SECURING THE FUTURE OF THE INVESTOR-STATE DISPUTE SETTLEMENT SYSTEM IN INTERNATIONAL INVESTMENT LAW*

Abstract

The Investor-State Dispute Settlement (ISDS) system is presently at a watershed moment, calling 
for a need to appraise the entire system and consider its (continued) relevance in Investment 
Treaties and even International Investment Law (IIL) in general. The ISDS mechanisms embodied 
in most investment treaties provide rights to foreign investors to seek redress for damages arising 
out of alleged breaches of investment-related obligations by host governments. The use of 
international arbitration to resolve investor-state disputes has increased dramatically over the 
past two decades. According to UNCTAD’s July 2022 Report on Investor-State Arbitration, as at 
the end of 2021, the total number of publicly known ISDS claims is 1,190. Many developing 
countries, after a long "honeymoon" with foreign investors, have been re-considering the pros and 
cons of the ISDS mechanism and have become more cautious in their negotiations of international 
investment agreements. This paper argues that a complete abandonment of the ISDS system 
instead of working on its reform would be a case of throwing the baby out with the bath water. It 
is further argued that radical proposals such as the multilateral investment court and a return to 
the state-state dispute settlement, to overthrow the established ISDS system are ill-advised as they 
do not guarantee a fair dispute settlement system. There should be more focus on incremental 
reforms on the existing ISDS by addressing the concerns raised by the stakeholders in the 
investment regime. This paper is predominantly analytical as it is based on an extensive review of 
the relevant literature in international investment law.