Investor-state dispute settlement (ISDS)
encompasses all forms of settling legal disputes between foreign investors and host states. The currently most prominent, and also most controversial, method of ISDS is investor-state arbitration (ISA) on which this chapter will focus. The other prevalent form of direct ISDS is conciliation/mediation. However, ISDS is only one possible form of settling such disputes. If the investor’s home state decides to espouse the investor’s claim, thereby exercising its right of diplomatic protection, it could be litigated on an inter-state level, for example before the ICJ, as was done in Barcelona Traction1 or ELSI,2 or in state-state arbitration. Disputes between investors and states may also be, and in fact often are, brought before national courts.
The ICSID Convention very tellingly provides for a choice between conciliation or arbitration; although, in practice, investors, who are regularly the claimants in ISA, obviously prefer arbitration. As of mid-2019, 942 known ISAs have been instituted. Of these, 602 decisions and awards have been rendered, of which a majority are in the public domain.3
It is important to realize that ISA may be based either on a normal contractual choice-of-forum clause, stipulating arbitration as the chosen form of dispute settlement, or on investment treaties providing for an option of investors from either contracting party to institute ISA against the other contracting party. While the former is usually referred to as contract arbitration, the latter is called treaty arbitration and is, in practice, the dominant form of current ISA. At the same...
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