What just happened?

As of 17th April 2020, nearly 210 countries in the world have reported the cases of Coronavirus.[1]

What does this mean?

While the governments are tackling this virus through emergency interventions, lockdowns, and restricted opening of business (only for medical supplies & essential commodities) - hundreds of foreign investors all over the world face restrictions in carrying out their business, which has severely affected their investments.

How does this affect the legal industry?

In months to come, there is an expected surge of investment-arbitration cases, which could have a severe impact on the already damaged economies of most countries. In a commentary by the IISD published in April 2020[2], the authors suggest ways in which the states could control the surge of these disputes. The authors speak of different examples which under normal circumstances would qualify as expropriation. For instance, Spain & Ireland have opted to Nationalise Private Hospitals till the crisis is handled.[3] Furthermore, a decree was issued by the Italian Govt on 17th March 2020, wherein the state would temporarily/permanently take over the medical devices.[4] Many states have additionally banned exports on medicines and food supplies to restrict cross border movement and impose effective lockdown. The commentary states examples from the past, but would the aftermath of this pandemic be comparable to the patterns of the past?

The authors strongly suggest that there is a need to avoid Investor-state disputes relating to COVID 19 claims as states may not survive the cost of arbitrations and hefty compensation from the multiple requests. Accordingly, some suggested measures include:

A joint, multilateral measure wherein the governments would come together and suspend the application of Investor-state disputes to COVID-related measures.
A joint interpretation by states, as to what is considered as necessity.
An emergency response through UNCTAD or UNCITRAL working group or through the World Health Assembly in May 2020.
Informing their treaty partners of the withdrawal of Consent to Investor-State Dispute Settlement Clause by states till further notice.[5]

While the joint measures would take time, it would be best for states to suspend the Dispute Settlement Clause to avoid costly arbitration and costlier compensation through these proceedings.

Some countries might take years to revive from their collapsed economy and might seek loans from the IMF & the World Bank to meet these financial difficulties, creating huge economic pressure on these institutions. It is noted that the IMF and the World Bank have already decided to discuss plans at the spring meeting to help all IDA countries (Poor countries eligible for support from the International Development Association) with their debt service obligations.[6] Taking these factors into consideration, it would be in the best interest of states to take immediate action in protecting Foreign Investments and preventing future disputes by taking effective measures as the commentary rightly suggests.

Written by Nidhi Patil (Guest Contributor)

Connect with Nidhi by clicking on this link: https://www.linkedin.com/in/nidhi-patil-b4b976197/

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References:

[1] https://www.worldometers.info/coronavirus/countries-where-coronavirus-has-spread/

[2] https://www.iisd.org/sites/default/files/publications/investor-state-claims-covid-19.pdf

[3] Ibid Pg 2.

[4] https://www.ashurst.com/en/news-and-insights/legal-updates/law-decree-no-18-of-17-march-2020---cura-italia-decree/

[5] IISD Commentary (n 2) Pg 7-8.

[6] Homi Kharas, ‘Future Development: What to do about the coming debt crisis in developing countries’ (Brooking, 13th April 2020)

Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.