CCSI Submissions to UNCITRAL ISDS Reform Process

In 2017, Working Group III (WGIII) of the United Nations Commission on International Trade Law (UNCITRAL) was tasked with “a broad mandate to work on the possible reform of investor-state dispute settlement.” As an observer organization in this process, CCSI has emphasized that in the context of investor-state dispute settlement (ISDS) reform, it is important to first consider what it is that investment treaties aim to achieve, and only then to consider what form(s) of dispute settlement will best advance those objectives. This means not only looking at reform of the existing ISDS mechanism, but also alternatives to it.

Having identified various concerns about ISDS in phase 1 and whether reform was desirable in light of the concerns identified in phase 2, WGIII has been engaged in developing relevant solutions in phase 3.

So far, the Working Group has completed its work on a draft code of conduct for arbitrators and judges, and guidelines on mediation for international investment disputes, which were adopted at the 56th annual session of the Commission in July 2023. In July 2024, WGIII completed its work on a draft statute of an advisory centre on international investment dispute resolution.

The Working Group is continuing its work on a draft toolkit on prevention and mitigation of international investment disputes, cross-cutting and procedural issues, various aspects of a standing mechanism, an appellate mechanism and a multilateral instrument on investor-State dispute settlement reform.

To contribute to UNCITRAL’s work, CCSI, together with the International Institute for Environment and Development (IIED), the South Centre, and the International Institute for Sustainable Development (IISD), have submitted (and continue to submit) a number documents outlining potential reform options and considerations:

"Prioritization of the Draft Provisions on Procedural and Cross-Cutting Issues" is a joint submission to the Secretariat's request for comments on the prioritization of the draft provisions on procedural and cross-cutting issues. The submission calls for an approach to classification and prioritization that allows working sufficient time to address issues that are particularly pressing in ISDS reform debates, including, for instance, draft provisions 10 (shareholder claims), 12 (right to regulate), and 23 (assessment of damages and compensation).
"UNCITRAL Working Group III: Contribution on the ‘Right to Regulate’ Provision" is a joint submission to the Secretariat's request for comments on the procedural and cross-cutting issues. The commentary focuses on the states' right-to-regulate provision, proposed in the Draft provisions on procedural and cross-cutting issues, and proposes additional policy options aimed at preserving the states' sovereign right (and duty) to regulate.
"Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation” is a joint submission in response to the Secretariat’s request for comments on its note addressing the issue of the calculations of damages and the award of compensation to investors in ISDS. The comments proposes, among other suggestions, the consideration of an entirely new standard of compensation rather than adding clarifications to the existing standard, restricting the use of Discounted Cash Flow, and limiting compensation based on investor conduct.
Comments to the draft Working Group III Workplan. The draft workplan is available on the Working Group III website and is intended to set forth and allocate time and resources to the WGIII activities over the coming years. Our comments relate to making the plan of work more transparent and participatory, in particular for developing countries, non-governmental Working Group III observers (including our organizations) and also how the workplan should incorporate the “cross-cutting issues” (see below submission).
Within the discussions at UNCITRAL, countries are working toward the creation of a multilateral instrument that could be crafted so as to reform ISDS. Recognizing that initiative, and broader support for reform of international investment law, ‘Reforming the International Investment Regime through a Framework Convention on Investment and Sustainable Development,’ proposes the creation of a framework convention to provide states with a mechanism to move beyond the current investor-protection centered system.
“UNCITRAL Working Group III on ISDS Reform: How Cross-Cutting Issues Reshape Reform Options” discusses at a general level how issues such as regulatory chill, investor obligations and counterclaims, the rights of non-parties, and damages – issues that were recognized by the Working Group as being important for guiding its efforts and outputs – could inform the contours of reform solutions.
A “Draft Text Providing for Transparency and Prohibiting Certain Forms of Third-Party Funding in Investor-State Dispute Settlement”, (also available in Spanish and in French), builds on our work examining the role and implications of third-party funding, and provides draft language that could be used by states in reform instruments.
“Third Party Rights in Investor-State Dispute Settlement: Options for Reform” (also available in Spanish) builds on work highlighting the impact of ISDS on access to justice for third parties, and briefly elaborates on how investor-state arbitrations can affect third parties, while also offering examples of procedural tools that states could use to better safeguard those third parties’ rights. CCSI staff also spoke about these issues at UNCITRAL Working Group III’s Fourth Intersessional Meeting.
In line with our broader work on objectives of international investment law, the costs and benefits of the current system, alternatives to investor-state arbitration, and strategies for advancing those alternatives, in “Draft Treaty Language: Withdrawal of Consent to Arbitrate and Termination of International Investment Agreements,” we outline two more systemic and near-term options that states can explore to recraft their investment policies with domestic and international sustainable development objectives.