The Future of ISDS

The Future of ISDS

Arbitration has no doubt offer a lot of good than bad and is undoubtedly one of the most efficient ways to resolve disputes legally without going through the courtrooms. Arbitration covers all areas and is most prominent in the commerce and energy sector, cutting across states and even to some extent possessing more scope than the national court (Brexit being a perfect example)

While international arbitration covers a lot of disputes and provides enforceable resolution, one of its most prominent areas is in Investor-state dispute settlement, termed ISDS for short.

Investor-state dispute settlement is a treaty or agreement mechanism that gives foreign investors the power and ri9ght to sue countries where investment is focused on discriminatory and unhealthy practices. ISDS in Foreign Direct Investment is the system that gives investors well-deserved right to protect their investments and restrict countries from literally playing a fast.

The major purpose of ISDS is to protect investors and benefit host countries that honestly keep to it as outlined. A country that has a reputation of standing with its Investor-state system will attract foreign investors as long as they are friendly.

Investor-state dispute settlement is a Public International Law instrument and is usually contained in Bilateral and multiple states Investment treaties. It is also employed in commercial and trade treaties. In international arbitration, which is also referred to as Investment Arbitration, ISDS is extremely prevalent in the energy and trade sector. It is mostly employed to protect the right of an investor in a certain country (known as the home state) that invests in another defined country (host state).

For ISDS to be triggered during foreign investment, both parties have to agree to its clause in the contract agreement, with both parties being able to trigger it. An allegedly cheated party (mostly the foreign investor) can implement ISDS by going to the Arbitral tribunal.

Investor-state dispute settlement (ISDS) is highly discussed in the context of international arbitration under ICSID (International Centre for Settlement of Investment Disputes of the World Bank) rules and is mostly enforced by international tribunals that are guided by different institutions and rules like the International Chamber of Commerce (ICC), London Court of International Arbitration and Hong Kong International Arbitration Centre.

International Arbitration in ISDS

The advantage of international arbitration in ISDS is that rulings are enforceable in reality which gives investors to go into an investment with the awareness that they can access top and skillful professional Arbitrators if need be. The awards of ISDS are enforceable and cannot be undermined by the National of the host country except in an extraordinary situation where rulings are supposedly biased.

Talking about Bias, one of the major advantages of Arbitral tribunals for ISDS is the fact that they cannot be influenced by the host state that is allegedly involved in a discriminatory practice. Arbitration laws, while they exist according to jurisdictions, have general and universal rules that give them the autonomy that does not exist in National courts. The state can more easily influence the court, and this can hold serious consequences for foreign investment and frustrate Bilateral trade relations between states.

However, while ISDS gives foreign investors the needed power to fight for their gain against possible national influences, the host country must consent to ISDS as a settlement solution in case of disputes. Host state agreement to Investor-State Dispute settlement is normally given by them in signed International Investment Agreements, including Bilateral Investment Treaties and Free Trade Agreements. ISDS is also agreed on Multilateral Agreements such as The Energy Charter Treaty.

The future of ISDS

The future of ISDS has been one of the most discussed aspects of Investment Arbitration, and there have been different views on it, with the negatives coming from those who do not really understand the underlying mechanism of arbitration. However, the fact and reality of foreign investment fully favor the longevity of the system. Foreign investors will clearly continue to opt for protective treaties such as Investor-state dispute settlement with enforceable awards, and since it is extremely difficult to undermine a treaty, the  Future of ISDS is well-grounded. In more realistic terms, the end of ISDS is only possible when foreign investment ends, which is an outright impossibility in the world of commerce and trade relations.


Investor-state dispute settlement is definitely not going anywhere yet, and man never does so as host countries may not be able to lure foreign investments if investors do not have any appropriate protective treaty that ensures that they do not lose out to discriminatory practices. Host countries are also not looking to go against it for now or in the near future, emphasizing the relevance of international arbitration in ISDS.

Pursuing an ISDS via an arbitral tribunal is by far one of the best ways to ensure that you do not lose out in the long run. Ignoring such requirements in a contract with a host country in which you seek to invest can be extremely detrimental with possible financial consequences. This means that trying to forgo an Investor-state dispute settlement is definitely not the best way to go.

If you currently have an investor-state dispute and are looking for the best way to get a settlement or looking for a related contract and desire to protect yourself, your firm, and your finances, then it is essential that you seek the services of professional arbitrators or an arbitration firm.

Rattsakuten is one of the major arbitration firms whose services you can employ and be assured of getting the best out of an ISDS related case or treaties. The firm has some of the best professional arbitrators that offer excellent services that help their clients get the best outcome in an Investor-state dispute settlement.

About Rattsakuten

Rattsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals.

Fredrik Jörgensen

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