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S-28 ¦ MARCH 22, 2021 ALTERNATIVE DISPUTE RESOLUTION

Investor-State Arbitration Faces Political
Backlash

By Tai-Heng Cheng

In recent years, investor-state arbitration, or in- Arbitration often becomes a collateral victim when
vestor-state dispute settlement (ISDS), has faced elected officials take aim at treaties that do not keep
intense political criticism. The international arbi- pace with these norms.
tration community has responded by implementing Investor state arbitration is the mechanism to
a plethora of reforms to the arbitration process. resolve disputes between foreign investors and sov-
However, these reforms cannot, on their own, fully ereign states. Such arbitrations arise from bilateral
address the criticisms heaped against investor-state investment treaties, or multilateral free trade agree-
arbitration. This is because the criticisms stem from ments. The disputes concern whether the actions
a political backlash against the perceived inequi- and policies of the state have violated international
table distribution of benefits from international obligations of the state to give foreign investors
trade and capitalism. Voters in many countries are protection under international law. In their awards,
also increasingly focused on enforcing environmen- Tribunals can determine what financial damage,
tal, social and corporate governance (ESG) norms. if any, foreign investors have suffered as a result.

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