UNCTAD’s review of ISDS decisions in 2019 highlights IIA reform issues

UNCTAD has published a “Review of ISDS Decisions in 2019: Selected IIA Reform Issues” (IIA Issues Note, No. 1, January 2021).
 
This Note reviews publicly available decisions in investor-State dispute settlement (ISDS) cases with a focus on issues of relevance for treaty drafting and the reform of the international investment agreements (IIAs) regime. For policymakers and IIA negotiators, arbitral decisions can be a useful source for building knowledge on how IIA provisions work in practice and for identifying which areas are most in need of reform.
 
In 2019, arbitral tribunals rendered at least 71 substantive ISDS decisions. Thirty-nine of these decisions were publicly available. Decisions from 2019 touched upon important issues on the reform agenda for the IIA regime, including:

  • Preserving the right to regulate (e.g. exclusions from treaty scope, interpretation of fair and equitable treatment, expropriation and umbrella clauses)
  • Improving investment dispute settlement (e.g. ISDS scope, relationship with domestic proceedings, counterclaims)
  • Ensuring investor responsibility (e.g. legality of investment under host State law)

 
The cases and issues highlighted in this Note were selected after a comprehensive case-by-case mapping of key issues addressed by ISDS tribunals in 2019.
 
Most decisions concerned cases based on old-generation IIAs signed in the 1990s or earlier. Policymakers and IIA negotiators may wish to consider the implications of these developments for treaty drafting, the development of future treaties as well as the modernization of existing ones.
 
UNCTAD’s next Annual IIA Conference, to be held at the World Investment Forum 2021, will focus on accelerating the reform of old-generation treaties based on options suggested in UNCTAD’s IIA Reform Accelerator. It will also build on the outcome of UNCTAD’s Virtual IIA Conference 2020.

Global Investment Trends and Prospects 2020-2021

We have just released our latest Global Investment Trends Monitor, with the first full-year assessment for foreign direct investment (FDI) in 2020 and prospects for 2021.
Key findings:

  • Global in 2020 f by 42% to an estimated $859 billion, from $1.5 trillion in 2019. more than 30% below the trough after the global financial crisis in 2009.
  • The decline was concentrated in developed countries, where FDI flows fell by 69% to an estimated $229 billion. Flows to Europe dried up completely to -4 billion (including large negative flows in several countries). A sharp decrease was also recorded in the United States (-49%) to $134 billion.
  • FDI to developing economies declined by 12% to an estimated $616 billion. The share of developing economies in global FDI reached 72% – the highest share on record. China topped the ranking of the world largest FDI recipients.
  • Looking ahead, the FDI trend is expected to remain weak in 2021. Data on an announcement basis, an indicator of forward trends, provides a mixed picture:
    • Sharply lower greenfield project announcements (-35% in 2020) suggest a turnaround in industrial sectors is not yet in sight.
    • Upticks in the fourth quarter of 2020 dampened earlier declines in newly announced international project finance deals (-2% for the full year). International investment in infrastructure sectors could thus prove stronger, buoyed by economic support packages in developed countries.
    • Similarly, the 2020 decline in cross-border M&As (-10%) was cushioned by higher values in the last part of the year. Looking at M&A announcements, strong deal activity in technology and pharmaceutical industries is expected to push M&A-driven FDI flows higher.
  • For developing countries, the trends in greenfield and project finance announcements are a major concern. Although overall FDI flows in developing economies appear relatively resilient, greenfield announcements fell by 46% and international project finance by 7%. These investment types are crucial for productive capacity and infrastructure development and thus for sustainable recovery prospects.

UNCTAD’s Global Investment Trends Monitors are available here. See also our SDG Investment Trends Monitor and our Investment Policy Monitors.

The next regular update on investment data will be published in the World Investment Report 2021, scheduled for publication in June.