UNCTAD puts forward reform options for investor-State dispute settlement system

27 May 2013

UNCTAD is calling for collective efforts to assess options for reform of the current system of investor-State dispute settlement.

UNCTAD's paper, entitled Reform of Investor-State Dispute Settlement: In Search of a Roadmap, which is part of the IIA Issues Notes series, comes out at a time when the number of new claims has reached a new peak, and debate about the pros and cons of the investor-State dispute settlement (ISDS) mechanism has been gaining momentum.

Concerns with the current ISDS system relate, among others things, to a perceived deficit of legitimacy and transparency; contradictions between arbitral awards; difficulties in correcting erroneous arbitral decisions; questions about the independence and impartiality of arbitrators; and the length and the costs of arbitral procedures.

These challenges have given rise to a broad discussion about the need to reform the current system of investment arbitration. To give shape to this debate, the Note puts forward five main reform paths:

  1. Promoting alternative dispute resolution.

  2. Tailoring the existing system through individual IIAs.

  3. Limiting investor access to ISDS.

  4. Introducing an appeals facility.

  5. Creating a standing investment court.

Each of the five proposed reform options comes with its specific advantages and disadvantages and responds to the main concerns in a distinctive way.

Some of the options can be implemented via actions by individual governments, while others require joint action by a larger group. The options that require collective action would go further in addressing the existing problems, but would also face more difficulties in implementation.

The Note calls for a multilateral policy dialogue on ISDS to search for a consensus about the preferred course for reform and ways to put it into action.