Study On European Union's Reform On ISDS

Investor State Dispute Settlement(ISDS)is a legal instrument that provides foreign investors the right to call for arbitration against a government when they believe the government has violated an international investment treaty.' Disputes arising between investors and foreign countries is not a novel concept,creating a need for such resolution mechanisms ever since the establishment of cross-border investment.The modern form of ISDS has been subject to heavy criticism lately,as the growth of foreign investment has led to an increase in investor-state disputes.This has created a public debate,calling for reform of current investor-state esolution.European Union has proposed the International Investment Court system to reform existing ISDS,which are mainly stipulated in its institutional documents,CETA text and TTIP proposal.Based on the disadvantages ISDS has been criticized for,EU proposed to establish an appellate body to improve the consistency of arbitration results,to promote transparency of procedures and to modify the rules for arbitrators to safeguard their impartiality and independence.More importantly,EU has for the first time stipulated in the main text of the investment agreements that the right to regulate should be respected and protected notwithstanding the investment protection provisions.As far as EU is considered,the measures taken to exercise the right to regulate shall not constitute indirect expropriation.As far as I am considered,EU's proposal has been directed at the shortcomings of existing International Investment Arbitration(IIA)and the expectations of thepublic which should be recognized and expected to be reasonable and advanced in this way.At the same time,it makes a diverse ISDS scheme and will promote IIA institutions to reform at a faster and deeper level.However,EU's IIC system is not perfect and some serious problems remain unclear which may jeopardize the legitimacy of itself in the future if not settled properly.Here I am referring to the boundaries of the appellate body and the right to regulate.As for the appellate body,I cannot agree that the facts issues should be reviewed when appealed because it may cause too much time and money in addition to harming the consistency of judgments.Worse still,it is highly possible that it would be inclined to protect the host governments which would cause partiality between the governments and investors.Concerning the boundary of regulation rights,I think it should be clearly and strictly restricted to the benefits of public health,safety and those public interests facing imminent risks as such.Since the host government will not be bound to pay compensation to investors,the likelihood that this stipulation may be used as an excuse for indirect expropriation.To sum up,EU's proposal of establishing IIC system to reform ISDS is acceptable in that it can be expected to modify the shortcomings of IIA and to meet the expectations of the public.However,other countries should draw a clear line in mind when negotiating about the regulation rights and appellate mechanism.It is highly encouraged that other countries take an active attitude in joining the establishment of IIC rules so as to find their voice and gain experience.