Reforming Investor–State Dispute Settlement Amid Global Uncertainty

The contemporary framework of investor–State dispute settlement (ISDS) is undergoing intense scrutiny amid unprecedented global challenges, including the aftermath of the COVID-19 pandemic, armed conflicts, increasing geopolitical polarization and multipolarization, trade wars, global inflation, and persistent supply-chain disruptions. These developments have significantly affected international investment relations and have intensified debates on the legitimacy, effectiveness, and future design of investment dispute settlement mechanisms. Against this backdrop, reform of ISDS is being discussed within UNCITRAL Working Group III. While the reform agenda reflects a broad recognition of systemic concerns, achieving consensus among participating States has proven particularly difficult in the current geopolitical climate. Divergent economic interests, regulatory priorities, and political considerations complicate negotiations. Nevertheless, a degree of common understanding has emerged on specific issues, notably transparency, consistency, and the adoption of a code of conduct for adjudicators. In this presentation we argue that, in an environment marked by uncertainty and fragmentation, maintaining a functioning dispute settlement system remains preferable to institutional paralysis. Accordingly, improvements to the existing ISDS framework implemented in parallel with ongoing multilateral negotiations may represent a pragmatic and stabilizing approach. We further examine the proposal for a standing Multilateral Investment Court and raises concerns regarding its potential susceptibility to political influence. In this context, the Court of Justice of the European Union's Achmea decision is analyzed as a critical example. The decision, which departed from the European Union's long-standing support for intra-EU investment arbitration, generated significant criticism and highlighted tensions between legal certainty and evolving political priorities. The contrasting Opinion of Advocate GeneralWathelet underscores alternative legal reasoning that remains relevant for current reform debates. The Achmea judgment raises a broader question: whether a standing multilateral court might risk becoming a forum for inter-State political contestation rather than neutral adjudication? We believe that a dual-track approach which is strengthening the current ISDS system on shared principles while cautiously exploring alternative mechanisms through treaty-based commitments and offers a balanced perspective for the future of investment dispute settlement.