Termination of International Investment Agreements and Withdrawal of Consent to Arbitrate

This is a crucial moment in international investment policymaking. Two factors have converged, calling for a new direction. First, it has become increasingly difficult to justify investor-state dispute settlement (ISDS); even governments that had been among its strongest proponents are now changing course and have raised a range of fundamental, systemic and inter-related issues relating to ISDS. Second, policy makers and other stakeholders have a greater awareness of the need to design appropriate policies to maximize the contributions cross-border investment can make to sustainable development. Influenced by these factors, various reform efforts related to investment policy are underway at the national, regional, and international levels. These discussions about reform are likely to be slow, and outcomes uncertain. In the meantime, governments and their stakeholders remain tied to an outdated system that is widely acknowledged to be ill-suited for modern investment policy objectives, with increasingly concerning consequences.

During the Summit of the Americas in June 2022, U.S. President Joe Biden announced the launch of negotiations for an Americas Partnership for Economic Prosperity (APEP). The Biden administration hopes this initiative can rebuild relationships with countries in the region by increasing cooperation to address economic development and inequality, climate, and other challenges affecting the entire Western Hemisphere. To fulfill this vision and its associated goals, the participating countries must address the severe challenges posed by the investor-state dispute settlement (ISDS) regime and its escalating threats to the transition to a post-carbon society and the establishment of resilient public health systems in the Americas. 

CCSI partnered with Rethink Trade and Georgetown Law’s Center for the Advancement of the Rule of Law in the Americas to co-author a white paper, Turning the Tide: How to Harness the Americas Partnership for Economic Prosperity to Deliver an ISDS-Free Americas (and Executive Summary). In the white paper, we explain how the APEP negotiating process can be leveraged to dismantle ISDS within the region. It includes original data describing the scope of the problem and provides pathways to address both the international and U.S. domestic law requirements for an effective ISDS exit. 

CCSI's Ladan Mehranvar spoke at a webinar organized by Rethink Trade that also featured Senator Elizabeth Warren and Nobel Laureate Joseph Stiglitz, on the occasion of the release of the white paper.

In addition, the policy paper Clearing the Path: Withdrawal of Consent and Termination as Next Steps for Reforming International Investment Law, explores two near-term options that governments engaged in reform discussions can pursue, alongside longer-term work on substantive and procedural reform. These options are: (1) a joint instrument on withdrawal of consent to arbitrate; and/or (2) a joint instrument on termination. The paper examines how both options could be implemented, and makes the case for putting a pause on ISDS to ensure that investment treaties and their dispute settlement mechanisms achieve their desired ends, produce legitimate decisions, and do not undermine international economic cooperation and sustainable development more broadly.

This blog post summarizes the key points of this policy paper.

In connection with ISDS reform efforts proceeding in UNCITRAL’s Working Group III, CCSI submitted “Draft Treaty Language: Withdrawal of Consent to Arbitrate and Termination of International Investment Agreements,” which sets forth specific treaty language that can be used to (1) amend existing international investment agreements to withdraw consent to investor-state arbitration (leaving in place substantive protections, which can be enforced through state-state arbitration, or permits consent to investor-state arbitration on an case-by-case basis) or (2) terminate existing international investment agreements.