Exploring Alternatives to ISDS

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Investment treaties are often described as instruments aiming to (1) promote investment flows; (2) provide investors remedies for harms; (3) improve governance and the rule of law in host countries; and (4) depoliticize disputes – objectives of varying degrees of importance to multinational enterprises, home states, host states, and other stakeholders. The investor-state dispute settlement (ISDS) mechanism contained therein is, in turn, cited as a necessary means of achieving those objectives. Yet in addition to mounting concerns about the legitimacy and negative consequences of ISDS, there are increasing doubts about whether it appropriately serves its purported objectives. More fundamentally, there are increasing doubts regarding whether those four objectives noted above are adequate or appropriate for international economic governance in an era in which the world is facing pressing economic, environmental, social and governance challenges, and in which the Sustainable Development Goals have been universally adopted to address those challenges.

Against that background, CCSI has been engaged in a comprehensive effort to examine the objectives of investment treaties – as they are and as they should be – and the best ways of achieving those objectives. In connection with that work, CCSI has also zeroed in on ISDS, examining both whether ISDS advances the four commonly stated goals of investment treaties (noted above), and whether it is consistent with broader sustainable development objectives. Beyond merely critiquing ISDS, this work seeks to advance a creative, solution-oriented and forward-looking discussion of the following five possible and non-exclusive alternatives to that mechanism:

  • state-to-state dispute settlement;
  • international collaboration to strengthen domestic legal systems;
  • political risk insurance systems;
  • human rights mechanisms; and
  • a standing investment court.

CCSI organized a workshop to gather input on these issues.

CCSI has also published a blog, “Investor-State Dispute Settlement: What Are We Trying to Achieve? Does ISDS Get Us There?” that considers whether ISDS is necessary to achieve its four purported objectives, and a Working Paper, “Alternatives to Investor-State Dispute Settlement” that explores four alternative tools to achieve those objectives while also aligning with other 21st century sustainable development priorities.

We continue to do relevant research, and will publish further analysis and suggestions on this topic.