By Marybeth Ehlbeck

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In 1994, a Mississippi state court ruled that the Loewen Group, a Canadian funeral conglomerate, had committed illegal anti-competitive and predatory actions at the disadvantage of local American-owned funeral companies. After a series of legal maneuvers to appeal the verdict, Loewen initiated a suit against the United States in 1998 under the investor-state dispute settlement (ISDS) of NAFTA that demanded $725 million from the U.S. in compensation for the alleged violation of investor rights provided by the agreement. This prompted the U.S. in 2004 to propose a clarification to its international investment arbitration that narrowed the definitions of expropriation, investment, and investor in the design of its bilateral investment treaties (BITs). 1 This proposal was meant to alleviate a perceived problem with investor-state tribunals—the flawed procedural commitments inherent to ISDS: the risk of bias in individual arbitration, inconsistency in panel rulings, and an absence of an appeals process. These factors combined, states, therefore, have a justified concern for their sovereignty stemming from the threat of frivolous suit by foreign investors seeking market de-regulation and considerable settlement compensation. 2 Still, despite over 675 investment arbitration claims filed against 120 states through 2014, only a minority of states have attempted to withdraw from procedural commitments to ISDS in their BITs as the loss of international capital garnered from such agreements would be too high of a cost to bear. 3 Thus, states have increasingly sought to renegotiate their BITs in recent years to address perceived risk in ISDS commitments. However, a question remains: What has been the effect of this renegotiation on investment arbitration rules and procedures? More specifically, are the renegotiated BITs providing capital-importing states increased regulatory tractability, or are they affording capital-exporting states’ international investors with expanded rights, and if so, how are these redesigned ISDS measures reflected in evolving BIT textual content?

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  1. Manger and Peinhardt, “Learning and the Precision of International Investment Agreements,” 925.
  2. Peinhardt and Wellhausen, “Withdrawing from Investment Treaties but Protecting Investment,” 572.
  3. Peinhardt and Wellhausen, 572 and 574.