In the year of 2016 the public attention was drawn to free trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) - planned, but eventually failed to be concluded between the United States and Europe -, furthermore, to the EU-Canada Comprehensive and Economic Trade Agreement (CETA) concluded between Canada and the European Union. The public reacted with great anguish and mixed feelings towards these agreements, and the biggest international NGOs, for example the Greenpeace, organised continuous waves of protests against their conclusion. Apart from the predicted adverse impact on society, the most heated debates were triggered by the so-called ISDS procedures, i.e. the provisions related to investor-state dispute settlement.
In order to deeper understand the importance of the provisions related to ISDS, certain questions have to be answered. Therefore, the research starts by describing the essence of ISDS procedures. In the opinion of the authors, it is inevitable to become familiar with the history of ISDS procedures first and to get to know their global role. In connection with this it is important to circumscribe the concept of investor. Within the sphere of current challenges of ISDS procedures the alternative recommended by the European Commission has to be taken into account as well, namely the Investment Court System (ICS). In the course of this the research places importance on examining certain political considerations, due to which the American party pushed for the traditional ISDS procedure. Finally, a number of cases assessed in ISDS procedures will be presented, which might bring us closer to understanding the essence of this institution.
ISDS is a method for resolving disputes arising between states and investors in a way that an arbitral tribunal - which can be institutional or ad-hoc - assesses the given dispute, and its jurisdiction is based on a trade agreement concluded by the states involved in the dispute.
ISDS is a relatively new legal institution of international law. It started to appear in the wake of the flow of international investments that spread after World War II. Its initial purpose was to bring the adjudication of disputes between states and investors front of an independent and professionally reliable tribunal, furthermore, to attempt to stop the possible escalation of legal disputes into political and diplomatic disputes. In this period it was not uncommon that in certain states, which were investment destinations upon the choice of companies, the implementation of the principle of rule of law was not flawless due to political influence and corruption, thus the traditional judicial path was not too attractive taking into account the possible outcome of cases in litigation proceedings initiated against states. ISDS was first used in 1959 by Germany and Pakistan in their bilateral agreement, but only as an alternative. However, in 1968, an agreement between the Netherlands and Indonesia set it forth as a mandatory rule, as the means for the enforcement of rights.[1] Setting forth ISDS in trade agreements became regular practice as of the 90s.[2]
It is apparent from the above that bi- and multilateral trade agreements provide the partial legal basis of ISDS procedures. As examples, large-scale international trade agreements such as the North American Free Trade Agreement (NAFTA) can be mentioned. However, these agreements do not cover all aspects of dispute resolution, because even though the states, as contracting parties, determine the procedural rules to be applied to the arbitration, they frequently include the application of already existing agreements as well.
Within the framework of ISDS procedures the method of resolving disputes might take multiple forms, depending on what the states set forth in their investment agreement. The most frequent solution is the arbitral path. Investment disputes between investors and states may be adjudicated
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by an ad-hoc arbitral tribunal established solely for the given case, but designating international arbitral tribunals that operate on a permanent basis is popular as well. These institutions include, among others, the London Court of Arbitration, the International Chamber of Commerce or the Arbitration Institute of the Stockholm Chamber of Commerce. It is typical for such institutions to adopt their own rules of procedure.[3]
One of the most important documents in the evolution of this legal instrument was the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It created the possibility for arbitral awards adopted in states that ratified the convention to become enforceable in those states. This greatly facilitated the motive to stop the necessary escalation of investment disputes into diplomatic disputes.
The second step in the evolution of regulations related to international investment disputes was the 1965 Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. Apart from its other features, this convention created the International Centre for Settlement of Investment Disputes (ICSID). Next to developing procedural rules for arbitration, the ICSID also mediates between disputing parties. This, however, does not mean that it would adjudicate certain cases, as the ICSID is not a tribunal. It only provides institutional background for arbitral procedures.
The UN fills a prominent role in the resolution of international investment disputes, since the main purpose of the United Nations Commission on International Trade Law (UNCITRAL) is the harmonisation and modernisation of international trade law. One of the most important tools for this activity is the creation of model rules. The advantage of model rules is that they facilitate the peaceful resolution of disputes by building a bridge between states having different legal cultures and traditions. The UNCTIRAL model rules have been applied in numerous arbitral procedures.[4]
As it is apparent, the ICSID procedures serve the resolution of investment disputes between states and investors. In order to further elaborate our thoughts, we clarify the subject matter of ICSID procedures and the questions related to investment disputes. As it becomes visible, the concept of investment can be interpreted very broadly. However, further attention has to be raised with respect to the new tendencies appearing in the practice of international arbitration, which attempt to interpret the concept of investor more narrowly.
In order to examine the legal nature of the concept of investment, it is worth reviewing again the provisions of the 1965 Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States.[5] Article 25 of the ICSID charter sets forth with respect to its jurisdiction that "[a] The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally."
The concept of investment was left undefined in the Washington Convention. This is the result of the so-called United Kingdom compromise, a compromise between capital-exporting developed states and low-income developing states.[6] Hot debates were raging between the states drafting the text of the convention on how to define the concept of investment. During the assessment of this concept, the states participating in the negotiations divided into two groups. One group consisted of financially strong states, whose interests would be best served by using a broad and abstract definition for investment. Against them were standing the group of low-income developing states, whose opinion was that a narrower concept for investment would mean greater protection.[7] This deadlock situation between the two groups was finally resolved by the compromise recommended by the United Kingdom: accordingly, the concept of investment was left undefined in the text of the Washington Convention. Therefore, if we would like to explore the concept of investment, we have to base our research on the definitions found in various trade agreements.
The trade agreement concluded between Hungary and Azerbaijan can serve as an example, the text of which was promulgated by Act CVIII of 2007 on the promulgation of the Agreement Between the Republic of Hungary and the Republic of Azerbaijan for the Promotion and Reciprocal Protection of Investments concluded in Baku on 18 May 2007. The concept of investment is defined in the agreement as "every kind of asset invested in connection with economic activities by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the
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laws and regulations of the latter". In connection with this, the agreement provides a non-exhaustive list of fundamental factors that characterise an investment.[8]
However, it is worth noting that in the international practice of investor protection - contrary to the ICSID charter -, the proceeding arbitral tribunals also started to develop their tests and definitions based on which they identified certain constellations as investment. A short description of the Salini v. Morocco[9] provides related information.
The prelude of the dispute was that in 1994 the Italian companies Salini Costruttori S.p.A. and Italstrade S.p.A. submitted a joint tender for a public procurement invitation issued by the government of Morocco, where the award was the entitlement to construct a planned highway between Rabat and Fès. On 17 October 1995 the contract was concluded between Société Nationale des Autoroutes du Maroc (ADM), the entity responsible for the development of road infrastructure in Morocco, and the consortium formed by the two Italian companies. In this contract, they undertook to complete the works in 32 months, but the construction of the highway was finally completed in 36 months, by 1998. A dispute had arisen between ADM and the two Italian companies, based on which Salini and Italstrade finally initiated an arbitration procedure front of the ICSID in 2000. As compensation for damages suffered, the two Italian companies claimed ITL 132,639,617 from Morocco. Finally, the parties have settled in 2004, but the details of their settlement remained undisclosed.[10]
Still, the Salini v. Morocco case was a milestone, since the system of criteria that later became notorious by the name of Salini test was described by Christoph Schreuer[11] in its expert opinion given on the case, which was eventually published in the commentary on the ICSID Convention. According to the criteria established by the Salini test, the investment has to have "(i) a certain duration, (ii) a certain regularity of profit and return, (iii) an assumption of risk, (iv) a substantial commitment by the investor, and (v) some significance for the host state's development."[12]
The Washington Convention defines investor to the extent that in its Article 25 (2) it determines the characteristics of "a national of another Contracting State". For natural persons, it set forth as a condition that the natural person has to be a national of a contracting state, excluding the contracting state participating in the legal dispute as a party, at the date of initiating the procedure or when the request is entered into the register. The Convention excludes from this circle all natural persons who, on either date mentioned above, also had the nationality of a contracting state which is simultaneously a party to the dispute. This provision serves the purpose of preventing persons with dual nationality to abuse rights related to their other nationality by picking from the proceeding panels.
Under the ICSID Convention, a legal person qualifies as a national of a contracting state if, at the time when the procedure is initiated or when the request is entered into the register, the legal person is a national of a contracting state other than the state party to the dispute. In essence, the condition determined by this provision is identical to the one pertaining to natural persons. However, the interesting part is that, unlike natural persons, legal persons having the nationality of a contracting state party to the dispute do qualify as nationals of a contracting state. However, a necessary condition for this is the consent of the parties whether they accept to treat the legal person as a national of another contracting state for the purposes of the Convention. The text of the Convention mentions foreign control as justification for this provision.
In light of the above, the question may arise whether and to what extent it is progressive in 2016 if, in connection with a possible free trade partnership, the world's two most advanced economic super regions apply a method of arbitration to their arising legal disputes that was initially created for resolving legal disputes arising in connection with agreements concluded by economically undeveloped, usually third world states, where the implementation of the rule of law might not stand on the firmest grounds.
As a criticism to ISDS it is frequently mentioned that because trade agreements are concluded between states and not between companies, under the rules of ISDS the states are not allowed to file claims against companies. They are not allowed to do that because companies do not qualify as contracting states in such agreements, thus they cannot breach obligations established therein. Therefore, in this respect, the public interest may become subordinated to the interests of companies. However, it is worth mentioning that there were two cases in which states, namely Gabon and Romania, were allowed to initiate ISDS procedures against companies.[13]
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Since it is an arbitral procedure, the principle of confidentiality applies in the case of ISDS as well. Confidentiality can be an important principle and a guarantee as well in other arbitral procedures, because legal disputes between companies are assessed in such cases, where the protection of business secrets might precede all other considerations. However, we have to keep in mind that in ISDS procedures legal disputes arising between states and companies are assessed. Ultimately, it serves the purpose of establishing states' liability for damages, which can be significant with respect to both the national economy and society as a whole, but still it is conducted in a manner that fully excludes the public.[14]
Another frequent argument against it is that ISDS offers few opportunities for establishing well-founded and consistent judicial practice. Companies have learned during the five previous decades that ISDS procedures can also be initiated on a try-out basis, because even in the absence of a particularly well-founded legal argument, and with bit of luck on the side, it is possible to enforce a high-volume claim for damages.[15] Since the procedure is expensive, it favours multinational companies, and it does not favour micro, small and medium sized enterprises.[16] This is also supported by the fact that similar legal disputes in ISDS procedures might have very different outcomes.[17] This works against legal certainty on the long run, and legal uncertainty can greatly decrease the willingness to invest, which is exactly the opposite of what the Transatlantic Trade and Investment Partnership (TTIP) stands for.[18]
Furthermore, ISDS procedures might also give rise to ethical and conflict-of-interest issues. The global circle of arbitrators who participate in the assessment of such legal disputes is very narrow[19], a fact which cannot go unnoticed.[20] These arbitrators are typically attorneys-at-law who, in other cases, might engage in the representation of the same companies in the case of which they proceeded as arbitrators.
Due to disputes recently flared up in connection with ISDS procedures, it is worth examining shortly the related provisions of the TTIP, the partnership agreement failed to be concluded eventually. According to the draft of the partnership agreement, the legal assessment of disputed matters between companies and states was to be done through arbitration. However, it is also important to emphasise that in connection with the provisions on ISDS, the European party had serious concerns.
Subsequently, the question arises why the United States pushed for the use of ISDS in the TTIP, since the institutions of the rule of law in European Union member states stand on sufficiently solid grounds for not to be included in the list of developing states in this respect. However, an article published in The Economist on 11 October 2014 titled "The arbitration game" pointed out that in the trade agreement planned to be concluded in the future between the United States and China, the provisions of the TTIP could have served as a model.[21] According to other viewpoints, maintaining the ISDS-related provisions was necessary for the interests of American multinational companies.[22]
By realising that standing on the side of ISDS would create a direct obstacle to the conclusion of the free trade agreement, the European Commission elaborated an alternative, which it named the Investment Court System (ICS). The aim of this new proposal was to take the edge of concerns in connection with the implementation of the ISDS procedure. Appointed (thus not selected) judges would pass judgments, making concessions to the public interest and social expectations, with respect for example to the requirement of publicity. However, the American party in negotiation was not open to this solution.[23] But eventually, the text of the CETA agreement concluded with Canada designated this court as the panel proceeding in disputes.[24]
The system of the ICS is two-tiered. The first instance tribunal is composed of a panel of 15 appointed judges. The appeal tribunal can be found on the second instance.[25] The investor-protection procedure outlined by the CETA has three main stages. During the consultation procedure the investor and the state can attempt to settle with each other. If successful, the investor withdraws its complaint. If not, the procedure continues front of the court. An important condition is that if in the given case another panel already proceeds, this has to be viewed as a ground for excluding the continuation of the ICS procedure. These provisions attempt to stop the abuse of the "forum shopping" phenomenon.[26] The court proceeds with a panel of 3 judges, consisting of a Canadian and a European member, and a member from a third state. How-
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ever, the court may also proceed with a sole judge, but in such cases the sole judge can only be a judge from a third state.[27] Finally, for legal remedies, the parties may turn to the appeal tribunal.
The leaked draft of the TTIP already contained the rules pertaining to dispute resolution. On the basis of this it can be established that, similarly to the traditions of the ISDS, the arbitral path would have been favoured. However, certain developments had been included, among others, the possibility of civil society organisations to participate in the procedure. By this the gravest criticisms could have been tackled.
With respect to civil society organisations, the rules pertaining to amicus curiae are important. Literally, this term means the "friends of the court". The legal institution itself has its roots in Roman law, but was implemented in both Anglo-Saxon and continental legal systems.[28] In Hungarian civil procedure, the provisions of Sections 54 to 56 of Act III of 1952 on the code of civil procedure are the rules pertaining to amicus curiae, setting forth the conditions of intervention in the action. It should be noted, as a matter of interest, that the Hungarian court practice also elaborated a system of criteria, based on which the civil society organisations may intervene in actions.
But what does intervention in certain procedures mean in international law? Fundamentally, the states are the subjects of international law. They conclude certain agreements between each other. However, certain issues not only concern states, but private individuals, civil society organisations as well. The rules of amicus curiae create the opportunity for civil society organisations concerned, and also for private individuals concerned, to participate in an action. If, for example, two states agree in an international treaty that they build a dam on their common river, but subsequently a legal dispute arises from this, certain civil society organisations interested in water and environmental protection may intervene for the purpose of facilitating the adjudication of the dispute. Intervention, however, has its limits. Its scope is limited to presenting written opinions in connection with the legal dispute, based on which the proceeding panel can assess the matter subsequently. However, the presentation of opinions might include certain statement of facts which can significantly influence the outcome of a legal dispute.[29]
The most important difference in the case of ISDS procedures is that one of the parties is necessarily an investor or a company, the seat of which is in a contracting state. However, this does not change the fact that civil society organisations have the right to intervene. Thanks to these rules, for example if a dispute arises from a measure taken in connection with public health - for example a state prohibits the use of individual packaging for cigarettes[30] - then the organisations striving for the reduction of smoking may intervene in this procedure.
From the leaked text of the TTIP draft the consensus with respect to amicus curiae provisions can be seen, because both parties agreed that it is necessary to set forth the intervention right of civil society organisations. However, certain differences can be detected in the draft texts proposed by the parties, since according to the preferred phrasing of the European Commission all natural or legal persons having domicile or seat in the territory of the contracting parties shall have the right to present their opinion to the court in accordance with the procedural rules determined in the Convention. In contrast, according to the phrasing proposed by the Americans, the arbitral tribunal would have the right to evaluate whether it allows requests incoming from the civil sphere (non-governmental entities) to present in writing their opinions, with which they might assist the work of the tribunal in assessing the parties' submissions and arguments. The most important difference between the two phrasings is that the European version would allow more space for such submissions, and would not entrust the arbitral tribunals with deciding on whether they allow it or not. This version could have been more advantageous, because it would have provided bigger space for the civil sphere for intervening in more sensitive issues, and more viewpoints could have been implemented during the procedure, restraining arbitrary nature.
The biggest fears in connection with ISDS procedures were caused by its confidential nature, and the relationships existing between the panel of arbitrators and the actors of the business sphere. However, the picture created on the basis of these fears is shaded by the statistics of the UNCTAD, i.e. the United Nations Conference on Trade and De-
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velopment. According to their registry, up to 2017 the number of ISDS procedures was 817, 278 of which still pending, 528 already closed, and the fate 11 procedures is yet unknown.[31] If we look at the already closed procedures, we can see that in 36.6% of the cases the state was the prevailing party, in 26.9% the investor was the prevailing party, in 23.5% the procedure was closed with the settlement of the parties, and in 2.5% of the cases the court ruled for the benefit of neither parties. In 10.6% the procedure was closed because the parties requested its termination.[32] Therefore, if an award is adopted, in most cases the state is the prevailing party. However, the picture is further shaded by the fact that due to the expensive nature of these procedures and despite them being the prevailing party, the states nevertheless have to finance the procedural costs from taxpayers' money.[33] Below, certain cases will be presented, providing examples of prominent ISDS cases:
The parties to the dispute were the state of Australia and Philip Morris Asia Ltd, having its seat in Hong Kong, and being the Southeast Asian subsidiary of Philip Morris' multinational tobacco company. The claim was filed on the basis of Article 10 of the bilateral trade treaty[35] concluded between Hong Kong and Australia.
The starting point of the case was that the government of Australia adopted an act with the purpose of reducing smoking, according to which tobacco products have to have standard, non-individual packaging, on which certain standardised warnings have to be indicated as well. Philip Morris Asia, being aware of the future legislative changes, reorganised itself in a way that it acquired direct ownership in its Australian subsidiary, so it could initiate an action against Australia. In its submission, Philip Morris Asia referred to Article 6 of the bilateral trade treaty concluded between Hong Kong and Australia, which prohibited unlawful expropriation. According to their standpoint, by the use of unmarked packaging, their rights related to trademark would be violated, because they would not be able to indicate it on standardised packaging. According to the referred provision of their agreement, both states shall refrain from unjustified and unlawful expropriation.
The arbitral tribunal did not accept the argument of Philip Morris, and ruled for the benefit of Australia. According to the tribunal's opinion, during the reorganisation of the company group they were already aware of the new legislative act. Therefore, it refused the claim and deemed it as an abuse of rights.
The procedure was initiated by Philip Morris Brand Sárl, Philip Morris Products S.A. and Abal Hermanos S.A against Uruguay, on the basis of Article 10 of the bilateral trade agreement concluded in 1988 between Switzerland and Uruguay. Abal Hermanos was the subsidiary of Philip Morris in Uruguay.
Uruguay was a world leader in the consumption of tobacco products, as well as in related health damages and deaths, thus by enacting new laws it strived to reduce smoking. This was Uruguay's obligation arising also from international law, therefore it implemented measures that increased the extent of warnings on the adverse effects of smoking. According to the new rules, the size of warnings was increased from 50% to 80% of the surface of the package. Further measures prohibited the sale of a certain brand of cigarette in multiple versions. Philip Morris requested the arbitral tribunal to order Uruguay to withdraw the measures, or oblige it to pay USD 22.267 million for damages and its interests, and for the procedural costs. Uruguay contested the lawfulness of the claim, because it created these rules in accordance with its obligations arising from international law, including also the compliance with the exceptions named in the bilateral trade treaty pertaining to public health measures. Furthermore, the measures had no discriminative nature, since they applied to all companies in the tobacco industry. Therefore, Uruguay requested the refusal of the claim and the condemnation of the claimant with respect to the procedural costs.
The arbitral tribunal accepted the request of Uruguay. It established that the measures taken did not violate Uruguay's obligations, thus it refused Philip Morris' claim. In connection with Philip Morris' claim it has to be noted that although partially, but it still requested the impossible from the arbitral tribunal, since in ISDS procedures the scope of the award can only extend to deciding on consideration for damages, and the award may not include the obligation to amend a legislative act.[37]
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Metalclad is a company having its seat in Delaware. Its subsidiary, ECO-Metalclad, carried out activities in Guadalcázar, Mexico, through the companies Ecosistemas Nacionales and Confinamiento Tecnico de Residuos Industriales. These companies were engaging in hazardous waste management. The claim was filed on the basis of Article 1117 of the NAFTA, and the arbitral tribunal proceeded with a panel consisting of three arbitrators.
According to the facts of the case, in 1990 the federal government of Mexico issued a licence to the company Confinamiento Tecnico de Residuos Industriales, still in Mexican ownership at the time, to construct and operate a hazardous waste transfer station in Guadalcazar, located in the area near the federal state of San Luis Potosi, furthermore, in 1993, to establish a hazardous waste landfill facility at the same location. In 1993, Metalclad purchased Confinamiento Tecnico de Residuos Industriales in the knowledge that, apart from the operating licence to be issued by the federal state, it possesses all necessary licences. Shortly after the transaction the governor of San Luis Potosi launched a public campaign against the landfill facility, and in 1994 he had stopped the construction and withdrew the licence. Eventually, however, Metalclad was able to finish the construction because it obtained the construction licence again, but it was not able to commence waste management activities because it did not get the operating licence, since the outgoing governor of San Luis Potosi, as one of his last measures, declared the landfill facility and the surrounding lands an environmentally protected area. He justified his measure by stating that a very rare kind of cactus grows there.
The arbitral tribunal ruled against Mexico on the ground that the governorate of San Luis Potosi proceeded by violating Article 1105 of the NAFTA. Therein, it was stated that states shall treat investors in accordance with the norms of international law and in compliance with the requirement of fair and equitable treatment. When Metalclad purchased Confinamiento Tecnico de Residuos Industriales, it did so in the belief that the governorate will not prevent it from carrying out its activities. It was stated that Mexico also breached Article 1110 of the NAFTA, the provision that prohibits arbitrary expropriation.
Nykomb Synergetics was a Swedish energy holding company which, in the beginning of the 1990s, acquired 51% ownership in the Latvian Windau, therefore, Windau became a subsidiary of Nykomb. Article 26 of the Energy Charter Treaty provided the legal basis of the procedure. The three-member panel of the proceeding arbitral tribunal, the Arbitration Institute of the Stockholm Chamber of Commerce, adopted its award in 2003.
Windau and the state-owned Latvenergo concluded an agreement in 1997, according to which Windau undertook to construct a new cogeneration plant for the state of Latvia, in the city of Bauska. In return, Latvenergo undertook to purchase the electricity produced at a double price. The construction of the power plant was finished by 1999, but it did not operate until 28 February 2000, because Latvenergo disputed the purchase price and its lawfulness. The Latvian laws were amended in a way that Latvenergo could only pay 75% of the general tariff to Windau. The parties tried to reach a settlement first, but it was unsuccessful, thus the case ended up front of the arbitral panel.
Together with default interest, Nykomb claimed LAT 4.119.502.00 as compensation for damages from Latvia. Latvia requested the refusal of the claim. According to the claimant, Latvia proceeded by breaching Article 10 of the Charter, as treatment was not equitable, furthermore, the principle of the most-favoured nation status was also harmed, and Latvia also acted in a discriminative manner, thus it also breached the prohibition of expropriation set forth in Article 13 of the Charter. Latvia referred to the lack of jurisdiction when requesting the refusal of the claim, because Nykomb was not a party to the contract concluded between Latvenergo and Windau, and therefore it could not suffer any damage. Furthermore, according to Latvia, the actions of Latvenergo were not attributable to the state.
Eventually, the arbitral tribunal ruled for the benefit of Nykomb, however, it decreased the amount of consideration for damages to LAT 1.600.000.00, increased with an annual interest rate of 6% . Furthermore, the arbitral tribunal obliged Latvia to purchase electricity from Latvenergo until 2007 at a double price, from the power plant in Bauska operated by Windau, and in accordance with the agreement concluded in 1997.
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The aim of the research was to present the standpoint of both sides in the dispute related to ISDS procedures. It has been established that ISDS clauses enjoy great popularity in international investment law. The most recent and frequent criticisms arising in connection with ISDS procedures were also presented. It is apparent that this institution is the subject of heavy debates in international law, however, the picture is shaded by statistics which show that in the narrow majority of cases the states are the prevailing parties, so perhaps this solution is not that investor-friendly. The two cases in connection with Philip Morris indicate this as well, in which they attempted to force states through ISDS to repeal certain laws which were detrimental for them. However, in the Metalclad and Nycomb cases we can see that if states, or organisations and economic actors proceeding on their behalf do not fulfil their obligations deemed un-wanted, or if they act in a discriminative manner, the arbitral panel is going to rule against them and for the benefit of the investor.
In addition, we emphasise that maintaining social interest towards ISDS procedures is indispensable, and at the same time, it is important to maintain the professional and academic discourse in the topic, as it is necessary for achieving more equitable and predictable procedures. The activity of the Investment Court System established by the CETA will most definitely be worth monitoring, as only their practice will be able to provide feedback on the viability of this new idea in the international regime of investor protection. ■
NOTES
* The research was supported by the programs of the Hungarian Ministry of Justice aimed at increasing the quality of legal education.
[1] See: Newcombe, Andrew - Pardell Lluís: Law and Practice of Investment Treaties. Kluwer Law International, 2009. p. 44. http://ssrn.com/abstract=1375600
[2] See: UNCTAD: World Investment Report 2015. http://unctad14.org/Documents/wir2015ch4_en.pdf (4 August 2016)
[3] UNCTAD: Investor-State Dispute Settlement. Un, New York and Geneva 2014. p. 62-63 http://unctad.org/en/PublicationsLibrary/diaeia2013d2_en.pdf
[4] See Kecskés András: A civil társadalom kihívásai: fókuszban a TTIP. In: Civil Összefogás Közhasznú Alapítvány (szerk.) Civilitika: a népfelség tudománya. Méry Ratio, Budapest, 2016. p. 93-118
[5] Promulgated in Hungary by Legislative Decree 27 of 1987.
[6] Mortenson, Julian Davis: The Meaning of "Investment": ICSID's Travaux and the Domain of International Investment Law. Harvard International Law Journal, 2010/1. pp. 257-318. pp. 289-291
[7] Mortenson, 2010, pp. 284-296.
[8] See: Point 1 of Article 1 of Act CVIII of 2007 on the promulgation of the Agreement Between the Republic of Hungary and the Republic of Azerbaijan for the Promotion and Reciprocal Protection of Investments concluded in Baku on 18 May 2007. On the basis of this the following can qualify as investment in particular:
a) movable and immovable property as well as any other rights in rem such as mortgages, liens, pledges and similar rights;
b) shares, stocks and debentures of companies or any other form of participation in a company;
c) claims to money or to any performance having an economic value associated with an investment;
d) intellectual and industrial property rights, including copyrights, trademarks, patents, designs, rights of breeders, technical processes, know-how, trade secrets, geographical indications, trade names and goodwill associated with an investment;
e) any right conferred by law or under contract and any licenses and permits pursuant to law, including the concessions to search for, extract, cultivate or exploit natural resources.
[9] Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4
[10] http://investmentpolicyhub.unctad.org/ISDS/Details/50 (7 November 2017)
[11] Christoph Schreuer (1944-) international lawyer, his main work is the more than 1500 pages long "The ICSID Convention: A Commentary". During his career he taught at the universities of Wien and Salzburg, furthermore, he is also active as a practicing lawyer, including acting as an arbitrator.
[12] Mortenson 2010, pp. 271-272.
[13] Uchkunova, Inna: ICSID: Curious Facts. Kluwer Arbitration Blog (25 October 2012)
http://arbitrationblog.kluwerarbitration.com/2012/10/25/icsid-curious-facts/ (7 November 2017)
[14] Saha, Himaloya: A Critical Analysis of the Commonly Recommended Reforms of Investor State Dispute Settlement (ISDS). Legal Issues Journal 2016/1. p. 39-54. p. 45.
[15] See: Eberhardt, Pia - Olivet, Cecilia: Profiting From Injustice. Corporate Europe Observatory and the Transnational Institute Brussels/Amsterdam, 2012. p. 26. http://corporateeurope.org/sites/default/files/publications/profiting-from-injustice.pdf (September 25 2017)
[16] See: Eberhardt - Olivet 2012: p.15.
[17] Murphy, John - Heather, Sean: 13 Myths about InvestorState Arbitration. https://www.uschamber.com/above-the-fold/13-myths-about-investor-state-arbitration (September 26 2017.)
[18] Kecskés 2016. p. 93-118.
[19] Mainly, law firms such as White & Case, King & Spalding, and Freshfields participate in these procedures.
[20] See: Eberhardt - Olivet 2012: p. 7-8.
[21] See: The Economist: The arbitration game. October 11 2014. http://www.economist.com/node/21623756/print (September 26 2017)
[22] Kecskés 2016. p.93-118.
[23] Hughes, Krista - Blenkinsop, Philip: U.S. wary of EU proposal for investment court in trade pact. Reuters, October 29 2015. http://www.reuters.com/article/us-trade-ttip/u-s-wary-of-eu-proposal-for-investment-court-in-trade-pact-idUSKCN0SN2LH20151029 (September 26 2017)
[24] European Commission: CETA Explained http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-explained/ (September 26 2017)
[25] European Commission: From arbitration to the investment court system (ICS) - The evolution of CETA rules
- 287/288 -
p.15-20.
http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/607251/EPRS_IDA(2017)607251_EN.pdf (2 September 23 2017.)
[26] ibid.
[27] ibid. p. 4.
[28] See: Hollis, Duncan B.: Private Actors in Public International Law: Amicus Curiae and the Case for the Retention of State Sovereignty. Boston College International and Comparative Law Review 2002/2: p. 235-255.
[29] ibid. p. 238.
[30] An example is the Philip Morris Asia Ltd v Australia case.
[31] UNCTAD Investment Hub:
http://investmentpolicyhub.unctad.org/ISDS (September 26 2017)
[32] ibid.
[33] See Eberhardt - Olivet 2012: p.26.)
[34] Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12
https://www.italaw.com/cases/851 (September 25 2017)
[35] Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments
[36] Philip Morris Brands Sàrl, Philip Morris Products S.A. And Abal Hermanos S.A. V Oriental Republic Of Uruguay ICSID Case No. ARB/10/7
https://www.italaw.com/sites/default/files/case-documents/italaw7417.pdf (September 25 2017)
[37] Murphy-Heather ibid.
[38] Metalclad Corporation v The United Mexican States ARB(AF)/97/1
https://www.italaw.com/cases/671
[39] Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, SCC https://www.italaw.com/cases/759 (September 25 2017)
Lábjegyzetek:
[1] The author Head of Department, associate professor, Department of Business and Commercial Law, Faculty of Law, University of Pécs.
[2] The author is assistant lecturer, Department of Business and Commercial Law, Faculty of Law, University of Pécs.
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