Rethinking investment treaties and dispute settlement in the light of sustainable development

Growing concerns that the pressures that human activities place on the world’s ecosystems may be reaching a tipping point have prompted important advances in international environmental diplomacy, including the Paris Agreement.

The Sustainable Development Goals (SDGs) have charted a new bold sustainable development agenda that encompasses the major social, economic and environmental challenges the world faces. Translating these advances into real change requires aligning sustainable development with the legal architecture of global economic governance. 

The 2015 plan of action underpinning the SDGs recognises the role of private investment in strategies to realise the goals. This raises questions about designing international legal frameworks that can promote the right types of investments in response to local development agendas, and ensure that business activity is aligned with the SDGs and contributes to achieving them.

At the same time, a growing number of investment disputes has shown how tensions can arise between commercial and sustainable development objectives, with action to promote public health, protect the environment or advance indigenous peoples’ rights having led to investor lawsuits.

Also, growing evidence suggests that, on several occasions, the prospect or threat of suits has discouraged authorities from acting in the first place.

In other words, global economic governance shapes room for states to take action, it influences the ways in which the costs of reorienting unsustainable development patterns are shared between businesses and states and, ultimately, it affects the balance of public and commercial interests in global society. 

A rapidly evolving international policy context has created openings for reform of the international investment regime. Many states have been reviewing their investment treaty policies.

At the multilateral level, United Nations member states gathered in the Working Group on ISDS Reform of the United Nations Commission on International Trade Law (UNCITRAL) are exploring options to reform the investor-state dispute settlement system associated with international investment treaties.

Meanwhile, the United Nations Conference on Trade and Development (UNCTAD)’s International Investment Agreements Reform Forum and the OECD's longstanding work on investment law reform have established and consolidated important forums for multilateral reform debates.

What is IIED doing?

We support global efforts to reform the international investment regime by contributing technical analysis to ongoing reform processes, and promoting informed public debate about policy reform issues.  

Contributions to the UNCITRAL reform process

• In May 2024, IIED, the Columbia Centre on Sustainable Investment (CCSI), the International Institute for Sustainable Development (IISD) and the South Centre made a submission on the prioritisation of the draft provisions on procedural and cross-cutting issues.
• In January 2024, IIED, CCSI and the South Centre made a submission on the 'right to regulate' in UN talks about reforming the international system of ISDS.
• In November 2021, IIED, CCSI and IISD made a submission commenting on the assessment of damages and compensation.
• In July 2021, IIED, CCSI and IISD made a submission commenting on the reform process of third-party funding.
• In March 2021, IIED, CCSI and IISD made a submission to provide comments on the UNCITRAL working group’s draft work and resourcing plan (PDF). The submission outlines ways to increase inclusiveness of process and ensure developing countries’ issues are duly considered.
• In July 2019, IIED, CCSI and IISD contributed four technical submissions on issues relating to the deliberations of the UNCITRAL working group discussing reform of investor-state dispute settlement
• In March 2019, we worked with the South Centre on a policy briefing on the UNCITRAL working group could consider investor obligations in its reform agenda (PDF) 
• In October 2018, IIED – with the Columbia Center on Sustainable Investment, and the International Institute for Sustainable Development – organised an open forum at UNCITRAL's Working Group III 36th session in Vienna, Austria. The event was designed to give interested members of the public (such as civil society organisations, academics and practitioners) and government officials an opportunity to present their views on the reform of investor-state arbitration. A similar event was organised during the 35th session in New York the previous April.