors in times of crises, based on the analysis of the awards in several cases brought against both developed and developing countries.
Against this backdrop, the brief elaborates on the different options and initiatives States can take for preventing ISDS claims at the national, bilateral, regional and multilateral levels. It concludes with some policy advice for developing and least developed countries to face possible COVID-19 related ISDS claims in the future.
Could COVID-19 trigger ‘localizing’ of international investment arbitration?
By Danish
In light of the challenges and travel restrictions due to the COVID-19 pandemic, many developing countries have been unable to effectively participate in international investment arbitration proceedings, traditionally held in locations like Washington D.C. and The Hague. To ease the heavy burdens currently being placed on States and ensuring investor confidence, this Policy Brief argues for the ‘localization’ of investor-State dispute settlement (ISDS) proceedings in host States and regions where the investment is actually located. It highlights the various advantages that localizing ISDS can bring, and the different regional initiatives already working towards this purpose. The brief also considers relevant legal and policy aspects, and seeks to provide concrete suggestions for the localization of ISDS as a small step towards the holistic reform of international investment arbitration.
Countries’ Policy Space to Implement Tobacco Packaging Measures in the Light of Their International Investment Obligations: Revisiting the Philip Morris v. Uruguay Case
By Alebe Linhares Mesquita and Vivian Daniele Rocha Gabriel
This Policy Brief aims to provide a concise analysis of the international investment dispute involving Philip Morris subsidiaries and the Republic of Uruguay. It depicts the main legal and political background that preceded the case, analyzes the decision reached by the arbitral tribunal, and assesses the award’s major regulatory and policy implications. It intends to contribute to the discussions on how and to what extent States can adopt tobacco control measures without violating their international obligations to protect the investment and intellectual property of tobacco companies. The main lesson that can be learned from the analysis of the Philip Morris v. Uruguay case is that investors rights are not absolute and can be relativized when there is a clash between private and public interests, such as in the case of public health. As a result, claims such as indirect expropriation and fair and equitable treatment can be dismissed. Finally, one of the main consequences is the progressive change in the design of international investment treaties, containing more provisions related to the right to regulate.
The ISDS Reform Process: The missing development agenda
By Nicolás M. Perrone
The foreign direct investment (FDI) governance agenda is centred on the reform of international investment agreements (IIAs) and investor-state dispute settlement (ISDS). The proliferation of IIAs and ISDS has contributed to narrowing the FDI agenda. A key policy question is whether this fragmented approach remains consistent with the 2030 Sustainable Development Goals (SDGs). Current FDI discussions point at the need for a holistic approach in this policy area, quite the opposite of a regime primarily aimed to protect foreign investors through treaty standards and international arbitration. The realisation of the SDGs depends on multi-stakeholder partnerships to combat poverty and provide clean water and energy to the world population. Crucially, these partnerships will require more cooperation and coordination than IIAs and ISDS can promote and nurture.
Legitimacy Concerns of the Proposed Multilateral Investment Court: Is Democracy Possible?
By José Manuel Alvarez Zárate
Growing concerns in Europe about international investment regimes and investor-state dispute settlement systems pushed the European Union into pursuing the creation of an investment court system and a multilateral investment court. The European Union (EU) started this reform through the Comprehensive Economic Trade Agreement, the Vietnam-EU Free Trade Agreement, and by direct persuasion of other countries to start negotiations at the United Nations Commission on International Trade Law. Visible reasons for the change include concerns over the perception of a lack of transparency, coherence, and arbitrators’ partiality, all of which diminish the legitimacy of the multilateral investment court. Other reasons might be laid on the budgetary risks of more than 213 claims against EU countries. To address these legitimacy concerns, the EU wants to replace traditional party-appointed arbitrators with a two-tiered investment tribunal system comprised by a roster of members selected by the state parties on the treaty. This Essay argues that the creation of the multilateral investment court needs to follow democratic principles in order to be legitimate. History has shown us that the EU has abused its power in the past when implementing resolution systems. Foregoing negotiation, comment by member nations, and implementing a tribunal at its own behest has shown this. The EU multilateral investment court proposal has legitimacy deficiencies because the EU has relied on its power to impose its views so far, i.e. its proposal was not previously negotiated multilaterally amongst other member nations. It is thus possible that the appointment of the future judges to this court will likely be subject to the political constraints and veto that the International Court of Justice or World Trade Organization appointments suffer today. This could leave small economies at a disadvantage because they might be subject to permanent, politically biased judges. A superior solution would be to adopt better arbitrator disqualification rules, clear interpretation directives to avoid law creation, and stricter arbitrator qualifications.
Challenges of Investment Treaties on Policy Areas of Concern to Developing Countries
By Kinda Mohamadieh
Country experiences have revealed that international investment agreements (IIAs) could have an adverse policy impact on various policy areas that are generally important for developing countries in relation to the achievement of their development objectives. This policy brief gives an overview of challenges resulting from IIAs to major policy areas of concern to developing countries. These policy areas include industrial policy, tax reform, handling debt crisis, the use of capital controls, intellectual property rights, public-private partnerships, and climate change action in relation to investment in clean technologies.
