Investor-state dispute settlement

Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which investors can sue countries for discriminatory practices concerning foreign direct investment. The purpose of the ISDS is to benefit the countries that voluntarily adhere to it; these countries benefit because foreign investors are motivated to invest under the protection that ISDS affords.

ISDS is an instrument of public international law, contained in a number of bilateral investment treaties, in certain international trade treaties, such as the USMCA.

A version of it also appeared in the older NAFTA (chapter 11), and the CPTPP (through incorporation of TPP chapter 9) and CETA (sections 3 and 4) agreements.

ISDS is also found in international investment agreements, such as the Energy Charter Treaty. If an investor from one country (the "home state") invests in another country (the "host state"), both of which have agreed to ISDS, and the host state violates the rights granted to the investor under the treaty, then that investor may bring the matter before an arbitral tribunal.

While ISDS is often associated with international arbitration under the rules of ICSID (the International Centre for Settlement of Investment Disputes of the World Bank), it often takes place under international arbitral tribunals governed by different rules or institutions, such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIA), or the UNCITRAL Arbitration Rules.