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Dispute Settlement in Bilateral Investment Agreements
The investor-state dispute settlement provisions, which are generally part of bilateral investment promotion and protection agreements, are increasingly being called into question by governments of various nations, especially those in developing countries. In the recent past, multinational corporations have begun using international arbitration clauses in the ISDS to challenge governments in countries where they invest and operate, thereby challenging national public policy decisions. With the global tide going against ISDS provisions, can India find a more opportune moment than now to take a call on this important issue
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A bilateral investment promotion and protection agreement (BIPA) is a form of international investment agreement (IIA) aimed at protecting foreign investment. The first BIPA was signed way back in the 1950s. But the 1980s and 1990s were witness to a dramatic proliferation in the BIPAs signed: from fewer than 200 in 1980, there were almost 2,000 BIPAs by the end of the 1990s (UNCTAD 2000). Developing countries, in particular, were under pressure to enter into BIPAs in order to remain competitive as a destination for foreign investment and also to project themselves as reform-minded economies (Haftel and Thompson 2013). Likewise, India went on to sign its maiden BIPA with the United Kingdom (UK) in 1994, and has since signed 83 BIPAs (The Economic Times 2014b). The World Investment Report 2013 published by the United Nations Conference on Trade and Development (UNCTAD), indicates that by the end of 2012 there were more than 3,196 IIAs (UNCTAD 2013a). IIAs include both BIPAs and investment chapters in other more comprehensive regional or bilateral free trade agreements (FTAs).
The most controversial aspects of IIA s , including BIPA s , are the investor-state dispute settlement (ISDS) provisions that allow investors to subject host foreign governments to international arbitration if they believe that they have been subject to expropriation or discriminatory treatment in that country, among other grounds. The ISDS mechanism was origi- nally designed to depoliticise investment disputes and allow foreign investors a fair hearing before an independent, neutral and qualified tribunal ( UNCTAD 2013a). However, controversies around ISDS have gained momentum more recently with the mechanism being widely criti- cised as unethical, unfair, undemocratic, unsustainable and even unconstitutional, giving undue power and benefi t to multinational corporations ( MNC s ) over host governments and public policy, thereby placing profit before people and the environment (Eaton 2014). Some of the serious concerns that have been raised about the ISDS mechanism include lack of legitimacy and transparency; contradictions between arbitral deci- sions; difficulties in correcting errone- ous ar-bitral decisions; questions about the independence and impartiality of the arbitrators; and costs and time of ar bitral procedures ( UNCTAD 2013b). It is indeed striking that under the ISDS re-gime unelected tribunals of three ex- perts are empowered to overrule a na- tion's highest authorities!
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