Originally from Investment Treaty Arbitration and International Law - Volume 18

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I. INTRODUCTION

Investor-State Dispute Settlement (“ISDS”) is a method of resolving disputes between foreign investors and the states that host their investments. ISDS is a creature of treaty, embedded within international investment agreements (“IIAs”), such as bilateral investment treaties (“BITs”) and multilateral investment treaties (“MITs”). It protects foreign investments by providing a legal avenue for investors to initiate arbitration against host states, thereby avoiding the risk of litigation in the host state and the political and diplomatic complexities of state-to-state dispute resolution. The value of this tool is clear—a foreign investor who has had their investment expropriated, for example, by a host state is unlikely to find redress in the courts of that same host state. The primary objective of ISDS is to offer a neutral, impartial forum where disputes between foreign investors and host states can be resolved, thereby mitigating the risks associated with cross-border investments.

In recent years, Sovereign Wealth Funds (“SWFs”) have emerged as significant players in the global financial landscape, managing vast pools of capital derived from natural resource revenues and foreign exchange reserves. These state-owned investment vehicles are designed to achieve specific financial and economic objectives, such as generating long-term financial returns, stabilizing national economies, and promoting economic diversification. As SWFs continue to grow in influence and scope, their role in international investment has become increasingly prominent. As disputes inevitably arise from these investments, SWFs and the international investment field generally can benefit from greater access to a wide variety of dispute resolution matters, including ISDS.