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

This joint submission by the Columbia Center on Sustainable Investment (CCSI), the International Institute for Environment and Development (IIED), and the International Institute for Sustainable Development (IISD) provides comments to the UNCITRAL Working Group III on the reform of damages and compensation in Investor-State Dispute Settlement (ISDS). The authors argue that current practices are inconsistent and create 'regulatory chill', particularly regarding climate action, and advocate for a legally binding multilateral treaty to standardize compensation and restrict speculative valuation methods.

• The authors argue that a legally binding multilateral treaty is the most effective way to reform compensation in ISDS, as non-binding guidelines may lack the legal weight to change established dispute settlement practices.
• There is a call for a fundamental overhaul of compensation principles to prevent large, unpredictable awards from hindering states' ability to implement climate policies, such as the phase-out of fossil fuels.
• The submission recommends restricting the use of the Discounted Cash Flow (DCF) valuation method, particularly for early-stage investments, because it relies on speculative assumptions and is applied inconsistently by tribunals.
• The authors strongly oppose the use of restitution in ISDS, arguing it is impractical and could conflict with a state's internal governance, separation of powers, and the rights of third parties.
• To reduce costs and bias, the authors suggest considering a system of tribunal-appointed experts rather than party-appointed experts, who they believe have inherent biases.
• The submission suggests that the Working Group explore giving domestic courts a greater role in determining compensation, citing precedents from the European Court of Human Rights and the Inter-American Court of Human Rights.
• The authors support exploring the capping of compensation to the amount actually invested and suggest looking at political risk insurance practices that link compensation to a percentage of book value.

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} }