Por: Anna Karoliny Fonseca Cometti  y Daniela Rojas Dager 
Complaints concerning the lack of neutrality, impartiality and transparency of investment arbitration  awards, jointly with the questioning of the possible simple repetition of judgements have made several countries withdraw from the 1965 Washington Convention and to question the legitimacy of investment arbitration —for example Latin American countries like Venezuela and Bolivia—. Considering that it is indeed not an isolated point of view, Sornarajah  explains that this scenario is a consequence of the “allegations that investment arbitration is dominated by a select group of arbitrators who usually decide in favour of foreign investors and create expansive law”.
In this context, in 2017, the UNCITRAL Working Group III began its work on the reform of investor-State dispute settlement (ISDS) mainly based on the aforesaid crisis of ISDS. As a result, the latest sessions aimed at discussing the draft of the Code of Conduct and its means of implementation and enforcement. Together with UNCITRAL, the International Centre for Settlement of Investment Disputes (ICSID) is also putting great efforts on the reform initiatives, for instance trying to promote and establish investor-State mediation.
Certainly, it is noteworthy to mention that the status quo is the reform, and it may take several years to build up a new panorama. So, the purpose of this topic of the contribution is to point out likely results of the current panorama regarding investment arbitration; that is to say, what would come after the UNCITRAL and ICSID reform. In this sense, taking into account the recent reports and developments, two scenarios may be thought of. Considering the rise of new bilateral investment treaties and, mainly, of the new generation of free trade agreements (that brings together investment provisions) —which regularly are said to construct the web of legal relations and the investment law itself— it is reasonable to expect a manifold dispute resolution system.
The first scenario is actually being put into practice, which is the use of investor-State mediation in response to the aforementioned concerns regarding arbitration and arbitrators. The 2021 ICSID Annual Report  states that ICSID and the Singapore International Mediation Centre entered into a cooperation agreement, the first for ICSID with a centre that is exclusively focused on mediation. Purposely, ICSID in its 2021 Annual Report also recognizes that there is a “growing number of international investment agreements that specifically refer to mediation in their dispute settlement provisions to resolve investor-State disputes”.
The second scenario is also being put into practice, although at a slower pace. The Comprehensive Economic and Trade Agreement (‘CETA Agreement’) signed by the European Union and Canada in 2016, although not yet in force, provides for a revolution in the ISDS. This agreement has a particular dispute settlement system which is characterized for having provisions on the creation of a multilateral international investment tribunal. In addition, there is a proposal of the European Union (“EU”) to set up an international investment court, composed of a first instance court and an appellate body .
Yet, the negotiations regarding the European Multilateral Investment Court (‘MIC’) are currently ongoing within the framework of UNCITRAL Working Group III on ISDS Reform being identified as an alternative through which investors may recur in order to settle investment disputes. Data from the European Commission states that “the EU has replaced the ISDS mechanism with bilateral investment court systems (ICS) in recently negotiated international investment agreements”  in order to anticipate the transition from the bilateral ICS to a permanent MIC.
Forthwith, it is reasonable to expect that throughout the upcoming years the arbitration may not be the first choice for the settlement of investment disputes. The rising of mediation, the legitimization of hybrid methods, the predictability of the creation of precedents and the ability to deal properly with complex disputes will for sure provoke a turnaround in the whole international investment law regime, perhaps with splashes on international trade law, helping to build up the so-called post-reform panorama.
Presently, approaching the Latin American perspective, this changing scenario may compose an effective response to the Calvo Doctrine —a doctrine characterized by a resistance to the internationalization of disputes— giving space to the investor's waiver of diplomatic protection and its subjection to the domestic judicial system by means of the Calvo Clause. Whereas the UNCITRAL and the ICSID are aware of the need for reform and are currently taking steps towards it, the adhesion of Latin American countries is highly limited.
Bolivia, Brazil, Cuba, Puerto Rico and Venezuela are not parties to the ICSID Convention, and the Dominican Republic has only signed it. Thus, the Latin American position has been characterized by being reluctant to investment arbitration and to ICSID as the Centre for the organization of international investment arbitration. This prospect stands for the utilization of their own investor-State dispute settlement regime and also for the lack of legitimacy of international investment arbitration internally. For instance, Brazil is known to solve those disputes making use of international commercial arbitration, which, albeit not being the best and more effective dispute resolution method, is said to be working well.
However, there are Latin American countries that have been pioneers in opening the door to the international investment arbitration system, such as Colombia, a country that ratified the Washington Convention in 1997. Although there were previous attempts at negotiation, most investment treaties were not signed until the mid-2000s. Since 2016, the year in which the first three lawsuits against the country were heard, Colombia has been an active part of the international arbitration system. One reason that explains Colombia's initiative to be part of this system is that it is a recipient country of foreign investment; and an importer of capital, and international investment treaties are instruments that have led to the opening of the country's economy to foreign investors.
Nonetheless, being one of the few Latin American countries that has signed the Washington Convention has posed a risk for Colombia. In 2018, it was the country most sued worldwide, that is, the country most sued before private arbitration tribunals by transnational corporations. Although so far only one lawsuit has been resolved, there are fifteen pending lawsuits against that country . In the only settled lawsuit, initiated by Glencore in 2016, the Court ruled in favour of the investor and ordered Colombia to pay US $ 19 million dollars as a result of proving that the Comptroller's Office took discriminatory and abusive measures in assessing sanctions against the plaintiffs .
The case of Colombia highlights the tension between the benefits of the international investment system and its risks, since: on the one hand, it is an instrument that guarantees economic openness by attracting foreign investment, vital for the development of a country; and on the other hand, imposing high risks in the event of a possible breach of the agreements, which can sometimes imply an exorbitant sum as a sentence.
In this way, this document seeks to encourage discussion regarding investment arbitration and think about its benefits, with its new approaches and possibilities, where Latin American countries could re-join the international ISDS regime, restoring trust in it and benefiting from the probable increase of investment flows; and their economic risks, where a scenario of economic and reputational volatility can be generated with respect to the obligations acquired in investment treaties due to the States role as guarantors in matters of investment in the National territory ..
Law undergraduate student at Federal University of Espírito Santo. Research Assistant in Private International Law and International Commercial Arbitration. Academic researcher at LABCODEX, The Labyrinth of International Civil Procedural Law Codification and Coordinator of the International Arbitral Awards Observatory of that group. Researcher in International Economic Law, conducting academic research in investor-State dispute settlement, with FAPES scholarship. Young ICSID, YMG CIArb Brazil branch, ICC YAF, ICDR Y&I and CAMARB Alumni member.
Ninth-semester student at the Universidad de los Andes Faculty of Law with an academic option in Sociology, taking courses from the Master's Degree in Intellectual Property at the same University. She is a fellow with honors from Giessen University in Germany and Marquette University in the United States to study International Economic Law and Economic Transactions and International Intellectual Property. Currently, working as a prosecutor specialist on intellectual property issues.
Investment arbitration is the way of settling international disputes arising out of investment agreements, whether treaty-based or contract-based. The conflict is commonly between an investor and a State, where the investment is made.
SORNARAJAH, M. The international law on foreign investment. Fourth edition. Cambridge, United Kingdom; New York, USA: Cambridge University Press, 2017.
International Centre for Settlement of Investment Disputes. 2021 Annual Report. Available at: https://icsid.worldbank.org/sites/default/files/publications/ICSID_AR21_CRA_bl1_web.pdf. Accessed on: 26 Out. 2021.
46% of the amount claimed comes from the mining and hydrocarbon exploitation sector; 16% come from the information and communication sector; 88% of investors from the United States and Canada and 86% of the lawsuits correspond to violations of the fair and equitable treatment clause (ISDS, 2020).
ISDS. 2020. Colombia in the face of an explosion of demands from foreign investors.
The foregoing, taking into account that the number of investment arbitration cases tends to increase in countries that present situations of economic crisis such as Argentina (facing 62 lawsuits) or drastic political changes such as Venezuela (facing 51 lawsuits) (Hoyos, 2020).