In contemporary international investment law, international arbitration has established itself as the main option through which foreign investors can pursue claims that they have against a host State resulting from an investment dispute. Provisions on investor–State dispute settlement (ISDS) are enshrined in almost all contemporary international investment agreements (IIAs)[i]. To provide in IIAs that arbitration and not litigation in national courts should constitute the main method to resolve investment disputes is considered as an important element of investment protection.
Furthermore, international arbitration has long been seen as the optimal way to address and resolve disputes between investors and States, and is to some extent still considered as such today. It depoliticizes investment disputes, assures adjudicative neutrality and independence, and was often perceived as a swift, cheap, flexible and familiar procedure. Moreover, international arbitration is seen to be offering the parties a possibility to exercise a substantial amount of control over the litigation procedure. It further assures that awards are enforceable and creates a sense of legitimacy
RAISON D’ÊTRE FOR SETTLING INVESTMENT DISPUTES
The Settlement of disputes between host states and foreign investors is a particularly important aspect of the legal protection of foreign investments. In the absence of other arrangements, a dispute between a host state and a foreign investor will normally be settled by the host state’s domestic courts. From the investor’s perspective, this is not an attractive option. Rightly or wrongly, the courts of the host state are not seen as sufficiently impartial in this type of situation. In addition, domestic courts are usually bound to apply domestic law even if that law should fail to protect the investor’s rights under international law. In addition, the regular courts will often lack the technical expertise required to resolve complex international investment disputes.