World Arbitration Update 2024
THE AUTHORS:
Pierre-Antoine Robin, Miami University Graduate, Attorney at Law (Madrid)
Anaïs Leray, Georgetown University Law Center Graduate, Dual Qualified Attorney (New York, Paris)
THE EDITOR:
Munia El Harti Alonso, Independent Practitioner, Universidad Complutense de Madrid
The Fourth Edition of the World Arbitration Update (WAU) took place from 14 May to 23 May 2024. This post highlights the panel titled ‘Impact on Investment Arbitration of the US and Other Countries’ Elections in 2024’.
Marinn Carlson (MCarlson Arbitration PLLC) introduced the panel by remarking topic is timely as at least 64 countries around the world will hold elections in 2024. Some elections, whether general, legislative, or even presidential, are expected to have an impact on international arbitration, particularly investment treaty arbitration.
The discussion focused on Latin America, South Asia, North America, and Europe. Mrs. Carlson was joined by Gaela Gehring Flores (Hughes Hubbard & Reed LLP), Mark Konstantinidis (PhD Candidate and Visiting Lecturer in Law, King’s College London), Lauren Mandell (WilmerHale), Eduardo Mathison (Crowell & Moring LLP) and Pushkar Keshavmurthy (LLM Graduate, Georgetown).
Latin and Central America: Unique and Complex Political and Economic Landscapes
Latin and Central America regions are characterized by unique and complex political and economic landscapes, where stability contrasts with unpredictability and volatility.
- While some countries present a favorable investment environment
- Others are faced with shifting political trends, controversial leaders, and regulatory uncertainties.
Continuance of a Favorable Environment
As presented by Mrs. Ghering Flores, in light of the re-election of the Dominican Republic President, Luis Abinader, continuity, and stability are anticipated, fostering a favorable environment for investment and reducing the probability of disputes. Nonetheless, while it is expected that his centrist position and strong anti-corruption commitment should further enhance the investment climate, the foreseen implementation of new ESG (Environmental, Social, and Governance) due diligence laws from Europe could potentially spark disputes if local suppliers do not align with these standards.
On June 2, 2024, Mexico held its largest-ever election. Claudia Sheinbaum, former mayor of Mexico City, was elected, becoming the first woman to lead the country. Mr. Mathison foresees the possibility that President Sheinbaum could continue the policies of her predecessor and mentor Andres Manuel López Obrador (especially in key sectors like energy), potentially setting a challenging environment.
Finally, Uruguay’s elections are scheduled for late October (October 27, 2024). Being known for its stability, strong democratic tradition, stable economic growth, high transparency and low corruption, Uruguay remains an attractive environment for investors. No radical changes are to be expected as a result of the elections.
Uncertainties and Political Shifts
According to Mrs. Ghering Flores, the election of Argentinian President Javier Milei in late 2023 brought a significant shift towards the right, affecting Argentina’s international relations and investment climate. His participation in controversial conferences and his speeches led to strained ties with countries like Spain, Colombia, and Chile. This political volatility and unpredictability, coupled with regulatory and policy shifts, increases the likelihood of investment arbitration disputes (see Regulatory Takings). Mrs.Ghering Flores emphasized that in the region, political extremes (whether shifts to the far-right or far-left) along with populism, introduce regulatory and policy uncertainties that heighten the potential for investment arbitration disputes.
In El Salvador, the re-election of President Bukele offers a paradox as it indicates continuity as he is set to govern for the next 5 years, as well as volatility. Indeed, Bukele’s administration is characterized by authoritarian policies, controversial cryptocurrency investments and human rights criticisms, prompting an unpredictable climate and, in turn, a heightened risk of investment disputes.
The recent election of President José Raúl Mulino in Panama also introduced a climate of uncertainty, especially regarding his independence from former President Ricardo Martinelli. As such, the business community is on the lookout to ascertain if President Mulino will maintain a pro-business stance following the nomination of his pro-business cabinet. If successful, this could suggest stability and result in fewer investment disputes. However, the administration’s handling of ongoing significant disputes, such as those related to copper mines, will be crucial in view of President Mulino’s comments ruling out talks with miner First Quantum.
As stated by Mr. Mathison, Venezuelan President Nicolás Maduro was expected to win again against the opposition’s candidate, Edmundo González (running on behalf of María Corina Machado) through a manipulated process. The fraudulent victory of President Maduro was considered to be likely — despite his low popularity — given his absolute control over institutions and the media. The election results were initially set for July 28 2024. Since the event has now taken place, it is worth noting that President Maduro was indeed reelected after a contested election, confirming the predictions. It is anticipated that this outcome will perpetuate political, social, economic instability and further challenge the private sector as more expropriations will be expected, coupled to a lack of investor protection. Hence, the international community’s response, especially from the EU and the US, will be crucial.
The European Trend: Between Status Quo and Potential Reorganization
As presented by Mr. Konstantinidis, following the elections, the political shifts witnessed across Europe did not raise any concerns as it should not impact preexisting engagements. For instance, elections in Finland, where the new president elected, Alexander Stubb, a strong supporter of the European Union (EU) and the North Atlantic Treaty Organization (NATO), is expected to further support Finland’s international agenda.
However, uncertainty surrounds other elections such as the ones of:
- The EU Parliament
- The United Kingdom’s (UK)
- Other key actors.
The EU Parliament Elections
From 6 to 9 June 2024, the citizens of the EU Member States voted for the constitution of the EU Parliament. Knowing that a majority of the Parliament votes for the appointment of the new President of the European Commission, the election is likely to have a significant policy impact, especially with the European People’s Party (center right) victory on June 10, 2024.
In this context, Mr. Konstantinidis presented three potential issues that could impact investment law and investment arbitration:
- The Parliamentary dynamic will shape the regulatory and legislative landscape of Europe for the next five years, potentially causing some issues. For instance, in terms of environmental policy, the European Green Deal has been somewhat rolled back and it is speculated that the overall policy in terms or decarbonization might be recalibrated.
- The European Parliament risks becoming increasingly critical of international investment agreements (IIAs), directly impacting investment arbitration and in turn, complicating the negotiation and ratification of investment protection agreements.
- The composition of the European Commission and Parliament can affect the EU’s commitment to reform Investor-State Dispute Settlement (ISDS) before the UNCITRAL Working Group III, especially since the EU and its Member States have been fostering efforts to reform ISDS.
The UK’s Elections
The UK’s election took place on 4 July 2024. The main opposition Labor Party won a landslide parliamentary majority and has formed a Government, having adopted a largely centrist, business friendly agenda.
The current issue following Brexit is that the UK embarked in extensive trade investment negotiations with several countries but has yet to develop a cohesive approach towards ISDS. Notably in its negotiation with Canada about the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or when it mirrored the EU’s withdrawal from the Energy Charter Treaty (ECT).
Hence questions remain on whether the UK will choose to align or partially align with EU standards, as part of a broader rapprochement with Europe. It is conversely uncertain if the UK would be willing to compromise on its environmental and public health standards for the sake of potentially pursuing greater foreign investment and securing further Trade and Investment Agreements. In Mr. Konstantinidis’ opinion, it will take time for a cohesive and comprehensive approach to ultimately emerge.
The Elections That Should be on Practitioners’ Radar
In addition to the above, some elections have been or are of significant interest as they might substantially impact foreign policies and the energy sector:
- The Presidential election in Lithuania (12 and 26 May 2024): The Prime Minister, who is seen as pro-Taiwan, ran against the President (ultimately largely reelected). It affected the relationship between Lithuania and China, and contributed to the development of an Anti-Coercion Instrument (ACI) at the EU level.
- The Austrian elections (expected on 29 Sept. 2024): The polls are suggesting that the FPO or Freedom Party (far right) will win. Since the event has now taken place, it is worth noting that the FPO did win, confirming the predictions. It is expected that this result could have an impact on the environmental, foreign and trade policy, and could undermine Austria’s relationship with Brussels.
- The Presidential election in Moldova (20 Oct. 2024), a candidate state for accession to the EU: The incumbent President is widely seen to be pro-Europe and a reformist (as is the newly appointed Moldovan Prime Minister). It is too early to state whether the elections will affect the country’s energy policy, and in particular its efforts to restructure its energy supply infrastructure to distance itself from Russia.
To conclude his review of the European Region, Mr. Konstantinidis stated that, overall, the continent is undergoing a period of significant political change. At the EU level, uncertainties and challenges are to be expected but a recalibration rather than a dramatic policy change is expected, especially when regarding the energy sector. In fact, it is the considerable skepticism about ISDS that could hamper both national and EU policy ambitions.
The Potential Impact of a Trump 2 or Biden 2 Administration in the United States, Dark Clouds or Silver Lining?
Mr. Mandell focused on the United States (US) Presidential election that will take place on 5 November 2024. He put the emphasis on the fact that while ISDS is a small issue in the broader scheme, it is an important election for the sake of ISDS. In order to better grasp the issue, he first set the scene before assessing the possible impact of a hypothetical Biden 2 or Trump 2 Administration.[GB1] It is worth noting that since the event took place, there has been a significant change in the political landscape. On July 21, 2024, President Biden announced his decision to withdraw from the 2024 race and endorsed Vice President Kamala Harris for the upcoming election.
ISDS as a Highly Political Issue
ISDS has been a highly political issue in the US since the Trans-Pacific Partnership negotiations (TPP). At the time, while ISDS still had a pretty significant bipartisan support (President Obama on the basis that it improved substantive investment protection standards), it also faced efforts to erase it from the TPP Agreement as a whole.
Fast forward to the Trump Administration in 2016 and the appointment of Robert Lighthizer, an ISDS skeptic, as the US Trade Representative determined to significantly narrow access to ISDS in the US, Mexico, Canada Agreement (USMCA), arguing that providing US investors with the access to ISDS would incentivize US companies to move jobs and production abroad. That agenda was ultimately reached since –
- ISDS between the US and Canada was eliminated;
- as well as ISDS between Mexico and Canada;
- ISDS between the US and Mexico has been significantly narrowed.
The current Biden Administration indicated in 2019-2020 that the President would not support ISDS but there have been no policy issues involving ISDS during his term. Nowadays, in addition to the normal debate on whether ISDS should be included in Agreements or not, there has been an extensive debate on whether the actual Administration should take ISDS out of preexisting Agreements.
The Potential Impact of Trump 2 or Biden 2
Mr. Mandell main takeaway is that the outcome and impact on ISDS will mainly depend on the personnel of the next Administration coupled with how intensely the private sector will push for ISDS. Overall, there are dark clouds for those who want to have ISDS in their agreements. Nonetheless, silver linings remain for ISDS.
Dark Clouds for ISDS
In the case of a Trump 2 appointment, Robert Lighthizer (ibid) is expected to be as influential as he was during the Trump campaign. Coupled with the new dynamic on Capitol Hill of a loss of mainstream pro-business Republicans and Democrats, the Trump 2 Administration would be met with no Hill opposition, allowing them to further reinforce the agenda they followed in the first term (i.e., opposition to ISDS).
As for the case of a Biden 2 appointment, the future could be significantly darker than under Trump 2, mainly because for the past 3 years, the Biden Administration’s position has been very negative towards ISDS, not considering it a valid tool to promote foreign investments.
ISDS’ Silver Lining
The Trump Administration is known to be transactional and has been open to consider ISDS in deals (for instance, the US alliance with Kenya for which there have been extensive discussions and negotiations with senior Trump administration officials in support of some form of ISDS settlement) in the past.
As for the case of a Biden 2 appointment, second-term democratic presidents tend to be more internationalist in their approach. Hence, there is a possibility that a pro-ISDS narrative will appeal to whomever is in the Biden Administration, particularly on the matter of competitiveness: US investors not having access to ISDS while international investors do may resonate when it comes to the protection of investments in critical minerals or mining.
As a conclusion, Mr. Mandell presented three issues that could force either Administration to address ISDS:
- In the USMCA context, a joint review process will take place in 2026, and the Agreement might be terminated. No ISDS claims have been brought by US or Mexican investors under the Rules and there has been no State-to-state settlement, even though the US had the ability to initiate claims as a government under the Agreement.
- In July 2025, the UNCITRAL Working Group III will make a decision on the reform of the ISDS Rules and the creation of a multilateral investments court and/or a multilateral appellate mechanism. In his view, neither Administration is likely to support the outcome. The US (both during the Trump and Obama Administrations) has voiced serious concerns about the multilateral investment court, viewing it as entrenching the system and questioning the democratic accountability of a permanent court.
- TC Energy and TransCanada Pipelines v. USA is the ongoing ICSID case involving the US. It involves a Keystone XL Pipeline and a 15 billion dollars claim brought by a Canadian company against the US. Mr. Mandell’s assumption is that under Trump 2, the Administration would restore the TC Energy permit and terminate the arbitration if it is still ongoing at the time. On the other hand, the Biden 2 Administration would be unlikely to reverse the decision on the permit, ultimately leading to the continuance of the arbitration proceedings. He considers this case as critical for the next generation of US policy because if the US were to lose, it could further reinforce its opposition to ISDS.
The Trend in South Asia: Navigating Political Stability, Economic Challenges, and Emerging Opportunities
As presented by Mr. Keshavmurthy, recent political developments across various Asian countries have sparked both interest and concern. From India’s stable regulatory environment amidst its recent elections to Pakistan’s economic instability and looming debt crisis, the region presents a diverse landscape of opportunities and challenges for foreign engagement.
The Particularity of India’s Regulatory Environment
Recent elections confirmed the current administration’s third term. As such, stability in the regulatory framework is expected, with potential changes in specific sectors. So far, the space, mining, manufacturing, and infrastructure sectors offer significant investment opportunities, notably with the allowance of 100% foreign direct investment in space. Another important aspect of the re-election of this administration is the constant evolution of India’s BITs landscape with over 70 BITs terminated since 2016 and new treaties with the UAE and the European Free Trade Association.
In addition to the above, Mr. Keshavmurthy underscored the importance of monitoring ongoing disputes such as the CC/Devas v. India (II) case and the Indo Gold v. India dispute, with significant implications for various stakeholders. While India has experienced both lost and successful awards, close attention to these disputes is crucial, especially given the annulment of the 960 million USD MBL Infrastructures v. DMRC, Award, 3 June 2020.
The South-East Asia Region
As mentioned by Mr. Keshavmurthy, Pakistan faces political agitation and economic instability, with a $24 billion debt crisis looming. Investment protection has also been affected by the added complexity of expired (terminated) treaties.
On the contrary, Bangladesh is experiencing stability and growth under Sheikh Hasina’s fourth term, particularly in the manufacturing sector. Its BITs frequently incorporate denial of benefits clauses, which impact arbitration proceedings, as exemplified by the Saipem v. Bangladesh case.
Not to forget Indonesia, where the political change following the victory of the former defense minister, Prabowo Subianto, suggests a focus on youth, technology and improving trade relations. The project to relocate the capital from Jakarta to Nusantara could also attract substantial investment. Interesting developments are thus expected.
Conclusion
This panel highlighted the direct impact of elections and in a broader scheme, political shifts, on international investment arbitration. While elections traditionally influence investment policies, their significance is acutely pronounced in 2024. Indeed, this year alone, we have witnessed and will continue to observe a substantial number of countries undergoing either status quo re-elections or radical shifts with the rise of populism or extreme parties (both far-right and far-left) across various regions.
Even if one can only speculate, the unpredictability arising from the elections will directly increase the dispute risk, especially given the defensive attitude that some regions have adopted towards ISDS. The Fourth Edition of WAU accurately zoomed in the need for stakeholders, including dispute practitioners, to remain vigilant during political transitions, as they have considerable influence on investment policies worldwide.
ABOUT THE AUTHORS
Pierre-Antoine Robin is an LL.M. candidate specializing in International Arbitration at the University of Miami. He holds a dual degree in French and Spanish Law from the University Paris 1 Panthéon-Sorbonne and Complutense University of Madrid, as well as a Master’s degree in International Trade Law from the University Paris 1 Panthéon-Sorbonne. He is currently doing his practicum externship at King & Spalding and is a registered member of the Madrid Bar Association.
Anaïs Leray graduated from Georgetown University Law Center with an LL.M in International Legal Studies coupled with a Certificate in International Arbitration. She holds law degrees from the University of Quebec in Montreal (UQÁM) and Aix-Marseille University, as well as a Master’s degree in International Arbitration and International Business Law (MACI) from the University of Versailles Paris Saclay. Anaïs is a registered member of the New York Bar Association and is awaiting swearing in for the Paris Bar.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
