How to resolve disputes between foreign investors and states remains a thorny issue in the Transatlantic Trade and Investment Partnership (TTIP), currently being negotiated by the European Commission and the US. One of the mechanisms for arbitrating these disputes is known as Investor-State Dispute Settlement (ISDS), but what does it really mean and what is the concept behind it? Read on to find out the differences between ISDS and the other options available to protect investors.
Mechanisms to resolve disputes between foreign investors and the countries where they invest are essential.
There are currently two main ways of solving such disputes: domestic courts and international private arbitration. Responding to concerns by the public and MEPs, the European Commission proposed on 6 May two additional options for TTIP: a multilateral investment court and a bilateral appeal body with seven judges.
System to solve disputes
1. National/domestic courts
2. Private arbitration system
(known as ISDS)
3. A multilateral investment court
4. A bilateral appeal body with seven judges exclusively for TTIP
According to the Commission's proposed reform of investor protection, in case of a dispute investors would be free to select the mechanism they prefer. In order to avoid double compensation or contradictory rulings, investors would be obliged to choose one option at the outset and then stick to it. They cannot use parallel mechanisms and then choose the most favourable decision.