Investor-State Dispute Resolution has become an important subject for discussion because since the 1970s, the world has seen international investment both in terms of direct and portfolio investments unprecedented in any era of world history. Liberalisation of international investment and trade has enabled the world’s GDP to grow. The global flow of trade and capital undoubtedly enriches all countries but not all countries are enriched equally and not all countries are blessed with the same conditions for growth. In the past century, there have been winners and losers, and this inequality has created tensions, which need to be reconciled. Also, the industrialisation and the use of energy accompanying this unprecedented surge of growth in the past century have created environmental problems of unprecedented proportions. There is a continuing call for liberalisation of investment, but the tensions of inequality and the need to halt continuing environmental despoliation represent the underlying contradictions in international investment. It is these underlying contradictions, which constitute the stuff of investor-state disputes.

In international investment, one must never forget that all countries are sovereign and within their borders, their laws and policies reign supreme. This credo is intrinsic in customary international law and explicitly recognised by the General Assembly of the United Nations in its December 12, 1974 Charter of Economic Rights and Duties of States (CERDS) which states that “each State has the right to nationalize and expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent” (see: Resolution 3281 (XXIX), UN GAOR, 29th Sess., 2315th plen. meeting, UN Doc A/RES/3281(XXIX), Dec 12, 1974).

Against this background, States have since then entered into a large number of International Investment Agreements (IIAs). According to the UNCTAD 2018 World Investment Report, there are at the end of 2017, 3322 IIAs, the vast majority of which are Bilateral Investment Treaties (BITs) and a small number are agreements entered into as Trade-Related Investment Provisions under the auspices of the WTO General Agreement on Trade and Tariffs. Most of the BITs are first generation BITS entered into before the tensions set out above have manifested themselves. Thus the dispute resolution machinery adopted has not been entirely satisfactory. According to the same UNCTAD Report, between 1987 and 2017 (a span of 30 years), there were 855 arbitrations with claims ranging from US$15 Million to US$1.5 Billion. Except for Canada (which was respondent under NAFTA), all the respondent states have not been rich countries, whereas claimants have generally been investors from developed countries. Argentina had been respondent 64 times and had awards made against it, as to which it could scarcely satisfy. In fact, the awards were made because of economic crises and the Awards themselves made it even more difficult for the country to climb out of its predicament. About half of the arbitration awards have been published, and they represent different approaches both as to legal liability and quantification, making it difficult for parties to predict outcomes when they have to decide whether or not, they would need to incur the expenditure to litigate in this sphere where only a small number of international law firms tend to specialise. Litigation bills frequently run into the millions of US dollars. Arbitration awards are final except under the ICSID regime, where there is an annulment process, which restricts review to very narrow procedural confines and thus few cases of annulment have succeeded.

It is therefore not surprising that the need for reform has been felt and it is a movement that has been welling up for a while. The discussion so far has been broad, ranging from a review of the current crop of first-generation BITs and some TIPs to more precisely define the areas where compensation is merited, thus dealing with the tensions between the requirements of sovereignty and fair treatment of investors. Also, there has been discussion as to whether disputes could be spotted at an early stage and machinery could be devised to deal with early-stage issues without having these fester into larger problems requiring arbitration. Other discussions deal with mediation and conciliation and how they could be adapted to investor-state disputes. Also, there has been discussion as to whether reviews of awards should be made possible and the scope and procedure for review. Finally, there are issues of enforcement, which include self-help measures such as the exercise of put and call options built into agreements. I am sure any time spent in this conference will be well rewarded by the discussions planned and thus, I welcome you to the conference.