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Investor-State Dispute Settlement (ISDS): An Introduction

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Handbook of International Investment Law and Policy

Abstract

While the Investor-State Dispute Settlement System (ISDS) was already under scrutiny for a number of years, the COVID-19 pandemic has brought additional challenges to the global debate.

It may well be that new contractual disruptions and nationalization lead to additional international investment disputes. In spite of the now generalized criticism on ISDS, international arbitration remains the preferred method to resolve ISDS with the International Centre for the Settlement of Investment Dispute (ICSID) still administering the largest number of investment cases. A critical examination of the existing ISDS mechanisms is however required. ISDS mechanisms are indeed facing a profound legitimacy crisis. From the duration of the process to the costs involved, or the independence and impartiality of the arbitrators and the accuracy of the decision-making procedure, the arguments against ISDS are legion. One notable alternative would be the use of settlement mechanisms such as conciliation, mediation, or negotiation. These mechanisms have been incorporated in a number of Bilateral Investment Treaties (BITs), particularly with China and the EU. The ICSID is also considering a new set of rules for investor-state mediation. Another reform proposal has taken the form of the Draft Code of Conduct for Adjudicators, aimed at enhancing the independence and impartiality of all adjudicators involved in the ISDS process. Other proposed solutions include a regulated use of third-party funding, advisory centers, and a multilateral investment court. All ISDS actors including international organizations and governments are now involved. However, a deeper examination of these solutions is required to identify the practical constraints faced by ISDS. Not to mention that none of the proposed reforms are able the solve present ISDS interrogations and the apparent inaccuracy of a number of decisions in particular. This “Investor-State Dispute Settlement (ISDS): Procedural and Substantial Issues” section of our handbook in international investment law and policy proposes to address quite systematically contemporary ISDS issues and reform proposals in a longer-term critical perspective.

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Notes

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    World Bank Group (2020) ICSID caseload – statistics 2020, p 6. https://icsid.worldbank.org/sites/default/files/publications/Caseload%20Statistics/en/The%20ICSID%20Caseload%20Statistics%20%282020-1%20Edition%29%20ENG.pdf

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    The ASEAN Comprehensive Investment Agreement (ACIA), Article 33.1 proviso. See discussion in Chaisse J, Jusoh S (2016) The ASEAN comprehensive investment agreement: the regionalisation of laws and policy on foreign investment. Elgar.

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  38. 38.

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    Anna De Luca and others (2020) Responding to incorrect decision-making in investor-state dispute settlement: policy options. J World Invest Trade 21: 406–409.

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Chaisse, J., Choukroune, L., Jusoh, S. (2021). Investor-State Dispute Settlement (ISDS): An Introduction. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_60-1

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