ITALY Trends and Developments Contributed by: Maria Chiara Malaguti, Filippo Rossi and Roberto Longhi, PedersoliGattai
PedersoliGattai Via Principe Amedeo, 5 – 20121 Milan Italy
Tel: +39 02 303051 Email: info@pglex.it Web: pglex.it/en/the-firm
Italy and the Changing Landscape of International Investment Law International investment law and international invest- ment arbitration are at a crossroads. The resolution mechanism for settlement of investor–state disputes (ISDS) is criticised by many states as inadequate for resolving disputes relating to foreign direct invest- ments for a variety of reasons linked to the mecha- nism itself, such as parallel proceedings that might produce conflicting decisions, claimed imbalance in favour of investors (as the mechanism generally permitting an investor to start a claim against a state and not vice versa), and questionable independence and impartiality of arbitrators, to name just the most readily discernible objections. Similarly, some provi- sions generally contained in bilateral or multilateral investment treaties are criticised, especially when it comes to assessing a sovereign state’s general regu- latory choices that also impact foreign investors under international investment law, which, by protecting the foreign investor’s rights, inherently limit the state’s general right to regulate. These critical elements stem in part from the chang- ing context of international trade and economic gov- ernance since the origins of investment arbitration: at the beginning, international investment law and ISDS were established specifically to protect investors who assumed the risk of investing in foreign countries with governments that were unstable, and who therefore needed to be granted some level of certainty in order to sustain large, multi-year investments without expe- riencing unexpected and sudden regulatory changes that would leave them with huge losses and without any concrete means of protection. In some ways,
investment law was complementary to development law. The context today is completely different as direct investments are: • part of a wider landscape of reciprocal exchanges and commerce; • widespread across states and regions of the world; • bidirectional (with each state generally being both host country to investments and home country to investors); and • much more complex, thus involving a wide number of actors and financial partners in the same opera- tion with different nationalities and principal places of business. In the same vein, states have strengthened their judi- cial domestic protection mechanisms over the dec- ades, thus mitigating the need for a specific set of provisions protecting foreign investors per se. Furthermore, the current debate on standards of behaviour in international trade and commerce is also influencing investment law. On the one hand, a substantial body of norms supports the applica- tion of human rights and sustainability principles as standards of conduct for operators spanning multiple states, also affecting investment law. On the other hand, states are gaining greater flexibility in apply- ing such standards in their legal systems and in their means of challenging the behaviour of investors under such standards. Conditionality of direct investments based on the respect of sustainability principles is equally under
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