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Columbia FDI Perspectives

Perspectives on topical foreign direct investment issues
No. 248  March 25, 2019

Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Marion A. Creach ([log in to unmask])
In November 2018, the consensus that investor-state dispute settlement (ISDS) needs to be reformed received multilateral imprint: UNCITRAL’s Working Group III agreed that reform is “desirable” with respect to (1) consistency, coherence, predictability, and correctness of arbitral rulings; (2) independence, impartiality and diversity of decision-makers; and (3) costs and duration of proceedings.[1]
Recent investment agreements entered into by key international actors demonstrate a willingness to advance along the same lines. The Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) (which succeeded the Trans-Pacific Partnership (TPP) after the US withdrawal), the United States-Mexico-Canada Agreement (USMCA), the Comprehensive Economic and Trade Agreement (CETA) concluded between the EU and Canada, Brazil’s Cooperation and Investment Facilitation Agreements (CIFAs),[2] and India's 2016 model bilateral investment treaty (BIT), all seek increased transparency, enhanced efficiency and the implementation of mechanisms for more effective state control over substantive rules and their interpretations.
However, in relation to dispute-settlement design, these key models diverge starkly. The CPTPP and the USMCA, which texts reflect the US position, retain investor-state arbitration but reform it. The EU is proposing the establishment of a Multilateral Investment Court (MIC) that would replace investment arbitration entirely.[3] India's model BIT strengthens the role of domestic courts by re-introducing the exhaustion of local remedies rule. Finally, Brazil's CIFAs feature inter-state adjudication rather than ISDS.
It is of course tempting to seek multilateral consensus by opening a debate about the pros and cons of each model; in fact, this is what the proponents of each model currently do, within UNCITRAL and beyond. At the same time, it is unlikely that one model will find universal support, as the different positions on investment dispute-settlement design reflect largely entrenched political stances. The predictable outcome of every party sticking to its own model—institutional fragmentation—threatens the achievement of key objectives of the current reform process, in particular the aim to enhance consistency, coherence and predictability. Therefore, the question arises whether the Gordian Knot can be cut, and the mutually incompatible dispute-settlement design models reconciled.
We propose adding to UNCITRAL’s agenda discussions on the establishment of a Multilateral Institution for Dispute Settlement on Investment (MIDSI), which could provide an umbrella for “dispute settlement à la carte”. Building on the idea of an “open architecture”[4] and the approach to dispute settlement under the United Nations Convention on the Law of Sea,[5] a MIDSI would not feature compulsory jurisdiction, but would rather allow states and organizations to opt into the dispute-settlement mechanism of their choice. Apart from administering inter-state and investor-state arbitrations, the MIDSI would also encompass, as one of its pillars, the proposed MIC.
On an opt-in basis, the MIC could perform different roles for different states, serving as a fully-fledged two-tiered investment court for some and as an appeals body or annulment institution for others. Even for those that do not opt to use it for adjudication, the MIC could carry out such procedural functions as deciding on challenges to arbitrators or rendering provisional measures before an arbitral tribunal is constituted. Finally, the MIC could perform “systemic” functions that are currently absent in investment dispute settlement, such as issuing advisory opinions or rulings on preliminary references by arbitral tribunals or even national courts, thus providing clarity on specific points of interpretation and resolving inconsistencies that have arisen under the current system.
The MIDSI, of which the MIC is part, could also serve as a forum for future investment treaty negotiations. While at the outset it could be expected that the law applicable to investment disputes would remain fragmented, over time states could use the MIDSI to collectively develop new rules, addressing for example standards of protection or investor obligations.
A key challenge in reforming investment dispute settlement is to prevent the divergent models and proposals currently being floated from leading to a fragmented system. The establishment of a MIDSI would address that risk. It would provide a solution for disagreements on dispute-settlement design by establishing an institutional framework within which participants can agree to disagree—and still effectively cooperate multilaterally in settling investment disputes and shaping the future of the international investment regime. Such an institutional framework would not only promote procedural convergence in investment dispute settlement, but could also provide states with a long-term tool for building a comprehensive investment governance system, including substantive matters.
While details of organizational structure, mandate, competence, and relations to existing institutions, including the International Centre for Settlement of Investment Disputes or the Permanent Court of Arbitration, would need to be negotiated, establishing a MIDSI would create a structure for consensus-building, adjudication and negotiation at the multilateral level and reassure states that they remain sovereign to decide on their preferred model for settling investment disputes.
* The Columbia FDI Perspectives are a forum for public debate. The views expressed by the author(s) do  not reflect the opinions of CCSI or Columbia University or our partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
** Stephan W. Schill ([log in to unmask]) and Geraldo Vidigal ([log in to unmask]) are, respectively, Professor and Assistant Professor at the University of Amsterdam. This Perspective draws on ideas presented in Stephan W. Schill and Geraldo Vidigal, “Cutting the Gordian Knot: Investment dispute settlement à la carte,” RTA Exchange (Geneva: ICTSD, 2018). The authors are grateful to Jan Paulsson, Anthea Roberts and Giorgio Sacerdoti for their helpful peer reviews.
[4] Ibid,, para. 39.
The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Stephan W. Schill and Geraldo Vidigal, ‘Investment dispute settlement à la carte within a multilateral institution: A path forward for the UNCITRAL process?,’ Columbia FDI Perspectives, No. 248, March 25, 2019. Reprinted with permission from the Columbia Center on Sustainable Investment (” A copy should kindly be sent to the Columbia Center on Sustainable Investment at [log in to unmask].
For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Marion A. Creach, [log in to unmask].
Most recent Columbia FDI Perspectives 
  • No. 247, Karl P. Sauvant, “The state of the international investment law and policy regime,” March 11, 2019
  • No. 246, Joachim Pohl, “Is international investment threatening or under threat?,” February 25, 2019
  • No. 245, Carlos Esplugues, “A future European FDI screening system: solution or problem?,” February 11, 2019
All previous FDI Perspectives are available at

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Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
(212) 854-0689
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Karl P. Sauvant, PhD

Resident Senior Fellow

Columbia Center on Sustainable Investment
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
p(212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | t: @CCSI_Columbia

"The State of the International Investment Law and Policy Regime", "Towards G20 Guiding Principles on Investment Facilitation for Sustainable Development", "Five Key Considerations for the WTO Investment-facilitation Discussions, Going Forward", "Arriving at Sustainable FDI Characteristics", "Putting FDI on the G20 Agenda", "International Investment Facilitation: By Whom and for What?", "Moving the G20's Investment Agenda Forward", "Emerging Markets and the International Investment Law and Policy Regime", "Sustainable FDI for Sustainable Development", "Towards an Investment Facilitation Framework: Why? What? When?", "Beware of FDI Statistics!", "Towards an Indicative List of FDI Sustainability Characteristics", "The Next Step in Governance: The Need for Global Micro-regulatory Frameworks", and "The Evolving International Investment Law and Policy Regime: Ways Forward" are available at and

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