INTRODUCTION Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP
Global Overview on Investor–State Dispute Settlement Introduction Investor–state dispute settlement (ISDS) has long stood as a cornerstone of international investment law, offering foreign investors a mechanism to chal- lenge state conduct that interferes with investor rights. For decades, it has provided recourse to a largely neu- tral international dispute resolution mechanism, which mitigated the risk of investing in jurisdictions with per- ceived judicial or political uncertainty. However, as the global investment and political land- scape experiences tectonic shifts, ISDS has increas- ingly come under close legal and policy scrutiny. Concerns over regulatory chill, consistency in arbi- tral outcomes, and questions around legitimacy and transparency (among others) have spurred a wave of reform efforts, which vary from changes to arbitral procedure to the push for a multilateral investment court, and in some instances the outright abolishment of ISDS. For investor–state dispute practitioners, this evolv- ing terrain raises significant questions. How is the practice of ISDS adapting to new realities? How will this practice look in the next ten years? This overview explores the current trajectory of ISDS, considering the sustained criticism it faces, the steady rise of cases, and the potential pathways shaping its future development. The backlash against ISDS and its consequences In recent years, ISDS has been widely criticised by various stakeholders, particularly academics and civil society actors such as NGOs, as well as officials of several sovereign states or supra-national organisa- tions, such as the European Union. Critics argue that ISDS undermines state sovereignty, prioritises corpo- rate interests over public policy, and lacks consist- ency, transparency and accountability. The stated concerns also revolve around investment treaty pro- tections affecting limitations on a state’s ability to regulate in the public interest, including public health, environmental and labour regulations. Citing such concerns, several states across diverse geographies have chosen to phase out ISDS provi-
sions in their investment treaties. In the case of the member states of the European Union, this was apparently done to protect and advance the suprem- acy of EU law in regulating investment. Several African countries, such as South Africa, Tanzania and Kenya, have selectively terminated investment treaties with European states. South Africa opted to enact domes- tic legislation that offers more limited protection of foreign investment. Other African countries have cho- sen a more region-specific route, adopting the Afri- can Continental Free Trade Area (AfCFTA) Investment Protocol as a substitute for “traditional” investment treaties. Other states that have partly or wholly cancelled their investment treaties, such as Indonesia, Ecuador, Bolivia or Venezuela, justified their choice by referring to treaty obligations as having been imposed on them for the benefit of large foreign corporations, and to the detriment of their sovereign discretion over natural resources and investment-related policies. Perhaps ironically, while ISDS was created ostensibly to “de- politicise” disputes between foreign investors and sovereign states by creating an impartial forum for their resolution, the very existence of ISDS eventually became a political issue – and a hotly debated one. Instead of outright eliminating ISDS, other states have chosen to modernise their investment treaties and to reform ISDS rules, reportedly aiming for a better bal- ance between protecting investors’ rights and allow- ing states to regulate in the public interest, particularly in areas such as climate change and environmental protection, public health and human rights. Prominent examples of such “new generation” treaties include the Switzerland–Chile, EU–Chile and Singapore–Ken- ya bilateral investment treaties (BITs). This rebalanc- ing leans in favour of increased sovereign discretion: according to data published by UNCTAD, nearly all newly drafted or revised investment treaties limit the scope of claims that can be brought under ISDS. In parallel, state parties to ICSID and UNCITRAL have proposed procedural reforms to the rules governing ISDS to enhance efficiency and fairness, increase transparency, and ensure a more balanced approach in resolving disputes. ICSID adopted new rules in 2022 incorporating rules on expedited procedure, costs
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