Investor-State Dispute Settlement (‘ISDS’) is a system in international law whereby foreign investors can initiate arbitration proceedings against host states. ISDS mechanisms have become ubiquitous in international investment and trade agreements, in particular bilateral investment treaties.
The reform of ISDS has been subject to extensive discussion in the EU since 2015, when the European Commission responded to the outcome of the public consultation for the inclusion of ISDS in the Transatlantic Trade and Investment Partnership (‘TTIP’) by proposing its replacement with a court-like system, the Investment Court System (‘ICS’). This system is now included in the Comprehensive Economic and Trade Agreement (‘CETA’) with Canada, amongst others. The new EU investor-state dispute settlement mechanism offers some possible solutions to the problems traditionally connected to ISDS.
This post will first provide an overview of the CETA’s ICS. It then analyses some benefits and disadvantages of this new form of ISDS compared to traditional arbitration mechanisms.