REFORMING ISDS: UNCITRAL’S STANDING MECHANISM IN FOCUS

Investor-state dispute settlement (ISDS) has long stood as a central pillar of international investment law, providing a forum for foreign investors to bring claims directly against host states for alleged breaches of investment treaties.

Originally conceived to depoliticise investment disputes and to foster investor protection, ISDS has expanded dramatically since the 1990s with the proliferation of bilateral investment treaties (BITs) and free trade agreements incorporating investor protections.

However, this expansion has also revealed deep structural and legitimacy concerns because of the ad hoc nature of arbitral tribunals, inconsistencies in their ‘jurisprudence’, questions surrounding the arbitrators’ independence and the limited mechanisms for review. All of these factors have undermined confidence in the system for both the investors and the host states and led scholars and practitioners to describe ISDS as a “structurally imbalanced” system.

Within this context, the United Nations Commission on International Trade Law (UNCITRAL) took decisive action to remedy the status quo and position itself as a catalyst for change. In 2017, UNCITRAL established the Working Group III (WGIII) on Investor-State Dispute Settlement Reform, making it the first truly multilateral initiative with a specific mandate to develop reforms within the ISDS system.

Unlike earlier efforts, often confined to bilateral negotiations or regional initiatives, WGIII carried a promise to explore reform proposals through an open, state-led and consensus-based process involving not only states but also international organisations, academics and civil society.

In many ways, the achievements of WGIII attest to the viability of multilateral cooperation in an area once thought resistant to coordinated reform. In fact, several projects have already been adopted in the past few years, such as the Code of Conduct for Arbitrators, the Code of Conduct for Judges in International Investment Dispute Resolution, the Statute of the Advisory Centre on International Investment Dispute Resolution, and most recently, the Toolkit on Prevention and Mitigation of International Investment Disputes.

Jan-Mar 2026 issue

Columbia Law School