The Stakes Are High: A review of the financial costs of investment treaty arbitration

The report examines the high financial risks governments face in investor-state dispute settlement (ISDS), where average claims reach US$492 million. It details the disparity between claimed and awarded amounts, a growing trend toward compound interest, and the significant burden of legal and administrative costs, which often fall disproportionately on respondent states, particularly developing countries.

• Investment treaty arbitration involves extremely high financial stakes, with the average claim in investor-state arbitrations based on bilateral investment treaties and other international investment agreements being approximately US$492 million.
• There is a significant gap between the amounts investors claim and what they are actually awarded; on average, a successful claimant receives only 41 per cent of the amount originally claimed.
• A trend has emerged over the last decade where tribunals increasingly award compound interest rather than simple interest, particularly in cases involving direct or indirect expropriation.
• Arbitration costs are dominated by legal fees for counsel and experts, which typically account for 82 per cent to over 90 per cent of the total costs for both parties.
• Third-party funding and contingency fee arrangements have expanded, allowing claimants to pursue cases with zero financial risk if they lose, which may encourage speculative claims and increase the pressure on respondent states.
• Developing countries face particular hardship because they often lack the internal legal capacity to defend themselves and cannot afford expensive external counsel, leading to calls for an international legal assistance centre.
• The 'pay-your-own-way' or 'American Rule' is the most frequent pattern for cost allocation, meaning parties generally bear their own legal costs and split arbitration costs equally, regardless of the outcome.
• Evidence suggests a cost disadvantage for respondent states, as winning states are less likely to receive cost reimbursement than winning investors.

APA

Rosert, D. (2014). The Stakes Are High: A review of the financial costs of investment treaty arbitration. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf

Chicago

Rosert, Diana. The Stakes Are High: A review of the financial costs of investment treaty arbitration. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf.

Wikipedia

{{cite report |last1=Rosert |first1=Diana |title=The Stakes Are High: A review of the financial costs of investment treaty arbitration |publisher=International Institute for Sustainable Development |date=July 2014 |url=https://www.iisd.org/system/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rosert2014stakes, author = {Rosert, Diana}, title = {{The Stakes Are High: A review of the financial costs of investment treaty arbitration}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = jul, url = {https://www.iisd.org/system/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }