MINISTRY EDUCAITION AND TRAINING MINISTRY OF JUSTICE HANOI LAW UNIVERSITY TRAN THI HONG NHUNG THEORY AND PRACTICE OF INVESTOR - STATE DISPUTE SETTLEMENT: APPLYING TO VIETNAM IN THE CURRENT CONTEXT OF INTERNATIONAL ECONOMIC INTEGRATION SUMMARY OF DOCTORAL THESIS IN LAW HANOI, 2019 The thesis is completed at HANOI LAW UNIVERSITY Science suppervisor: Assos.Prof Dr NGUYEN VU HOANG Referee 1: Assos.Prof Dr Le Mai Thanh Referee 2: Assos.Prof Dr Tang Van Nghia Referee 3: Dr Nguyen Thai Mai The thesis will be examined by Examination Board of Hanoi Law University at:…………………………………………………………………… The thesis can be found at: National Library Library of Hanoi Law University INTRODUCTION Necessity of research theme Globalization, regionalization of the economy is an inevitable trend, which has a strong impact on subjecs in international economic relations In fact, this trend not only creates a deeper and broader link between the subjects but also forms a strongly competitive environment at the international level, creating a significant challenges for the subjects In this context, international investment, one of the key economic activities, playing an important role in the economic development of countries in the world is also strongly influenced by the conditions of economic integration, global economic competion and crisis Since the late 1990s, there have been many disputes between entities involved in international investment activities, especially investor - state disputes, a particular type of dispute compared to other disputes arising in this field, because one party to the dispute is a state, called respondents which have special legal status Therefore, resolving this dispute becomes one of the problems for the host state in condition of formulating and perfecting international investment policies and laws Along with the development of economy, international investment relations, the investor - state dispute has become more and more complicated in recent years In the face of this situation, the host state has recognized the need to reconsider the international investment policy system on resolving disputes between foreign investors and the host countries Ensuring effective prevention and settlement of disputes will both have implications for market opening policies, attracting investment, economic development, building prestige and national image in relations International investment has both ensured the interests of people and nations Basing on the nature of international investment, this type of dispute is common among investors in developed countries and the host states are developing countries Therefore, Vietnam as well as other developing countries will have to ensure a favorable investment and business environment for foreign investors and appropriate adjustments and solutions in the tournament resolving issues related to this type of dispute In particular, in current conditions, Vietnam not only has to implement its commitments in the system of previous investment agreements but also has to implement agreements in a number of new generation of free trade agreements Specifically, our country has participated in negotiating and signing the Trans-Pacific Economic Partnership Agreement (TPP), the Free Trade Agreement between Vietnam and the European Union (EVFTA) and recently the Agreement Comprehensive and trans-Pacific Partnership (CPTPP), which has very strict commitments on liberalization and protection of investment in general and resolving disputes between foreign and national investors receive investment in particular.In the above situation, the study of the topic "Theory and Practice of Investor – State Disputes Settlement: Applying to Vietnam in the current context of international economic integration”, has both theoretical and practical significance, and this is really a necessary issue for Vietnam in the current conditions Research aims and obligations ● Research Aims Purpose of the study is to build a system of solutions to the improvement effectiveness of preventing and resolving Investor and host state from Vietnam in the context of international economic integration today ● Research Obligations To implement the above mentioned purpose, the thesis sets out the following research aims: - Analyzing theoretical issues on investor - state dispute settlement such as the concept and characteristics of investor - state dispute, the cause of the dispute In addition, the thesis will focus on clarifying the concept and characteristics of investor - state dispute settlement, generalizing the content law as well as the investor -state dispute settlement mechanism Presenting models of investor - state dispute settlement reforms - Studying the practice of ISDS in India through analysis of the situation of dispute settlement between foreign investors and India in the recent time This shows the adjustment of ISDS policy to be consistent with the ISDS reality of this state Besides, the thesis will make predictions about the difficulties that India faces when implementing the ISDS reform policy Moreover, the thesis also reviews the India's ISDS reform policy Finally, giving meaningfull lessons needed for Vietnam.- Doing research the content of investment liberalization and protection standards, the ISDS mechanisms under the current two new generation FTAs of Vietnam such as CPTPP and EVFTA From that points out the differences compared with the commitments on liberalization of investment protection regulated by other agreements; And make a comparison ISDSM of these two agreements with other legal dispute settelemt mechanisms in general, the ISDS mechanisms under other Vietnamese IIAs in particular - Researching practice of dispute settlement between foreign investors and Vietnam in current conditions.- Building the system of solutions to improve effectiveness of preventing and resolving investor -state disputes of Vietnam in the implementation period of ISDS commitments under the new generation FTAs Research Object and Scope ● Research Object Investor – State dispute settlement ● Research Scope Stemming from the practical requirements of ISDS in the current condition of international economic integration in Vietnam, the thesis will focus on researching theory and practice on ISDS to apply for Vietnam In particular, in the context that Vietnam has participated in negotiating and signing new FTAs including ISDS commitments, as follows: ⮚ About content: - Researching the theoretical issues of investor - state disputes, ISDS, substantive law and ISDSM so that it can be applied to resolve this type of dispute in Vietnam's current conditions - Researching on practice of ISDS from some states in the world - Studying the status of the ISDS law and ISDS of Vietnam in the current conditions - Studying solutions to improve effectiveness of prevention and settlement for Vietnam when resolving disputes between foreign investors and Vietnam in the context of enforcing both ISDS commitments under new generation of FTAs like as CPTPP and EVFTA The above contents are studied within the scope of international investment relations between foreign investors and the host states rather than other administrative, commercial or non-commercial relations ⮚ In terms of space: The thesis has general researches on ISDS in a number of states around the world in general, which aim to states with favorable development conditions, international investment system are similar to Vietnam, especially India Moreover, the above theoretical and practical studies will be applied to solve this type of dispute in Vietnam ⮚ About time: The thesis is studied to build solutions for Vietnam in the current period, at the present time when Vietnam has negotiated and signed new generation free trade agreements such as CPTPP, EVFTA Theoretical basis, research questions, research hypotheses and approaches to research issues ● Theoretical basis - Theory of Investor - State Dispute - Theory of Investor - State Dispute Settlement ● Research questions - What is the comprehensive theoritical basis to be applied to resolve disputes between foreign investors and the host country? - How is the practice of ISDS in states which are similar to Vietnam? - What are differences of the ISDS commitments under new generation FTAs which Vietnam is a member of - How does the current practice of ISDS of Vietnam take place? - Are there any solutions to improve the effectiveness of preventing and resolving investor - state disputes during the implementation of ISDS commitments under the new generation FTAs that Vietnam is a member of? ● Research Hypotheses The thesis topic is based on the research hypotheses: - The theoretical system of ISDS has existed and has been increasingly improved to be more suitable for the development of international investment relations, ensuring legitimate rights and interests for both foreign investors and the host state There includes a range of issues related to investor -state disputes, ISDS and ISDS mechanism The practice of ISDS is very diverse and has occurred in some countries with similar conditions with Vietnam In particular, the most notable case is India, the country in the top 10 most sued states, has accepted the ISDS policy but also had radical reforms to prevent and resolve this type of dispute is more effective Vietnam can get many lessons learned from this example - Vietnam has been sued by foreign investors on the basis of commitments to ISDS - Regulations on ISDS in the new generation FTAs of Vietnam have many differences compared with the previous regulations in both content and form - There are many different solutions in both preventing and solving this type of dispute in Vietnam's current conditions ● Approaches to research issues The research is based on the following approach: - Approaching from theoretical issues in ISDS - Approaching from the practice of ISDS of the states with similar conditions on economic and investment to Vietnam - Approaching from ISDS commitments under the new generation FTAs of Vietnam and the current status of ISDS of Viet Nam Methodology Based on the methodology of Lenin Marxism, Ho Chi Minh's thought, the views and guidelines of the Party and State of Vietnam in the innovation process, to realize the research objectives and tasks in the thesis, the thesis has used a number of main methodologies including: analysis, synthesis, comparison, in which there are methodologis of comparing laws and of case studies These methodologis are used independently or in combination Methods of analysis and synthesis are applied in approaching problems in all chapters of the thesis Summarizing, analyzing and assessing the theoretical issues of disputes between foreign investors and host states, ISDS, ISDS mechanis In addition, these two methods are also used to study practices related to ISDS, a model of ISDS, practice of ISDS in India Especially the ISDS mechanisms in CPTPP and EVFTA, as well as the situation of resolving this type of dispute in Viet Nam The integrated method is also used to collect information from secondary data sources such as online databases, UNCTAD, OECD, ICSID and Vietnamese authorities The legal comparative method is used to make new assessment of ISDS mechanism in CPTPP and EVFTA and present some contents of ISDS mechanism in Chapter Especially in Chapter 4, the method is used to anticipate the problems that Vietnam faces to in the integration conditions when implementing ISDS mechanisms of new generation FTAs and to develop appropriate solutions for Vietnam The case study method is used to study the investor – state disputes of some countries in general, India in particular Specially, it is applied to research ISDS cases of Vietnam The scientific and practical significance of the thesis topic - Completing the theory of investor - state dispute settlement by building up the concept of investor - state dispute, ISDS and ISDSM, characteristics of the dispute, ISDS and ISDSM Moreover, analyzing the general content and characteristics of alyzing the basic ISDS commitments under the CPTPP and EVFTA 3.2.2 Differences in standards of investment liberalization and protection under the CPTPP and EVFTA agreements Similar to previous IIAs, CPTPP and EVFTA also set standards for investment liberalization such as MFN, NT or investment protection standards such as FET, FPS, Expropriatio, compension and transfer However, the content of each standard has many new points compared to previous commitments From the perspective of being the substantive law in ISDS, those differences have a decisive meaning to the arising situation and settlement results the dispute Here are some new main points of these standards under CPTTP and EVFTA 3.2.2.1 Expanding scope of adjustment of the principle of most favored national treatment (MFN), the principle of national treatment (NT) 3.2.2.2 Adjusting principles of fair and equitable treatment (FET) and full security protection (FPS) 3.2.2.3 Specifying expropriation and compensation for damages 3.2.3 Contents of ISDS mechanisms in Vietnam's new generation of FTAs 17 3.2.3.1 The ISDS Mechanism under CPTPP Agreement CPTPP is an agreement that has been evaluated with many significant impressive factors in the current context of global international economic integration This is a regional agreement with a wide range of impacts Among the numerous specials of this CPTPP Agreement, the investment chapter is considered as special and even controversial chapter for its members The content of investment is stipulated in Chapter of the Agreement, the chapter includes two sections A and B with 30 Articles and 12 Annexes from A to L (Appendix L is suspended) Section A contains 17 Terms to explain the terms, scope of application, basic principles of investment Section B contains 13 Articles, which directly stipulate ISDS Some of the provisions in Section A and all of the provisions in Section B constitute the latest version of ISDS specified in international economic agreements in recent decades The basic content of this mechanism includes provisions on the subjects of dispute; methods, procedures for each dispute resolution method is used 3.2.3.2 Mechanism for foreign investor and Viet Nam Dispute Settlement under the EVFTA Agreement The content of the ISDS mechanism under EVFTA includes a number of regulations on the subjects of dispute; methods, procedures are based on the ISDS regulations and the scope of application of this mechanism The scope of ISDSM under EVFTA depends on the scope of investors and investment concept specified in the agreement In particular, the concept of investment is a fundamental influential concept, EVFTA investment means all types of assets owned or managed directly or indirectly by investors of a contracting party in the territory of the other contracting party of the Agreement ⮚ Dispute subjects It is the same as other disputes, the Agreement must determine the status of plaintiffs and defendant of the disputes The plaintiff defined in Paragraph 3, Article of Section 3.1 is an investor of a Member State that may be a natural or juridical person who has, or will, conduct investment activities within its territory of other contracting members of the Agreement The defendant is either a member of the Vietnam, EU or EU member states ⮚ Dispute settlement methods 18 VFTA is one of the FTAs that offers the most dispute resolution methods: negotiation, mediation, consultation, and the system of permanent investment courts (Investment Tribunal System) ⮚ Procedures To ensure the maintenance of relationships between the disputing parties, minimize time and costs The Agreement provides for the priority of using alternative dispute resolution methods (ADR) including negotiation and mediation Mandatory nature, application procedure of each method in relation to other methods is not the same Negotiation and mediation procedures are not required and are entirely dependent on the choice of the parties in the dispute In contrast, consultations and courts require mandatory procedures, in which the consultations must be applied before approaching to a tribunal method is a permanent investment court ⮚ Enforcement This is the final procedure in dispute settlement which is of interest to the parties Regulations on enforcement of award will ensure actual effectiveness of the ISDS mechanism under the Agreement 3.2.3.3 Differences of the ISDS mechanisms under EVFTA and CPTPP * Detailed and strict regulations First, about the level of detail Second, about the tightness * Scope * Transparency 3.3 Practice and general assessment of the situation of resolving disputes between foreign investors and Vietnam According to statistics of UNCTAD, Vietnam is in the group of foreign investors who sued the least Currently, Argentina is the most heavily sued with 60 cases, followed by Venezuela with 44 cases In Southeast Asia, in 2017 Indonesia was the most sued country with cases, Vietnam and the Philippines ranked second with cases, but in 2018 our country became the most sued country in the region with cases Foreign investors in Vietnamese lawsuits come from developed economies like the Netherlands, France and the United 22 foreign investors and the host state The effectiveness of prevention will bring many different positive effects to the economy and society of the host states Therefore, in the current context, this is the first solution that Vietnam will have to study and apply Based on international experience, background of Vietnam's ISDS laws and practices, here are some basic preventive measures as follows: 4.2.2.1 Improving domestic laws to ensure compliance with international investment commitments 4.2.1.2 Propagate, disseminate, explain the differences of the new mechanism 4.2.1.3 Training human resources for resolving disputes 4.2.1.4 Developing mechanisms to receive and handle problems of foreign investors 4.2.2 In dispute resolution 4.2.2.1 Maximizing the effectiveness of negotiation, mediation and consultation 4.2.2.2 Completing the Regulation on coordination of investment dispute settlement 4.2.2.3 Focusing on authority of international tribunal in ISDS 4.2.2.4 Enforcing awards of ISDS institution 4.2.2.5 In-depth research is needed on new issues in ISDS CONCLUSION OF CHAPTER On the basis of the theoretical and practical basis of Chapter and Chapter 3, Chapter analyzed all the issues raised for Vietnam when resolving the disputes in the current conditions With the position of a capital importer, Vietnam will encounter common difficulties in ISDS at the current stage as the limitations of investment arbitration, the risk of economic losses due to the compensation and the cost of participating in lawsuits, difficulties to control environmental issues, ensuring public benefits In addition, in the current context, Vietnam will have its own difficulties such as implementing many kinds of Different ISDS commitments, dealing with new issues in EVFTA, CPTPP ISDS commitments 23 In the above conditions, in order to improve the effectiveness of prevention and settlement of the disputes, Vietnam should implement a system of solutions Therefore, the following section of this Chapter focuses on presenting the proposed solution system The solutions are divided into two groups: solutions in prevention and solutions in dispute resolution These solutions aim to reduce the legal risks for Vietnam when implementing ISDS commitments in the current conditions 24 GENERAL CONCLUSION The process of implementing the "Theory and Practice of Investor" State Disputes Settlement: Applying to Vietnam in the current context of international economic integration", The thesis offers some general statements below Firstly, in the context of strong bilateral and regional economic integration, the wave of suing for the host state based on IIAs continues to increase are still a problem for economies The theoretical issues related to both the content and form of dispute settlement between foreign investors and the host country are also changing constantly and not the same when building the international investment law Secondly, Vietnam is not an exception, a developing country, has signed and implemented IIAs since the 1990s, now has participated in a number of new generation FTAs with ISDS commitments such as EVFTA and CPTPP ISDS under the agreements have many differences compared to those already existed and implemented earlier Moreover, although not much, Vietnam had to participate in some disputes sued by foreign investors and the number of lawsuits also increased rapidly in recent years Thirdly, Inspite of the current conditions, it will not be easy for our country when any foreign investors can sue Vietnam at international arbitration tribunal at any time, assuming that Vietnam violates the investment commitments investment under previous IIAs as well as new generation FTAs There are a number of difficulties in preventing and resolving these disputes in the context of having to implement ISDS commitments under both IIAs and new generation FTAs Therefore, Vietnam should conduct a series of different solutions to effectively implement these commitments in the current period The solution is built in two ways of preventing and resolving disputes to minimize the impacts for Vietnam On the basis of such observations, after the process of conducting research on the topic, the thesis has achieved remarkable results both in theory and practice on ISDS as follows: - Completing concept, characteristics of investor - state dispute - Analyzing the general content and characteristics of ISDS substantive 25 law of ISDS Building definition, characteristics of ISDS and ISDSM Moreover, ; studying the development process of the ISDSM until the time of having the ISDS commitments under new generation FTAs Analyzing the models of ISDS reform in order to effective improvement of ISDS in the world - Analyzing the practice of ISDS in India and thereby providing necessary lessons for Vietnam in the context of implementation of the ISDS commitments under the new generation FTAs - Comprehensive analysis of the content and different characteractics of investment liberlization and protection commitments as well as ISDSMs under CPTTP and EVFTA, the two new generation FTAs of Vietnam Moreover, analyzing the differences of these mechanisms in comparision to the ISDSM under previous IIAs Pointing out issues when resolving disputes between foreign investors and Vietnamese State in the implementation of ISDS commitments under those FTAs - Analyzing the reality of ISDS in Vietnam up to now - Proposing a system of solutions to improve the effectiveness of preventing and resolving this type of dispute in the context of implementation of the ISDSMs under Vietnam's new generation FTAs Although the above research results have been achieved, but within the framework of the thesis, some contents related to the topic are necessary and meaningful in both theory and practice These issues should be further studied in the future - Continued research on the impact or outcome of policy reforms on ISDS of India - Research more models of practical experiences on reforming ISDS in countries with similar conditions with Vietnam, thereby building lessons suitable experience for Vietnam - Improving solutions to improve the effectiveness of preventing and resolving the disputes for Vietnam in a specialized direction towards each subject and managing problem group LIST OF WORKS RELATED TO THE THESIS HAVE BEEN PUBLISHED Tran Thi Hong Nhung (2017), “Ap dung nguyen tac cong nhan quyen mien tru cua quoc gia giai quyet tranh chap giua nha dau tu nuoc ngoai va nha nuoc tiep nhan dau tu”, Legal Professions Review, Vol.5 , page 50-54 Tran Thi Hong Nhung (2018), “Nhung diem moi ve giai quyet tranh chap giua nha dau tu nuoc ngoai va nha nuoc tiep nhan dau tu theo mau Hiep dinh dau tu song phuong nam 2015 cua An Do”, Viet Nam Trade and Industry Review, No 12, page 39-34 Tran Thi Hong Nhung (2018), “Su phat trien cua co che giai quyet tranh chap giua nha dau tu nuoc ngoai va Nha nuoc tiep nhan dau tu phap luat dau tu quoc te”, Legal Profession Review, Vol 6, page 40 – 44 Tran thi Hong Nhung (2019), “Cai cach chinh sach ve giai quyet tranh chap giưa nha dau tu nuoc ngoai va nha nuoc tiep nhan dau tu An Do”, Democracy and Law Review, No.1 (322), page 19 – 24 ... nhan dau tu”, Legal Professions Review, Vol.5 , page 50-54 Tran Thi Hong Nhung (2018), Nhung diem moi ve giai quyet tranh chap giua nha dau tu nuoc ngoai va nha nuoc tiep nhan dau tu theo mau... RELATED TO THE THESIS HAVE BEEN PUBLISHED Tran Thi Hong Nhung (2017), “Ap dung nguyen tac cong nhan quyen mien tru cua quoc gia giai quyet tranh chap giua nha dau tu nuoc ngoai va nha nuoc tiep... Do”, Viet Nam Trade and Industry Review, No 12, page 39-34 Tran Thi Hong Nhung (2018), “Su phat trien cua co che giai quyet tranh chap giua nha dau tu nuoc ngoai va Nha nuoc tiep nhan dau tu phap