In an era of increasing economic globalization, international investments have seen continuous expansion over the past five decades. From the onset of industrialization, the opportunity to invest abroad quickly became apparent. It was from the 1950s, in conjunction with the development of investment exchanges between developed and developing nations, that it became imperative to establish a legal framework aimed at ensuring the protection of investments and investors.
A concerning climate of expropriation and dispossession affects investors, particularly in developing countries or former colonies, making their peace of mind difficult to maintain. It is in this context that at the end of the 1950s, bilateral investment agreements emerged, seeking to address this situation. Gradually, these agreements began to multiply. They are generally limited to bilateral rather than multilateral agreements. Attempts to introduce multilateral instruments have been observed since the end of World War II, in the form of conventions, charters, or agreements. However, these multilateral instruments have faced difficulties in establishing themselves solidly.
Various reasons justify this situation. Each country has its own set of characteristics, which leads to specific practices. Moreover, for a state that has established a strong conventional network, this is of importance in connection with its international status, illustrating its ability to forge agreements and to demonstrate its position. It is logical to assume that a state will always prefer agreements that are advantageous to it rather than a general multilateral framework designed for multiple parties, which by nature is more complex to develop to ensure adequate protection.
In this perspective, the organization of the International Centre for Settlement of Investment Disputes (ICSID), created on March 18, 1965 by the Washington Convention, and part of the World Bank group, emerges. This organization has the role of framing disputes in investment matters. It enjoys genuine success, having to date administered more than 900 investment cases.
Subsequently, dispute resolution mechanisms between investors and states (hereafter: ISDS), also called Investor-State Dispute Settlement (ISDS) in English, have been put in place. In an international context, arbitration quickly appeared as an obvious solution for resolving these disputes. Arbitration has gained importance within the established conventional networks since the mid-60s. Moreover, it is common for these international treaties to grant investors the ability to directly use international arbitration to assert their rights in case of disagreement with the host country. This further enhances the appeal of arbitration as a means of protecting investors' interests.
This trend can be explained by the undeniable advantages of arbitration. One of these advantages is the possibility to choose one's arbitrators, opting in particular for competent experts in the complex legal domain related to investments. Also, arbitration offers the flexibility to apply procedures adapted to the specific requirements of the field, making it a judicious choice.
It is also worth noting that arbitration awards are recognized as final and have enforceable force. They thus prove to be particularly effective in compelling states to respect and implement decisions made. Arbitration awards based on the ICSID convention are generally unassailable before national courts, which ensures their robustness.
Article 54 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States stipulates that "each contracting state shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that state […]".
Despite its advantages, this solution presents certain limits often identified by experts. Due to the diversity of multiple bilateral agreements, a lack of uniformity is evident in dispute resolution. Each bilateral convention being unique, the solution found is inevitably specific, leading to a lack of consistency in arbitral decisions. Thus, for the same case, two tribunals could interpret the elements in notably different ways.
Furthermore, it is appropriate to raise the issue of transparency within the ISDS domain. Currently, a problem of lack of transparency persists, but it is essential to remember that arbitration in this context is based on a commercial arbitration model where confidentiality is predominant. This characteristic significantly limits the dissemination of information. However, under the increasing influence of non-governmental organizations (NGOs), progress has been made in terms of information accessibility. It is crucial to question whether this evolution is beneficial. While transparency can offer greater visibility, systematically disclosing confidential data could potentially compromise the economic interests of companies. Thus, the balance between transparency and protection of economic interests remains a complex issue to resolve.
Moreover, ISDS mechanisms raise concerns related to a possible regulatory chill. This concern stems from the fact that governments might hesitate to introduce new regulations, especially in areas such as public health, the environment, or safety. This hesitation comes from the fear that international investors might initiate arbitration proceedings against them. Such apprehension could hinder the adoption of necessary political measures to defend the public interest, potentially weakening the ability of states to enact policies beneficial for their citizens and their environment.
An example illustrating this dynamic is the Phillips-Morris vs. Australia case, where the implementation of a regulation on tobacco product packaging, requiring the inclusion of health warnings on packets, was challenged through an ISDS procedure. This request had the potential consequence of questioning rules aimed at protecting public health.
Finally, let's not forget that these mechanisms were originally used mainly between Northern states and Southern states. Since the 2000s, the situation has evolved, and investors are now increasingly targeting developed countries. Additionally, developed countries are also victims of a practice known as “treaty shopping.” This process allows multinational corporations to take advantage of their presence in multiple countries to engage in legal optimization, using the most favorable investment treaties to resolve their disputes and thus exploit legal differences to their advantage.
Due to the aforementioned elements, it seems that ISDS clauses are becoming increasingly rare and tend to be removed from international agreements. This evolution is a response to the growing concerns of contracting parties regarding their sovereignty. As a result, intra-European investment arbitration has significantly decreased, as the European Union has progressively implemented measures aimed at restricting, or even eliminating, its use in most agreements concluded within the Union.
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