Investment pact system needs review

The system of International Investment Agreements (IIA) — including the Investor-State Dispute Settlement (ISDS) mechanism — needs to be urgently reviewed and reformed, according to a senior Indian government official.

  • This is because the IIA system currently has a pro-investor bias — with an aim to protect only capital and not labour, indigenous people, migrants, or consumers, all of whom have linkages with investment.
  • Another factor that needs to be considered is the pro-investor bias of IIAs, due to the focus on the protection of capital and the return on capital. No such protection has been extended to labour, indigenous people, migrants, or consumers, all of whom have linkages with investment.
  • Reforming the IIA system assumes significance as India, along with countries including South Africa, had recently opposed efforts by nations including China, Brazil, Australia and South Korea to begin discussions on a proposal for an investment facilitation agreement at the World Trade Organisation (WTO)-level that reportedly seeks to incorporate provisions including the controversial ISDS mechanism.

What is IIA: 

  1. An International Investment Agreement (IIA) is a type of treaty between countries that addresses issues relevant to cross-border investments, usually for the purpose of protection, promotion and liberalization of such investments.
  2. Most IIAs cover foreign direct investment (FDI) and portfolio investment, but some exclude the latter. Countries concluding IIAs commit themselves to adhere to specific standards on the treatment of foreign investments within their territory

What is ISDS:

  1.  Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which individual companies can sue countries for alleged discriminatory practices
  2. Provisions of ISDS are often associated with international arbitration under the rules of ICSID (the International Centre for Settlement of Investment Disputes of the World Bank).

Source:TH & WIKI

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