UNCTAD | June 2017
Phase 2 of IIA reform: Modernizing the existing stock of old-generation treaties
• International investment agreement (IIA) reform has made significant progress. Consolidating phase 1 of IIA reform, most new treaties follow UNCTAD’s Road Map for IIA Reform (WIR16), which sets out five action areas: safeguarding the right to regulate, while providing protection; reforming investment dispute settlement; promoting and facilitating investment; ensuring responsible investment; and enhancing systemic consistency.
• It is time to move to phase 2 of IIA reform: modernizing the existing stock of old-generation treaties. Old treaties abound: more than 2,500 IIAs in force today (95 per cent of all treaties in force) were concluded before 2010. Old treaties “bite”: as of end-2016, virtually all known investor-State dispute settlement (ISDS) cases were based on those treaties. And old treaties perpetuate inconsistencies: their continued existence creates overlaps and fragmentation in treaty relationships and poses interaction challenges.
• UNCTAD presents and analyses the pros and cons of 10 policy options for phase 2 of IIA reform: (1) jointly interpreting treaty provisions; (2) amending treaty provisions; (3) replacing “outdated” treaties; (4) consolidating the IIA network; (5) managing relationships between coexisting treaties; (6) referencing global standards; (7) engaging multilaterally; (8) abandoning unratified old treaties; (9) terminating existing old treaties; and (10) withdrawing from multilateral treaties. Countries can adapt and adopt these options to pursue the reforms set out in the Road Map in line with their policy priorities.
• Determining which of these 10 policy options is right for a country in a particular situation requires a careful and facts-based cost-benefit analysis that considers broader challenges; and should ultimately reflect a country’s international investment policy direction and national development strategy. Moreover, policymakers have to consider the compound effect of multiple options, which could result in a treaty regime that is largely deprived of its traditional investment protection rationale.
• Comprehensive reform of the IIA regime would benefit from intensified multilateral backstopping. UNCTAD, through its three pillars of work – research and policy analysis, technical assistance and intergovernmental consensus-building – can play a key role, as the United Nations’ focal point for international investment and the international forum for high-level and inclusive discussions on today’s multilayered and multifaceted IIA regime.
• Recent developments in the international investment regime, a stocktaking of IIA reform and phase 2 of IIA reform are discussed in UNCTAD’s World Investment Report 2017 (chapter III).