Part IV The Impact of International Investment Law, 17 Investor–State Dispute Settlement

Abstract

This chapter studies investor–state dispute settlement (ISDS) in International Investment Agreements (IIAs), the primary method of which is investor–state arbitration. It outlines the nature of investor–state disputes and the main types of dispute settlement techniques. The chapter also considers the principal characteristics of investor–state arbitration and examines arbitration under the Washington Convention on Settlement of Investment Disputes between States and Nationals of Other States 1965 (the ICSID Convention), which established the International Centre for Settlement of Investment Disputes (ICSID). Most Bilateral Investment Treaties (BITs) refer to ICSID arbitration as the sole, or optional, method of dispute settlement. ICSID Tribunals have acted in a wide range of disputes, adopting expansive interpretations of personal and subject-matter jurisdiction. This has led to criticism that investor–state arbitration has become too pervasive and a threat to the states’ ‘right to regulate’, given the risk of high procedural costs and compensation. ‘New-generation’ IIAs have responded by limiting the jurisdiction of tribunals over investment disputes. Moreover, recourse to alternative dispute resolution (ADR) and dispute avoidance techniques is being encouraged. The United Nations Commission on International Trade Law (UNCITRAL) has also taken up ISDS reform and is in the process of formulating a multilateral reform package.