InvestorStateDisputeSettlement

Investor-State Dispute Settlement (ISDS) is a mechanism in international investment law that allows a foreign investor to bring a claim directly against the government of a host state when the investor alleges that measures affecting the investment violate protections in an international investment agreement. ISDS claims are typically based on bilateral investment treaties (BITs), regional or bilateral free trade agreements, or multilateral investment treaties, and may be administered under rules such as the International Centre for Settlement of Investment Disputes (ICSID), UNCITRAL Arbitration Rules, or other arbitral frameworks.

Disputes under ISDS generally involve claims that a host state's actions amount to a violation of protections such as fair and equitable treatment, national treatment, full protection and security, indirect or direct expropriation, or umbrella clauses. Proceedings usually result in an arbitral tribunal issuing an award, which is intended to be final and binding. Awards under ICSID are enforceable worldwide through the ICSID framework and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, subject to limited grounds for challenge.

ISDS is widely used to attract foreign investment by providing investors with a dispute resolution mechanism that can offer neutral forums and predictable outcomes. However, it is subject to criticism, including concerns about sovereignty, transparency, cost, and potential regulatory chill where governments fear adverse rulings may deter legitimate public policy measures. Reform debates have focused on legitimacy, transparency, and balancing investor protections with states’ regulatory space, with proposals ranging from improved transparency to a standing multilateral court system.