The Outsized Costs of Investor-State Dispute Settlement

Abstract

The Investor State Dispute Settlement (ISDS) mechanism, included in over 3000 treaties, has raised widespread concerns, particularly as investors increasingly challenge measures related to environmental protection, public health and safety, and financial stability. Even some investors – the purported beneficiaries – have voiced concerns about the costs of proceedings, uncertainty regarding outcomes of disputes, and an absence of rules to ensure the impartiality of arbitrators. As states continue to include ISDS in their treaties, this analysis argues that the costs of ISDS outweigh its alleged benefits, and alternative strategies should be employed to protect investors and promote the rule of law.