Investment Law – 3B
Investor state dispute settlement
Investment arbitration is controversial but is seen as a alternative of settling investment
disputes through national courts
Investment arbitration thus provides pathways for investors to hold host states to seek
direct redress against host states if substantive features of the IIA are not honoured.
This procedure is said to offset one of the most significant risks involved in investing abroad
– ineffective access to justice through the legal system of the host state.
But ISDS is often said to be undemocratic and non-transparent.
The first issue within ISDS is the procedural advantage that it accords to investors as distinct
from the alternative, namely pursuing claims in the courts of the host state as normal
litigants.
If there is no clause in the IIA which specifies a particular forum for the settlement of
disputes, the default route is that disputes will be resolved in the domestic courts as the
courts with the closest connection to the matter.
In such situation it is not implausible that an investor may fear for the partiality of the host
states courts.
Investors prefer international arbitration to head off the challenges described the previous
slide.
Arbitration is a procedure whereby both sides to a dispute agree to let a designated third
party, the arbitrator, or the arbitral tribunal, decide the outcome of a legal dispute, the
decision will be legally binding and as such arbitration is different from mediation or
diplomatic dispute resolution.
Arbitration is based upon the consent of the parties and in that sense, it may be seen as a
kind of contract.
Consent to international investment arbitration can be trained in one of three ways.
1. In an investment contract between state and investor
2. In an investment treaty
3. In a piece of domestic legislation such as an investment code
Appointed arbitrators are often investment law experts.
Arbitration is faster than normal litigation, although there have been numerous instances
where investment tribunal cases lasted for years.
Investor – state arbitration can be quite expensive with legal fees and other costs regularly
amount to several million dollars
Investment arbitration is less adversial than court hearings which can often be bombastic
Normally confidential, this is advantageous if commercially sensitive is being discussed.
Investor state dispute settlement
Investment arbitration is controversial but is seen as a alternative of settling investment
disputes through national courts
Investment arbitration thus provides pathways for investors to hold host states to seek
direct redress against host states if substantive features of the IIA are not honoured.
This procedure is said to offset one of the most significant risks involved in investing abroad
– ineffective access to justice through the legal system of the host state.
But ISDS is often said to be undemocratic and non-transparent.
The first issue within ISDS is the procedural advantage that it accords to investors as distinct
from the alternative, namely pursuing claims in the courts of the host state as normal
litigants.
If there is no clause in the IIA which specifies a particular forum for the settlement of
disputes, the default route is that disputes will be resolved in the domestic courts as the
courts with the closest connection to the matter.
In such situation it is not implausible that an investor may fear for the partiality of the host
states courts.
Investors prefer international arbitration to head off the challenges described the previous
slide.
Arbitration is a procedure whereby both sides to a dispute agree to let a designated third
party, the arbitrator, or the arbitral tribunal, decide the outcome of a legal dispute, the
decision will be legally binding and as such arbitration is different from mediation or
diplomatic dispute resolution.
Arbitration is based upon the consent of the parties and in that sense, it may be seen as a
kind of contract.
Consent to international investment arbitration can be trained in one of three ways.
1. In an investment contract between state and investor
2. In an investment treaty
3. In a piece of domestic legislation such as an investment code
Appointed arbitrators are often investment law experts.
Arbitration is faster than normal litigation, although there have been numerous instances
where investment tribunal cases lasted for years.
Investor – state arbitration can be quite expensive with legal fees and other costs regularly
amount to several million dollars
Investment arbitration is less adversial than court hearings which can often be bombastic
Normally confidential, this is advantageous if commercially sensitive is being discussed.
