*Karl P. Sauvant, PhD* *Resident Senior Fellow* *Columbia Center on Sustainable Investment** Columbia Law School - The Earth Institute, Columbia University 435 West 116th St., Rm. JGH 645, New York, NY 10027 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> * Formerly the Vale Columbia Center on Sustainable international Investment. “The negotiations of the United Nations Code of Conduct on Transnational Corporations: Experience and lessons learned” and K. P. Sauvant and F. Ortino, *Improving the International Investment Law and Policy Regime: Options for the Future are* available at http://www.works.bepress.com/karl_sauvant/. > View this email in your browser > <http://us6.campaign-archive1.com/?u=ab15cc1d53&id=d60905f950&e=ab9621c61b> > 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看： > http://ccsi.columbia.edu/publications/columbia-fdi-perspectives. > *Columbia FDI Perspectives* > Perspectives on topical foreign direct investment issues > No. 149 June 8, 2015 > Editor-in-Chief: Karl P. Sauvant ([log in to unmask]) > Managing Editor: Adrian P. Torres ([log in to unmask]) > *When is investor-state dispute settlement appropriate to resolve > investment disputes? An idea for a rule-of-law ratings mechanism* > <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7821714e0a&e=ab9621c61b> > by > John P. Gaffney* > > Differences exist within the international community regarding the > appropriate means of resolving investment disputes, with stakeholders > divided over whether such disputes should be resolved by national courts or > investor-state dispute settlement (ISDS) (especially by developed countries > in the context of the Transatlantic Trade and Investment Partnership). This > *Perspective* considers whether there is a role for the creation of a > rule-of-law ratings mechanism – involving the issuance of ratings by a > designated agency on the degree of respect for the rule of law by domestic > courts in a given country or region – in mediating this division, and > resolving which dispute-settlement model should be preferred. > > The concept of sovereign rating offers a comparable framework for a > rule-of-law ratings mechanism. Sovereign rating involves an opinion issued > by a credit rating agency (e.g., Standard & Poor’s, Moody’s) on the > creditworthiness of a country, and presented according to a ranking system. > These ratings are not uncontroversial, of course, and international > regulators are taking steps to reform them. Nonetheless, the sovereign > ratings mechanism will remain part of the international economic > superstructure. > > Why would a similar mechanism be desirable for rule-of-law issues? It is > suggested that such a mechanism could help determine when it is appropriate > to have investment disputes with a given state resolved by ISDS rather than > the domestic courts of that state, where the rating indicates that there is > a substantial risk that the rule of law would not be upheld in relation to > such a dispute by the domestic courts of the host country. > > While credit rating agencies derive their authority solely from the > confidence that lenders have in their ratings, a rule-of-law ratings > mechanism would require agreement of all the parties to an international > investment agreement (IIA). Future IIAs would therefore need to specify > alternative investment-dispute mechanisms - comprising both domestic and > international dispute-settlement mechanisms - and provide that the choice > of appropriate mechanism would be determined according to the rule-of-law > ratings system suggested in this *Perspective*. > > In addition to playing a central role in determining whether ISDS is > appropriate to resolve investment disputes for a given state, the > rule-of-law rating could also serve to incentivize the development of > domestic legal systems to a standard whereby investors could be assured > that investment disputes would be resolved in accordance with the rule of > law. Stakeholders could hardly complain if investors are entitled to invoke > ISDS in circumstances in which the host country’s domestic courts are > unlikely to respect the rule of law in accordance with international > ratings by an independent agency. > > Such a rating agency is not without precedent. The European Union (EU) > Justice Scoreboard, for example, is an information tool published by the > European Commission, which aims to assist the EU and member states to > achieve more effective justice by providing objective, reliable and > comparable data on the quality, independence and efficiency of justice > systems in all member states. > > The foregoing proposal presupposes that ISDS meets a minimum threshold > whereby investors and states alike can be assured that disputes will be > settled in accordance with the rule of law. Undoubtedly, the ISDS system > suffers from flaws. Hence, the development of a rule-of-law rating would > have to proceed hand-in-hand with ongoing reforms of the ISDS. > > There would be a number of key issues to be considered in the > establishment of such a mechanism, including: > > · How would the objective, consistent and reliable criteria on > which to base the rule-of-law rating be defined? > > · How would the threshold level, beyond which ISDS would no longer > be appropriate to resolve investment disputes, be determined? > > · How would a ratings mechanism be incorporated into existing or, > more likely, future IIAs, to govern the choice of dispute-settlement > mechanism? > > · Who would act as the relevant ratings agency? Would it be > appropriate for a World Bank or United Nations agency to serve in such a > capacity? > > · How would a rule-of-law rating interact with claims based on > denial of justice by the domestic legal system of the host country? > > · What should happen in the case of profound political change > (e.g., military coup, illegal invasion)? Should the rule-of-law rating be > suspended for a defined preliminary period (so as to favor ISDS)? > > Whatever the answers to these questions might be, a rule-of-law ratings > mechanism could help mediate the current controversy over whether > investment treaty disputes should be resolved by national courts or ISDS. > Developed countries, whose court systems satisfied the rule-of-law ratings > mechanism, would avoid being subjected to arbitration. At the same time, > their investors would be entitled to pursue ISDS in developing countries > (that failed to satisfy the same criteria), which would be incentivized to > develop their domestic courts in a manner that respects the rule of law. > Finally, the process of formulating appropriate criteria for a rule-of-law > ratings system could in itself make an enormous contribution to the rule of > law. > _________________________ > > * John P. Gaffney is a Senior Associate at Al Tamimi & Company (United > Arab Emirates). The author is grateful to Andrea Bjorklund, Alejandro M. > Garro and O. Thomas Johnson for their helpful peer reviews. *The views > expressed by the author of this Perspective do not necessarily reflect the > opinions of Columbia University or its partners and supporters. Columbia > FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.* *The > material in this Perspective may be reprinted if accompanied by the > following acknowledgment: “John P. Gaffney, ‘When is investor-state dispute > settlement appropriate to resolve investment disputes? An idea for a > rule-of-law ratings mechanism,’ **Columbia FDI Perspectives, No. 149, > June 8, 2015. Reprinted with permission from the Columbia Center on > Sustainable Investment (www.ccsi.columbia.edu > <http://www.ccsi.columbia.edu>).” A copy should kindly be sent to the > Columbia Center on Sustainable Investment at [log in to unmask] > <[log in to unmask]>. * > For further information, including information regarding submission to the > *Perspectives*, please contact: Columbia Center on Sustainable > Investment, Alex Weaver, [log in to unmask] > > *Most recent Columbia FDI Perspectives* > <http://columbia.us6.list-manage2.com/track/click?u=ab15cc1d53&id=a411d16eb6&e=ab9621c61b> > > > - No. 148, In Hyeock Lee, Shige Makino and Eunsuk Hong, “Outward FDI > does not necessarily cost domestic employment of MNEs at home: Evidence > from Japanese MNEs,” May 25, 2015. > - No. 147, Joachim Karl, “An appellate body for international > investment disputes: How appealing is it?,” May 11, 2015. > - No. 146, Anna Joubin-Bret, “Why we need a global appellate mechanism > for international investment law,” April 27, 2015. > > *All previous FDI Perspectives are available at **http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/ > <http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/>**. * > > *Other relevant CCSI news and announcements* > > - *On June 8, 2015*, CCSI and The Institute for Economic Research > (IIEc) of the National Autonomous University of Mexico (UNAM) released the > results of their sixth survey of Mexican multinationals. The survey, > conducted during 2014, is part of a long-term study of the rapid global > expansion of multinational enterprises (MNEs) from emerging markets. The > present report, “*Changing Characteristics of Large Mexican > Multinationals during Legal Reforms > <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=46e086f652&e=ab9621c61b>*,” > focuses on 2013 data. > - *On July 13-17, 2015, *CCSI will host its first Executive Training > on Investment Arbitration for Government Officials > <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=fa873fcb49&e=ab9621c61b> at > Columbia University. Through an intensive week-long course, government > officials involved in managing investment treaty disputes or negotiating > investment treaties will increase their knowledge of crucial procedural and > substantive aspects of investment law. Sessions will be taught by leading > academics and practitioners and will be tailored to uniquely address issues > relevant to governments. *For more information about the program, > please download the 2015 Executive Training Brochure here > <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ffe588820f&e=ab9621c61b> and > application here > <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=f9a242424f&e=ab9621c61b>.* > - *On June 15, 2015*, CCSI and the Global Economic > Governance Programme at Oxford University will launch a new online forum on > New Thinking on Investment Treaties, a series of short presentations by > academics, practitioners, and civil society on key topics in international > investment law. *All presentations will be posted at noon EST* *here > <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=efa3588671&e=ab9621c61b>. > Please subscribe to the channel and visit our website for updates*. *For > more information and for the schedule of speakers, please visit our > website *here > <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=249533deca&e=ab9621c61b> > . > > Karl P. Sauvant, Ph.D. > Resident Senior Fellow > Columbia Center on Sustainable Investment > Columbia Law School - Earth Institute > Ph: (212) 854-0689 > Fax: (212) 854-7946 > *Copyright © 2015 Columbia Center on Sustainable Investment > (CCSI), All rights reserved.* > [log in to unmask] > > *Our mailing address is:* > Columbia Center on Sustainable Investment (CCSI) > Columbia Law School - Earth Institute, Columbia University > 435 West 116th Street > New York, NY 10027 > > Add us to your address book > <http://columbia.us6.list-manage.com/vcard?u=ab15cc1d53&id=a61bf1d34a> > > > unsubscribe from this list > <http://columbia.us6.list-manage.com/unsubscribe?u=ab15cc1d53&id=a61bf1d34a&e=ab9621c61b&c=d60905f950> > update subscription preferences > <http://columbia.us6.list-manage.com/profile?u=ab15cc1d53&id=a61bf1d34a&e=ab9621c61b> > > > [image: Email Marketing Powered by MailChimp] > <http://www.mailchimp.com/monkey-rewards/?utm_source=freemium_newsletter&utm_medium=email&utm_campaign=monkey_rewards&aid=ab15cc1d53&afl=1> > Not spam <https://antispam.law.columbia.edu/canit/b.php?i=01OCc9dkT&m=7f6bfc5022ac&t=20150609&c=n> Forget previous vote <https://antispam.law.columbia.edu/canit/b.php?i=01OCc9dkT&m=7f6bfc5022ac&t=20150609&c=f> ____ AIB-L is brought to you by the Academy of International Business. 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