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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