Cutting the Gordian Knot Investment Dispute Settlement à la Carte

There is widespread consensus that investor-state dispute settlement (ISDS) is
in need of reform. This consensus, however, obscures stark differences among
states with respect to how to reform the current system of investment arbitration.
This think piece examines the different approaches proposed for investment
dispute settlement reform by major players in the global North and global South
and considers both differences and commonalities between the different models
– ranging from incremental changes that respond to specific criticisms of the
ISDS system to the development of far-reaching institutional reforms, such as the establishment of a multilateral investment court.
The analysis of the main models points to convergence in the objectives of
investment dispute settlement reform and many procedural features. Yet, in
relation to core elements of dispute settlement design, the main models are not
only incompatible with each other but are often presented as non-negotiable red
lines that reflect either constitutional constraints or deeply enshrined ideological
choices. Should these positions remain entrenched, arriving at a consensual
model for the future of investment dispute settlement may be impossible, leading to a fragmented system that in fact defeats important goals of the current reform process. The question therefore arises whether (and how) the Gordian Knot of competing investment dispute settlement designs can be cut, and whether and how competing ideologies in the current reform process can be bridged.
Following a review of the principal challenges to the legitimacy of the current
investment dispute settlement framework, the think piece presents the main
models proposed for reforming the investment arbitration system and introduces the idea of “dispute settlement à la carte“ as a way forward. Drawing on the dispute settlement design under the United Nations Convention for the Law of the Sea (UNCLOS), the think piece suggests a model that allows states to
choose, under the umbrella of a common framework, among different modes
of investment dispute settlement. This would encompass the creation of a
multilateral investment dispute settlement institution, which would include a
multilateral investment court to whose jurisdiction states and organisations can
voluntarily submit, but also provide states with the option of continuing to use
investor-state arbitration or inter-state arbitration to settle investment disputes.
Such a model could provide a common framework for investment dispute settlement reform, allowing different states and organisations to pursue different structural models for investment dispute settlement, while providing them with a platform that promotes convergence where possible. This would ensure representativeness of the regime and a degree of interpretative unity and safeguard the ability of states and organisations to shape their reciprocal obligations.