Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation

The document argues that current ISDS compensation practices are complex, inconsistent, and create legal uncertainty, which can lead to 'regulatory chill' and hinder states' ability to take climate action. The authors advocate for a legally binding multilateral treaty to standardize compensation, the restriction of speculative valuation methods like Discounted Cash Flow (DCF), and the consideration of investor conduct and public interest when determining awards. They further suggest exploring the role of domestic courts in assessing damages and increasing the transparency of expert opinions.

• The authors argue that a legally binding multilateral treaty is the most effective way to resolve problems with compensation, as non-binding guidelines may be less effective in changing established dispute settlement practices.
• The use of the Discounted Cash Flow (DCF) method for valuation is criticized as being based on speculative elements and inconsistent risk assessments; the authors suggest banning or providing guidance against its use for early-stage investments lacking a business history.
• There is a concern that high and unpredictable ISDS compensation bills may increase the cost and difficulty for states to implement necessary climate policies, such as phasing out fossil fuels.
• The authors oppose the use of restitution in ISDS cases, arguing it is impractical and may conflict with internal governance, separation of powers, and the rights of non-parties.
• The submission suggests that compensation should be limited based on investor conduct, specifically referencing compliance with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights.
• To reduce costs and increase consistency, the authors support the possibility of a generalized system of tribunal-appointed experts, similar to practices in the International Court of Justice, rather than relying on party-appointed experts who may have inherent biases.
• The document proposes that UNCITRAL explore a more deferential approach to compensation by allowing domestic courts to determine award amounts, citing precedents from the European Court of Human Rights and the Inter-American Court of Human Rights.

APA

Brewin, S., Cotula, L., Güven, B., Johnson, L., Nikièma, S., & Schaugg, L. (2021). Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-11/ccsi-iisd-iied-unictral-damages-november-2021.pdf

Chicago

Brewin, Sarah, Lorenzo Cotula, Brooke Güven, Lise Johnson, Suzy Nikièma, and Lukas Schaugg. Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-11/ccsi-iisd-iied-unictral-damages-november-2021.pdf.

Wikipedia

{{cite press release |last1=Brewin |first1=Sarah |last2=Cotula |first2=Lorenzo |last3=Güven |first3=Brooke |last4=Johnson |first4=Lise |last5=Nikièma |first5=Suzy |last6=Schaugg |first6=Lukas |title=Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation |publisher=International Institute for Sustainable Development |date=12 November 2021 |url=https://www.iisd.org/system/files/2021-11/ccsi-iisd-iied-unictral-damages-november-2021.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{brewin2021possible, author = {Brewin, Sarah and Cotula, Lorenzo and Güven, Brooke and Johnson, Lise and Nikièma, Suzy and Schaugg, Lukas}, title = {{Possible Reform of Investor-State Dispute Settlement (ISDS): The assessment of damages and compensation}}, publisher = {International Institute for Sustainable Development}, year = {2021}, month = nov, url = {https://www.iisd.org/system/files/2021-11/ccsi-iisd-iied-unictral-damages-november-2021.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }