RETHINKING INVESTOR PROTECTIONS: THE GLOBAL PUSH TO REFORM ISDS
Investment treaties are a vital component of the global economy, helping to shape the legal framework for foreign direct investment (FDI) across jurisdictions. For decades, they have been used to encourage and protect foreign investment in national economies.
Modern investment treaties – including bilateral investment treaties (BITs) and investment chapters in free trade agreements – help create a more predictable and secure environment for cross-border investment. According to the World Bank, investment treaties tend to increase FDI flows between signatory states by more than 40 percent. Countries with stronger institutions, better human capital, greater openness to trade and lower levels of informality tend to benefit even more from FDI inflows. The World Bank also notes that a 10 percent increase in FDI inflows generates approximately a 0.3 percent increase in real gross domestic product after three years, rising to as much as 0.8 percent in countries with favourable conditions.
Despite their critical role in the global economy, disputes arising from investment treaties are on the rise. This trend may be partly attributed to significant shifts in the international economic landscape in recent years. Geopolitical instability, macroeconomic pressures and the coronavirus (COVID-19) pandemic have all had a profound impact on global economic activity. Concurrently, rapid technological advancement and digitalisation have reshaped economies and societies. Many developing countries have undergone industrialisation, while several advanced economies have experienced deindustrialisation.
Given these shifts, it is unsurprising that disputes have emerged. According to the United Nations Conference on Trade and Development (UNCTAD), between 2013 and 2023 the number of treaty-based investor-state dispute settlement (ISDS) cases more than doubled. The total number of ISDS cases brought under investment treaties reached 1332, with 60 new arbitrations initiated in 2023 alone.
Jan-Mar 2026 issue
Richard Summerfield