Reform Options for ISDS

This briefing by the Center for International Environmental Law outlines several reform options for Investor-State Dispute Settlement (ISDS) to be considered by UNCITRAL Working Group III. The document argues that current ISDS mechanisms are asymmetrical, often ignoring state obligations and public interest, and proposes alternatives such as multilateral treaty termination, the allowance of state counterclaims, public interest carve-outs, 'clean hands' clauses for investors, the requirement to exhaust local remedies, and expanded third-party access to proceedings.

• The document proposes a multilateral approach to terminate existing Bilateral Investment Treaties (BITs) or withdraw consent to arbitrate. This would allow states to coordinate termination to signal that the action is directed against the ISDS system rather than specific investors, while maintaining obligations under customary international law.
• The briefing suggests that UNCITRAL should recommend allowing state counterclaims in ISDS cases, provided there is a factual connection to the original claim. This is intended to correct an asymmetrical system where investors have rights without obligations, and would improve efficiency, consistency, and the rule of law by holding investors accountable.
• To protect the sovereign right to regulate, the document recommends implementing a 'public interest carve-out.' This mechanism would prevent investment protections from being used to challenge legitimate, non-discriminatory decisions regarding public health, environment, or human rights, similar to the 'tobacco carve-out' in the Trans-Pacific Partnership (TPP).
• The author advocates for a 'clean hands' clause, which would deny ISDS access to investors who have violated domestic or international obligations. The document cites the case of Copper Mesa Mining Corporation v. Republic of Ecuador, where a tribunal awarded $24 million to an investor despite findings of 'unlawful and violent behavior.'
• The briefing recommends requiring investors to exhaust local remedies in domestic courts before initiating ISDS proceedings. This would align ISDS with customary international law and international human rights law, preventing investors from side-stepping domestic legal systems.
• The document proposes granting third parties full legal standing to join ISDS cases, rather than the limited role of amicus curiae. This is justified by the fact that ISDS outcomes can significantly impact local communities, as seen in Ecuador v. Chevron, where a tribunal overturned a $9.5 billion judgment for environmental remediation.

APA

Center for International Environmental Law (n.d.). Reform Options for ISDS. https://www.ciel.org/wp-content/uploads/2018/08/UNCITRAL-recs-and-justification-final.pdf

Chicago

Center for International Environmental Law. Reform Options for ISDS. n.d. https://www.ciel.org/wp-content/uploads/2018/08/UNCITRAL-recs-and-justification-final.pdf.

Wikipedia

{{cite report |author=Center for International Environmental Law |title=Reform Options for ISDS |url=https://www.ciel.org/wp-content/uploads/2018/08/UNCITRAL-recs-and-justification-final.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{centerforinternationalenvironmentallawndreform, author = {{Center for International Environmental Law}}, title = {{Reform Options for ISDS}}, institution = {Center for International Environmental Law}, url = {https://www.ciel.org/wp-content/uploads/2018/08/UNCITRAL-recs-and-justification-final.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }