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

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


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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.
2. Research aims and obligations
● Research Aims
Purpose of the study is to build a system of solutions to the improvement

of ISDS commitments under the new generation FTAs.
3. 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


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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

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.
5. 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

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.
7. Structure of the thesis
With the research purpose and obligations, the object and scope of the


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above research, the thesis is structured into four chapters excluding indexes,
preface, list of abbreviations, conclusions, references list and appendices.
Chapter 1. Literature Review of Investor – State Dispute Settlement
Chương 2. Theory Background of Investor – State Dispute Settlement

Chương 3. Practice of Investor – State Dispute Settlement in Viet Nam
Chapter 4. Solutions to improvement on effectiveness of Investor –
State
dispute prevention and settlement for Viet Nam in the today condition of
international economic integration
CHAPTER 1
LITERATURE REVIEW OF INVESTOR – STATE
DISPUTE SETTLEMENT
With the constant increase in ISDS in international economic life, the
settlement of disputes between foreign investors and the host country is no
longer a problem. New topics in legal science. Receiving the attention of many
generations of scholars around the world, the theoretical and practical issues of
solving this type of dispute have been studied in many ways and presented in
many other forms. each other such as monographs, newspapers, specialized

1.3.3. International experience in Investor – State disputes Settlement
1.3.4. Practice of ISDS in Viet Nam
1.3.5. Issues need further research
The first is in theory
- Supplementing and perfecting the system of arguments about the
concept and characteristics of investor - state disputes.
- Develop a system of theory about resolving disputes between foreign
investors and the host country. Clarify the characteristics of the substantive law
of ISDS, ISDS mechanisms. Development trend of ISDS mechanism
- Overview of reform models to improve the efficiency of ISDS
The second is about practice
- Analyzing the practice of ISDS in India, developing countries have
many similarities in the development of international investment and ISDS.
Thereby pointing out the necessary references for ISDS of Vietnam.
- Analyzing the legal practice of ISDS through analyzing the differences
of commitments on liberalization and investment protection, the content of
ISDS mechanisms in CPTPP and EVFTA, specify the differences of these two
mechanisms compared to the ISDS mechanism in the previous IIAs system.
- Analyzing the situation of ISDS in Vietnam in recent years. Provide


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assessments on the situation of ISDS in Vietnam
- Thirdly, to develop solutions to improve efficiency in preventing and
settling disputes between foreign investors and countries receiving investment
for Vietnam.
- Evaluate the issues raised for resolving disputes between foreign and national
investors receiving investment under IIAs in the current period of Vietnam.
- Develop solutions to improve the effectiveness of preventing and resolving
ISDS for Vietnam in the context of implementing mechanisms for settling

follows: A dispute between a foreign investor and the host state is construed
as disagreements and conflicts of legal rights and obligations in the process
of implementing international investment activities.
2.1.2. Characteristics of Investor - State Dispute
In addition to the general characteristics like other legal disputes, investor
- state disputes have some derivative characteristics such as the nature of the
investment the host state and the dispute related to long-term commitments...
2.1.2.1. The disputing party is a host state- a subject of national sovereignty
2.1.2.2. Content of disputes related to international investment
2.1.2.3. Nature of the host state's measures
2.1.2.4. Nature of investment commitments
2.1.3. Cause of ISDS
2.1.3.1. Differences in benefits between foreign investors and the host state
2.1.3.2. Change of international investment protection
2.2. Investor - State dispute Settlement
2.2.1. Definition of Investor - State dispute Settlement
From the arguments in a broad sense, narrow meaning, the subject of
dispute settlement as well as from the perspective of a legal regime, the thesis
introduces the concept of ISDS as follows:
ISDS is an overall set of activities aimed at resolving disagreements
and conflicts of legal rights and obligations in the process of implementing
international investment activities between foreign investors and host states
under ISDS mechanisms.
2.2.2. Characteristics of Investor - State Dispute Settlement
2.2.2.1. Legal resources of the Investor - State Dispute Settlement
Legal basis for ISDS includes substantive law and procedures. Unlike
solving other types of disputes, the substantive law and procedure to deal with
this type of dispute have separate points. Specifically, the content law expresses
the obligation of the host state in international investment to be regulated in the


2.4.2. Characteristics of Investor – State dispute Settlement Mehanism
First, Claimants are foreign inestors
Second, Legal forms of ISDSM are very diverse


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2.4.3. Classification of ISDSM
Based on certain criteria, ISDSM can be classified into the following
groups: Based on the structure of content of the legal basis in the dispute
settlement, the mechanism is divided into two categories, including a separate
mechanism and combination mechanism. Based on the number of subjects
divided into bilateral mechanism and multilateral mechanism; Based on the
method of dispute resolution: Mechanism to resolve disputes by Court, by
Arbitration, by means of mediation; Based on the trial regime: the one-level
trial mechanism; Two-level mechanism for trial
2.4.4. The development process of the investor – state dispute settlement
mechanism
The development of ISDS mechanism in the international investment law
is divided into two phases, the first stage is marked by the regulation of ISDSM
in investment protection and liberalization agreements (BITs), the second phase
is from ISDS mechanism in free trade agreements (FTAs) up to now.
2.4.4.1. From Diplomatic Protection to BITs
2.4.4.2. From BITs to new generation FTAs
2.5. Models of reform to improving the efficiency of ISDS
The following will analyze the practice of selecting the reforming model
of ISDS in the world by approaching from the stage of prevention to the
dispute. Such reforms will help improve the effectiveness of preventing and
resolving investor – state disputes. In other words, improving the effectiveness
of dispute resolution is the purpose of reform. There are four base groups to
determine the effectiveness of ISDS: one is the settlement time, the other is the

of disputes in international investment and trade ..., especially the substantive law
of ISDS and distinguish ISDS mechanisms from other dispute settlement
mechanisms in trade and international investment. The final section of the chapter
outlines the models of reforms to improve the prevention and resolution of ISDS
disputes used by countries. The contents of Chapter 2 form the theoretical basis for
practical research and develop solutions to improve the effectiveness of preventing
and resolving disputes between foreign investors and the host country receiving
investment in Vietnam. The next chapters of the thesis.

CHAPTER 3
PRACTICE OF INVESTOR – STATE DISPUTE SETTLEMENT
IN VIET NAM
3.1. Investor – State Dispute Settlement - Practice in India and some
references for Vietnam


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3.1.1. Overview of the practice of resolving disputes between foreign investors
and receiving countries today
The practice of ISDS is reflected through various contents such as name
of lawsuit, number of cases over years, plaintiff and defendant of the lawsuit,
applicable laws, institution... The thesis is generalized by data and assessments
of the number of cases of the years, settlement status, infringement content,
plaintiffs and defendants of the lawsuit, applicable laws, institution, procedural
rules, damages and arbitration costs.
Settling disputes with foreign investors is a common problem for many
countries in the context of globalization and regionalization of the current
economy. Therefore, there are many contradictory assessments about the policy
of resolving disputes between foreign investors and the host country, India's
policy is special one of them. Therefore, the practice of ISDS as well as its

reform program. Third, after the ruling, India has just had to change its
adjustment policy to attract FDI, and to start a program to review the
regulations in BITs so that the country does not face disputes like case of White
Company. New points of the BIT 2015 model are built on the basis of the main
content in the dispute between the White Company and India. One is to change
the concept of investment; The second is to eliminate the principle of mostfavored-nation treatment (MFN); Three is limiting the scope of national
treatment principles (NT); Four is the limit of full protection and security
principles (FPS); Five is to eliminate the principle of fair and equitable
treatment (FET); Six is a clearer regulation of deprivation of ownership; Seven
is a regulation of transparency; Eight is to adjust authority and apply domestic
dispute resolution methods.
3.1.3. Indian difficulties during the implementation of policy changes on ISDS

* Must continue to perform obligations from signed agreements
* Must continue to follow lawsuits on the basis of previous commitments
* Negotiate multiple BITs negotiation at the same time
* There is no precedent for India
3.1.4. Evaluation of adjustments to India's ISDS policy
3.1.4.1. Adjust the content of investment liberalization
3.1.4.2. Create a uniform ISDS policy
3.1.5. Lessons learned for Vietnam
3.1.5.1. Focus on ISDS content adjustment law
3.1.5.2. Develop uniform ISDS policies
3.1.5.3. Study different models of ISDS reforms.
3.2. The practice of ISDS commitments of Việt Nam


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3.2.1. The development process of ISDS commitments of Viet Nam
As of the end of 2017, Vietnam has signed a total of 65 BITs, of which 47

3.2.3. Contents of ISDS mechanisms in Vietnam's new generation of FTAs


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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 9 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.

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 7 cases, Vietnam and the Philippines
ranked second with 5 cases, but in 2018 our country became the most sued
country in the region with 8 cases. Foreign investors in Vietnamese lawsuits
come from developed economies like the Netherlands, France and the United


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States. However, according to information collected from a number of
documents, Vietnam now faces 16 petitions of foreign investors. With the
mechanism of not disclosing case information in previous IIAs, access to
official information is very difficult. Below are the most basic summaries from
foreign investors suing Vietnam that UNCTAD collected, which partly reflects
the practice of resolving disputes between foreign and Vietnamese investors in
the period. current paragraph.
3.3.1. Number of disputes
3.3.2. Applicable law and violation
3.3.3. Institutions and arbitration rules of arbitration
CONCLUTION OF CHAPTER 3
Chapter 3 of the thesis is built on the basis of analyzing the reality of
ISDS in general, then focusing on in-depth analysis of the case of India, the

CHAPTER 4
SOLUTIONS TO IMPROVEMENT ON EFFECTIVENESS OF
INVESTOR – STATE DISPUTE PREVENTION AND SETTLEMENT
FOR VIET NAM IN THE CONDITION OF INTERNATIONAL
ECONOMIC INTEGRATION
4.1. Issues raised from the ISDS practice of Vietnam
Besides the different positive impacts, ISDS also has potential legal riks
for the host states like as Vietnam. It includes common issues which other
countries have been dealt with, and specific issues arising only in the economic,
social and legal conditions of Vietnam.
4.1.1. Common issues are raised in ISDS
Here are problems arising from the common ISDS practices of states
around the world and cannot be an exception for Vietnam.
Although, investment arbitration is considered as a method of domestic
business dispute resolution as well as disputes in international business have many
advantages due to ensuring objective factors through selection of arbitration
centers, arbitrators and selection of arbitration procedure rules. But these are not
promoted in ISDS, the weaknesses analyzed below have significant impacts on the
host state when this method is applied to ISDS. First: Transparency; Second:
Arbitration decision is not consistent; Third: High arbitration costs
4.1.1.1. Risk of economic damage to the investment recipient country
According to UNCTAD statistics, the number of disputes between foreign
investors and developing or underdeveloped countries accounts for 60%, while
developed countries account for only 40%. This means that in countries with
developing and underdeveloped economies, there will be more problems with
disputes from foreign investors of developed economies. When participating in


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the above disputes, the host states may be subject to two types of damages:



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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 4
On the basis of the theoretical and practical basis of Chapter 2 and
Chapter 3, Chapter 4 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