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Proposals for Reform of the Investor State Dispute Settlement (ISDS) System



By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021.*

The influx in the number of ISDS cases filed by private investors is not only directed at the developing countries only but is also affecting middle income countries as well as the developed countries. However, the bulk of these cases still involve developing countries as the respondents. More countries and policy makers have therefore been calling for reforms to the ISDS system which is still largely viewed as more investor friendly at the expense of the hosts’ countries’ interests. It has been observed that the trend towards more balanced IIAs was, incidentally, started by the United States (US) and its North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, in response to a number of high-profile ISDS cases, where the three NAFTA countries introduced a number of pioneering provisions that aimed to recalibrate the relationship between investment protection and the regulatory policy space of host countries.

The recalibration of IIAs sought to increase governmental policy space relating to the regulation of foreign investors featuring a more restrictive definition of the investments covered, fair and equitable treatment clauses that do not require more beneficial treatment than is granted by customary international law, and a more constrained meaning of indirect expropriation. With regard to the ISDS mechanism, the US introduced transparency requirements for arbitral proceedings and provisions aimed at preventing the filing of ‘frivolous’ claims, and it also strengthened the role of non-disputing parties. In 2017, the United States announced it would seek to excise the investor-state dispute settlement from NAFTA, and in 2015, the European Commission declared that an investor-state dispute settlement is not suited to resolution of investment treaty disputes, and it began publicly pursuing development of alternative models.

According to the United Nations Conference on Trade and Development’s(UNCTAD’s) World Investment report 2019, forward-looking international investment agreements’ reform is well under way and involves countries at all levels of development and from all geographical regions, and with almost all the treaties concluded in 2018 containing a large number of reform features. Some of the reforms are sustainable development-oriented, meant to take into account the sustainable development goals and aspirations. The UNCTAD’s Reform Package for the International Investment Regime sets out five action areas which include: safeguarding the right to regulate, while providing protection; reforming investment dispute settlement; promoting and facilitating investment; ensuring responsible investment; and enhancing systemic consistency.

UNCTAD’s World Investment Report 2019 has also pointed out that Investor–State arbitration continues to be controversial, spurring debate in the investment and development community and the public at large. As such, it has identified five principal approaches which have emerged from IIAs signed in 2018: (i) no ISDS, (ii) a standing ISDS tribunal, (iii) limited ISDS, (iv) improved ISDS procedures and (v) an unreformed ISDS mechanism. In these principal approaches to ISDS, used alone or in combination: (i)No ISDS: The treaty does not entitle investors to refer their disputes with the host State to international arbitration (either ISDS is not covered at all or it is subject to the State’s right to give or withhold arbitration consent for each specific dispute, in the form of the so-called “case-by-case consent”) (four IIAs entirely omit ISDS and two IIAs have bilateral ISDS opt-outs between specific parties). (ii)Standing ISDS tribunal: The treaty replaces the system of ad hoc investor–State arbitration and party appointments with a standing court-like tribunal (including an appellate level), with members appointed by contracting parties for a fixed term (one IIA).

In addition, other approaches include (iii)Limited ISDS: The treaty may include a requirement to exhaust local judicial remedies (or to litigate in local courts for a prolonged period) before turning to arbitration, the narrowing of the scope of ISDS subject matter (e.g. limiting treaty provisions subject to ISDS, excluding policy areas from the ISDS scope) and/or the setting of a time limit for submitting ISDS claims (19 IIAs). (iv)Improved ISDS procedures: The treaty preserves the system of investor–State arbitration but with certain important modifications. Among other goals, such modifications may aim at increasing State control over the proceedings, opening proceedings to the public and third parties, enhancing the suitability and impartiality of arbitrators, improving the efficiency of proceedings or limiting the remedial powers of ISDS tribunals (15 IIAs). (v)Unreformed ISDS mechanism: The treaty preserves the basic ISDS design typically used in old-generation IIAs, characterized by broad scope and lack of procedural improvements (six IIAs). Following the above highlighted approaches, countries therefore have a number of options to choose from while negotiating their IIAs with foreigners. They can settle on the approach that most favours their domestic interests while participating in international investments development.

In conclusion, it is clear that most IIAs grant extensive rights to a wide range of foreign investors against host states, without imposing any reciprocal obligations on those investors. Where broader concerns such as human rights or sustainable development are included within IIAs, they do not, for the most part, demand action from investors or states. As a result, the legal framework for investment operates on an understanding of justice where fairness to investors is the dominant principle. As a result, there is a growing international consensus that more is needed from international investment treaties and the regime in general, if they are to have a meaningful future, or any future at all, and this consensus is increasingly revolving around the sustainable development paradigm.

*This article is an extract from the Article “Africa’s Role in the Reform of International Investment law and the Investor State Dispute Settlement (ISDS) System” by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.


Muigua, K., “Africa’s Role in the Reform of International Investment law and the Investor State Dispute Settlement (ISDS) System” Available at: 2020/08/Africas-Role-in-the-Reform-of-International-Investment-law-and-the-Investor-State-Dispute-Settlement-ISDS-System-Kariuki-Muigua-August-2020.pdf (accessed on 21st May 2022).

News & Analysis

The Roles of the Three Parts of the Permanent Court of Arbitration




H.E. Amb. Marcin Czepelak, the Fourteenth Secretary-General of the Permanent Court of Arbitration (PCA)

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Brief History of the Permanent Court of Arbitration (PCA)




By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.

The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20th Century during the first Hague Peace Conference held between 18th May and 29th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.

The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.

The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”

In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.

As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.

The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.


PCA Website: (accessed on 25th May 2023).

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Former KCB Company Secretary Sues Over Unlawful Dismissal




Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for Unlawful Dismissal

Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.

Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.

In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.

He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.

“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.

Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.

Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.

He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.

“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.

Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.

He wants  further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.

Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.

He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.

He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.

He adds that at that point his roles were given to Okumu for reasons that were not related to work demands.  He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.

Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.

“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.

He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.

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