Investor-State Dispute Settlement Challenges and Reforms
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INVESTOR-STATE DISPUTE SETTLEMENT
CHALLENGES AND REFORMS
MARINA KOFMAN*
Abstract
This article will discuss the issues that have emerged over time in the field of investor-
State dispute settlement (ISDS) as the field has matured, and the efforts being made
by different stakeholders to reform the current system. The first part will give a brief
background to the ISDS system. The second part will discuss the criticisms of the system
that have emerged and the challenges of reforming the system given its structural aspects.
The third part will outline the reform efforts currently underway, including the reform
mandate of UNCITRAL Working Group III. The fourth part will look to the future,
reflecting on some dynamics that have emerged during the UNCITRAL negotiations.
I INTRODUCTION
A. Hybrid nature of investment arbitration
Foreign direct investment law is largely based on a network of more than 3,000 known
bilateral and multilateral investment treaties (and other agreements with investment chapters)
that incorporate a core set of protection standards for foreign investors, coupled with a strong
enforcement regime that allows an investor to have direct recourse against a host State in
international arbitration.'
Investment arbitration has been called a hybrid system of sui generis character.2 This
characterisation reflects the largely public international law character of the source of
obligations, the Bilateral Investment Treaties, (BITs), on the one hand, coupled with a
procedural enforcement mechanism with rules based largely on the model of international
commercial arbitration, on the other. As Anthea Roberts has poignantly observed, 'Investment
treaties ... lie at the fault line of many problematic dichotomies, such as public and private
law and international and domestic law. ... States and private parties simultaneously hav[e] a
vertical substantive relationship (between governor and governed) and a horizontal procedural
one [in the event of a dispute] (between equal disputing parties).'
Associate, Norton Rose Fulbright. Any views expressed in this article are solely the views of its author and should not
be attributed as representing the views of Norton Rose Fulbright Australia. The author attended the 34 h, 35h and
36,h sessions of UNCITRAL Working Group III.
UNCTAD reports that 'The cumulative number of all signed IIAs [international investment agreements], inde-
pendently of whether they have entered into force, is 3,322', see United Nations Conference on Trade and Develop-
ment (UNCTAD), 'World Investment Report 2018 - Investment and New Industrial Policies', 89.
2 See Zachary Douglas, 'The Hybrid Foundations of Investment Treaty Arbitration' (2004) 74 British Yearbook of
International Law 151.
Anthea Roberts, 'Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System' (2013) 107](ViewImageLocal?handle=hein.journals/austintlj25&div=7&collection=&method=preview&ext=.png&size=3)
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Investor-State Dispute Settlement Challenges and Reforms
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