Investor-State Arbitration: Balancing Interests And Sovereignty

Investor-State Arbitration, also referred to as Investor-State Dispute Settlement (ISDS), is a system that allows foreign companies or investors to bring actions against host countries for unfair practices under enforceable international agreements or contracts.¹ In this form of arbitration, a foreign investor directly institutes a claim against a host government if such government has breached an important obligation under the agreement.

This system bypasses the local court of the host nation since the local court could be biased or may find itself having a lack of complete independence, thereby, providing a neutral mechanism for dispute resolution, usually through the International Centre for Settlement of Investment Disputes (ICSID) in accordance with procedures of the United Nations Commission on International Trade Law (UNCITRAL). ²