International Investment Agreements and Investor-State Dispute Settlement
For companies, international investment agreements (IIAs) as well as investment chapters in free trade agreements are an important instrument for safeguarding foreign direct Investment (FDI) against political risks such as expropriation, expropriation-like measures (indirect expropriation), and discrimination. For States, they are a central tool for promoting foreign investments.
With these international agreements, they signal to foreign investors that they will protect their investments against arbitrary sovereign infringements. Most of these Agreements give investors the possibility to assert their rights before a neutral tribunal – beyond the host State’s range of influence (investor-state dispute settlement, ISDS).
Existing IIAs and dispute settlement procedures exhibit some weaknesses that should be avoided in new agreements. For instance, transparency needs to be improved, legal concepts need to be more precisely formulated, and frivolous claims need to be prevented. An appellate mechanism would also be desirable. German industry has outlined reform recommendations in the BDI position papers “Protecting European Investment Abroad” and “The ‘I’ in TTIP”. In our paper “Fears, Facts, Faultlines”, we take a closer look at the criticisms most frequently voiced against investment protection agreements and investorstate dispute settlement, and set out why IIAs are indispensable for industry.