EJIL:Talk! | 10 April 2024

How a documentary film can help UNCITRAL Working Group III think through ISDS reform

by Lorenzo Cotula and Ladan Mehranvar

As states explore options to reform investment treaties and investor-state dispute settlement (ISDS), they can draw on a growing body of grounded perspectives about how the system works in practice and how it is experienced by those involved in or affected by investment disputes. The Tribunal, a documentary film directed by Malcolm Rogge in collaboration with the Columbia Center on Sustainable Investment (CCSI), offers a powerful illustration of the ways in which ISDS can impact third parties, exacerbate inequalities, and reinforce power imbalances.

In the Spring of 2022, Rogge travelled to the Intag Valley, Ecuador, to film a sequel to his 2008 documentary on a complex investment dispute around a copper mining project. The new film sheds light on how local actors experienced their exclusion from ISDS proceedings. Their perspectives provide distinctive insights for policy processes aimed at reforming ISDS, such as UNCITRAL Working Group III on ISDS Reform.

The Copper Mesa v. Ecuador dispute

At the centre of the new documentary is an ISDS case between a Canadian mining company and the government of Ecuador. The company acquired rights to mine copper across three sites in Ecuador – including in Intag, a locality in the country’s northwestern region. Faced with local opposition to mining in this environmentally sensitive Andean region, the company contracted security personnel (Copper Mesa Mining Corporation v. The Republic of Ecuador, PCA Case No. 2012-2, Award of 15 March 2016, para 4.179). As local opposition intensified, particularly in the Junín area, violent altercations ensued, including security personnel “using tear gas canisters and firing weapons at local villagers and officials” (ibid, para. 4.265). Some incidents were caught on camera and included in the 2008 documentary, which would later be produced as evidence in the ISDS arbitration (ibid., paras. 4.228, 4.241, 4.249, 4.251, 4.253).

The government ultimately terminated the concessions, and the company initiated ISDS proceedings under the investment treaty between Canada and Ecuador. The arbitral tribunal found that the government of Ecuador had breached its investment protection obligations and ordered the government to pay damages. The tribunal reasoned that Ecuador had treated the company unfairly and had unlawfully expropriated two of the three concessions. Noting the company’s role in causing the dispute in Junín, the tribunal resolved to reduce by 30% the damages related to that concession. On this basis, the tribunal awarded the company over USD 19 million in damages, plus interest (ibid., paras. 6.91, 6.97, 6.100, 6.102, 10.7, 10.8, 11.5).

As local actors played a central role in the dispute, one question is how they fared in the ISDS proceeding. Did this community of coffee and sugarcane farmers who successfully resisted a mining project play a part in the ISDS case? Were their interests protected and voices heard? Were they informed of the case outcome?

Documenting the exclusion of local actors

The Tribunal sheds light on the community’s exclusion from the ISDS process. Through compelling and powerful testimonies, the documentary’s participants lucidly expose the limitations of the ISDS system and highlight the need for a different model that does justice to their rights and to the complexities of investment disputes.

In the film, Junín residents recount how three lawyers from Europe came to visit them. The lawyers were hired by the government of Ecuador to defend the country in the ISDS case. They were interested in the activists’ testimony, intending to use human rights arguments as part of the defense. Willing to assist, three witnesses traveled to Washington DC to present their testimony. However, all three found themselves waiting for days and were ultimately told that their testimony was no longer needed.

Participants also note that the final award was not officially translated into Spanish. Extensive portions of it were redacted – particularly the sections detailing the violent incidents. When one local resident flips through the award in the film, she remarks that not only were the community’s voices absent from the proceedings, but the repression they endured was erased from the record. Another local resident commented that the 30% reduction in damages owed by the government was a slap in the face of those who experienced the suffering first-hand.

Implications for UNCITRAL Working Group III

In January 2024, the film was presented at a side event during the 47th Session of UNCITRAL’s Working Group III on ISDS Reform, followed by a short panel discussion on its significance for the ISDS reform agenda. The themes in the documentary connect closely to concerns about the asymmetric nature of treaty-based ISDS and to calls for “rebalancing” rights and obligations in international investment law. Working Group III has discussed these questions from early on, particularly as part of its deliberations on the “cross-cutting issues”. The documentary provides food for thought on the Draft provisions on procedural and cross-cutting issues, which the Secretariat developed for discussion by the Working Group.

Third-party participation. Draft Provision 18 envisages the application of the UNCITRAL Rules on Transparency, which include amicus curiae submissions as an avenue for third parties to input into the proceedings. Early in the Working Group’s discussions, however, several states and observers expressed concerns about the more direct impact of ISDS proceedings on the rights of third parties, highlighting that the role and intent of amicus curiae submissions were insufficient and not intended to address those concerns. (Audio recordings of the 37th Session, afternoon of 1 April 2019 and morning of 5 April 2019.)

In the situation portrayed in the documentary, residents of Junín have a far more direct stake in the investment dispute than assumed by the amicus curiae system. Amicus submissions are primarily designed for a public interest body assisting the tribunal with an informational contribution, rather than providing an effective means for third parties to advance their own rights. For example, authorization to file a submission is at the tribunal’s discretion, as is the extent to which the tribunal considers its contents. Similarly, filing a submission does not necessarily grant access to the case documents and to the hearings.

Some recent treaty practice goes beyond the amicus curiae arrangement. For example, the investment protection chapter of the “modernized” EU-Chile Advanced Framework Agreement establishes a right of intervention for “any natural or legal person which can establish a direct and present interest in the specific circumstances of the dispute”. This arrangement is designed to complement the amicus curiae system. If granted, the intervention also entails the right to access the case documents and to make an oral statement at the hearings. However, the intervention is “limited to supporting, in whole or in part, the legal position of one of the disputing parties” (Article 10.48 of the Chile-EU Advanced Framework Agreement, not yet in force). Such developments offer models the Working Group could consider to ensure the reforms reflect at least the latest practice.

Recourse to local remedies. Draft Provision 6 addresses recourse to local remedies. It conditions access to ISDS on the claimant first attempting to resolve the dispute before domestic courts, at least for a certain time. As highlighted by one participant in the documentary, local residents are more familiar with domestic proceedings. On the other hand, investor-state arbitration is unknown and inaccessible to most, and in any case geographically distant from the people and place affected by the dispute. In addition, proceedings before domestic courts might be more conducive to accommodating diverse interests, as the court’s jurisdiction is not limited to a particular legal instrument centered on protections for one set of actors (foreign investors).

Contributory fault and counterclaims. The documentary highlights issues related to business accountability, which surface in the draft provisions on counterclaims (Draft provision 11) and the calculation of damages (Draft provision 23). For example, Draft provision 23(3) requires tribunals to consider the investor’s contributory fault and non-compliance with business and human rights standards when assessing damages. This arrangement makes sense, in legal terms; but as highlighted by the documentary participant commenting on the inadequacy of the 30% reduction in damages, it alone offers only a partial response to the compressions of rights that can occur in investment disputes. As to counterclaims, one issue yet to be discussed in the Working Group process is what arrangements might ensure that any payments reach the people most directly affected.

Discontinuation of proceedings. One issue not covered in the Draft provisions concerns the circumstances under which claims should be discontinued or reformulated if they directly affect the rights of third parties that cannot participate in the proceedings.

Conclusion

The Tribunal adds to the growing evidence on the limits and asymmetries of ISDS. Truly rebalancing these asymmetries would require deep reforms to the international system of investment treaties and investment dispute settlement. While these extend beyond the remit of UNCITRAL Working Group III, it is helpful to take a holistic approach to understanding the problems and to framing policy responses, and consider what reforms can be advanced through the UNCITRAL process; what other processes can address issues deemed outside mandate; and what linkages across processes can maximize effectiveness.

Lorenzo Cotula

Ladan Mehranvar is a Senior Legal Researcher at the Columbia Center on Sustainable Investment (CCSI). Her work centers on analysing the legislative and international legal frameworks governing international investment