Tuesday, June 30, 2015

TPPA - ISDS Clauses - States never win,Only investors win awards ofdamages?

Well, a new United Nation's report confirms that States(like Malaysia) will always lose out if there are Investor State Disputes, and our Malaysian government again foolishly seems to be going to sign the Trans-Pacific Partnership Agreement (TPPA) which has the ISDS provisions

As most observers
acknowledge, states never
win; they only do not lose.
Only investors win awards of
damages; states may at best,
receive an award of costs.

See earlier post:- 

TPPA - Investor-State Dispute Settlement (ISDS) Clauses - No more improvement in Malaysian life?

ISDS: Who Wins More, Investors or States?

By Howard Mann, Senior International Law Advisor, IISD
On June 24, 2015, the United Nations Conference on Trade and Development (UNCTAD) released its
World Investment Report 2015 (WIR). Chapter III of the report provides some new and most interesting
numbers on investor–state dispute settlement (ISDS) cases—who wins how many cases and when.1

Following UNCTAD’s traditional methodology, the total number of concluded cases is broken down
between settled, state “wins,” and investor wins. Arbitral decisions on jurisdiction and merits are thus
cumulated without distinction. The application of this methodology results in the following numbers, also
presented in the latest WIR:
Source: http://unctad.org/en/PublicationChapters/wir2015ch3_en.pdf

Based only on the annual numbers resulting from UNCTAD’s traditional methodology, many proponents of
the system have argued that investor–state arbitration or international investment agreements in general
are not biased against states because the United Nations’ own numbers show that states win more than
investors do. Supporters of the system have insisted on this simplistic argument to counter concerns that
the system is biased against states.

But what happens when the decisions on jurisdiction and the merits are disaggregated? Looking only at the
cases determined based on fial arbitral awards, the number of cases leading to fial awards is 255 based
on the UNCTAD numbers: 144 in favour of states plus 111 in favour of investors (p. 116).

It turns out that 71 of these decisions (p. 116) for the state were decisions on jurisdiction that terminated
the arbitration. Assuming that all arbitrations face some form of jurisdictional challenge—which is almost
certainly true and in any event close enough to use as an assumption for present purposes—out of 255 total
jurisdictional decisions, states have won 71, or 28 per cent. Investors, therefore, have won 72 per cent of
jurisdictional determinations.

1 United Nations Conference on Trade and Development (UNCTAD). (2015). Recent policy developments and key Issues. In World investment report 2015 (pp.
102–118). Retrieved from http://unctad.org/en/PublicationChapters/wir2015ch3_en.pdf

Breach but no damages 2%  
Investor 27%  
State 36% 
Settled 26% 
Discontinued 9%
As most observers
acknowledge, states never
win; they only do not lose.
Only investors win awards of
damages; states may at best,
receive an award of costs.

www.iisd.org © 2012 The International Institute for Sustainable Development
Taking out the 71 jurisdictional decisions that terminated arbitrations, the number of cases decided on the
merits is 184. Of these, investors have won 111, or 60 per cent. Investors, thus, have won 60 per cent of the
decisions on the merits.

So despite the oft-heard refrain that “states ‘win’ more often than they lose,” it is the investors that have
actually won most of the time: 72 per cent of the decisions on jurisdiction, and 60 per cent of cases decided
on the merits.\

Why does this distinction between jurisdiction and merits matter?
Essentially, the jurisdictional phase is the point of entry: if it is relatively easy to get to the merits phase, it
is more often than not worth a shot for investors, even if the jurisdiction is unclear. The high win rates for
investors here show the entry point is not the most signifiant hurdle. By contrast, if the win rate on the
merits is high—at 60 per cent here—it can lead investors to take the chance at jurisdiction even if the case
may be weak on that issue.

The combination of low bars to entry and high win rates, precisely as seen here, is perfect for motivating
investors, counsel and third-party funders to initiate cases. Importantly, it also increases the effctiveness of
threats by investors against states in response to potential measures states may be considering adopting—
the regulatory chill impact of the investor–state arbitration system.

By aggregating the numbers on jurisdiction and merits, as UNCTAD’s methodology used to do, the crucial
diffrences between their functions and roles were lost, and the critical statistic on wins on the merits,
hidden. By including additional numbers that correct for this methodological flw, UNCTAD has now
brought to light the real numbers. No longer can it simply be said that the system is balanced because
states win more than investors; they clearly do not when comparing the proper numbers.

The balance in the ISDS system cannot be measured by wins and losses alone. The impacts of the current
dominant approach to investment treaties and ISDS go well beyond simply a tally of wins and losses. But
with these new numbers, at least it can no longer be said, simplistically, that the system is balanced because states win more than investors—they clearly do not when comparing the proper numbers.

ISDS: Who Wins More, Investors or States? (PDF - 163 KB)

 See earlier posts:-

For raising minimum wages, Egypt sued by Veolia, a French multinational?

TPPA and ISDS must be a concern for caring Malaysians - Right to know before it is signed?

Malaysians Need to stop Najib until... [TPPA equals holding nations to ransom, warn experts (Malaysiakini) ]

TPPA - Do not let the foreign investor affect the improvement of livelihood, better health/environmental policies and better worker rights