State–State Dispute Settlement in Investment Treaties

The report analyzes state-state dispute settlement (SSDS) in investment treaties as an alternative or complement to investor-state dispute settlement (ISDS). It details various mechanisms—including ad hoc arbitration, judicial bodies like the ICJ, and quasi-judicial systems like those in ASEAN—and categorizes claims into diplomatic protection, interpretive, and declaratory relief. Through case studies such as Italy v. Cuba and Ecuador v. United States, the document highlights the legal complexities of 'dispute' definitions and the interaction between parallel state-state and investor-state tracks. It concludes by recommending that states explicitly define the relationship between these mechanisms and clarify requirements such as the exhaustion of local remedies to increase predictability.

• State-state dispute settlement (SSDS) is seeing renewed interest as an alternative to investor-state arbitration due to concerns over the latter's high costs, lack of transparency, and challenges to public welfare measures.
• Investment treaties typically employ three forms of state-state dispute resolution: arbitration (the most frequent), judicial mechanisms (such as the International Court of Justice or regional courts), and quasi-judicial mechanisms (such as the ASEAN Protocol on Enhanced Dispute Settlement Mechanism).
• In the case of Italy v. Cuba (2003), the tribunal ruled that a home state can exercise diplomatic protection under a state-state clause as long as the investor has not already submitted the dispute to investor-state arbitration.
• The Ecuador v. United States (2011) case established that silence by a respondent state in response to an interpretation request does not constitute a 'dispute' required to trigger state-state arbitration jurisdiction.
• The Mexico v. United States (2000) case under NAFTA demonstrated that a home state can seek declaratory relief regarding treaty violations without needing to identify specific affected investors or prove the exhaustion of local remedies.
• Article 27 of the ICSID Convention generally prohibits a state from providing diplomatic protection or bringing an international claim if the dispute has already been submitted to ICSID arbitration, unless the host state fails to comply with the award.
• To improve predictability, the report recommends that states explicitly define the term 'dispute' to include non-responsiveness or allow for advisory opinions, and clarify whether state-state decisions are binding on parallel investor-state tribunals.

APA

Bernasconi-Osterwalder, N. (2014). State–State Dispute Settlement in Investment Treaties. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/best-practices-state-state-dispute-settlement-investment-treaties.pdf

Chicago

Bernasconi-Osterwalder, Nathalie. State–State Dispute Settlement in Investment Treaties. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/best-practices-state-state-dispute-settlement-investment-treaties.pdf.

Wikipedia

{{cite report |last1=Bernasconi-Osterwalder |first1=Nathalie |title=State–State Dispute Settlement in Investment Treaties |publisher=International Institute for Sustainable Development |date=October 2014 |url=https://www.iisd.org/system/files/publications/best-practices-state-state-dispute-settlement-investment-treaties.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernasconiosterwalder2014statestate, author = {Bernasconi-Osterwalder, Nathalie}, title = {{State–State Dispute Settlement in Investment Treaties}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = oct, url = {https://www.iisd.org/system/files/publications/best-practices-state-state-dispute-settlement-investment-treaties.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }