Reforming the ISDS at the United Nations Commission on International Trade Law (UNCITRAL) – a note for the positions of trade unions

The United Nations Commission on International Trade Law (UNCITRAL) Working Group III is mandated to discuss potential reform options for the Investor to State Dispute Settlement mechanism that can be established under our country’s Bilateral Investment Treaties.

We welcome many governments’ statements and proposals on the issues currently on the table, including reform ideas to address the lack of independence and impartiality of arbitrators, third party funding, and the duration and costs of proceedings.

Nonetheless, the international trade union movement, and our country’s movement, call for a wide reform to incorporate investors’ responsibilities. Mandatory Corporate Social Responsibility as defined in the UN Guiding Principles for Business and Human Rights, including human rights due diligence, and respect for ILO Fundamental Rights at Work shall be made a minimum requirement for every international investor to respect.

We have already stated our scepticism to the possibility to reform the ISDS, and in particular to establishing a Multilateral Investment Court (MIC) as proposed by the EU. We cannot support a reform that would end up entrenching this parallel system of justice reserved only for foreign investors.

In particular, EU’s proposal does not address all the concerns we have, though it admittedly makes a few improvements in terms of transparency of the current system. The scope of these improvements falls short of our expectations for deep reform. Quite contrary to what we had argued for, the MIC would transform the ISDS from an ad-hoc mechanism to a standing mechanism risking to create new privileges and ‘rights’ for foreign investors through its expansive interpretations of current Bilateral Investment Treaties (BITs). It also risks increasing the ISDS-covered stock of investment by giving opportunity for accessions to the standing mechanism, while we worry that only a few governments would opt-in their BITs, and therefore it would create an additional system of ISDS rather than replace the existing multiple ISDS systems.

It is important to see these developments in the context of an increasing imbalance of power between labour and capital, and labour’s falling share of total income against capital’s increasing share. It is lamentable that, in a time of increasing inequalities and wealth over-concentration, there is no comparable effort, in terms of zeal and time invested, to create a global mechanism for the protection of human rights, including labour rights, and the environment.

The next UNCITRAL meeting in New York on April 1-5 will discuss Indonesia’s proposal paper, which contains a list of ideas that, if agreed, would change ISDS radically, and which would address many of our concerns. In particular, we find merit in proposals that call for addressing frivolous cases; establishing a clause on exhaustion of local remedies; a more balanced definition of ISDS-covered investment, establishing mandatory mediation before any proceedings; and requiring separate written governmental consent as a requirement for an ISDS case to be examined.

We also support the position shared by a few governments and UNCTAD UNCTAD The United Nations Conference on Trade and Development is the main body of the United Nations General Assembly dealing with trade, investment, and development issues. It formulates policies related to all aspects of development including trade, aid, transport, finance and technology. It’s also a forum where the developing countries can discuss the problems related to their economic development. ’s Investment Division that a matter of essence in UNCITRAL’s discussions is the introduction of investors’ responsibilities. In particular, we support that both Parties and certainly the investment-sending country should have legislated mandatory Corporate Social Responsibility as defined in the UN Guiding Principles for Business and Human Rights, including human rights due diligence and compensation mechanisms. That is, investors should be held accountable at their country’s courts if they fail to put in place human rights due diligence and transform their supply chains and purchasing practices as to prevent, address and compensate for labour and other human rights’ violations.

Governments shall amend their BITs as to require that both Parties have ratified and effectively implemented the ILO Fundamental Rights at Work and other up-to-date Conventions.

The International Trade Union Confederation (ITUC) and the European Trade Union Confederation (ETUC) have obtained observer status in UNCITRAL WGIII and attended the October 2018 meeting and will also attend the April 2019 and following meetings.

The UNCITRAL WG III comprises a number of government missions, an academic forum, the practitioners’ group and other observers. According to the participation ledgers analysed by a lead resource person from the civil society, it is curious that the majority (85%) of the invited observers is “directly or indirectly linked to the private arbitration industry (or broader transnational business interests)”. While the practitioners’ group was established to gather ISDS lawyers and vested interests groups, the same researcher finds that at least one of every four members of the academic forum “have acted as arbitrator in ISDS, and many more as counsel or expert witness”.

Reforming the ISDS at the United Nations Commission on International Trade Law (UNCITRAL) – a note for the positions of trade unions