UNCTAD publishes its annual review of investor-State dispute settlement cases

10 April 2013

The year 2012 marked a new record, with at least 62 new investment arbitration cases being initiated against host countries - the highest number of known treaty-based disputes ever filed in one year.

UNCTAD's annual review of investor-State dispute settlement (ISDS) cases - part of the IIA Issues Notes series - provides up-to-date statistical data on treaty-based ISDS cases, an overview of arbitral decisions issued in 2012, and a brief account of some systemic challenges.

The Issues Note reveals that 62 new cases were initiated in 2012, which constitutes the highest number of known ISDS claims ever filed in one year and confirms that foreign investors are increasingly resorting to investor-State arbitration.

Foreign investors challenged a broad range of government measures, including changes to domestic regulatory frameworks (with respect to gas, nuclear energy, the marketing of gold, and currency regulations), as well as measures relating to revocations of licences (in the mining, telecommunications and tourism sectors). Investors also took action on the grounds of alleged breaches of investment contracts, alleged irregularities in public tenders, withdrawals of previously granted subsidies (in the solar energy sector), and direct expropriations of investments.

By the end of 2012, the total number of known cases reached 518, and the total number of countries that have responded to one or more ISDS claims increased to 95. The overall number of concluded cases reached 244. Out of these, approximately 42 per cent were decided in favour of the State and 31 per cent in favour of the investor. Approximately 27 per cent of the cases were settled.

2012 saw some notable developments, including:

  • The highest monetary award in the history of ISDS (US$1.77 billion) in Occidental v. Ecuador, a case that arose out of unilateral termination by the State of an oil contract; and

  • The first treaty-based ISDS proceeding where an arbitral tribunal affirmed its jurisdiction over a counterclaim that had been lodged by a respondent State against the investor.

Finally, public discourse about the usefulness and legitimacy of the ISDS mechanism is gaining momentum, especially given that ISDS is on the agenda in numerous bilateral and regional IIA negotiations. Although ISDS reform options abound, a systematic assessment of them - including with respect to their feasibility, their expected effectiveness, and methods for their implementation - remains to be carried out. A multilateral policy dialogue could help in developing consensus about a preferred course for reform and ways of putting this into action.