17 Mar 2021

Reforming the investment treaty regime

A ‘backward-looking’ approach


— Investor–state dispute settlement (ISDS) – which allows foreign investors to sue governments through international arbitration – has become increasingly controversial. Reasonable observers disagree about the value and fairness of the mechanism, but ISDS has become politically toxic even in capital-exporting states.

— The most important reform effort lies not with future treaties but with those already in place. Even if all newly negotiated investment treaties were improved, or governments stopped negotiating agreements with ISDS provisions altogether, the existing stock of 3,000 investment treaties continues to provide access to ISDS on the same terms as before.

— This briefing paper outlines a practical, flexible and low-cost option for catalysing reform of ISDS: plurilateral ‘interpretative statements’, whereby governments endorse joint statements clarifying and defining their positions on contentious clauses in their existing investment treaties.

— The mechanism provides a viable alternative, or complement, to renegotiations and terminations. It should be prioritized within the broader reform discussions in the United Nations Commission on International Trade Law (UNCITRAL).

Alternatively, the new US administration could fast-track the initiative by taking the lead through the OECD, possibly together with the UK.

Download the paper