The debate on the resolution of investment disputes has been highly topical for some years, largely as a result of the European Union’s severe criticisms of the ISDS, which is largely focused on ICSID arbitration.

It is suggested that such criticisms might be divided into two classes.

Main criticisms

The main criticisms seem to be that arbitration is the product of few people who exchange their roles, the suspect of a bias in favour of investors and the high costs of the arbitration, what is largely due to the fees awarded to the winning party.

Other criticisms

Lack of transparency, lack of consistency and of predictability, high administrative costs and negative effects on the state regulatory powers.

Aspects of investment arbitration which seem to be easily remedied


Transparency of the proceedings seems to be easily available by adding to the arbitration rules a specific rule which provides for it.

Lack of consistency

Lack of consistency is a well-known problem also in court litigation, except in those jurisdictions in which the stare decisis rule applies.

Creating an investment court does not then seem to cure this problem, unless the stare decisis rule is introduced.

The provision of an appellate arbitral degree might reduce the number of inconsistent decisions even if it does not eliminate this problem.

Administrative costs

Administrative costs are not necessarily high.

What is high is not rarely the taxation of fees by some Arbitral Tribunals in favour of the successful party. This too is a problem which it would be possible to cure by well drafted provisions in the arbitration rules.

Negative effects on state regulatory powers

The negative effects on state regulatory powers would seem to depend mainly upon the BITs, which frequently might be improved by providing for duties of the investor vis à vis the Host Country and for wider rights of the Host State to protect its interest.

Heavier criticisms of ISDS

Mr. de Zaya, an expert of the United Nations, has once stated that arbitrators are business lawyers who wear several hats, one day that of counsel for a party, the following day as supporter of the interests of international business, another day eventually as arbitrator.

He has suggested that this would be a classic situation of conflict of interest and of lack of independence.

While this definitely seems an unjustified generalisation, there may be some cases where the conduct of arbitrators and the “copinage” practice do not give the best image of arbitration in investment as well as in commercial arbitration.

Independence of arbitrators – Suspect of bias

It is suggested that the present status of arbitrators might be improved for example by creating a roster of arbitrators who may carry on no other activity.

The appointment of two arbitrators by the parties might also be replaced by their nomination by the arbitration centre, provided it does not select them from a close circle of very good friends.

If the arbitration centre properly selects the entire panel of three arbitrators, any suspect of bias should fade away.

The high costs of arbitration

This criticism does not seem totally deprived of grounds.

It is not rare that a party produces a very large number of documents to flood the opposite party. This involves high costs and in the end frequently many of them are not useful.

Likewise a team of lawyers frequently attends the hearing for each side, while only one or two of them argue the case. Sometimes various law firms are involved and not always their talks are complementary.

Long evidentiary hearings are not always necessary and many witnesses are of little help.

It is suggested that it is indeed possible to substantially reduce the fees even in arbitral proceedings.

Uneasiness the Host States when attached by a private investor

Many States are accustomed to impose their decision on their citizens, who - even if with regret - have to accept them.

It is then understandable that a State is not accustomed to, and does not like to be treated by a foreign investor at its same level.

However, this is what investment treaties provided for.

A solution might be to provide that, like treaties are entered into by two States, then if an investor of a State intends to assert claims, he should seek that they be “espoused” by its State, which would assert them in arbitration as a derivative right. The litigation would then be between two States.

Even without such a drastic change, other ways to condition claims by foreign investors might ensure that they be sometimes prevented from exploiting a wrong move by the Host State, in order to earn by that much more than they would have earned through their own investment.

Would a multilateral investment court give better results than arbitration ?

Would a permanent body of judges, appointed by the various Member States ensure that they are not subject to some other pressure, in this case at least psychological pressure by their respective States to decide it ?

Even if only judges not belonging to any of the parties to an arbitration were selected for each dispute, would their own State always be indifferent to such litigation ? Would a sort of Diamocles sword on the head of such judge giving rise to a different attack to his independence ?

In addition to that, paying 2 or 3 judges of each one of the States who adhere to the international convention (and who maybe would have only one case per year) would not be extravagant in a world where poverty is increasing and only those who work deserve to be paid ?

As earlier discussed, consistency amongst judges’ decisions, does not seem obvious at all and frivolous claims may be the object of a deterrent even in arbitration.

Transparency of the entire proceedings is also achievable in the present investment arbitration system.

Economies of scale would perhaps not depend on a permanent Court covering disputes arising from BITs between Member States, more then on the present arbitration system, when well administered.

In view of all this, the Negotiations Directives adopted by the United Nations Security Council on March 20, 2019 could perhaps be further reviewed.

Even if the ISDS tool has problems (while it is not necessarily broken) should we perhaps not do our best to try to fix it rather than destroying it ?

Are we really sure that its replacement by a permanent court, made of judges or former judges, would really be much better ?

Does this other dispute resolution mechanism not also contain weaknesses to be further considered ?