Investor-state dispute settlement in the context of "International arbitration"

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⭐ Core Definition: Investor-state dispute settlement

Investor–state dispute settlement (ISDS), or an investment court system (ICS), is a set of rules through which states (sovereign nations) can be sued by foreign investors for certain state actions affecting the foreign direct investments (FDI) of that investor. This most often takes the form of international arbitration between the foreign investor and the state. As of June 2024, over US$113 billion has been paid by states to investors under ISDS, the vast majority of the money going to fossil fuel interests.

ISDS most often is an instrument of public international law, granting private parties (the foreign investors) the right to sue a state in a forum other than that state's domestic courts. Investors are granted this right through international investment agreements between the investor's home state and the host state. Such agreements can be found in bilateral investment treaties (BITs), international trade treaties such as the 2019 United States–Mexico–Canada Agreement, or other treaties like the 1991 Energy Charter Treaty.

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👉 Investor-state dispute settlement in the context of International arbitration

International arbitration can refer to arbitration between companies or individuals in different states, usually by including a provision for future disputes in a contract (typically referred to as international commercial arbitration) or between different states qua states (typically referred to as interstate arbitration).

Civil and commercial arbitration agreements and arbitral awards are enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention"). The International Centre for the Settlement of Investment Disputes (ICSID) also handles arbitration, but it is limited to investor-state dispute settlement.

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Investor-state dispute settlement in the context of Bilateral Investment Treaty

A bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. This type of investment is called foreign direct investment (FDI). BITs are established through trade pacts. A nineteenth-century forerunner of the BIT is the "friendship, commerce and navigation treaty" (FCN). This kind of treaty came in to prominence after World Wars when the developed countries wanted to guard their investments in developing countries against expropriation.

Most BITs grant investments—made by an investor of one Contracting State in the territory of the other—a number of guarantees, which typically include fair and equitable treatment, protection from expropriation, free transfer of means and full protection and security. The distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international arbitration, often under the auspices of the International Centre for Settlement of Investment Disputes (ICSID), rather than suing the host State in its own courts. This process is called investor-state dispute settlement (ISDS).

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LINKED FROM (PARENTS)
← International arbitration ← Bilateral Investment Treaty
LINKS TO (CHILDREN)
Sovereign nations → Investor → Foreign direct investment → International arbitration → Fossil fuel → International law → International investment agreement → Bilateral investment treaty → Trade treaty → United States–Mexico–Canada Agreement → Energy Charter Treaty →