*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
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The Evolving International Investment Law and Policy Regime: Ways
Forward (E15 Task Force policy options), "China's outward FDI and
international investment law", "Policy options for promoting FDI in
the LDCs", “The negotiations of the United Nations Code of Conduct on
Transnational Corporations: Experience and lessons learned”, and
*Improving the International Investment Law and Policy Regime: Options
for the Future are* available at
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 175 June 6, 2016
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Maree Newson ([log in to unmask])
*The case for an advisory center on international investment law*
by
Umirdinov Alisher* **
Since it is costly for developing and especially least developed country
(LDC) members to participate in the World Trade Organization (WTO)
dispute-settlement mechanism, the Advisory Center on WTO Law (ACWL) was
launched in 2001; it provides subsidized, low-cost legal advice to
developing and LDC members of the WTO. As an institution engaged in legal
aid on a global scale, it currently has nine staff members. All are
lawyers, providing over 200 legal opinions each year in response to
requests from eligible members on potential trade disputes. The ACWL has
been recognized for its role in helping represent poor countries in WTO
disputes, and has a high level of satisfaction among its users.[1]
Is there a need for a similar advisory center in the field of international
investment arbitration? While no one denies the need for reform of
investor-state dispute settlement (ISDS), few have offered specific
recommendations.[2] Filed cases totaled at least 667 as of September 2015.
[3] New market entrants, such as third-party funders, are making the
situation even more difficult for respondent countries. Unfortunately, many
developing countries still lack human resources, face language barriers and
often struggle with budget constraints. Therefore, compared to the WTO’s
dispute-settlement mechanism, it could be argued that the developing world
has a stronger need for an ACWL-like institution in the field of investment
arbitration in order to lessen their financial burden.
Given this need, why do we still not have such an institution?
- First, the WTO is a multilateral system built on one set of rules,
working with one centralized state-to-state dispute-settlement mechanism.
The international investment regime, however, is fragmented, consisting of
more than 3,000 international investment agreements with several
institutional and ad hoc forums.
- Second, the geographical dispersion of ISDS venues presents a problem.
The WTO Panel and Appellate Body have a permanent seat in Geneva; this
makes it easy for ACWL’s lawyers to handle trade disputes.
- Third, there is the scope of fact-finding and legal fees. WTO cases
are not inherently prone to lengthy fact-finding. However, investment
arbitration requires significant time and expense for fact-finding and may
make it difficult for a small, permanent institution to follow long and
costly case procedures. The average WTO case costs about
US$600,000-700,000, while average investment-arbitration costs total more
than US$4 million[4]—more than the annual ACWL budget.
- Finally, lack of political support, budgetary constraints and perhaps
lobbying by law firms have discouraged previous initiatives on an advisory
center for investment arbitration in Latin American and ASEAN regions.[5]
This simple comparison might suggest that it is too difficult to establish
an investment advisory center. However, there is one feasible option: to
transplant the ACWL model into investment arbitration, but with regional
offices in the main investment dispute hubs. Capacity building for in-house
lawyers and assisting host countries in the defense of ISDS cases would be
the main tasks for an investment dispute advisory center. In this case, the
center could be launched under the auspices of one of the ISDS forums,
potentially drawing on minimum contributions by member countries.
Obviously, the minimum contribution would need to be higher than ACWL’s.
However, compared to the high legal fees of law firms, developing countries
would still reap the benefits of inexpensive and efficient service.
Developed countries could be asked to donate to the advisory center.
Subsidizing the defense cost of host countries could be taken as biased
against the interest of their investors in the short term; however, it
would serve the policy goals of those countries in terms of viability of
the investment-protection system for the longer term.
The International Centre for Settlement of Investment Disputes (ICSID)
Secretariat would be well-placed to propose and launch such an institution.
Since it arbitrates the majority of investment disputes, comprises 151
contracting member states from around the world and is backed by the World
Bank, ICSID is uniquely positioned to play a meaningful role in
establishing such an advisory center. Another potential candidate is the
Permanent Court of Arbitration, which has the benefit of 20 years’
experience administering its Financial Assistance Fund.
Ultimately, whether an advisory center on international investment law can
be launched in the near future depends on the political will of
governments. Nonetheless, it is worth thoughtful consideration.
------------------------------
* Umirdinov Alisher ([log in to unmask]) is assistant professor
of Law at Nagoya University, Graduate School of Law, Japan. The author is
grateful to Cristian Chiffelle, Anna Joubin-Bret and Rodrigo Monardes for
their helpful peer reviews and to Dai Yokomizo and Yaraslau Kryvoi for
their comments. *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.*
[1] Nora Plaisier and Paul Wijmenga, “Evaluation of trade-related technical
assistance, three Geneva-based organizations: ACWL, AITC and QUNO”, IOB
Working Document, Policy and Operations Evaluation Department, Netherlands
Ministry of Foreign Affairs, 2004, pp. 1-36.
[2] Karl P. Sauvant and Federico Ortino*, Improving the International
Investment Law and Policy Regime: Options for the Future* (Helsinki:
Finnish Ministry of Foreign Affairs, 2013), pp. 119-122; Thanh T. Nguyen
and Thi C. Vu, “Investor-state dispute settlement from the perspective of
Vietnam: looking for a ‘post-honeymoon’ reform”, in Jean E. Kalicki and
Anna Joubin-Bret, eds., *Transnational Dispute Management Journal*, vol. 1
(2014).
[3] UNCTAD, available at http://investmentpolicyhub.unctad.org/ISDS.
[4] Matthew Hodgson, “Counting the costs of investment treaty
arbitration”, *Global
Arbitration Review News* (March 24, 2014).
[5] Anna Joubin-Bret, “Establishing an International Advisory Centre on
Investment?”, E15 Initiative (December 2015), p. 6, available at
http://e15initiative.org/wp-content/uploads/2015/09/E15-Investment-Joubin-Bret-FINAL.pdf
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.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Umirdinov Alisher, ‘The case for an advisory
center on international investment law,’ Columbia FDI Perspectives, No.
175, June 6, 2016. 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,
Daniel Allman, [log in to unmask]
*Most recent Columbia FDI Perspectives*
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- No. 174, Qianwen Zhang, “China’s “new normal” in international
investment agreements,” May 23, 2016.
- No. 173, Gabriel Bottini, “Using investor-state dispute settlement to
enforce investor obligations,” May 9, 2016.
- No. 172, Maria Borga, “Not all foreign direct investment is foreign:
the extent of round-tripping,” April 25, 2016.
*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 August 1-5, 2016*, CCSI will hold it's Executive Training on
Investment Arbitration for Government Officials
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New York City. 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, including
application materials, please visit our website
<http://columbia.us6.list-manage2.com/track/click?u=ab15cc1d53&id=4c2e72f210&e=237ee78ed3>.
Applications will be accepted on a rolling basis. Firms or organizations
wishing to provide scholarships for the 2016 program should contact us at
[log in to unmask] for more information.
- *On November 2-3, 2016*, CCSI will host the eleventh annual *Columbia
International Investment Conference*, entitled “Climate Change and
Sustainable Investment in Natural Resources: From Consensus to Action.”
Both the Sustainable Development Goals and the Paris Agreement, reached
last December at COP21, make clear that climate-change mitigation must be
pursued within the broader agenda of ending poverty, promoting economic
development, ensuring social inclusion, and protecting the physical
environment. Our Conference, taking place one week before COP22, will offer
a high-level opportunity to explore the complex challenges of the Paris
Agreement in light of sustainable development, the SDGs, and the real
challenges facing developing countries within the global economy. The
Conference’s sessions will address issues including: the rapidly changing
(and declining) role of hydrocarbons in the global energy system; how
low-carbon strategies can and should be adapted to the development needs of
low-income countries; how to manage land use to mitigate climate and
environmental impacts and to maximize benefits for development; and the
development of new international legal frameworks and global governance to
support national-level actions. *Registration is free, but required; for
more information, including registration, please check our website
<http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=d114d61d8a&e=237ee78ed3>.*
- CCSI’s *Negotiation Support Portal *is now available in Portuguese
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, Russian
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The Portal is designed to support host countries in their planning,
preparation for, negotiation, monitoring, and implementation of complex
investment projects. We are always updating and improving the Portal, and
encourage readers to regularly engage with the wealth of resources,
trainings, and support provider organizations which are constantly being
updated and improved.
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 © 2016 Columbia Center on Sustainable Investment (CCSI), All
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