The Risk of ISDS Claims Through National Investment Laws: Another “Damocles sword” hanging over governments’ COVID-19 related measures?

The document examines how national investment laws can provide a pathway for foreign investors to initiate ISDS claims, potentially challenging government responses to the COVID-19 pandemic. It highlights that while treaty-based claims are more common, domestic laws—often influenced by international organization 'best practice' advice—can grant unequivocal consent to international arbitration. This creates risks of unpredictable, costly awards and a dichotomy between how domestic and foreign investors are treated. The brief suggests that governments review and potentially amend or suspend these provisions to preserve policy space during the crisis.

• National investment laws can provide direct consent to international arbitration, allowing foreign investors to bypass domestic courts and have international tribunals interpret domestic law. According to UNCTAD, of 125 national investment codes, 40 provide consent by states to international arbitration for foreign investors.
• Investment law-based ISDS presents a broader risk than treaty-based ISDS because these laws typically apply to all foreign investors regardless of their home state, whereas treaties are limited to party states.
• The inclusion of international arbitration in national laws was often driven by advice from international organizations like the World Bank. One study indicated that receiving such advice increased a country's likelihood of adopting a law with international arbitration by 650%, with 30 out of 65 advised states doing so.
• While there were no investment law-based COVID-19 ISDS claims as of the report's date, the document notes that at least 30 known investment law-based cases existed by the end of April 2020. For example, the Kyrgyz government faced 14 known arbitration cases since its 2003 investment law, with at least five claiming jurisdiction based on that law.
• To mitigate risks, governments can amend or suspend ISDS provisions in their national laws, as these can be changed without the agreement of another government. Options include interim suspensions specifically for COVID-19-related measures or a more holistic revision of the investment code.

APA

Nikièma, H. S., & Maina, N. (2020). The Risk of ISDS Claims Through National Investment Laws: Another “Damocles sword” hanging over governments’ COVID-19 related measures? International Institute for Sustainable Development. https://www.iisd.org/system/files/2020-09/isds-claims-investment-laws-en.pdf

Chicago

Nikièma, H. Suzy, and Nyaguthii Maina. The Risk of ISDS Claims Through National Investment Laws: Another “Damocles sword” hanging over governments’ COVID-19 related measures? International Institute for Sustainable Development, 2020. https://www.iisd.org/system/files/2020-09/isds-claims-investment-laws-en.pdf.

Wikipedia

{{cite report |last1=Nikièma |first1=H. Suzy |last2=Maina |first2=Nyaguthii |title=The Risk of ISDS Claims Through National Investment Laws: Another “Damocles sword” hanging over governments’ COVID-19 related measures? |publisher=International Institute for Sustainable Development |date=September 2020 |url=https://www.iisd.org/system/files/2020-09/isds-claims-investment-laws-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nikima2020risk, author = {Nikièma, H. Suzy and Maina, Nyaguthii}, title = {{The Risk of ISDS Claims Through National Investment Laws: Another “Damocles sword” hanging over governments’ COVID-19 related measures?}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = sep, url = {https://www.iisd.org/system/files/2020-09/isds-claims-investment-laws-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }