Investor-State Dispute Prevention: A Critical Reflection

Johnson, Lise; Sachs, Lisa E.; Merrill, Ella Nora

Especially as treaty-based investor-state dispute settlement (ISDS) claims rise, governments have been increasingly adopting dispute prevention approaches or mechanisms to avoid such claims. This paper identifies two basic approaches used by governments to avoid disputes -- described as ISDS-minimizing and ISDS-elevating approaches -- and evaluates the possible costs and benefits of each. ISDS-minimizing approaches minimize the risk and impact of ISDS claims by reducing the scope of such claims in favor of domestic and other technical means of resolving disputes. ISDS-elevating approaches give certain actors within government greater authority to address investor concerns, thereby increasing the power of ISDS for claimants and the leverage of foreign investors over policymakers. The paper discusses the possible advantages and disadvantages of the two divergent approaches for different stakeholders, and also identifies how some currently used metrics can be misleading or incomplete. The paper concludes with suggestions for rethinking dispute-avoidance strategies by clearly defining a country’s objectives, as well as taking into account public policy considerations that may help to avoid unintended consequences arising from efforts to minimize the costs of ISDS disputes.


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Dispute Resolution Journal

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September 3, 2021