Inter­na­tion­al law schol­ars from around the world gath­ered at the Uni­ver­si­ty of Michi­gan Law School recent­ly to focus on improv­ing the sys­tem of investor-state dis­pute set­tle­ment (ISDS).

ISDS is a mechanism of international law by which foreign investors can sue governments for taking actions they see as harmful to their investment. The right to pursue ISDS suits is typically part of an international treaty, and the suits take place in independent tribunals rather than a nation’s own courts. 

The ISDS system is widely seen as flawed for reasons like high costs, inconsistent rulings, and perceived bias in favor of investors. Efforts are under way to reform the system, most notably by a working group of the United Nations Commission on International Trade Law (UNCITRAL).

Addressing ISDS reform

The recent gathering at Michigan Law was a plenary meeting of the Academic Forum on ISDS, conducted in cooperation with the newly launched University of Michigan Program on Law and the Global Economy. At the two-day meeting, international investment law scholars from six continents presented and discussed a variety of academic papers related to ISDS and particularly the UNCITRAL reform process. 

“The level of buy-in by every single person was so high,” said Professor Julian Arato, who organized the gathering. “The spirit of the discussion was something special—rigorous, but also deeply cooperative, creative, and generative.”

In addition to the presentation of academic papers, conference attendees heard an opening keynote address from Mélida Hodgson of Arnold & Porter, a former US trade official who is now the president-elect of the American Society of International Law. She discussed a number of shortcomings of the ISDS process and her view of proposed changes, and also noted the slow progress toward reform.

“It’s striking how similar the concerns are today to the way they were when we were dealing with the backlash against NAFTA 20-something years ago,” she said, citing a lack of transparency as one example. “What has been surprising in some respects, disappointing in others, is that in the last 18 years or so since I left the government, these concerns really haven’t gone away. We are still examining the same issues, even five years into the reform process.”

On the second day of the conference, Malcolm Langford of the University of Oslo gave the inaugural Daniel Behn Memorial Lecture, presented in remembrance of one of the founding members of the Academic Forum on ISDS. Langford discussed issues of ISDS reform in connection to three core themes in Behn’s research—empiricism, complexity, and psychology.

 

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How do we solve the ISDS legit­i­ma­cy cri­sis?” Lang­ford asked, pos­ing a ques­tion cen­tral to his col­lab­o­ra­tive work with Behn. There is no easy answer. It is a com­plex prob­lem. Crit­ics charge that the sprawl­ing, inter­lock­ing sys­tem of treaties and arbi­tra­tion is pro investor and pro West­ern, played by undue secre­cy, con­flict­ing jurispru­dence, and exces­sive dam­ages and costs — and the state’s reg­u­la­to­ry auton­o­my and respect for human rights and envi­ron­ment is lost in the rush to uphold investor claims. Yet there is lit­tle con­sen­sus on the verac­i­ty of such claims, and the régime con­sti­tutes one of the most polar­ized areas in inter­na­tion­al rela­tions and domes­tic politics.”

Law and the Glob­al Economy

The ISDS forum rep­re­sent­ed the kick­off event for Michi­gan Law’s Pro­gram on Law and the Glob­al Econ­o­my, which serves as a hub for the study of inter­na­tion­al eco­nom­ic law — from the reg­u­la­tion of cross-bor­der trade and invest­ment to inter­na­tion­al tax and finance to com­par­a­tive and transna­tion­al com­mer­cial law.

The new pro­gram — unique among top-tier law schools — builds on Michi­gan Law’s exten­sive his­to­ry in inter­na­tion­al law, which dates back to the school’s found­ing char­ter. Yet the pro­gram goes well beyond what’s thought of as tra­di­tion­al inter­na­tion­al law to encom­pass oth­er areas of law, Ara­to noted.

Basic com­mer­cial law has an effect on the glob­al­iza­tion process. Basic prop­er­ty rights and all sorts of com­par­a­tive and con­sti­tu­tion­al law issues come into the mix. There’s domes­tic law, there’s transna­tion­al law, there’s supra­na­tion­al law — and it became clear that if we want­ed to study the process of glob­al­iza­tion as it has occurred through law, it was too con­strain­ing to focus on just pub­lic inter­na­tion­al law,” Ara­to explained. 

The new pro­gram there­fore pro­vides a forum for schol­ars to engage across dif­fer­ent fields, as well as for dia­logue involv­ing stu­dents, prac­ti­tion­ers, and pol­i­cy­mak­ers. The pro­gram will present a con­fer­ence every year, focus­ing on dif­fer­ent top­ics, as well as oth­er events. Next up, the pro­gram will serve as a co-spon­sor of the Transna­tion­al Law Con­fer­ence in March, along with Michi­gan Law’s Cen­ter for Inter­na­tion­al and Com­par­a­tive Law, focus­ing on The Inter­na­tion­al Law of Money.”

Ara­to, who is the fac­ul­ty direc­tor of the Cen­ter for Inter­na­tion­al and Com­par­a­tive Law, said Michi­gan is a nat­ur­al home for the Pro­gram on Law and the Glob­al Econ­o­my, both because of its inter­na­tion­al exper­tise and the inter­dis­ci­pli­nary nature of its faculty. 

We’ve devel­oped seri­ous exper­tise in com­par­a­tive cor­po­rate law across a num­ber of schol­ars, and oth­er areas like pri­vate law the­o­ry with inter­na­tion­al per­spec­tives. And all of those peo­ple can be brought togeth­er in an inter­est­ing way,” he said.

At the same time, though, fac­ul­ty think beyond their exper­tise to a holis­tic view of the law. Here at Michi­gan we talk to each oth­er and engage with one another’s work across dis­ci­plines, and find con­nec­tions and bridges and link­ages and write togeth­er. And that’s actu­al­ly pret­ty uncom­mon,” Ara­to said.

So while we have all these pock­ets of exper­tise that relate to the broad­er issues of the glob­al econ­o­my and glob­al­iza­tion, we’re also the kind of place where schol­ars want to talk to each oth­er and engage in com­mon projects. What makes this fac­ul­ty spe­cial is not just its exper­tise – it’s a cul­ture. Michi­gan is the kind of place where we can have gen­er­a­tive dis­cus­sions on the future of law and world society.”

To stay up to date on the Pro­gram on Law and the Glob­al Econ­o­my, watch the program’s web­site or email the Cen­ter for Inter­na­tion­al and Com­par­a­tive Law and ask to be put on its mail­ing list.