Complementing investor-state dispute resolution: A conceptual framework for investor-state conl ict management

Abstract

Introduction Two decades of investor-state litigious activity have revealed the limitations of existing investor-state arbitration procedures. These procedures do not fully satisfy the interests of either the foreign investors or the host states when it comes to ensuring the effective implementation of international investment agreements (IIAs), and the optimal functioning of the international investment regime. Both investors and states consider existing investor-state dispute settlement (ISDS) processes too costly, too slow and too indeterminate. Further, some stakeholders have cautioned that increased litigation curtails the possibility of developing long-term harmonious relationships between foreign investors and host states. Such an outcome is contrary to one of the key objectives that IIAs are supposed to promote, that is the creation of a political and economic environment in host states conducive to fostering increasing investment inflows. Against this background, and considering the success that alternative dispute resolution (ADR) mechanisms have had in other contexts, various investment stakeholders have started to advocate the consideration of non-litigious means of resolving investment-related disputes arising between investors and host states. Interestingly, in addition to investor-state arbitration, most IIAs include provisions calling on both investors and host states to settle their disputes amicably. Further, the international investment regime provides for different institutions, such as the International Centre for Settlement of Investment Disputes (ICSID), and rules, such as the United Nations Commission on International Trade Law (UNCITRAL), which offer investors and host states the opportunity to use ADR mechanisms other than arbitration to solve their differences. These include fact-finding, mediation and conciliation. Yet, in practice, such ADR mechanisms have rarely been used in the context of treaty-based investor-state disputes.