ICSID v. UNASUR: same game, new rules?

April 30, 2013

By Dr Antoine P. Martin

Attempts to limit the jurisdiction and reach of ICSID seem to be progressing as South American states’ efforts to foster regional cooperation through a new regional organisation (regrouping Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela) gain in precision.

Given the numerous investment claims brought by foreign investors against South American States lately, governments have thought about setting rules for an alternative investment protection and dispute settlement mechanism in which greater consideration would be given to sovereign and regulatory needs (see our previous post on Venezuela’s withdrawal from ICSID), and where appeal and precedents mechanisms would be put in place. Following the entry into force of the ‘Unión de Naciones Suramericanas’ (UNASUR) constitutional statutes in 2011 (for a chronology, see this very informative piece by the IIS), the famous EFE Press Agency indicated in Mid April that efforts towards the creation of a dispute settlement centre are becoming more concrete.

According to EFE, the Ecuadorian Government in the person of Andres Arauz (National Secretariat for Planning and Development) announced that a meeting will take place in May 2013 to discuss and define the protocol framing the activities of the future regional centre, which work would “definitively” begin this year (see here and there). Apparently, the Centre would have a role to play in settling investment-related disputes, but its scope of action would be significantly enlarged in comparison to ICSID since its jurisdiction would also be extended to commercial matters as well as to regional and international trade disputes.

The point is very interesting because it not only suggests that South America might soon become a increasingly important hub for international investment and commercial arbitration (thus competing with current European arbitration venues), it also suggests that South America might become a major alternative, no to say counter power, to the existing ICSID or NAFTA based investment forums. As a matter of fact, a regional summit known as the the ‘First Ministerial Conference of Latin American States Affected by Transnational Interests’ took place on April 22d with the aim of discussing investment treaty issues under the auspice of the Bolivarian Alliance for the Peoples of America with South American countries suffering from current treaty terms and where the denunciation of existing dispute settlement mechanisms (i.e. ICSID) might be ongoing. According to the official declaration published after the Summit, it appears that creating a chain of information, cooperation and assistance is increasingly considered as being essential to the preservation of South American States’ sovereignty and immunity against liberal, foreign and corporate interests. Amongst other factors, the participants admitted the idea of setting up an International Observatory responsible for auditing / monitoring international tribunals’ actions in relation to worldwide investment disputes, for proposing alternative means to reform international arbitration instances and for ensuring that consistent policies and litigation resolution standards would be conducted on a regional scale from now on. In addition, the ‘Latin American States Affected by Transnational Interests’ would establish an Executive Committee in charge of designing / implementing various mechanisms for the protection of regional legal and political security whilst ensuring that legal actions are managed jointly by international teams of specialised lawyers and experts.

Time will tell whether such news represent a step forward in enhancing international economic and political relations, but the fracture seems to widen. Whilst the international framework for the protection of transnational investments was originally set up as a means to settle disputes through a universal set of rules rather than through diplomacy and political pressures, the emergence of an alternative forum promoting sovereignty over transnational standards “affecting” domestic interests suggests that ICSID somehow failed to achieve its unification efforts.

There is, of course, a symbolic but nonetheless deeply enshrined ideological ‘divorce’ which suggests that the legitimacy and authority of investment protection standards will be increasingly questioned because of their liberal nature. In fact, the press articles listed above clearly suggest that – as far as South American States are concerned – solving BIT tensions implies taking measures on a regional scale and requires a regional consensus in order to offer a strong and unified response to forthcoming criticisms and claims.

There is also a risk that, as a result of such a failure to establish investment rules as a universal framework, the very investment promotion and protection system might be weakened. It seems logical (not to say unavoidable), indeed, that the apparition of a new doctrine of international investment law will lead to new standards of law on a regional scale, whilst existing standards might be interpreted differently if not simply ignored as a result of ICSID rules’ denunciation and withdrawal procedures. This, in turn, will leave plenty of work for lawyers and experts to discuss. In the meantime, let’s see…

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