Investor-State Dispute Settlement: An Analysis of the Reform Proposals on Its Institutional Structure

Abstract

Investor-State Dispute Settlement (ISDS) has played an important role in the international arena since its creation, especially after the 1990s when the number of cases arose dramatically. By providing an unbiased forum for settling disputes among investors and states, ISDS has proved to be a relevant tool in the international regime. In spite of its useful features, ISDS is experiencing a period of intense criticism and reorientation of its scope and application. The critics argue, inter alia, that ISDS lacks transparency, legitimacy, coherency, and suggests the mechanism is investor-oriented. As result, a series of options for reforming ISDS is under discussion, ranging from fixing the ISDS structure to completely excluding these provisions from international investment agreements. Bearing this discussion in mind, this document compares which alternative is most effective to ISDS criticism: Mauritius Convention or an Investment Court System. In so doing, this article analyzes the ISDS structure from its origin to today's application in an attempt to reach a conclusion as to whether these criticisms are true concerns or misconceptions. Along these lines, this work argues that not all criticism of ISDS has a sound basis, especially the claims that ISDS would be investor-biased and that ISDS impairs the state's power to regulate. This paper provides an analysis of the reform options on their merits, pointing out the advantages and disadvantages of each one to conclude the main criticism against ISDS is the lack of transparency, concluding that the Mauritius Convention is the option that offers better responsiveness to reform of ISDS.