Mismatched commitments: treaty law solutions for multilateral ISDS reform

Journal of International Economic Law, vol. 29, pp. 2–19

Abstract

ABSTRACT Calls to reform the system of investor–State dispute settlement (ISDS) have progressed to the multilateral negotiation of several treaties within UNCITRAL Working Group III. This article analyses the risk of mismatched commitments under the draft Multilateral Instrument on ISDS Reform (MIIR), which would serve as the delivery vehicle for proposed reforms. While the MIIR’s opt-in design allows each State to select its preferred reform protocols and which of its international investment agreements are to be modified by each protocol, such flexibility may generate further fragmentation. Empirical evidence from the implementation of recent treaties on OECD tax reform (BEPS MLI) and transparency in ISDS proceedings (Mauritius Convention) underscores the challenges in aligning State preferences through treaty design. This article identifies five scenarios of mismatched commitments and offers possible solutions informed by the general law of treaties. It argues that the MIIR should prioritize systemic coherence to mitigate transaction costs and ensure effective reform. A pragmatic roadmap is provided for negotiators to balance these competing goals in navigating the technicalities of treaty law in a fragmented ISDS system.

Authors 3

1. Daniel Peat corresponding Aachen Grotius Centre for International Legal Studies Daniel Peat

   Leiden University

   Affiliation as printed

   Leiden University, Leiden, The Netherlands Daniel Peat, Assistant Professor, Grotius Centre for International Legal Studies,

   Daniel Peat, Assistant Professor, Grotius Centre for International Legal Studies, Leiden University, Leiden, The Netherlands

2. Oliver Hailes

   London School of Economics and Political Science

   Affiliation as printed

   London School of Economics and Political Science, London, U.K Oliver Hailes, Assistant Professor of Law, LSE Law School; Associate, Grantham Research Institute on Climate Change and the Environment, . Email: o.hailes@lse.ac.uk

   Oliver Hailes, Assistant Professor of Law, LSE Law School

3. Chunlei Zhao

   Ocean University of China

   Affiliation as printed

   Ocean University of China Law School, Qingdao, China Chunlei Zhao, . Email: cz@ouc.edu.cn