On 31 March 2025, the Investment Treaty Conference, jointly organised by the OECD, UNCTAD and UNCITRAL, was held in Paris to dabate how to “Modernise Investment Treaties to Support the Sustainable Development Goals (SDGs)”. This meeting brought together policymakers, legal experts, business leaders, academics, and civil society representatives to reflect about reforms to incorporating in international investment treaties.
Telefónica works with other companies through Business at OECD (BIAC) to bring key private sector recommendations to the meeting and emphasising the importance of legal certainty in encouraging and attracting investment. Legal certainty limits state discretion and protects against abrupt regulatory changes — a critical factor in economies with a history of political instability. Various studies show that countries with stable legal regimes attract more Foreign Direct Investment (FDI).
The focus of the debate was on:
Modernisation of Investment Treaties
The benefits of updating treaties to attract sustainable investment and mobilise private finance for climate-related projects were explored. The need to balance investor protection with states’ right to regulate was also highlighted.
While it is essential that governments retain the ability to legislate in the public interest, this should not result in sudden or arbitrary measures that unfairly impact investors. In countries facing governance challenges, striking this balance becomes even more crucial, and bilateral agreements that safeguard against discriminatory or unfair state action are key.
Reform of the Investor-State Dispute Settlement System (ISDS)
Issues such as inconsistency and lack of transparency in arbitration rulings, as well as the high costs of proceedings, were addressed. However, an international arbitration mechanism remains necessary to protect investments. UNCTAD also recommends the establishment of preventive dispute management methods.
Arbitration allows disputes to be resolved outside local courts, helping to avoid perceived biases. A well-balanced ISDS system is essential to uphold legal certainty and prevent disputes from becoming political bargaining tools between states.
Achieving sustainable development through the Investment Protection Treaties in the face of globalisation
Recent changes in treaty design were examined with the aim of aligning them with current priorities, such as sustainable development and global economic resilience.
The future calls for more inclusive frameworks that balance investor rights with regional sustainable development objectives.
A lack of legal certainty remains a major barrier to FDI — particularly in regions like Latin America. However, through legal and institutional reforms that reinforce the rule of law and reduce uncertainty, countries can better position themselves to attract foreign investment and drive sustainable economic development.
Creating favourable conditions for attracting investment is vital for a country’s economic and social progress. Reforms that strengthen the rule of law and improve judicial efficiency are essential for securing stable, high-quality capital — and investment treaties can play a key role in achieving this.
