Chapter 2.5 Investment and Dispute Settlement
The Investor-state dispute settlement (ISDS) clauses are a mechanism to resolve potential investment disputes related to a given trade agreement. They are considered as a fundamental aspect of property rights protection for investors, as they ensure the enforcement of contracts. They are typically used when a trade agreement involves developed nations with mature legal systems and developing nations with less matured legal systems. However, such a system can also be applied in agreements among developed economies, such as the Transatlantic Trade and Investment Partnership (TTIP) presently being negotiated between the U.S. and the European Union.
It can be argued that an ISDS system is positive for both investors and host countries: on the one hand ISDS clauses provide a secure environment for investors, on the other hand, this security attracts FDI for developing countries, that may not fulfill their investment needs if the regulatory and political framework is perceived as unstable or risky.
Arguably, the international arbitration has been designed in order to avoid bias, delays, corruption, or lack to access to justice in developing countries. However, one may wonder if these private courts, international arbitration courts or ISDS mechanisms are 100% free of bias, delays and corruption; and how capable are national governments to access justice through these means.