Is sovereignty of the SR affected by ISDS?
No. Well balanced international investment agreements do not prevent States from adopting legislative changes, unless such a measure is discriminatory or arbitrary. Regulatory power of SK is thus preserved. Moreover, even if any violation of international investment agreement by adopting controversial legislation was proven in the course of arbitration, arbitral tribunals would not be able to order States to change their legislation; tribunals could only order the States to pay compensation in case of proven violation of international investment agreement.
What is the position of the MoF SR to investment chapter in CETA?
The MoF SR appreciates the text of the investment chapter in CETA, especially because of its balanced content which shows a significant progress towards modern investment standards. Main aspects of CETA are disclosed in document Factsheet: CETA and investor–to–state dispute settlement (ISDS) issued by the European Commission.
What is the position of the MoF SR to investment chapter in TTIP?
The text of investment chapter is not available yet, therefore it cannot be reviewed. In any case, the MoF SR will require the European Commission to negotiate similarly balanced agreement as CETA. Particularly in relation to TTIP it is necessary to bear in mind that SK concluded BIT with the USA on October 22, 1991 . Therefore American investors can file a claim against SK before arbitral tribunal under this BIT. This is proved by the claim filed against SK by EuroGas and Belmont on the basis of BIT between SK and the USA and BIT between SK and Canada. Moreover, existing BIT with the USA is based on so-called golden standards of investor protection, focused on high level of protection of an investor. For SK, TTIP provides a unique opportunity to replace disadvantageous BIT between SK and the USA, since the European Union as a whole, compared to SK, is much stronger negotiating partner for the USA.
Statistics of the SR in international investment arbitrations
To this date, there are nine international investment arbitrations concluded, none of which SK lost, with the following statistics: SK won five investment arbitrations in the jurisdictional phase (Austrian Airlines, HICEE, Alps Finance and Trade, Achmea II, Euram Bank), one arbitration in merits phase (J. Oostergetel and T. Laurentius), one arbitration was discontinued by tribunal (Branimír Menšík), one arbitration ended with settlement without payment of any damages (SPP), and one arbitration ended by mutual agreement on discontinuance of the arbitration (U.S. Steel). Achmea I dispute is still pending – arbitral award has been rendered against SK; however SK has filled motion for annulment of that award and the annulment proceedings are pending. From the above stated it is clear that SK excellently succeeded in all its previous international investment arbitrations. In several disputes the SR was also able to achieve full or partial remuneration of its costs on legal representation, which resulted in full compensation of the legal costs of SK on legal representation or its significant reduction.
“BIT” – bilateral investment treaty, international investment agreement concluded between the two States
“CETA” – Comprehensive Economic and Trade Agreement between European Union and Canada
“ISDS” – Investor-to-State Dispute Settlement
“TTIP” – Transatlantic Trade and Investment Partnership between European Union and the United States of America
“MoF SR” – Ministry of Finance of the Slovak Republic
If you have any further questions, please contact: firstname.lastname@example.org (Intrastate and International Legal Affairs Unit of the MoF SR).
1. What is ISDS?
ISDS represents out-of-court dispute resolution between the foreign investors and States before an arbitral tribunal. Jurisdiction of the arbitral tribunal is constituted by the arbitration clause in international investment agreements, whether in (i) BITs or in (ii) the investment chapters of international investment agreements concluded between the EU and third countries.
BITs and/or investment chapters in EU treaties comprise of two main parts (i) the promotion and protection of the investments – so-called investment standards; investors are provided in particular with protection against discrimination, unlawful expropriation, and unlawful restrictions on the transfer of revenues relating to foreign investments and (ii) ISDS, which is a tool for enforcement of investment standards through international investment arbitration against the host State.
2 What is the position of the MoF SR to ISDS?
The MoF SR consistently declares that balanced international investment agreements with ISDS mechanism are an appropriate tool to promote inflow and sustainability of foreign direct investments. The aim of SK is to have balanced international investment agreements which on one hand preserve regulatory powers of States whilst, on the other hand, adequately protect foreign investors, prevent speculative and parallel disputes and promote sustainable development of investments.
ISDS constitutes an important element of the international law which helps to strengthen the respect of sovereign States to their obligations under the international law.
2) Parallel disputes arise e.g. when a foreign investor pursues its claims through ISDS and at the same time also in a local court.
3 What are the benefits for SK that international investment agreements provide?
(i) Inflow and sustainability of foreign direct investments. When considering their investments, foreign investors also take into account the existence of enforcement mechanism of their impaired rights which is usually enshrined in international investment agreements of a country as one of the criteria for selection of such country. Since SK is a country with open economy and high number of foreign investors, concluding of international investment agreements with ISDS is important for SK in terms of economic development.
(ii) Protection of Slovak investors abroad. Slovak investors may encounter abroad various problems which, for various reasons, cannot be always solved before local courts (expropriation without any compensation, restriction on transfer of capital, discrimination). Therefore, ISDS provides foreign investors with the opportunity to resolve their disputes by an impartial and independent tribunal.
Each BIT concluded by SK contains ISDS.